'The few vs. the many' - having led the upside romp especially lately, sported nothing particularly distinguishing about the move besides 'trend in motion'. It was our 'Generals out in-front of the troops' analogy, but also big distortions of the true growth picture and prospects by some major economists.

Pixabay

Downward revisions of growth by the Atlanta Fed 'reverse' prior expectations, although it's particularly interesting since 'heavier' economic conditions tend to keep the Fed more 'at-bay', though that remains to be seen. In the face of the continuation of the pandemic, the forthcoming commencement of tapering, as well as the questionable and varied forward guidance, this is no wonder.

Executive summary:

• Iran agreed to resume 'nuclear talks', and that's being cited as an excuse for the drop in Oil, which we already had called as 'having achieved' quite enough by marching into the 80's, and wasn't heading to 100-130 as just a few pundits and analysts have inferred (at least not for now).

• The largest-ever 'allied aerial training exercises' are beginning in Israel, with the U.S., the U.K., France and Germany participating...all from a big Israeli Air Force base not far from Eilat (near the Red Sea).

• This is stated as 'not' a rehearsal for bombing Iran's nuclear facilities but it strikes me as 'coincidental' that Tehran agreed to the talks 'now', perhaps they got the message that is implied if not intended, especially as these 'jet fighter / bombing' exercises are multinational and inter-operational.

• Globally the pandemic remains tense, including of course China property developer collapse risk, and several countries that reduced restrictions as relate to COVID and not as free of it as they expected, including Denmark.

• Fiscal and monetary policy is mostly what's worrying markets, although it was notable the Yield Curve flattened pretty solidly, which is negative for Banks short-term only, a steepening of the curve is likely next year.

• Crypto, especially Bitcoin (BITCOMP), remain under pressure, as has been the case since I missed the preceding rally, but nailed the idea of it topping just as the crypto ETF was launched, as that indeed was the top day for now.

• On the fighting COVID front, top-line data results of tests expected, related to ARDS were released by Sorrento (SRNE), results were encouraging in both the USA and Brazilian Phase 2 Studies of Abivertinib, good considering it was given to people already in the hospital receiving oxygen support.

• The U.S. patients were in ICU's, whereas in Brazil merely hospitalized, in both cases they estimated a 20-25% reduction in severity and a 2-3 day faster release from ICU (I'm unable to evaluate if they wanted more), and I presume (I don't think they stated) that it moves to Phase 3.

• SRNE shares popped a bit on the news then sold-off (typical on news of anything that's not ready to market and produce revenue), however that was news just as the broad market accelerated to the downside a bit, on the other hand if they announce 'specific' distributors or Covi-Stix sales, I suspect it would pop and even enter an uptrend (shorts are less active).

• Now, 'if' Sorrento's results were presented properly, we would see that there's a 69.6% survival with Abivtinib, vs 44.4% without, that is a 25.2% gain which represents an advantage of greater than 56% better survival likelihood, as compared to the current standard of care (SOC), so all I'll say about that is ask if they purposly phrased it to understate results... makes no sense, so it suggests low competency at preparing a PR.

• Ford (F) beat on revenues, initiated a small dividend, and increased fiscal year guidance, while also noting their semiconductor supplies improved.

• Ford expects over 40 billion expenditures (EV related mostly) from '22-25 but did not change Fiscal Year free cash flow guidance (long from around 12 and as oft-noted, prefer it to GM (GM), though liked both a lower prices), the rollout of the F150 EV is going to be the highlight of the year ahead, lots more affordable and perhaps practical (dealerships around if need) vs. of course publicity afforded to Tesla's (TSLA) coming pick-up (both are aluminum).

• Lastly, two key employees of Rockley Photonics (COO and CFO, both in Pasadena, not the UK by the way) were awarded large over 100k shares options which can only vest in 3 year increments, incentive to succeed.

• All this underscored their solid numbers and supports our vision since 12 that it was worth more, on-top of being the superior investment to GM, given various aspects, although we don't also liked GM.. from the 30's.

• Dangers continue to lurk for the S&P and over-blown mega-caps.

There is another view of 'matters'. The Fed and even other central banks are trying to 'not have their hands forced', so they can push-out significant taper a bit longer. I'm saying 'maybe' growth really is so bad, perhaps the patterns as relate to estimates for 2022 aren't that different this week to a month ago.

If that's the case it might be that this gives maneuvering room to the Fed sort of enabling 'holding back' the hawkish tendencies (while actually justified for a number of reasons) while telegraphing a none-too-subtle message to where it matters at the moment: Congress. Nobody will say this, but mediocre growth would make politicians more willing to support the big spending bills... just one thought I'm having. I'm not saying they should or shouldn't, but if they're now at the point of a 'few hundred billion' difference in negotiations, a message the Fed thinks things are weakening for the economic outlook might spur them.

In-sum: 

The market was not only on fumes, but posturing for decline for days in my view, so we had the 'red flag' warnings going through the last rally. Now today you had Oils & Banks both waning, so as 'good news selling' occurred in a majority of mega-caps (which remain over-inflated in a sense), it was set for the unwinding. Of course the Atlanta Fed growth cut assisted the swoon.

The 5-year Auction almost seems orchestrated by the Fed to suppress rates (did Atlanta cut GDP estimates ahead of the Auction for 'effect'?). Anyway, it means dealers were left holding fewer bonds. The bid-to-cover certainly didn't soar, but rose to levels that leave it below about 70% other issuances shown in the past decade, and it rose by a smaller increment than many other spikes along the path. So dealers wind-up holding fewer bonds, bid-to-cover 'bumps', with the financial markets pondering the (genuinely uncertain) GDP outlook.