E Market Briefing For Tuesday, Dec. 22

Post-expiration sell-offs - such as Monday morning's, are not uncommon at all, and we discussed that. As well the prospect of a turnaround albeit not that dramatic going forward, even though we had a dramatic turnaround today.

We expected that Monday morning. It doesn't mean a shakeout can't occur in the near-term but actually it just did. Lasted a whole 45 minutes. Seriously this just show how the shakeouts -for now- don't gain real traction.

To a degree the S&P absorbed a lot of selling-pressure from re-balancing, as well as the inclusion of Tesla (contributed to volatility), and some rotation has not occurred as dramatically in bonds or financials as Wall Street focuses on.

Largely (aside the normal decline after Expiration) there was response to the horrendous situation we wrote about in the UK over the weekend. 

Manipulation . . . might be commencing, in an odd way. You've had massive run-up's in many stocks, lots of bad news relatively ignored by markets (the cyber-attack being the outlier, while the dismissal of post-election autopsies is debatable as to whether unsettling repercussions are still forthcoming), and of course COVID and the lack of an effective 'relief' bill, at least as of press-time (but forthcoming it must be assumed).

While I think the Fed sees the behavior and is making use of its toolbox early in this situation, the allowing Banks to resume 'buybacks' might signal more in terms of 'stabilization' efforts, than merely fortifying the economy (or market).

Big-caps remain extended, as bears continue 'fighting the Fed', even as for sure, a post-Expiration pause would be normal, but Tesla might mix that up.

Now, S&P prices aren't cheap in the leadership area, compelling focusing on overlooked issues. That's more key, so actually minimizes the behavior of the big-caps in a sense as predictive of money-making approaches to 2021.

I explained this week, that even as a shakeout is due I prefer listening to the 'messages of the market', which haven't reinforced odds of significant decline. That's been in-part by virtue of internal corrections, with a host of small stocks never really recovering to the Summer highs, working off their 'then' extended levels, or now encountering some year-end tax selling too. Some of these will probably do fairly well in January, after such pressures tend to abate.

Executive Summary:

  • The insidious cyber-attack would not bring a new 'cold war' with Russia in a Trump Administration (he has barely said a word about it apparently as he suggests it was China), but with a new Pres., (or woman) it just might.
  • Saturday's tweets by Trump directly contradicted Sec'y. of State Pompeo, as whoever is, the attacks are insidious and dangerous, not overstated.
  • Hence I elevate the 2021 geopolitical risks, aside the 'Roaring 20's' stock market call that otherwise should prevail once we 'pass peak COVID'.
  • What will be done about Russia, taking center-stage away from China, is going to be assessed as more is grasped, but sounds pretty dire overall, and the 'bull market' extension case does 'not' include ramping tensions but actually a calmer time to rebuild infrastructure and expand innovation.
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