Heads were spinning - as Japan attacked Pearl Harbor on this fateful day of 1941. With all the rolling-in of enemy fighters from different angles-of-attack, it was difficult to know where to focus defenses, we must never forgot all of it. In Wednesday's outside-down day, you see the bulls battle lost for the day, as a slew of pundits tries to figure things out. Please, this is a normal S&P setback.

In assessing markets just now, there are whipsawing narratives and confusing economic data that are also rolling-in from different directions, and difficult for any analyst to 'decode' with reliability as to what's forthcoming. Hence talk of a 'rolling recession' versus 'rolling recovery', as various economist try hard to grasp in efforts to explain what this is.

To me it's just the bifurcated markets I outlined and seasonal pattern. There's a lot of nuance under the surface, with the manufacturing recession ongoing and services remaining strong, all while the labor market moderates. And we have the Jobs number of Friday, so maybe Thursday is erratic and shuffles.

There's a lot of nuance under the surface, with the manufacturing recession ongoing and services remaining strong, all while the labor market moderates. I would not bother over-analyzing all this, and recognize a multiple personality market, that has actually confounded investors and analysts most of the year.

Much of the economic and payroll data dovetail in soft-enough fashion to feed into the idea of a Federal Reserve rate-cutting narrative for 2024. Maybe even QE returning to replace QT, 'if' it becomes necessary should formal recession prevail, which you know they won't want to acknowledge ahead of Elections. I think this means you won't pivot to aggressive rate-cutting, but on the horizon.

Market X-Ray: 

Smaller-caps are eroding too, but shine compared to the 'once magnificent seven' that we've anticipated would leave a first-half of December 'pause to refresh', unlikely to be catastrophic (barring a feared terror attack on the United States...as we can't be totally oblivious to the FBI Director's warning express to Congress yesterday). Ideally things improve later in the month.

Lots of stocks are 'just a hold' and let the year-end shuffle play itself out a bit.

If there is another geopolitical shock (or God-forbid a domestic terror attack), it would hit the market, and presumably be an optimum entry point not exit, at the same time nobody in their right mind wants that. (I might mention that just before Hamas attacked Israel on October 7, there was heavy short-selling of a number of Tel Aviv Indexes, 'as if' someone outside of Israel knew a reason to do so and then cover after. Reminds me of reports before the 9/11 attack, that Saudi traders were shorting the U.S. market through London accounts.. of course you never heard about that in mainstream coverage... besides sure they knew.. official or not, the Saudi's financed the primarily-Saudi hijackers. It is not Islamophobia when it's an accurate revelation of foreknowledge of war.

Let me again say, with WTI Oil under 70, 'now' again the U.S. Government ought to be buying for the Strategic Petroleum Reserve, despite nonsense of the type believing they can move to sustainable resources sooner than later. I realize Oil stocks have a dimmer future, but not all of them.. Chevron for one is investing in renewable and alternative energy.. but I wouldn't buy any of the oil stocks now. Some of us have 'big oil' for years so that's fine, but not more.

Bottom-line:

Various explanations for the outside-down-day, which is a key reversal, focus on the Oil decline or big-cap valuation worries. That's right, but this is mostly about a nearly straight-up S&P 'A-wave' we looked for, and it's now part of the 'B-wave' correction, anticipated.

It should go without say that there was no reason for anyone to have chased big stocks higher, and some reason to accumulate bargains in small stocks a money manager might assess as likely to survive or even thrive next year.

Countdown to the Jobs report, but short-term even a rally then would likely only flail, then fail, but again we view sell-offs as selective entry not exit spots.

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