New market angina surrounding Gary Cohn's resignation late Tuesday is emblematic of the turmoil we've projected and seen since late January's repeated call for a serious S&P breakdown; followed by periods of effort trying to reorient the market (whether or not it became a full Spring rally); but definitely in our view NOT a time for investment-grade commitment.

Essentially I warned that the market was low on fresh liquidity; growing increasingly dependent on leverage (or margin) to buoy stocks, and that aside trading moves (such as off-of the twin-bottoms in the S&P futures we believed were tradeable with ensuing rallies to be sold-into); there was no realistic justification for investment entry in the leading big stocks as were and are overpriced.
 

Sure some pundits were bullish yesterday; and this morning shouting at investors about how they need to get in; and then tonight probably will in a 'rinse & repeat' fashion, warn about how 'everyone knew the markets' were high and that if Cohn resigned the prospects of calm diminish. Or something like that. It amazes me because as we suggested upside Tuesday morning from the first sell-off, there were others trying to short it.

The S&P rallied. I agree about the markets overvaluation; but the swings are too violent to press the downside or the upside. That's why intraday calls on Tuesday suggested the rebound (it took more than an hour to get going this time); but also suggested it would not penetrate resistance that developed; and that there was a shot at developing what technically is called a 'head & shoulders' formation as relates only to the post-crash rebounds over recent weeks. 

We sort of have that now. In fact in my pre-final-hour intraday comment I made a remark about uncertainty and who knows what happens over a given night; hence, rather clearly suggested any day-traders who bought the morning dip ideally should close those longs 'now' and go home flat. Good thing we had that in mind; look how the evening is going.

Along of course the same theme; I have persistently argued the futility of chasing rallies lately; because there is (in my view) so little potential and a heck of a lot of risk (trap-door style) underlying this market. Now that's not to say stocks won't yet again try to rebound from an implosion (sure they probably will); but there's a case to be made that 'if' they (there is a 'they') couldn't get Trump to back off his trade tariff ideas ('Plan A'); that there might be a Cohn resignation to break markets and sway Trump (it might be called 'Plan B'). Hard to say and probably not; but Trump tends to be influenced by the market and should not be after such a big run we anticipated for the year just past. 

In sum:  traders scrambled to reverse excess short-term bearishness early in Tuesday trading; 'as if' the 'Trade War' risk had returned after seemingly being banished a day earlier as unlikely. Well; I thought part of that was a quip by the President himself (during his Netanyahu photo-op) saying he thought a 'trade war was unlikely'.

However while he acknowledges possible adjustments of exceptions (of course the real goal is to push for a better NAFTA agreement), and it's a bit obvious when he pushes just before a trade conference is scheduled to wrap-up apparently without a sufficiently-broad 'deal' made; there isn't an indication that he intends to 'back-off' in general; nor should he from a strategy perspective. I believed this before Cohn's resignation today.

A 'Renaissance' of American industry is not simply old smokestack firms but all part of the repatriation of capital and jobs to the United States. It's very hard, given how many decades of decay were allowed. Unlike in Oil where the forces (some in this Country) were opposed to self-sufficiency in Oil & Gas for years; there is less OPEC can do 'to' us now; whereas it is more challenging when dealing with the EU or China. Of course those in the EU have also been dealt tough blows from Asian competition; but allowed those economic 'victors' to invest too heavily in Europe; so that I think extrication of the linkage becomes more difficult. The US can learn from this and ease-up on the trend before it's irreversible.

And I can't say if the Qualcomm / Broadcom deal really threatens in this manner; because of Broadcom's pledge to become an American firm as things evolve. However the CFIUS Letter today opposing it (and that's a ruling that is not necessarily arguable in Courts) does symbolize concern about preserving our semiconductor industry for National Security. That may be a part of today's market that is under-appreciated; as a security battening-down-the-hatches era may be underway. Mostly; it's trade.

Bottom line: no change in my view of these unsustainable rallies, and a suspicion one of the declines is going to take out recent lows and trigger exactly what the institutions and hedgers have tried to prevent; a break that works its way to more than a 10% decline; something not so easily absorbed based on the leverage out there.

That is the key to what follows; because trade deals or not (as it's likely we'll get some, neurotic markets or not) .. this is an overprice market. A series of pundits and other talking heads, or outrageous upside market calls by some established analysts, is not that different from what we've seen at important distribution 'zones' in the past. 'They' will generally be 'comforting' investors even if behind the scenes they're worried.