Market Briefing For Wednesday, Sept. 29

Negativity accelerates the as 'obviousness' of primary challenges tends to be inflated (no pun), so as to explain a 'correction process' that persists adhering to the pattern outlined over these past few weeks. S&P broke, fought around the S&P's 50-DMA, and then resumed downside (SPX). And yes it will bounce soon.

tennis ball bouncing on ground


Later selling will reach a crescendo in either of a couple ways, but not exactly at this moment, especially with 'end-of-Quarter' rebalancing as well. So I don't concur with those selling weakness now, as this was all anticipated as likely a way the process unfolds, and everyone knew of overall seasonal tendencies. It's just had more drama injected, thanks to the Fed, Congress and debt.

Executive summary:

  • Delta variant may be peaking, but there is another one threatening, that's of course not why the stock market is under seasonal pressure for now.
  • Government closure would not be constructive of course, but everyone is aware of that, so prospects of catastrophic consequences Sec'y. Yellen spoke of are seen impossible, but that 'attitude complacency' makes them a little more likely, if both political sides remain totally at loggerheads.
  • Interest rates have firmed 'as' Oil has risen, and that's a combination that the market doesn't like, having gone as far as it has.
  • Missed in that point is that China may have reduced Treasury purchases, a part of why rates are firming to attract buyers, not robust economies.
  • However the economy is fairly robust, it's the velocity of money that will matter, but there's no doubt the overall debt issue is very troubling.
  • 'Panic' in tech has some managers selling off some of their financials or other stocks, even though those are well positioned, drugs killed too.
  • Generally they don't own heavy Oil positions they once did, which remain in a structural uptrend (call it secular if you like), which retains 'legs'.
  • Higher rates and lower earnings is sort of what market's explain as more or less the reason for what is a technically a normal correction process.
  • The economy itself is not exhausting capital, there are supply-chain and other issues, and that's a short-term margin problem, not a long-term or traditional waning-of-demand problem, as demand exceeds supply now.
  • Next year the Fed might have to lean-in against the enduring inflation I've thought this to be consistently, and that's one reason 2022 will be more about stocks than Indexes, more focus on sectors than big ETF's even.
  • Most of this day was an 'air-pocket' to the downside related to the S&P's failure at the 50-DMA, although here and there some are mystifying, of course algo's will get nastier when we breech the 100-DMA, and that's a likely set-up for a rebound, the 50-DMA that was the key battle so far.
  • One of those hammered was Sorrento (SRNE), which managed a notable sell-off despite a slew (unintended?) leaks of pre-launch CoviStix info.
  • Plus there is no indication of Sorrento's filing for an FDA EUA aside they say so, whereas ANP's Application was approved yesterday at the top of the FDA list, and there is nothing announced as of late Tuesday.
  • Back in February, filed March 1, was a deal for Sorrento to buy ANP in a complex 'term agreement' to be 'worked-out', then nothing more heard.
  • ANP is unresponsive to inquiries, remember they are/were quasi-private, originally spun-off from a U.S. Army Research Lab DoD arm, so spooky.
  • A prior deal to buy ACEA was also done with a 'term sheet agreement', not a word heard until suddenly they proclaimed a done deal.
  • Hence the speculation last night at length as I tried to figure-out what is not possible to assess fully without clarification from the parties to it, so we await Sorrento and/or ANP coming-forth (material information that by law they have to reveal unless cloaked by National Security 'cover').
  • 'IF' there is an immediacy to CoviStix, with the website 'leak' and also the 'TV commercial' posting (leak?), when do they plan on announcing it(?), I don't know what Dr. Ji (CEO) will have to say tomorrow on any of it.
  • In-theory SRNE should not be dropping with all this pending, and two presentations and a panel discussion tomorrow, but little with the stock makes sense, so why apply logic to figuring-out what they're planning, it was a bad market day, and particularly bad for drugs and biotechs.
  • In essence people stay in this stock either in raw speculation or frustrated with Dr. Ji's lack of transparency (even now with the FDA issue), and yes the FOMO (fear of missing out) of a possible key announcement.
  • By the way, we knew Sorrento leased a new 163,000 Sq Ft building being built now, but that's for two years from now, so some suggested not really needed, nope, we hear they leased a 52,000 sq ft move-in-ready office building blocks away from their corporate HQ in San Diego, so clearly they need space now for something, guess we'll all learn soon enough.

After all that, there's little surprise in market action, perhaps a bit in the rancor in Washington, where the language is getting harsher than usual. Higher rates are being attributed to growth, but we don't know that's really the case (could also be reduced buying from abroad, where others were active at Auctions).

On top of everything, after 4 year since Filing, a U.S. Patent was granted by the Patent Office today, for transdermal delivery of high viscosity bioactive agents. That's presumably the nano-needle patch delivery system (perhaps that eliminates the need for a 'port' into the veins for delivery of some drugs), and yet-again a potential big win that the market so far tends to ignore.

Certainly Sorrento is most controversial, and I outlined where things stand as far as known, as clearly we know what we don't know yet. It appears waiting on EUA for CoviStix as the most recent near-term concern. The completion of a merger or convoluted deal for or with ANP should follow directly. So if ANP's FDA EUA is indeed for a deal with Sorrento (directly or indirectly) why is the stock so defensive?

Now if it's a partnership / royalties that's fine, because given what is a 'spooky' relationship of Dept. of Defense with ANP, that's a possibly complicating issue 'if' there is a deal. However, if Sorrento actually somehow merges with ANP, it can be even better, think world class testing unit. That's a net positive deal for SRNE. Great track record, and solid association with Dept. of Defense. Plus 4th quarter could look stellar for other 'trials' or progress reports (like the non-opioid pain reliever and of course the nose-drops against COVID and so on). It is indeed FOMO that keeps us around for some time (aging in the process!).


There is runway for this shakeout, while weakness should rotate into buying of many sectors closer to yearend. The rotation led by Banks and Oils was projected, but it's very difficult for these stocks to offset the pressures just a handful of breaking FANG-types can generate.

I've commented periodically that 'heavy lifting' has to be done by momentum, or similar, mega-caps, with the best moves (like the other day) broadening-out enough to give an impression of 'real' market strength. You'll get that again for sure, but more related to 'true' recovery from the pandemic, not fueled largely by artificial liquidity pumped-into the system, or debt piled upon debt.

This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for  more

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