Lighting the path for the market's rotational topping process; we have for several weeks described markets as in an 'exhaustion phase', as rotational selling in one sector was offset temporarily by buying in other sectors, like of course old-line Industrial types (which typically are less volatile than techs). Today only one stock we follow really defied the decline.

As this evolved, equity markets are internally throttling back and have been for more than a month, regardless of the Indexes sporadically venturing into levels above any reasonable expectation. Meanwhile Oscillators and clearly the Advance/Decline Line(s) have decently reflected the 'real' market tone.

Now there has been a spate of wishful-thinking pundit-cheered perceptions, that really make little sense. One of those was the idea of compressed rises because buybacks reduced 'floating supply' of shares available to trade. For sure the same enthusiasts forgot the rotational aspect and how that works in both directions; similar to how leverage helps on the way up, but is a killer in the liquidation process.

Last week's one-day downside shakeout was a first recent preview of this kind of volatility, and as suspected, today was another. The direct-lending and high-yield markets are not priced for the risk that exists; and of course the markets are awaiting Thursday's ECB reflections as well. Meanwhile do note that the leader of Catalonia 'cancelled' plans (for now) to speak at the Senate in Madrid; perhaps fearful that the tough guys there would arrest him on the spot. There are pending votes (honored or not; and interfered with or not by the Federal Police) coming in Barcelona perhaps tomorrow. It matters to the Euro and the Dollar as to whether Catalonia actually flat-out revolts.

Meanwhile Apple has again been in the news; as constrained supply is well known for iPhone X, but the idea of Apple sacrificing 'quality for quantity' by reducing the accuracy of the Laser-Dot (Facial Recognition) components to get a higher 'yield' in production, circulated and was debunked by Apple.

Also there was just one shining upside stock Thursday, and technically had some meaning. LightPath Technology (LPTH) finally popped-over 3, ahead of the Annual Meeting (which I'll attend, hence may defer a couple intraday reports depending on the duration of the gathering). I watched the 'march upward' in terms of the spreads and size and it was persistent buyer(s) absorption of it seem every overhanging share on the books as it was relentless upside for about a half hour. Then they let it settle down a bit after 2 million shares.

(While I haven't expected news announcements at the Annual Meeting I will attend tomorrow, I recently updated a bit about their increasing focus and a possible business association related to LIDAR. It's clear that part of future growth is not reflected in current revenue; thus shares have moved forward on already-promising results including the wholly-owned ISP Optics division. Hence any growth from LIDAR is, excuse the pun, 'under the radar', as for that matter is the stock, which has doubled from original January selection.) 

Going a bit off the track here, there are stories about Tesla (TSLA) misjudging by its moving to an in-house autopilot product (perhaps contributing to the irritated owners both in the U.S. and the recent gathering in Amsterdam). Whether it can be pinpointed or not, Tesla's crashed more often since abandoning prior systems from MobilEye (MBLY). While it's premature to draw too many inferences; it may be worth noting that the company starting production near LightPath in Orlando (Luminar) claims about 10 times more accuracy to their system. For now Toyota (TM) signed a contract with them for prototypes, and we do not know if they are (yet) using LightPath glass in their systems; though they may now or in the future; or there could be no relationship, or something greater (both optical glass and Infrared are utilized in autonomous driving systems). The idea here is that the newer systems (such as evolving in Orlando) are safer and more accurate than what has existed. And the history of LightPath most recently shows a majority of manufacturers as customers to some degree. 

As for LPTH share performance, I've suggested for some time the shares, in an ideal pattern, would pop over the 3 level before the Meeting. That's now happened as buyers cleaned up virtually every overhanging nearby offer for sale, and in less than half an hour constantly bid it up to then let it rest. My view: that even without any benefit from the new LIDAR possibilities, market capitalization should be roughly double where it is now; eventually more. It was rebuffed for awhile from the 3 area; now it popped through. Perhaps we will see it have less restraint getting from 3 to 4 than we had from 2.40 to 3. It has more than doubled since selection as 'speculative pick-of-the-year' in January. We continue to view it as generally undervalued and little known.

Technically, the market has been in what I termed an 'exhaustion phase' at least for several weeks. Within this pattern rotational action tried to conceal the tired behavior stretching the Dow Industrials higher, but with the S&P for the most part lagging; and often with a negative breadth disparity. Internals (including Oscillators and A/D Lines) have affirmed this deterioration.

Fundamentally, growth is so mediocre that pundits are resorting to claiming buybacks will again be key to next year's market gains. Really? That would require slow growth because higher interest rates reduce that attractiveness for companies. So does any 'real' boom related to reconstruction for storms this year; which we believe will indeed contribute to jobs and business and in fact can already be tracked to new home sales in the South. Add any Bill that feeds infrastructure programs; and you have a potential 'real' recovery.

Bottom line: 'Air pockets' like Chipotle (CMG) and Advanced Micro (AMD) do reveal the nature of overzealous optimism on stocks; technically, fundamentally, or just upside greed and perpetuation of trying to buy dips instead of realizing this has been a sell-the-rallies market for some time in numerous sectors.

We maintain our 'exhaustion phase' perspective; with variable risk degrees that may flow from a market break, as we have discussed. This has been a 'Greater Fool Theory' game for awhile now, as markets are revealing.