Jarring metrics combined to impact economic and market expectations, by a crowd that had been in-denial (they might as well have been in Egypt's river .. just kidding) or hoping more progress would occur sooner. That sure applies to political wrangling about 'Stimulus', which continues to run-into roadblocks.

It is also forthrightly about the Election, since the market is more comfortable, as it has been for months, with the prospect of a Trump re-election favored. At the same time nobody wants to take-on a lot of risk in the run-up to Elections, and remember Octobers tend to be jumpy ahead of Election, though this one is 'special', to say the least. We warned technically last week of not much of a bump before we went lower at least temporarily. Now a Tuesday turnaround? 

By this time tomorrow you 'might' have progress between Pelosi & Mnuchin, and that's part of it too. It has 'zero' to do with any personal political views (as are conflicted because I don't embrace in-totality either political stance, and I think that's probably the case for a majority of Americans trying to be fair with a contest that's been heavily adversarial when confronting National issues).

SAP (SAP) came-out with a comment that removed the software sector as a rescue vehicle for the market (in their take anyway), and part of this market decline is being portrayed as waning leadership by technology which really isn't like the case 'broadly' in tech but sure, we could see bounces and falters as a slew of earnings reports come-put this week, including Apple (AAPL) and Amazon (AMZN).

So lower guidance from the giant German software maker may reflect them, or shifts in Europe, even as they move away from Huawei for 5G (nobody I know of gave consideration to the German issue related to 'delays' because they must now move to European or USA gear for their systems, but that's likely part of it. And that doesn't have a direct spillover to most American techs even though some pundits attributed the decline in U.S. tech being because a bad outlook from SAP is a 'coal mine canary' for others. I think it's a European indication as I just mentioned not global, while believing at the same time so many of our own tech stocks are extremely pricey which is not news.

I have mentioned that a lot of companies beat their expectations in this unique environment, but at the same time they face early (pulled-forward) tax-selling, based on concern about higher Capital Gains rates 'possibly' ahead if Biden wins, which is part of why a Biden victory was seen by me as more bearish for this Quarter than necessarily for the broader market next year.

Executive summary:

• I checked back: Chief of Staff Meadows did 'not' say we're not trying to control it (COVID), he said 'we're not able to control it', that's quite a big difference and I think media and markets missed that nuance.

• Chief of Staff Meadows essentially meant (I think) that the virus cannot be shutdown or seriously controlled by reasonable measure (at this point), I think that's worrisome and everyone can debate how we got here.

• So it simply recognizes reality, rekindles all the arguments about making it to the time when 'therapeutic antibodies' and/or vaccines arrive.

• Despite being an observation (not a policy), media treated it 'as if policy', and that contributed to (as was obvious immediately) market risk.

• Hence some media comments were 'they're giving up' which is not what he said, as sadly coronavirus globally does defy containment efforts.

• Regardless, lack of control, whether trying or not, leaves uncontained rise of cases and hospitalizations, and that's a real-world worry markets note, even though things like mortality data are challenged once again (hoping they are lower and not about to surge in the weeks ahead).

• Clearly clarifying what Chief of Staff Meadows 'actually said' doesn't get into the debate about how everything was handled (isn't intended too).

• (Hard to thread the needle of COVID being politicized), but regardless this week involves not just COVID fatigue, not just regulatory risks next year, but angina rising beyond the 2020 Vote (much is behind already given the historic levels of early and mail-in voting).

• To the concerns out there, it's fear of uncertainty in the wake of elections too, both legally and conceivably in-term of public disruptions, and while that's possibly a factor in current moods, civility is tough to diagnose.

• Super-cap-led (mostly tech) break is a jarring event pending for awhile, and as I'll note momentarily, I suspect the SAP story was misinterpreted.

• S&P (SPY) and Nasdaq (QQQ) primarily hit by liquidation of those FANG types we warned of for weeks, so while some of the backdrop is unfortunate, what more can one say other than some sort of shakeout like this was coming.

• Exponential growth in COVID cases without meaningful containment in many areas (here and abroad) is suppressive and concerning.

• Election uncertainty and COVID-fatigue combined to allow this purge.

