Finishing the quarter with tomorrow's re-balancing, the rebound occurred as projected, while markets continue dealing with more than quarter's end.

The month will likely be the most down for the Indexes in over a year, and the concern you're hearing from many analysts now is 'after the fact' of year-long (almost) distribution in small and mid-cap stocks, with the S&P covering it up. There is no surprise having warned of August, September and October.

Inflation might cool a bit, but still be relatively hot when we get the CPI around mid-October. We've warned of 'risks' (even an accelerated taper possibility is out there), but I think (unfortunately) some of the 'threatening' chatter heard at a Congressional Hearing by Powell & Yellen was excessively political.

If we hear anything from the FOMC directly, not while Congress debates bills, then the concern and a normal Index correction, can become more agitated. Technically, a lot of mega-cap tech stocks made highs below highs, and were supported as we'd speculated by Oils and Financials, though that was seen as insufficient keep the bears outside the gates (I didn't say barbarians).

To the Chinese mess impacting millions of their citizen homeowners (in some cases compelled to buy units they know can't even be leased), we hope they continue to exercise responsible financial moves, if impossible geopolitically.

It isn't on the front-burner these days, but Biden (approve or not) might have smoothed some issues with China. However that's not clear, and the world is filled with relics of appeasement at crucial times. At least we finally heard the believable version of what happened in Afghanistan from General Miley. Not to praise him particularly, but the quasi-political line they were taking was total nonsense as any middle school kid that plays war video games would know.

Against this backdrop, the U.S. Dollar is stronger, not weaker, as preferred. It isn't likely going a lot higher, but remains firm at the top of a trading range or a bit more. More indeed, will be discussed after we review Sorrento's first day of supposed transperency (which omitted much that we'd like to know, but if they execute well with products it will reduce, pain, prevent disease and save lives, which incidentally is intended to be a main reason wanting them to succeed).

The mandate of fighting inflation is real, and I've said that all along (enduring not transitory). In this case as this Country 'wants' to emerge from pandemic, demand exceeds supply, which is not what consumers are used to. On top of it you have a financial crisis simmering without resolution yet in China, and it matters too.

In-sum: 

Today's S&P and NASDAQ bounce was important and required. So it unfolded, while markets are freaked at the early stages of monetary policy shifts, not to mention the drama surrounding Federal spending (SPX, COMP).

Inflation has been viewed by us as 'enduring', not 'transitory', however that's a factor we've known for weeks. So some uncertainty with the questionable as well as upsetting (to the public) comments by the Treasury Sec'y. which very much seemed to be used by Congress to get Yellen (and Powell) to comment in such a political way, which risks compromising confidence in the Fed.

Tomorrow is month-end and Quarterly Pension fund re-balancing.

A 'pivoting' towards certain cyclicals was our idea for holding the market up all year, and perhaps some of the suddenly-favorable views on Oils & Banks is associated with the need to get Pension Funds to point money there with the re-balancing. Hard to say, but they're loaded with the hyper-expensive techs.

Many techs (and related ETF's) are off 20-30% or more, and many so-called 'best' tech plays turned-out to be just what we expected: a crowding into the mega-cap stocks late in the game for the preceding cycle.

That gave an illusion of strength that wasn't there, and likewise extraordinary impact such stocks have on the S&P index will actually help drive value back, over time. Like I've said it's the period of September and October, not merely a single day event.

What we had on Wednesday was a reasonable, but indecisive rebound, just it bears pointing-out, where it needed to be mounted: as a secondary test of the preceding low. That doesn't mean it will hold for long, but might tomorrow if of course the funds really do continue absorbing supply, especially Oil & Banks.

Wrapping-up:

This market is not just about Yields, though that's obviously the stun of the week, including Powell's comments about 'structural' inflation. He said that (agreeing with me in-essence) and then said most will be transitory.

He can't have it both ways, though if you look at Dollar Tree's (DLTR) price increase (the bane of all the millionaires shopping for bargains), they're sounding alarm bells. But most of what they say comes from Asia, so it's not even available. It is a price-trend that's been going on for a few months, but then the Fed Chair saying it's 'frustrating' and of course Yellen's 'catastrophe' comment, well that is the backdrop of a technical pattern that adhered to the general projection.