False breakout - over S&P 4000 preceding a sell-off was the expectation and delivered, however it wasn't expected to be quite so dramatic and swift. That was a factor of the backdrop, which was totally mixed amid Expiration too.

Prices for big-caps generally cratered after a Beige (Tan) Book report which showed weakness in most sectors, but there's more than that. You had some conflicting comments from regional Fed-heads, with Jim Bullard more dovish than we've heard lately, and Ester George still hawkish.

These comments (Bullard's especially) helped the early upside, given that he remarked existing Federal Reserve policy 'may be entering restrictive areas'. Bullard's remarks helped the disinflation argument, while George's countered that just minutes later. The reality is Bullard is correct and prices are easing.

Of course you don't see that in the Oil market, because demand is increasing and especially so as China emerges from COVID lock-down suppression. And, importantly, the 'frienemy' Saudi Arabia today repeated at Davos the interest in 'other than Dollar' Oil transactions, hence speculation about 'Petro-yuans' (China) instead of 'Petro-Dollars' (in which Oil trades for over half a Century).

I doubt that will happen, but the Saudi's verbalized what indirectly supports a diminution of the Dollar as 'global reserve currency' so thus supports exactly what a Russian/Chinese axis is trying to develop. Be careful with the Saudis.

Also at Davos there was Henry Kissinger's speech by video, advocating that Ukraine be invited to join NATO, which reverses his approach of last year. It's fairly logical in a sense, but also provocative vis-a-vis Russia. But Putin has become so loony that he thinks he can bomb Ukraine into submission, which only leverages those 'within' NATO who want to confront him more directly.

In-sum: 

Initially S&P reacted well to bad news, then reversed and the overall paradigm has shifted a bit to 'has the Fed gone too far and too fast'.. Yes that is so. And some in the Fed want to tamp-down optimism to keep enthusiasm low and repel repeated S&P thrusts to or slightly above the 4000 level.

The Fed won't offer opinions on the stock market, but yes they have mentality issues about correlating prosperity with inflation, which isn't direct correlation.

This is a tricky week, with Expiration. And yes a vast majority of technicians as well as analysts are not blending the factors and cheering for downside. I know that, we talked about how they 'need' a break of October's low not for a bearish purpose, but for entry 'into' stocks that they missed from recent lows.

There is the prospect of a soft-landing, and that is not dispelled by today's hit. The base case remains a shakeout, with short-term variable behavior related to Expiration, psychology shifting, Oil prices (higher), and mixed Fed-heads.

Certain technology stocks are well-positioned for rallying over time, others for sure the opposite. Some of the mega-caps are either controversial or pricey, or both, and the largest companies are not as invincible as they were before.

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