Immediate headwinds piled up on the market; including (unlikely) Government Shutdown; which I thought weighed on Thursday action; as the tone from Congress clearly exhibited. In other words, not just interest rates; not just the UAW strike; not just the technical market structure; many factors.

There are pockets of concern in a number of areas; not all will be problematic, and not all will be skirted through. The economy itself ought to slow somewhat but not necessarily move into recession. An actual recession, some analysts think, is essential for the market to get the lower rates and higher stocks; well, I say the opposite. An actual recession of a full-blown nature would impact big-cap earning and actually justify declines in such stocks 'even more so' that their overpriced nature recently warranted.

The charts below highlights some of the well-known concerns. None secret of course; and probably underpin most very bearish perspectives. Hence why it's a time of crowded short-sides, and in the midst of an already-tanked market a cursory glance at the S&P or major Indexes doesn't really address. That's for the most part why we anticipated decline, but not catastrophe absent dramatic existential events, which can occur. More likely you get past the holiday; Ford possibly becomes the first to settle with the UAW, and there's a relief rally.

So, while I can't imagine Congress not coming to an understanding over the Government shutdown issue; I do grasp the problem of unbridled spending as well as Debt Service (which is why they 'want' inflation but limited, so reduce the 'real' impact of servicing out debt, but they'd like it without higher so-called entitlement spending; as they slowly discover that doesn't work in both ways).

While I believe that was Thursday's 'crunch time' selling; I also view Friday as a mixed consolidation session; but not much of a rebound considering selling that preceded, as far as the S&P. Semiconductors rebound better than most of the mega-caps; but all that says is to anticipate SOX to do better when the next 'serious' rally occurs. That could be next week; but let's see Monday first.

Market X-Rays: We looked for a defensive week between the Jewish holidays; and I guess that's an understatement. We had no higher S&P targets for the last two months; but plenty of downside prospects which are debatable.

Why? Because negativity is so heavy; option bets on the downside immense; and quite often that either denies much decline (did so for weeks); provides a bit of short-covering fuel for rebounds; but doesn't change longer-term metrics or prospects, which do relate more to interest rates and of course earnings as well as general business prospects.

Monday is Yom Kippur, as many money managers will atone for chasing the year's upside in mid-summer; after the majority of the mega-cap rally was as noted already done and overdone; with a last gasp effort to levitate prices.

We'll see if we get some pressures (absence of traders often equates to more of an absence of bids) and an opportunity for a rebound into midweek. But it's still 'this time of year', so sustainability prospects of any rally remain dubious.

Inflation will definitely not be so strong next year; and that's why 'softish' will still be the key to what happens; as despite what they say; full-bore economic recession is not good for the American people, for earnings, or for stocks in a funk already. However, if not too heavy (hence softish) you get a Fed reversal of policy and stocks bottom where value prevails, not simply a big-cap partial retracement. And that complicates determining valuation for S&P next year.

Bottom line: can't say this market's at 'washout levels' yet; but one or two more pummeling moves could set-up some sort of stabilization...as at the moment now it's merely holding at the primary rising bottoms trendline.

The overall so-called bull market was correctly identified; however it was one of the weakest in the entire post-World War II era; which in-part explains 'why' the money managers focused on big cap (high volume/high liquidity) stocks.

Now we have leverage concerns for the big-caps and small-caps eroding with concerns about tax-selling (offering accumulation spots for next year) and for sure high 'yield' environments cloud prospects for small firms needing capital.

However, settlement of the auto strike (perhaps Ford first); sidestepping risks of Government shutdown; and a post-Yom Kippur rebound, even if just relief, will put the speeze on uber-bears, at least temporarily; then likely lower later.

More By This Author:

Market Briefing For Thursday, Sep. 21
Market Briefing For Wednesday, Sep. 20
Market Briefing For Tuesday, Sep. 19