Structural damage to mega-cap charts has finally become evident to most that argued they were immune, or good hiding places, during the deluge of selling in the broader market, that predates all of this current angina. Yes we have had an A-B-C decline already; but you can tank big stocks further given geopolitics, or you can wash out to make a low, if some miracle mitigates war.Yes there is anxiety, but fund manager neurosis is absolutely understandable in this situation. Plus we go into a military weekend with no reason for anyone to be active on the buy-side of the ledger. After all, Chevron delayed expansion plans as earning numbers were actually (to my surprise) a good bit below expectations. I believe they had to know this was forthcoming; so why the Hess deal (which I was not thrilled about at the time)? These stocks (most Energy) buckled and where were most managers were heavy in; and we’ve warned that Oil stocks were a hold (if bought lower) and not a buy. The same goes for Oil itself; even if temporarily spiking higher.The headlines of Israel ‘going into Gaza’ this weekend triggered an immediate ‘absence-of-bids’, and that’s appropriate. Israel shutting down all cellular and internet coverage in Gaza was essential (since terrorists would use cellular as the landlines they strung in tunnels will be irrelevant above ground and likely are already shredded by air strikes on much of the tunnel complex as known).There is no choice (we’ll start to hear the ‘woke’ crowd complain about lack of civilian communication by cellphone); since terrorists don’t have advanced or satellite-based communications networks (let’s hope they don’t!) and would in this case find Hamas using cellphones more. It’s important to deny as much coordination or communication among barbarians (terrorists) as is feasiblMarket ‘X’-rays – might be posted over the weekend, if I see anything other than negativity for the start to the new trading week. We do have an FOMC meeting Wed., and AMD numbers; but all mostly takes a backseat to ‘war’.It’s hard to define what is ‘excessive’ fear in this market. You feel progressive selling.. A-B-C decline … and beyond, as towels get thrown-in and down goes the ship (kind of thinking) prevails, which tends to be how you construct panic lows; but it has to presume you’re not in the midst of early stage World War.I’ve touched on that prospect for some time; and hope it’s not that. For more than the market’s sake of course (‘sake’ can also be ‘sake’ ..rice wine, lots of which might dull the stress of the present era). Annual seasonal patterns sure would suggest a low unfolding; but impossible to handicap beyond saying it’s a greater dependency on geopolitics than one or two stocks rescuing S&P.At the same time S&P would already be closer to a measured +/- 3800 area, if it were not for relative strength in Amazon and Apple continuing to mask the broadly heavier pressure. We had a day or so of better small-cap breadth earlier in the week, and that’s a sign that money managers ‘want’ to populate their portfolios with fresh holdings ahead of 2024; but it’s premature due to a threat of wider war, which if it goes favorably (eviscerate terrorists without the intervention of the other terrorists, Hezbollah, or their Masters from Tehran) ..it arguably could set-up a great entry (not exit) time.However unless Iran is long S&P futures into weakness, they too probably are waiting for developments, rather than try to catch falling knives (brief thinking of Samoan warriors demonstrating their battle prowess with dancing knives; but of course with theocratic zealots running Iran; celebratory dance is only a legal art-form if shooting AK-47 guns in the air) illegal.. slight cynicism).Pretty dramatic drop in TLT bears mentioning; as it tracks long-term Treasury holdings, as most downside pressure this year has come from the bond side; with lots of people pretty happy to get 5% or so yields these days. If the Fed finally verbalizes what they must know about pricing; and rates stabilize; and if war is resolved (or even paused, though that might not be ideal).. well much of the anxiety and ‘abandoning of ships’ will have sailors wishing they sensed the change in winds and were buying instead of selling. But premature so far.If the Fed got dovish, mortgage rates would drop; spending would maintain (to the extent not influenced by general retrenchment or focus on war and nearer term economic concerns); and anyway spending should cool-off and the Fed’s unlikely to ease, but ‘talk’ in a sort-of hawkish tone, but maintain a rate pause. The consumer has been the linchpin perhaps; but monetary and fiscal policies have been ‘butting heads’ so to speak. If consumers crack; market hit anyway as QT is there; if unemployment spikes, it drops for another reason (profits).Bottom line: the risk of conflagration beyond what already seen in the Middle East is the greatest in years, or even decades. Many fail to appreciate that ‘all’ Islamic terrorist groups are linked, if not directly, then by a common patron, which is Iran and it’s a Persian society, not Arab (by the way), as you know.Hence that may relate to ‘why’ Iran’s proxies struck now (Hamas, to a lesser degree Hezbollah and Yemini Houtis); as Tehran fears an offsetting block of nations, including United States, Saudi Arabia, UAE and Israel (possibly an integration with Egypt and Jordan too).. which would thwart their evil plans.Market seems painful, with mega-cap extended stocks rolling-over, while the already repressed stocks erode a bit because an absence-of-bids typically will ‘take no prisoners’; until the Fed calms, and/or war is resolved. Breakdown is now classic; Retail (XRT) being a good example of consumer retrenchment.What’s the alternative? Everything escalates further militarily, and bifurcation aspects notwithstanding, it won’t matter if the crisis morphs into a broader war so the key to that is deterring Iran (it wouldn’t take much to galvanize support for eliminating their budding nuclear ambitions.. so that’s an incentive for the ayatollahs to chill.. or better yet, the good people of Iran to throw them out).As that is likely wishful thinking, this will probably evolve as outlined a few weeks ago: bad news; precedes more bad news; precedes worse news and more angina. Then some sort of bottoming formation to crisis and to stocks. (And of course the Fed would be extra-insane if they did anything but pause.) Quantitative Tightening is a primary restraint the Fed continues employing.More By This Author:Market Briefing For Thursday, October 26
Market Briefing For Wednesday, Oct. 25
Market Briefing For Tuesday, Oct. 24