'Bad news has been good news' - for getting in, rather than out, of markets on prior occasions, including the 'Trump Tariff Trauma' panic earlier this year.

However this is 'rocktober', and now we all see what shakes stocks (Oil most hit as far as a sector); and 'geopolitics' has intruded, as has been suggested as a catalyst. That also makes a 'tariff battle' geopolitical; and whether or not the parties perceive a sorting-out of differences between China and the USA has more to do than any technical or fundamental equity assessments.

After the Close Friday lots of stocks tried to recover; but minutes later Trump raised the bar with 100% 'added' tariffs on everything China; and that stopped that effort. Of course it may be a Trump negotiating ploy; and China knows that; so it may actually stick a bit. More info and some time to see how this sorts out needed.

Because China's pronouncement occurred on a Friday, followed by President Trump's rejoinder reminding Beijing that we have more in our armamentarium to counter President Xi's trade war acceleration, which is what it clearly is. So, either it deepens, or this is China's effort to change agendas (in China's favor) in advance of the Meeting in Asia that Xi 'was going to attend; so now Trump implies 'no need to meet with Xi on the sidelines'; and we don't know if this is the first act in this particular series of geopolitical theatrics, or gets mitigated.

This is a geopolitically-based economic scare; as Oil shows and presumably rising GDP is still on. Friday's news makes it appear 'growth is not so sound', plus we still have a 'shutdown' to contend with. Everything won't automatically be hunky-dory; but it could migrate that way 'if' certain things transpire soon. If it take longer, then the rug which is pulled is not replaced as quickly. Again it's a fluid situation, though we opt for a Fed rate cut, a resolution of the shutdown as well as 'perhaps' some sort of amelioration of U.S./China fiscal tensions. If you were to add threats by China against Taiwan then all bets would be off of course; except for Defense.. which in either case should be first to rebound.

Market X-ray: the Friday draw-down is 'not' a market 'crash' for now, but it is close enough 'for the moment' to qualify as a structural break..however that in the past is how you got to trading lows; and it may be again (too soon to tell).

Ironically it came after a couple focus tickers had just broken-out to the upside and have retraced to where they were a day or two ago; not lower than that. If there's a make good statement (or post by Trump or Xi) over the weekend; we get something different than downside follow-through to start the new trading week. If there are no constructive moves, changes, or 'tweets', then normally you'd look for a washout, margin calls, and similar to really freak investors.

In most cases that would be a 'buying opportunity' and may be; but depends on the news flow (or lack of) and nobody yet knows how that will evolve. In a negative progression providing nothing constructive, well it's 'rocktober' and it still sets-up buys, in this case especially in the new-era defense tickers that of course are all being clipped too; because in panic people sell what they can in many cases, not necessarily what they want to part with.

Furthermore next week, coincident with the first 'Nor'easter' drenching much of the Northeast including Washington DC, we have the U.S. Army Assoc. in full regalia displaying defense contractor gear at their Conference/Exhibit. I'm pointing this out as we will likely see more of 'Iron Drone' and more there.

Of course nothing is really riding out the storm for now; but we'll see what happens, and whether Trump will be inclined to soften his tone given personal dispositions to keep the stock market in his mind. However without China's Xi saying something milder, that sort of leaves the United States in the middle in a sense; since China has made overt threats against certain chips companies too.

It's hard to suggest institutions putting big money into the stock market at high valuations for the Senior Indexes; but most funds are sitting with large sums of liquidity in their portfolios, and may well look to take advantage of this drop that they have wanted to see for months really. Will that occur and be wise; of course only time will tell. But that's also what we said early in the tariff panic; however Senior Indexes like the S&P were at lower relative valuations.

Bottom-line: finally the market has faltered in 'rocktober'... AI, data-centers (not our favorite), Oil, and even our 'new-era' tickers; all go clipped by varying degrees. A couple actually broke out Friday in the hour 'before' the China syndrome combined with Trump to hit markets.

Tech, Quantum, cyclicals, retail ... across the Board they ran for the hills. They did this in the original tariff panic and it was a buying opportunity. Now it is the 4th Quarter, and funds want in. But I think they need some sort of proof that 'this too' will be an event, or geopolitical struggle, that passes with time. It is too soon to tell; but particularly in 'Defense' and Quantum stocks (that are domestic-centric and not so reliant on Chinese 'rare earth' or other component parts), should benefit after this shakeout and compelled (margin) liquidation.

So we have the worst (heaviest) day since April and a retreat from record high levels in most indexes, and frankly it's overdue. As to particular tickers looking for 'contract awards', from the 'War Department' or TSA or CBT and so on; it's exciting in a sense. Because if those are upcoming they still are, irrespective of the geopolitically-based dramatic shakeout. So will those be trading buys in weakness in the days ahead. Probably so. But again overreaction in specialty stocks (including drones) does not mean a resolution to what ails the S&P.

So we will look for washouts and buys (or at least certainly hold where able) new-era tickers (yes including Quantum) with an open mind to seeking some sort of resolution or mediation regarding China trade.. but right now too soon.

If this is posturing before the end-of-month Xi-Trump meeting; then it's time to look at Monday panic (or washout) to set-up a significant rebound.. but we don't know that yet. If it is we get through this and you first liquidate leveraged speculators, to then run stocks higher right into Earnings Season. Seasonality has prevailed, and while not particularly pleased at the nature of tantrum of a geopolitical nature, that was the greatest risk for 'rocktober', and here we are.

P.S. after the Close Trump doubled-down. Added 100% tariffs on everything on-top of existing tariffs; and 100% on software. Of course this is negotiating.. but if China assume that then he may not make progress. Is he bluffing or not is the question. And next week starts a Quarterly Earnings Parade. Solve the shutdown and let's roll; at least in companies likely to get Federal contracts.

Trump did NOT call off meeting Xi; only threatened. Tough negotiating has been the pattern with Trump and Xi; and even higher broader tariff threats were made; not implemented. And because everyone knows margin calls will hit early Monday (deal over the weekend or not), there is broad expectation of a further decline; hence nobody was really willing to buy the dips... as of yet.

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