Market Briefing For Monday, August 12


Lingering neutrality – not because of fears the Carry-Trade liquidations could slam stocks again (though it’s not inconceivable), but mostly a carry-on set of ‘risks’ in what is and should be a relatively defensive and erratic time.Action sees a tick-up in volatility (and I don’t mean the VIX as such) as jitters dominate, and they should. Plus there is limited cash coming in this time of a year; so that’s also the basis for traditional late Summer hiatus time (and risk).In the midst of all this there is something else geopolitically crucial, besides the Middle East. And that’s Ukraine’s so-far-successful incursion into nearby border areas of Russia; to show Putin that he can reap what he sows (to put it bluntly). A primary target in Kursk could be the nuclear power plant there; at the same time Moscow’s two primary supply lines to Belgorod and their troops goes through the area. Bold, creative and justified move by Kiev.Sure we have CPI and domestic data-points to reflect on this coming week; at the same time I think success or failure, peace or war, and Oil price reactions, will have more dramatic influence on day-to-day action; varying with outcome of course. We could have Iran back-off; even a Gaza ceasefire; or opposite of anything perceived as relieving, whether or not viewed as constructive.Market X-ray: action Friday was kind of muted; and it’s not yet time to view a U.S. economy as particularly sturdy; it’s going to be sketchy in various areas, almost regardless of data we get. Everywhere sees higher prices even as we are told that prices are coming down (could fool me, including travel costs that I prepaid prior to a short journey in a couple weeks).Functionally the Fed isn’t anxious to protect consumers; despite proclamation rhetoric they claim. Oh sure they’ll move, but if they have to … because they’d rather continue attracting funds to our Treasury Auctions.. that’s a part rarely noted by financial press (if ever); and it’s just my thought about why they’re so reluctant to cut rates barring an actual emergency.Next week we have CPI, Retail Sales and more on the agenda (probably retail will be soft). It’s going to achieve nothing to engage in a debate about ‘affordability’ beyond basics for most Americans; or a deteriorating economy is some ways (mostly related to extraordinary prices almost everywhere that are beyond tolerance it seems in most households). However I can say that the reasons we’ve cited, including technical, carry-trade and war risk, all play roles (less so elections) in near-term concerns.Smart money usually goes to the sidelines somewhat this time of year; hence the markets are thinner and can respond to any significant event fairly rapidly. In any event these are indeed agitated markets in the defined outlined pattern for S&P and other indices, as we’ve discussed. Remains on tenterhooks.Bottom-line: all risks as discussed; everything pending and defensive. The big sell-off was the algo-driven S&P 5400 break exacerbated by Carry-Trade liquidations; the rest is relatively calm shuffling without particular direction.More By This Author:Market Briefing For Thursday, August 8
Market Briefing For Wednesday, August 7
Market Briefing For Tuesday, August 6

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