Bulls are falling-by-the-wayside - at an increasing pace, even as efforts to sustain the 200-Day Moving Average 'inflection', are showing ragged signs.  

This is notable ahead of a deluge of earnings reports in the week ahead. It's against a backdrop of firmer rates amidst a sliding Housing sector; and the relapse of Chinese markets, prompting their version of a 'Plunge Protection Team' stepping-in to 'stem the outgoing tide'. I warned about 'submerging' markets, and particularly the Shanghai Index spiking and reversing for say two years or so; and while others freak now; China may plunge to a low.  

Of course since their Government is trying to minimize the market's decline, while while ignoring the wealthier-class of Chinese with funds seemingly in a 'stuck posture' with both stocks and excessive (often empty) ghost condo's, or similar; it's a challenge to envision how their economy troughs out.  

That gloomy assessment (their GDP report shows it) may be assisted soon, if the combination compels some accord between President's Xi and Trump, which is 'tentatively' going to occur in Argentina at G20 next month. That in my opinion meant more to the morning's initial rebound than anything else. Of course we don't know that they'll make a deal; we do believe essentials include Trump not causing Xi to lose face, and make it a 'win-win' if they do any sort of Agreement. That's something to focus on next month.

Gunfight at the OK Corral 

Basically you have what I'm calling a slugfest between Bulls & Bears; with a slew of markets catching-up to the fact of what's been evolving for months.  

We'll probably see another leg down for this market, after the shootout runs its course; which next week's earnings flow may assist. The FANG run-up is history; and I suspect nothing like that 'momentum surge' is going to repeat, at least as we saw previously. Sure many of those stocks will ultimately find an attractive support point; but generally not at these levels and not as yet.

The Fed is tightening; a natural deterioration of the Chinese Yuan continues (a true impediment to what China wants, and supportive of Dollar strength); and the 'true' economic internals in the U.S. peaked earlier this year as we'd outlined. It really was visible not only as 'high wealth' individuals were selling as discussed (the 'smart money' exiting) but just looking at Housing or Auto sectors; as well the sloppy Banks, given no significant loan-demand rise.  

Technically, the 'gunfight' at the moment is around the 200-Day moving average again. The longer this prevails (as it has most of the past week), in a pattern of low volume unsustainable rebounds, the greater the odds of a break.  

In essence the significance of the technical picture becomes more evident, as even though you have Put-Call and other ratios in ranges that 'often' are in the vicinity of low (oversold) points worthy of buying, a constant lowering of guidance, uncertainty about prospects for another 'upward growth leg' (a portion of that relates to upcoming midterm election outcomes as well), the destabilization in the Middle East and of course the impact of a China deal, if indeed one can be cobbled together. 

In the Middle East we'll see if Saudi Arabia's king can potentially replace his nephew MBS with another relative (unless MBS does to the King like he did to so many royals he extorted money or assets from at the Ritz Carlton as we all recall). Perhaps the Saudi Ambassador to Washington makes lots of sense, which would give the King some plausible deniability regarding the horrific murder in Turkey.

Plus of course snugger monetary polices that are not being reversed, at least not yet. And as I've contended, Fed policy has lots to do with factors other than the economic cycle that I thought already slipping earlier this year. It's more about offloading their balance sheet, with natural pressures higher on rates, rather than just bumping the Fed Funds rate repeatedly.  

In sum, the long Summer 'stealth' stability (more so than a rally) engineered after the 'buyback' surge faded, was sustained by the FANG+ momentum stocks and as you know they accounted for over 90% of the price gains as well as volume activity. Yes ,everyone knows this now; but for months we in a sense were fighting the crowd of 'extended market deniers' by pointing to all of it as a stealth bear (rotational corrections) being 'masked' by strength in the Dow Industrials and S&P 500; while internal deterioration persisted.

Bottom line

We're well along in this year's sequence of underlying decline but many (if not most) fund managers are still overly-laden with momentum heavyweights; and that's part of the problem will identifying anything here as a low-point for the market; although they keep trying to stem the tide.