Intraday volatility - was again the highlight of the session, which tells you we have moved-on from last year, as no seamless charade is seen, like when the S&P led only a few up, exists in this market. Tonight S&P futures recovering a bit from a heavy hit after the Microsoft (MSFT) earnings report, so the morning will be a mixed affair ahead of the Fed statement, which will be key to the outcome.

However, it's a 'take no prisoners' environment just getting going, with what is being described as one of the more important earnings seasons coming up. A lot of companies should report good results, but often the shares previously of course discounted that. So many will be very cautious with forward guidance.

The multiple U-turns today, in what should have been more consolidation just ahead of the Fed's decision, reflects the character of 'take no prisoners', buy the dips, and run for the hills on the slightest hiccup. Is that ridiculous? Sure. However it is a reflection of what can be a 'bear market' continuation pattern.

Nevertheless the most such volatile alternating reversals usually occur at or near washout lows in a Bear Market, not merely 10% off the S&P highs. That is further complicated by a majority of stocks which are down way more than that, and often do look like they're trying to pound-out a bottoming pattern. It's complicated by the monetary, geopolitical and even 'global health' issues. I've discussed all these, so won't delve into them more on this mixed pre-Fed day.

In-sum: 

A very interesting, surprisingly volatile session in both directions, as S&P made a rapid U-turn and then built-upon a solid Treasury auction before a late fade. The big-caps and small-caps generally moved in-sync during this swinging day.

Clearly short-term expectations for the moment hinge on the Fed statement, or more dramatically, should they pre-empt themselves and hike without the broadly-anticipated move in March. I talked about that in the 2nd video, with a possible correlation to whether the Fed will really be so aggressive given the obvious concerns the evolving January swoon expressed.

Now we have a market that can tank Wednesday morning on the chaos, on a beat (but sell-off) by Microsoft, something we warned of possibly being a sort of catalyst to break the market anew. But if that happens (it's being countered already by the evening action), and then the Fed's statement is 'milder', well it again can become a giant set-up for another U-turn whipsaw. Of course if the Fed puts the hammer down to reinforce their hawkishness, that's.. obvious.

The broadside fired by Wall Street reminded investors how absurdly multiples were expanded in overpriced stocks, and now they see likely premature entry into those stocks, but they're trying to make it a bottoming cycle.

The small stocks are another story, in several cases not only moving 'with' the decline in S&P (eroding more than I thought likely, but reflects illiquidity and a follow-the-funds kind of trading mentality), but creating exceptional value for a speculator who wants to sticks 'toes in the water' (probably a couple by now it seems), with a realization it will take time to achieve awareness of which will be successful, and which will not. Hence not like having booth feet in a spa (you can tell where I would like to have my sore muscles about this hour).

Part of limiting small-cap commitments is because they are disruptive, so of course nobody knows with a degree of confidence, which (in a sector) will be the dominate leaders or when they really might prevail with their objectives. Hence we say don't get swung by every tick. Pick your spots, and patience. No rush, this market will have lots of opportunities if the Fed stays the course, but of course the totally pummeled stocks try to find their base 'sooner'.

Warren Buffet, famously said 'The stock market is a device for transferring money from the impatient to the patient'. That is so true for so many truly speculative stocks in this incredibly wild (still bifurcated and truncated) market that has to contend with everything from the Fed, to COVID, to Putin. And just tomorrow we have the Russians, Germans, French and Ukrainians meeting in Paris, without the U.K. and the U.S., which even our allies think are too tough on this issue (or too mild, depending which politician you ask).

Speaking of that we don't know if the Paris Conference becomes a Munich of modern times, probably not. Putin doesn't want to kill Ukraine he wants to milk it economically. And he wants to splinter the unity of NATO if he can. Notice it. Also note that 'activating the 82nd Airborne' is actually less provocative than what Russia is doing, however that doesn't mean we should be doing so yet.

After the close we got Microsoft earnings, pretty good, with limited on-news selling. Also our long-followed Texas Instruments (TXN) absolutely beat estimates, and rose 10 points before ebbing a bit. Both will do well in the future, with the realization of rotating chaos the market has to endure and deal with this year.

In the small stocks, Sorrento (SRNE) followed the ABC San Diego local news story, with coverage on WCBS-Channel 2 New York, clearly more important. Not just because 'network' people definitely catch what's on in New York, but also as the story referenced Mt Sinai as collaborating on the 'CoviShield' drops. It is too bad the CEO Dr. Ji squandered credibility with his over-optimism (being kind to refer to it thusly) last year. But the science is catching-up, so if finally the media will pick-up the Sorrento progress and get FDA (and 'slorento', so well-known for lackadaisical movement to trials and follow-ups) to emerge just a bit from their alliance almost solely with big-pharma, that would expedite it.

By the way, yesterday the head of the WHO warned that it's a mistake to just assume Omicron is the last variant of COVID (spoil-sport). To the contrary, he's suggesting a 'sub-variant' has been detected but isn't a primary focus yet (so as usual everything goes at 'turtleneck' speed, except the virus as it moves at breakneck speed). We've got to get the acute phase of this pandemic to end, and there is not enough going on here to achieve that, and less is most other countries. It is demoralizing to healthcare workers, to markets, and to people.

Oh I mentioned a new sub-variant WHO says is too soon to focus on. Really?

'Son of Omicron' (shall we nickname it for now) has been identified across at least 40 countries, including three cases reported in Houston and several in Washington state. Doesn't sound so rare as WHO implied. It's called BA.2.

BA.2 accounts for only a small minority of reported cases so far, including 5% in India, 4% of those in the United Kingdom, and 2% each of cases in Sweden and Singapore. The one exception is Denmark, a country with robust genetic sequencing abilities, where estimates range from 50% to 81% of cases. So at this point it's impossible to know (or they won't say) how severe BA.2 really is.

The news throws a little more uncertainty into an already uncertain situation, including how close we might be to a less life-altering infectious disease. That is at the core of the market, relates to inflation, and impacts all expectations.

I don't know (but hope) that companies like Pfizer (PFE) will have better vaccines (it goes into testing now) and pills, or perhaps someone will light a fire under the FDA and Sorrento to get their testing approved and monoclonal antibody that does work against multiple variants (developed with Mt Sinai) expedited.

Our best wishes to Elton John, for recovery from COVID, diagnosed today.

Overall .. some of the peak earnings and so on are warranted, but contrary to that, and the concern about the Fed, the parallelization of alternation action in big-caps versus small-caps seemingly paralyzes investment managers, hence you have the ebb-and-flow currently being symbiotic, although one area stays overpriced, and the other either underpriced or potential for business progress in the disruptive speculations.

Inflation is going to be above the Fed's target all year, even if it eases later as events mitigate it somewhere. However, it's not just up to the Fed, but COVID. Even the strict Chinese cannot control COVID, so it's their production levels as a contributor to COVID (supply-chain issues may seem boring but are central in a way to all this) that matters. 'If' inflation settles to 2-3% by by year's-end that would be welcomed, but there's no evidence to support that being the case at this time, so we all have to 'stay tuned'.