The 'fog of war' got murkier given Turkey's shoot-down of a Russian SU-24; putting an impulsive Russian leader into heightened tension with questionably 'soft' on ISIS Erdogan.  He  has been quick to object to near-border flights by Russian aircraft (understandable, but not they way they reacted in this 'barely' momentary, if at all, intrusion into their airspace), while reluctant to disrupt the illegal sale of black-market Oil by ISIS (until finally Russia and France and the US, hit the transport trucks, which could have occurred long ago).
 

We won't go so far as saying that Turkey (or others?) aid ISIS; but complexity in an overall manner can be slightly simplified by acknowledging that Turkey, as well as Saudi Arabia, are vehemently opposed to Assad; hence their hatred for Russia and Iran being the primary supporters; with the Russian Air Force of course functioning in a way that bails Assad's tail out of his mess. That's a reason why once ISIS miscalculated and attacked Russia's commercial jetliner  and you had Moscow swing resources into 'actually' focusing on ISIS; so much so that it's embarrassed Washington, who could have brought this high firepower level to bear much earlier.This is why so many have implied that the tactics, dubious at best, were to 'prioritize' moving against Asad, if not indirectly aiding ISIS (or the rebels, or both; it's impossible for most to tell for sure) before going against ISIS in a more serious way. 

Russia's intrusion into the region threw that formula to the curb; and once ISIS attacked Paris, there was no further question of how this would go. Turkey was irate, and perhaps Putin means that when he says 'stabbed in the back'. There had been some military cooperation between Russia and Turkey previously. Of course now the question is not just 'why or whether' Turkey was trigger-happy; but more to the point: is this a form of response to throwing off Russia's goals, which already had shifted more to combating ISIS; finally was nudging toward creating a workable relationship, if not coalition, between Russia, France and of course the U.S. (with Britain in the wings). So do we back NATO member as well as primary USAF launching point (Incerlik AFB) or question if Mr. Erdogan has ulterior, and slightly pro-Islamist objectives. Hmm... consider his domestic clampdown on press and other freedoms lately; and you might see a pattern. I suspect that's why NATO didn't jump onto a unity bandwagon today; but rather urged Turkey to settle-down and not provoke retaliation from Moscow (which is not possible to determine if that's too late or not). 

In reaction  

Stock market behavior was initially only modestly lower; which on the surface might seem more like a counter-intuitive response, but not really. It was primarily a sell-off in leisure and travel stocks (including airlines) that have an undermined set of issues: one being the 'travel warning' that came out last evening; and the other being the prospect of higher oil prices, should tensions ultimate result in a short-squeeze, because too many are playing for lower oil.

On a day before Turkey Day (we're talking the kind with stuffing) the simmering market may not quite reach its boiling point, but it's close. You even had Goldman talking about S&P price goals for the end of 2016 that are barely 1% above where we are now. Of course that's ludicrous, nobody invests in an Index for a tiny move. Why say it then? Perhaps it's 'Street code' for: if it's not a buy, then it's a hold or a sell. 

Of course they'll differentiate that by trying to pick more attractive 'selections', as the industry will tend to do that. But if it's come to that, with Wall Street now more or less finally coming to the same conclusions we've provided evidence factually to support regarding growth and over-zealousness by optimists, what does one make of it? Concern; perhaps of a massive if not immediate decline. 

That kind of 'reality check' suggesting a 'flat market' is not what 2016 should in fact provide; it's what we had in 2015 if you smooth it out very long-term. This was a year for the 'push' to get everyone chasing yield again; to get monetary authorities fearful of coming to grips with an overextended stimulus policy; and to buttress the market with 'buybacks' to underpin earnings artificially, while it seems inviting the largest increase in ensuing insider selling seen in years. It's not just about 'executive compensation', but perhaps a shine to the jewel, as if it were diamonds, but many were just cubic zirconias. Not bad, but won't survive the test of time (or 'appraisal' when one looks at actual earnings prospects). 

We retain a partial guideline Dec. S&P / E-mini short from 2092 overnight. 

Daily action

Distressed debt losses are very heavy; algorithms have not 'yet' kicked in to really break this market; and the S&P lifted 'just barely' from what is again the same support/resistance point previously traversed: mid-2070's. 

As (not if) that level comes out, the lower similar range should visit the 2050's. Fail there (eventually let's not press this) and you probably get some algo's to see the repeated assaults on 2100 that just couldn't pull it off for the bulls. 

Of course if you take out upper levels we'll simply be flat the Dec. S&P as we assess whether anything changed. It's dicey in this in between range; but I am skeptical of the rally efforts, and again notice the limited leadership, while of course a few stocks are doing well so far (big caps like Apple (AAPL), and a couple of smaller players that might have an Icahn active, like Nuance...and no I just notice the behavior, the shopping for a partner has been ongoing for a longer time, even as Apple contracted with them as the original software behind Siri). Not to mention that major defense stocks are no bargain; with innovative small firms often interesting wartime plays; but that's highly selective. We're mostly  focused on the overall market primarily; and that's been a year of distribution; and liquidation by insiders; masked by monetary policy and buybacks; trends in both cases on the wane.  

The world economy, even before the 'war fever' escalation, was telling different stories than central bankers; and of course the Fed could use these tensions, if they wanted to, as an excuse not to move; or a reason they need to move. It will be no solace if the Fed doesn't move, because message sent is more than inaction, it's an admission that forward prospects are worse than mediocre. Of course we knew their story about 'economic traction' generally was malarkey, but there were (and are) other reasons to reign in monetary policy. The tension globally now just makes the 'recovery' (yes more stocks are way off their highs than at them) even more illusive; and you know where consumer sentiment is. 

So, whether this persists with ebb-and-flow moves into the start of 2016 is for sure problematic, but the risks of a number of things pricking the bubble to the extend it remains, are present. The irony is that we've had a rotational bear for months, and most won't even acknowledge it, unless you have a big down day.

For now we retain the balance of our short sale from 2092 (or possibly added to on the midday rebounds, not important for investors; traders are aware) as a trading guideline, and for now it carries a breakeven stop. We simply note that on two occasions yesterday and today we noted that with 10 handle gains, the aggressive trader would take something off the table; and perhaps put it back into play on rebounds. It oscillated repeatedly, but that was the idea. The S&P and overall market is shaky to say the least.