Markets should celebrate - the heavier-then-consensus-expected inclusion of the Chinese Yuan in the SDR basket (effective October of next year); but didn't take much note. Slightly cynically, the inclusion at a weighting heavier than that of the British Pound or Japanese yen, ought to bring delight that the US won't be 'as alone' in running global deficits as a sole world reserve currency.   

Seriously, though the markets ignored this; there's an eventual plus for bringing China into the system more formally, besides recognizing the diminution of the Japanese and British currency weightings. That is it perhaps prevents or deters any Chinese de-pegging from the Dollar; inhibits floating Treasuries if they get in a twit about any event (such as their eventual plan to incorporate Taiwan as might find some opposition); or might even validate their Gold holdings, unless the fairly steady erosion lends itself to Beijing sales as they move to embrace, as opposed to contest, the IMF system. Most will simply view this as moving to a more prominent level versus Japan and Great Britain.

Just speculation, and no relevance to the immediate issues, although one may ponder if IMF told China not to allow massive spread between CNY/CNH; thus why we saw a PBOC intervention last night. Just one final word on this topic as I'm sure media is thoroughly speculating on East/West ramifications; but this time there are not so many. How many times has China devalued their currency this year alone? Those who saved in RMB were debased each time, as it reveals itself to be just another paper currency, in our view more dubious than the Dollar (we'll not explore the Euro tonightother than to say keeps moving as forecast for two years or more, towards parity, coming down from 1.40). We have contended it's a myth to believe China is financially sound; their debt picture is miserable. Just a part of why I've contended that eventually the United States leads the world in recovery; it's just going to be a protracted process. 

While China needs a commitment to further opening up its capital account and accelerate domestic financial reforms, led by interest-rate liberalization there; it is Europe where most will focus on this week (ECB) followed-by the FOMC the week after. Neither move (a further stimulus by Super Mario, or a failure to hike by the FOMC) would result in sustainable rallies; but again moves that likely to be sold-into, not invested upon. The US Fed is more likely to forge ahead with their rate-hike plans; even Goldman's economist seems to concur, and spins it with a tale of faster job growth than any statistic particularly bear-out. So fine; it is about time to get-off this absurd multiyear 'emergency' rate structure, since it cannot be argued that the systemic risk is as high as before. 

In some ways 'risk' is higher; but not systemic risk (as in Lehman's wake). This is one reason why we're essentially defensive on markets based on valuation; but not bullish on alternatives like Gold; because this isn't inflationary (yet) and most market bears that agree with us on equity valuations still promote Gold as an effective hedge, which it has not been. I've called it merely to bounce once in a while, and that's been appropriate, with it near 9-year lows for the moment.  

Constant rotation and re-allocation of funds has dominated markets; and while it's not a direct result; hearing Morgan Stanley lay-off 25% of their fixed-income staff should be sobering (if not really surprising that profitability in that sector is increasingly slender). That's barely the real story; although more failing hedge funds and liquidations of Asian ETF's by hedgers definitely merits some note.

Bottom-line: the S&P hold just shy of 2100 or so; and may or may not make it during the week. Risk-reward ratios favor the downside; so while it's tough just to call for a decline in December; it's tougher yet to suggest buying stocks just at a time it's so obvious a small tight universe of big-cap stocks is holding it up.

So whether equity markets are in a final spasm of stabilization or not (can't say rallying because this is fairly lateral on a daily basis); their levitation is based on that narrow leadership group we've talked about before. Ideally it would be the 'calm before a storm'; but it seems reasonable to forestall that through the ECB and FOMC; but be prepared for any rally on either to be sold into; and any drop to have a shot at being a bit more violent.  

Daily action - whether the game of enabling debt by lowering interest rates is closer to ending, or whether the global deflation cycle is accelerating; there are a plethora of concerns. Though I'm not sure I'd believe that news 'service' (lots of indirect propaganda), Russia Today claims Erdogan will leave office if it's yet proven that his Administration looked the other way while his son facilitated Oil sales by ISIS within Turkey. In fact Turkey is livid at this accusation. 

However where there's smoke, sometimes fire is nearby; so bears monitoring. I noted that Russian Jet fighters will now carry air-to-air missiles, so besides the S-400 SAM systems; there's a bit more tension flying in close-quarters amidst all this. Also; I had a long chat both with a colleague involved in St. Louis news (TV), as well as an analyst in Athens about Turkey. What's gleaned includes an awareness of Erdogan's son owning four tankers which transit oil from Turkey; and also a confirmation of a story (headline news in Greece but not hear as far as I know) that thousands screamed 'Allah Akbar' when asked to pause for just a moment of silence at a soccer game to honer the victims of the Paris attack. 

What's that about? That's Erdogan's base of political support: Eastern Turkey. I am told he would not have won if it were up to a more-secular Western Turkey; and it does explain the political pressures there a bit, as well as the pro-Islamist leaning that absolutely should be unacceptable for a NATO member; especially one who wants to be in the EU (still; and that's being dangled out there again). 

Basically you had some month-end balancing today and little change. We took a solid gain for intraday scalpers in the afternoon; and stayed with Dec. S&P's holdover partial 2092 short-sale guideline (break-even mental stop). We may well see a bounce taking that out in the morning and we'll address it for traders; while there's little for investors to do but be suspicious of any intraweek rallies.