Panic a couple weeks ago - was (as market action validated my opinion by action) was nothing more than a response to Japan's rate hike, on the 'Carry Trade' implosion, combining for sure with an anticipated 'algo-driven' selling squall as S&P 5400 broke down. A little complex, but that's how it unfolded. I mention this because while I want the Fed to cut rates, I didn't think it should have been because of that market purge, as it was likely destined 'anyway'.

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Recovered it all since then, and a bit more than filing the (upside target) gaps I outlined. Besides DJIA back to 40,000, S&P is decently back over 5400, so we may get to a point anytime where the Index feels slightly top-heavy again. But it's August, so even into September (with allowance alternating swings), I see no reason to become comfortable with revived optimism, nor pessimistic.

You have a slowing consumer, even tapped-out consumption at some levels, I have referred to this is one of many bifurcated areas of the American scene of this era. People had too much money in their pocket, maybe even a function if one gets carried-away, of a guilty Government that knew they failed to react to the pandemic properly, then got carried away with restrictions, so bought their way out of it with credits, random checks, over-stayed ultra-low interest rates, or so on. It's unimportant other than the economy is slower or more 'ordinary'.

Since S&P (SPX) behavior roughly falls into-line with July and August expectations, (I don't need to review the pattern call, but close enough), we term this as just a 'relief rally' at least for now. The depth of the preceding decline was viewed by most as serious, but it was almost to our ideal measure of 4900-5100 and did not 'evoke' panic as you heard elsewhere, as the conditions were mostly a function of the (described) causes of a breakdown and not a seminal shift.

For sure that matters because we 'might' meander within this 'seasick' mood, a way to describe uncertainty, all the way until the Fed meets, but S&P stays open to a further shakeout more from geopolitical events, than from monetary policies everyone keeps talking about. The Fed move is already factored-into analyst thinking, so I would only see a 'surprise' if they fail to cut next month, while of course drama can occur depending what happens internationally.

Market X-ray: 

The Wednesday scorecard was just mixed: DJIA up a couple hundred, the Russell (and most small-caps) down, and S&P up about 20, as Nasdaq was +5, almost flat for the session. No definitive changes.

Bottom-line: 

Upside should be nearly exhausted for our 'relief rally' rebound. However, 'if' (long shot) there was a ceasefire in Gaza, that would give Iran an excuse 'not' to attack for now (but we wouldn't trust any such proclamation). In fact that's why I noted the Russian Air Force flights to Iran, presumably they're facilitating the ability of the radical mullahs to cause more trouble. And if they plan some 'surprise' attack, they might wait for 'after' ceasefire or stabilization efforts, or even weeks until the U.S. Navy tires of being on 'Med' alert status.

On Iran, a bit of sarcasm perhaps: one Brit writes me that Ayatollah Khamenei ordered not to launch a “retaliation” until “traitors” involved in the liquidation of Haniyeh are identified. I'd say the el-supremo Iranian ruler probably has things in common with Maduro in Venezuela.. both want to make sure that nothing gets into his bedroom in the event of an attack or uprising.

The Ayatollah and Maduro want to sleep peacefully, but “sleeping peacefully” is understood differently by anyone other than in Tehran or Caracas. Judging by media as to Iran, so far Iranian intelligence services adhere to the version that the Mossad managed to “interest” someone from the Ansar Al-Mahdi unit, part of the IRGC radicals, who put explosives in the Tehran guesthouse room.

Khamenei summoned the heads of the IRGC several times over the past few days, the Brit says. “For him, revenge on traitors is far more important at the moment than revenge on Israel.” Aha.. and according to the NYT , it's much worse. The Ayatollah is not sure he can trust his guards in event of an attack on Israel. After all, a missile aimed at Tel Aviv could fly to his residence... (if only the IDF could reprogram a missiles targeting software accordingly :) ).

Stocks, more of the same tomorrow, even slightly defensive later. Might have a reaction to overhanging angst about Hamas not returning to negotiations. It is a pretty irresolute time when I'm thinking more about how to take-out Iran's terror regime, which of course would be welcomed by most Persian people.

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Market Briefing For Wednesday, August 14
Market Briefing For Tuesday, August 13
Market Briefing For Monday, August 12