E Market Briefing For Thursday, Sept. 24

Rapid sobriety returned - with a vengeance, just slightly before expected anyway in the course of 'evolution' of the S&P decline, and this time the selling was broader in a sense (with a reason I'll suggest) than merely being led by the 'super-caps'.  

They, for sure, also cratered somewhat and that would be as outlined for weeks since we identified not merely the probability of correction, but a specific blow-off peak that I described as an 'S&P overshoot' as the key senior index exceeded a then-rising-tops pattern (above the 'standard deviation' envelope or 'band') typical of a top. (VIX)

Executive summary:  

  • Market break today was just hours (at most) ahead of expectations, within context of our projected 3rd leg down, with a break, intraweek rebound, then lower.
  • The decline was broader than the S&P, primarily because of Oil (OIL) breaking down in the wake of the California decision, and realization of 'zero emission' implications on a broad variety of industries, and not just in the 'Golden State'.
  • Though media isn't reporting it (as far as I know), we learned that at least one of the largest brokerages is 'soon' going to increased margin requirements, rather specifically because of concerns about volatility associated with the Elections.
  • We totally agree with such defensive stances, and may help insulate the firms (and their clients whether they like it or not) from some of the potential risks.
  • I also believe today's report of Citigroup (C) shuttering its retail options business (as relates to 'order flow' from most discount brokerages), is a big deal, and some of that has been how the industry coped with zeroed-out trading commissions,
  • Presumptions (with we have shared about S&P prospects) that resumptions of downtrends was probable, tended to provoke selling without waiting for 'proof' or more evidence, especially after the higher margin trend became evidenced).
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