'Covid the Sequel'  could be the marquee title for what's ailing the market; of course aside seasonality aspects, plus uncorrected tech mega-cap(s) status.

Overwhelmed hospital systems, tapped-out staff, and low-vaccination rates in some of the states (which are the fastest getting vaccinated now that they've found their raison d'être) to step-up and 'bet' with rather than against vaccine. In a bit I'll speculate why you hear little 'truth' about natural immunity in Covid.

Nevertheless the data has been pretty bad; as forewarned it would be. I think Hollywood talking about resuming 'mask-wearing' on TV shows and movies is likely overkill; politicizing it more by Los Angeles commanding masks even in the case of fully vaccinated people; recently told they didn't need to wear any.

We do need 'treatments' as once people have infections; vaccines do nothing regardless of how one views the issue of masks and/or vaccines. This is an issue for markets.

Meanwhile the same issues we've been concerned about aside pandemic, as it has exited the 'eye of the hurricane' to hit us from the other side (essentially) as we've believed was most likely; as it (Covid) was and remains the so-called 'wild card' of this Summer; and in my view more significant than interest rates.

We've discussed monetary policy and the Fed often enough not to belabor all of that again; which comes down to Fed watching all the way until Jackson Hole. And then, 'if' Covid is indeed in full-bloom (sadly probably will be just about the time kids go back to school) the Fed will have an excuse to justify their 'not' tapering; but of course talking about talking about tapering or so on.

Inventory levels are generally drained; the global resurgence of Covid / Delta, for sure plays a role (including shipping delays from China, on which we're so very dependent for so much, like it or not, for now); and the pressure on Pres. Biden (probably by Chancellor Merkel) to reopen regular air travel to Europe; well it makes little sense given a pandemic roaring back to life, so to speak.

The insurance mandate Cruise Industry companies are requiring. makes a trip a challenge; more expensive even if free WiFi and with a few cocktails thrown into the deal (I get these offers from Celebrity all the time and regardless, if I were fully recovered I'm doubting I'd do a Med or Greek Islands cruise 'yet'). The idea of low capacity might be intriguing for those wishing to relax or read; but do nothing; for the rest it makes cruising tenuous to familiarize (I didn't say fraternize lol) with other cruisers, and shore excursions almost impossible (as the requirement to 'only' disembark on excursions is safe; but also more profit for cruise lines, by preventing passengers hiring a taxi or a boat at any port).

But all this is why I've been defensive or negative on travel-related stocks for a few weeks; and generally they've headed lower. Now Delta (the airline not the virus) did get a good deal I understand on 29 'used' Boeing 737-900 ER's.

That's a good airplane. Smart guys. They avoided the MAX; threatened to go all Airbus; and instead replaced the retired (less fuel efficient) MD-80's & 90's with the 'best' Boeing 737. The Extended Range 737 carries about the same number of passengers with similar range as the MAX, which I'm sure Boeing wishes they hadn't bothered developing (talked about its woes log ago). (Now by the way, the MAX-10 'might' be a bit better balanced; because it's length is greater forward of the wings; so it might offset too-forward engine mounts.) A word about the current Flight Directive relative to 737 pressurization systems: that's just 2 switches in the cockpit and is being over-dramatized by media. It is true that defective switches have been found; and takes less than an hour for any average mechanic to change-out both switches if deemed necessary.

In sum: the market cracking almost as if on-cue (mid July) as far as S&P. As to the broader market; it continues the multi-month correction interspersed of course with rebounds; but not serious rallies that are able to retain traction.

The warnings by The White House about Chinese companies; stocks; or IPO exemptions in Hong Kong; are not just controversial; but moving targets and we won't be shorting; but weighed against the big Chinese stocks recently.

I do not think the market is confused; but financial media might be, as they're pretending we're near the highs; when that only refers to the Senior Indexes.

Observing earning reports: generally good to excellent. However sell on news is the prevailing up-down (then consolidate) response to favorable earnings.

The rallies overall in Oil and the Dollar (calmer these past couple days) are a bit of a weight on cyclicals as they fade a tad. Likewise the Bank & Oil rallies were, in my view, an essential component on the overall preceding upside.

The pace, or cadence, of growth..like the stock market largely, has been a rolling affair. I have called it a rolling 'bear market'; though few want to hear it. There's a plus to that; it means that many stocks may be nearer their lows; at the same time the uncorrected are more vulnerable. Talk about bifurcated!

In addition; we have the issue of serious rotation to stay-home / work-home stocks; as the approach to risk has been a disconnect not just from the Fed vs reality; but a realization that the stocks that were hot last year might not be so hot this year, 'even if' (heaven forbid) we were to go thru 'pandemic 2.0'. It's a reason I'm so focused on whether or not the psychological drama holds shy of lock-down (we can't or won't do that again). It's not exactly President Biden's July 4th 'Covid Independence' proclamation; though we all wish it was (and a bit curious who convinced him to stick with that as the surge was known).

In the near-term; the set-up is risky and we've forewarned of this time-frame a lot over recent weeks (even months) as forthcoming after interim strength just around the July 4th holiday. Well here we are; and major Indices at their lows on Close Friday.

So I do not concur with the idea of any significant bump from earnings that of course are streaming forth now. In isolated cases sure; but generally not at all so broad as last year or early this year. Many stocks are not being lifted even if their peers are up; and we've seen this evidence for some time.

On a more serious market issue; where I've seen small caps trade more than their entirely floating supply; in one case a single trade was greater; than does open lots of questions. Clarity about naked shorting and synthetic shares..well if manipulation (as small float stocks go crazy at times); it needs better grasp.

Handing off the technical risk to fundamental underpinnings (jobs and earning growth) is not a realistic move. I believe the Index overshot on the way down, back in March of last year; hence the 'Inger Bottom' as I termed it. And now I believe we've overshot to the upside; with the S&P 'correcting' rotationally for some time now', impossible as it sounds, while it made 'charade' record highs.

I particularly found President Biden's comment Friday that 'Facebook is killing people' with misinformation eye-opening; as well as Facebook's response that they are 'saving lives'. I won't wade into that; but perhaps the President might have been closer to reality by including (or differentiating) mentioning Twitter or inflammatory nonsense on YouTube, which lately scrubs lots of posts. I do know that Facebook tracks everything extremely well; hence although I rarely use it; somehow they keep trying to sell me digital pill dispensers. Hah. Hard to say if Facebook shares will drop after clashing with POTUS; but the pattern is somewhat negative; coming off a month long lateral high; about to break a key daily uptrend line; and facing ongoing (or additional) regulatory scrutiny.

So; although nothing has really changed; next week remains defensive.

S&P and others finished near or at lows on Friday and likely head lower; have a dubious intraweek bounce and then go defensive again. It's a process; like of course most evolutions in the market that aren't dramatic or exogenous sort of major events. As we've outlined 4400+/- resistance and 4200+/- support for S&P; the only footnote is the reminder that for now there's little potential on the upside and more risk on the downside (in theory way below 4200).

Even that will rotate and relate to Covid / Delta. More disappointments related to Covid at the Olympics (hope not, but being realistic) will make it hard for a beleaguered media (putting politics aside for those who can) to combine what is a recovering economy; rapid growth; declining forward spending intentions; and an equivocating Fed; while downplaying the effects of Covid the Sequel.

This turned into a long report.. over several computer sessions. I'm better, but not that strong; so must try to abbreviate reports. Oddly the S&P is still lateral weekly, if just a good bit more defensive on a daily basis.