E Market Briefing For Thursday, Dec. 7

Ttake the market's 'main force' down, and you risk sinking the overall S&P. This notably better-handled preparation for attack by today's money managers, occurred because they tried rotating from sector-to-sector, and hoped that would 'mask' the rotational distribution, hence create a better defense against a 'raid' on the cross-section of stocks.

This tactic was successful for several months in forestalling overt reversals by the Senior Averages, and allowing Funds (and other pools) to diversify a bit into 'relatively' defensive stocks that hadn't soared to absurd levels. That placed the funds in a better survivable stance, should a 'swan attack' occur.

Realizing that their view of 'modern portfolio theory' has them 'in' the market 'fully' at all times (something I vehemently disagree with, but understand the investment policy committees at many funds actually compel that approach) ... even those managers that reasonably grasp the prospects of 'correction' of the overall S&P.. will have moved into someone reduced vulnerability.

That takes us to the 'rollover' of recent days, which hasn't been very brutal, despite the moaning. If it was, the Index primary trends would be broken as well as the VIX being in the 'teens', rather than oscillating between 9 to 12, with only an occasional spike higher. But it is a warning sign. Here they are selling-off the FANG and similar stocks, and moving into telecom and less excessively priced stocks (they call them value stocks, but they're not exactly bargains either).

What happened in the last couple weeks, which we spotted well in advance, as well as the periodic firming moves by VIX, telegraphed a possibility of an attack on the market sooner-rather-than-later, and not conveniently waiting until (say next Spring) for some sort of almanac-style topping process. One thing that's amusing is that most of such a process is behind not ahead.

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