Headwinds are limited and predictable ahead of tomorrow's CPI, then PPI on Thursday. Defensive action would look about the same whether this is just a pause before grinding a bit higher, or part of a resumption of 'turbulence', as would be perfectly normal including seasonal prospects.

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However, there is a so-called 'delta' between a friendlier CPI and Fed plans of course, and some aspects of CPI, like 'rent', remain impediments to big drops. At the same time you have had warnings from both Nvidia (NVDA) and Micron (MU), so in a sense that can telegraph to most of the semiconductor industry short-term.

Generally most stocks recovered somewhat in the afternoon, but the litigation against Alphabet (Google search related) or the Semiconductor question do impinge on the near-term bullish case, although I continue to avoid negativity being excessive for now, with an expectation of alternating turbulent periods.

I don't expect a new 'recession' to wipe-out earnings because technically we had the recession I've spoken about for months, and there was a capitulation of sorts in May and June, leading to our expected rally from late June forward. I realize it's extended and suspected some of that was embellished by 'flight capital' mostly from Asia and Europe, which also accounted for Dollar strength that we had looked for over a long time. These factors should ease a bit.

In-sum: 

Much of the market recovered moderately ahead of CPI but mostly it was an on-hold session with lots of angst ahead of the numbers.

Much of Tuesday's selling recovered moderately, but distractions ranging from the CPI anticipation, to Micron's warning .. possibly implying near-term risk in the semiconductor sector .. (valid but there is also a 'Neon' shortage coming that is unrelated to the other aspects), to even extrapolating what might have been involved in the search of Mar-a-Lago yesterday (which has riled-up lots of politicians, jumping to conclusions before evaluating any 'probable cause' or lack, for which the public remains relatively clueless about), to fears that a well-known recession in the UK is rendering Britain almost declining to what's called 'developing nation' status (and I'll dispute that unless the same applies to parts of the US at this point too), to the ongoing stress over Ukraine.

All of these are factors or variables that remain, plus Taiwan (with assurance from the Pentagon that the Chinese are not ready to attack the island 'as yet'). But mostly this is a consolidation at a high level ahead of the CPI and has lots of analysts and technicians (bull and bear alike) primed for some correction.

What we can't really evaluate is whether there are newly 'forthcoming' political actions, related to civil disobedience, which whether the process goes forward with or without justification, somehow results in some ugly even spooking the stock market indexes, which otherwise should be immune from being caught up in the political or judicial sequence related to the January 6th investigation.

We don't have a way to answer that question, and there won't be a release of the affidavit that allowed the obtaining of the warrant. So along with others we are curious and will reflect on whatever might be required 'if' it relates to risks or behavior of the market, which is sensitive after a rally and in August no less (a seasonally tricky time of year which is nicknamed 'Dog Days of Summer').

While the touchy subjects percolate, this market has frustrated skeptics and a slew of 'normally' bullish money managers who also disbelieved the rebound. So that's just how it is, and is slightly reminiscent of the 2020 Summer, as the S&P continued advancing from our preceding March 'Inger Bottom' low and in fact it was the upside capitulation then that helped the Averages blossom.

Here we had a downside capitulation in May and early June, setting-up what I called a seasonal rebound into early-mid July, and it kept going grudgingly at times. Now between S&P 4100-4200 that's about as high as we measured, so sure, it can go higher, but probably with difficulty given the backdrop.

Bottom-line: 

On-hold ahead of CPI, and if we get a big drop and big spike (not too likely for the latter), it probably gets sold into, or at least temporary peaks, possibly tied-into the PPI that comes on Thursday. Individual stocks are behaving independently, which is a sign of varying influences now, and that's probably a good thing (as there's often too much 'crowd behavior').

More By This Author:

Market Briefing For Tuesday, Aug. 9
Market Briefing For Monday, Aug. 8
Market Briefing For Thursday, Aug. 4