A sobering somber session - for everyone; given the seemingly senseless as well as 'unresolved' murderous attack in San Bernardino California, with heavy suspect search efforts going on in nearby Redlands as we go to press. Details will unfold as the evening evolves, and so far bears characteristics of terrorism (organized, plan, multiple perpetrators); although one report suggests one dead attacker (the other a woman) appeared Caucasian; but that's not confirmed. A 3rd suspect (or more) are being sought by authorities in this fluid situation.

As of now the FBI is bringing in more resources, as explosives were thrown in the streets, believed found in the building first attacked, and may be elsewhere as the investigation unfolds. The FBI has 'adjusted' their approach to consider the possibility of 'terrorism', but they're not willing to say it goes that way as yet. What's likely is that this was NOT an Islamist attack, but law enforcement at the moment believes a disgruntled guest at the 'County' party left and returned with the woman and committed the atrocity. Workplace or similar violence taken to a horrible extreme? Too soon to tell; but the suspicions point that way. Ironically if so it's a sad reflection on society if local idiots behave like this who aren't even radical terrorists. Hard to feel relief about that, or anything associated with this.

Tuesday saw a barrage of negative economic data-points outlined in yesterday's report, which the market ignored. It sure did that; we shorted it and have a solid downside gain, which is retained overnight. Now you may get some rebound if we awake with relief that this was not a terror attack; but remember that the majority of all of Wednesday's reversal was largely ongoing before news of the attack. (As I'm typing this, the FBI and local SWAT are raiding a townhouse in Redlands.) 

Bottom-line: matters were reversed from up-to-down but accelerated more on news from California. The Beige Book was sort of firm; while Yellen rationalized the lack of inflation based on strength in the Dollar and weakness in Oil. That's the heart of how she defended the upcoming rate hike prospects; presuming (a little premature to do so incidentally) that the Dollar will soften and Oil firm; thus restoring something like a 2% inflation rate (yes the Fed, not citizens, generally prefer that inflation be reignited, for reasons we've often explored).   

Daily action - warns that any rebound due to 'excess' selling (or lack of buying in the wake of both Yellen and shortly-thereafter the murderous rampage) may be cut-short if Mario Draghi brings less to the table at ECB overnight than so widely expected. So we have to be flexible in early going.

As to the short-sale guideline today from 2100 'even' or a hair above perhaps; it is doing fine, and I mentioned to our intraday members 'possibly' taking parts of it off the table, as one typically does when a 10 handle gain or more is provided (with the rest retained). The overall guideline short simply has a break-even (or mental) stop for now, going into Thursday morning. 

Whether the barbaric attack in California proves to be domestic or terrorist as to origin; it's not only sad, but highlights the advantage an attacker has over police or certainly civilians in the line of fire. That the death toll is 14 in a group having hundreds in attendance, might infer the killers knew roughly who they aimed to kill, as their weaponry was sufficient to have actually done more carnage. Thus regardless of the investigation, the exposure of multiple threats in a wide area (police were running around quite a bit in San Berdo today) shows the chaos in a part of the Country with superior police training, which still lacks the ability to respond more precisely (as will always be the case). Note that a SBPD Police dispatcher was heard complaining about 'radio troubles', because of so many 'agencies' on all the channels. In that respect this event will likely be reviewed in many ways to see how inter-agency responses worked, and what can really be refined, especially as relates to communications.

Next week, some believe the economic picture will be defined by the Jobs data or other economic data that may affirm (or deny) the Fed's planned rate hikes. I suspect that another global exogenous event could impact that; but rather think it otherwise is on the agenda, and won't be deflected by a mediocre jobs report, which of course is now what the bulls want to see (in hopes it freaks the Fed).