• IF Biden wins, the Democrats are believed 'coming for' big technology, if so it's problematic even if targeted stimulus is a plus for smaller firms.

• This focus on smaller rather than larger business is part of our outlook, to some degree that's bipartisan because of scrutiny of antitrust aspects with some bipartisan support.

• If it's not clear, multiple compression is still likely on almost any Election outcome, as relates to the FANG-type super-caps, not the broader list.

• A decisive victory by either candidate would bring a sigh-of-relief just as the clarity alone would allow Stimulus for optimistic economic recovery.

• Obviously we don't know that a decisive Election would clear-the-paths, but I suspect if we don't have Stimulus sooner it would.

• What it will also clear, is whether or not to expect more Capital Gains or long-term pressures, which would be more likely should Biden win.

• Pressures (or surges) in sectors, will vary in this Election cycle as well, while biotech will depend very much on approvals, rejections, funding, and other aspects on this key area during the perpetual pandemic.

• Lots of 50-Day Moving Averages came out and that accelerated selling technically, but this is more sort of 'prioritizing' reality over politics, that technical washout should lead to a rebound even if lower later.

• A quick uncontested Election (either ticket by a landslide) would, from the stock market's perspective, be the best way to proceed, that's especially because there's a segment of the population that might not accept the winner on any relatively narrow outcome.

• It's basically wishful thinking to expect a breakthrough vaccine or drug of known efficacy suddenly emerging, but favorable news of a therapeutic or similar trial would likely spark a rally from any level, and if it's rapid testing simplified, more likely a modest overall rally aside for the stock involved.

• Again not expressing bias, just believing that markets will be choppy or have a tendency to trend lower overall until clarity prevails, uncertainty of this magnitude is anathema to market stability and challenges strategies.

• Regeneron (REGN) can't readily mass-produce their MAB (monoclonal antibody as we now call MAB), Lilly's trial of theirs is halted for now, as Sorrento (SRNE) is pending possibly early results from Brazil or perhaps Philadelphia.

• NIH sees no benefit of therapy with the Lilly (LLY) MAB in hospitalized patients but it may be helpful in earlier stage patients, interesting in-that Sorrento is trialing it initially in sicker hospitalized patients .. gets very interesting if Sorrento's works and the others don't do much or are too hard to make, a couple more bearish views on Sorrento are out there, without any basis, while it seems stock offered for sale is readily absorbed, speculative.

• Trends toward online gambling 'might' indicate it's a long time before Las Vegas recovers, hence Adelson's move to sell the properties (?), hard to say given his age so possible desires beyond Las Vegas Sands (LVS) price.

• One more thing: Release 16 of 5G (for networks), supports integrated access and backhaul, meaning that telecom operators can add mmWave base stations without need to run a cable to a cell site, just electricity.

• Instead, they can use wireless frequencies to provide both consumer and network backhaul (and essentially 'fronthaul'), which should cut both time and costs of rolling out more stations and help boost existing coverage.

• We don't know exactly who customers are, but little Cerragon (CRNT) (the Israeli typically boring stock) happens to offer just that wireless capability, they have Vodaphone India (VODPF) as their largest customer, but have something with both T-Mobile (TMUS) and AT&T (T) in the U.S. and/or Latin America.

• IF we emerge from a decisive Election, get COVID 'relief' (stimulus, plus medical solutions), then the market's 'reflation trade' rapidly finds a path to resume, so maybe the rhetoric will calm down a bit too.

In-sum: weekend comments from Chief of Staff Meadows were really candid, about COVID, whether entirely accurate or not. That plus polls (valid or not) for sure had a sobering effect on markets, and possibly capital gains type selling that would result, if one believes a Biden victory is forthcoming.

This has nothing to do with whether one favors Biden or not, just the market's interpretation based on their call for higher taxes or also higher Capital Gains possibly retroactive to a January 1 of 2021 date. Meanwhile decent earnings in many major issues has and will contribute to stability, possibly later this week, but in a tenuous way.

Bottom-line: the market wants a clear outcome for the Election, uncontested so we know what strategies make sense looking forward.