Choppy frustration weighed on markets almost across the Board Tuesday, as value plays and cyclicals were defensive, not just pricey super-cap (FANG type) leadership stocks declining. It was a modest sell-the-rebound day. But if so many 'FANG' types are reporting good results, is it an alternating rotation?

Not particularly, more of a technical consolidation, whereas Monday took-out the 50-Day Moving Average, and in a choppy fashion rebounded to it Tuesday but couldn't find any real traction. Nor did we expect it to. So the forecast for a choppy but defensive session (washout, rebound but going nowhere basically for this day's) behavior was correct, nevertheless a bit of a stressful feeling.

After the Close you got Microsoft (MSFT) hitting on all cylinders, like AMD (AMD) did earlier, but neither is a bargain, and both can be under tax-selling pressure politically influenced, as we migrate through an impossibly tricky Election season.

Lower stimulus hopes and flip-flopping perspectives on which candidate might be better for stock prices was also 'in the mix', as JP Morgan (JPM) changed views, Goldman Sachs (GS) reiterated their belief Trump would be better for the market, at the same time this is really nervousness, knowing different sectors will see a varying impact next year. Banks and Oils were defensive (regional banks a bit better), and those are sectors, unlikely as it was and is, where you need to get some stability for the S&P to actually advance meaningfully.

Yes, pundits will argue that big-techs are now 'oversold', that's not exactly so, but it's part of Wall Street hand-holding. The largest stocks (even AMD which we own from around 17, as our pick of the year for 2019 back in late 2018 as I suggested months ahead of time from Berlin after viewing the latest Ryzen processor) are oversold only on an hourly or daily basis, not anything longer.

Wednesday we'll hear Mr. Zuckerberg's version of events in Congress, as to how Facebook (FB) will avoid censorship by perhaps censoring early returns or declarations of winning states by any network or wire service. Seriously, that's already the policy of Twitter for next week, and while everyone knows there's a prospect of a contested situation, trying to block conveying what everyone is assessing is not how things are done. Twitter says it's to prevent violence, so it's come to this? Not releasing whatever data emerges, and letting it flow how it flows, might be more provocative. It's such a dangerous circus CBS had to hire security guards for Leslie Stahl and even her children, after a threat. The extremes on both sides are basically out-of-control.

This gets ridiculous for sure. But it also has a market aspect. While we doubt anyone will be conceding after a few hours of vote counting (unless numbers are so lopsided for one, that victory by the opponent becomes mathematically impossible not merely unlikely), nobody will be willing to declare a winner. And just that is sad, even if agenda media brought some of this upon themselves, on the alter of exposing hypocrisy on both sides, stil, this isn't Putin's Russia.

Heightened sensitivity to COVID exists here too. Not because people recall the negativity so many hedge managers and analysts had through the rebound in late March and thereafter, but the situation now is different, and worrisome in a sense. It's not about allocations, it's about lack of advanced COVID solutions perhaps even more so than the tax-implications of a 'Blue Wave' or any such concerns (that's probably already well understood). I think it's frustration that, to a degree, we all feel that there's no significant virus or antiviral progress, at the same time that indeed may be 'right around the corner' on the radar. But it isn't as quick as everyone wants, and that's causing really a 'global' concern.

I've mentioned companies beating expectations in this environment, but at the same time facing early (pulled-forward) tax-selling, based on concern about higher Capital Gains rates 'possibly' ahead if Biden wins, part of why a Biden victory was seen by me as more bearish for this Quarter than necessarily for the broader market next year. That concern persists too, but mostly COVID and lack of a stimulus package arriving is certainly more than frustrating for many.

Executive summary:

• Little has changed, as S&P efforts at consolidating Monday's heavier hit were uninspiring, hence frustration grew through much of the afternoon.

• It is all part of the same defensive pattern, related to technicals outlined already (the break of S&P's 50-Day, rebound tries, and then likely lower),

• Everyone likely heard about disappointing (or slowly proceeding) COVID vaccines, and in-theory this may bolster the 2nd generation developers, although the 1st generation vaccines have 'some' expected efficacy.

• With patience thin, these delays not only enhance desired therapeutics (as 'if' efficacious, a patient knows within hours or a day or so because it is not a vaccine but a treatment), but they focus upon the COVID 'timeline'.

• With Europe now acknowledging it cannot (even with a proven vaccine) be vaccinated effectively for two years or so, that delays business and of course travel, beyond the range most are anticipating for now.

• In Italy and in France, street violence has occurred because of mandated mask wearing, and perhaps more so by small businesses protesting the new shutdowns, which most simply won't survive financially.

• Aside business, the politics of 'masking' (as inane as they may be) reach across oceans too, with those opposing it 'usually' changing their views if someone close to them sadly contracts the virus.

• The good news is that there is less flu (well masks and no handshakes is a factor), while the bad news is these current waves have not peaked nor will they on November 4, in the U.S. or other countries also impacted.

• As or if we see more restraint on business activity, that contributes more than the tax-selling (political) aspects to a further market shakeout, since it brings into question profitability and continuation of the 'reflation' trade.

• However (and it could be any day) the first vaccine to be approved will be well-received (by markets at least briefly), and I suspect a MAB (that's the monoclonal antibody treatment) even more so if one is found effective).

• Speaking of there is no news on MAB's or anything during today's trade in Sorrento (SRNE), although they filed for a couple new Phase 1 Trials.

• What is eye-opening was after-the-close they withdrew a 'shelf offering' in which funding had come in the form of up to 250 million from a somewhat hidden Caribbean entity that was actually a sketchy Canadian.

• Withdrawing that shelf, means any such dilution ends, perhaps they don't need the money (unclear how it could be already), or something favorable is on-tap almost immediately (we have always lacked confidence in their management, but interested in the varied portfolio of solutions, but if they are maturing and not getting funding in sub-optimal ways, that's good).

• Perhaps they have done something constructive, they have a big litigation that they won, with settlement not required until next year, but that guy (a tycoon who owns the LA Times) resigned from NantKwest yesterday, so that's also possibly a coincidence (this is late-breaking so don't know).

• Coincidence or not, this is where the short-term downtrend intersects with a longer-term uptrend in Sorrento, so an interesting spot to possibly turn the tide higher, based on technicals, if not fundamental progress as yet.

• Chicago has now banned 'indoor dining' and other cities are restricting, as a lot put curfews on too, and that's here and abroad, this likes gets played as a political issue, but actual restrictions seem to be based on not merely high cases, but increasing hospitalizations.

• It's not universal, here in Florida cases (not positivity rates) are higher but there are no new restrictions, perhaps we'll know in 2-3 weeks if that's at all wise, the beat goes on with all this, and yes that's frustrating to us all as well as the stock market's near-term prospects.

• Besides tax concerns one-way or the other, a proven therapeutic within a couple weeks (not months) would be the ticket to arrest defensive market conditions, which otherwise continue to shuffle in a corrective way.

In-sum: essentially the pattern evolves, and barring some breakthrough that's related to stimulus at this (later than optimal) pre-Election date, S&P likely is going to break lower, in-harmony with the pattern outline in recent weeks.