* The 19th nervous breakdown! 
* Market breadth was -400 decliners over advancers. (There was a $2.2 billion market on close-sell program.)
* The market more than halved its losses from the early afternoon lows.
* Bonds rallied and yields dropped by five basis points.
* Oil is +$1.70/barrel and gold down is down two bucks.
* The upside feature, from a group standpoint, was clearly cannabis stocks. The proximate cause was (a 24-10) U.S. House Judiciary Committee approval of HR 3884, the Marijuana Opportunity Reinvestment and Expungement Act that would decriminalize pot and remove it from the list of federally controlled substances as well as expunging most marijuana convictions and arrests on a federal level. The bill now moves to the full House and also would require passage in the Republican-controlled U.S. Senate, where its prospects are more uncertain. Cannabis stocks rose by between +8% to +15%. (Canopy Growth Corp (CGC) was upgraded by Bank of America (BAC) ). More on this space early next week. 
* Banks and FANGs continue to roll over from the recent highs (something I warned about recently -- and I cut down positions).
* Cyclicals and some semis got hit -- along the same lines of the strength in the bond market.
I have to run to another meeting.
Thanks for reading and enjoy the evening.

* The twentieth (next) breakdown may be more of a serious illness facing Mr. Market

"You better stop
Look around
Here it comes, here it comes, here it comes, here it comes
Here comes your nineteenth nervous breakdown."
- The Rolling Stones,19th Nervous Breakdown

By 1966 the Rolling Stones - post-scruffy blues band and pre-psychedelic aristocracy - had a look and sound as lethal and streamlined as a Ferrari at full speed, with an engine (powered by Watts and Wyman) at least that efficient. Keith's guitar intro is worth the price of admission and he keeps it up straight through to the end, where he, or Brian Jones (or somebody) comes up with the quirky, quavering riff on which Texas acid-punk hero Roky Erickson built a whole career.

Meanwhile the pithy social satire and mean spirited misogyny of lyrics are redeemed by Mick Jagger's self-deprecating performance (Could all this sniveling be directed at himself?). The lyric everybody talks about is the one about "our first trip" but the one that's unforgettable is "Nothin' I do dont seem to work/It only seems to make matters worse," a double negative so profound it would work as a review of Altamont.

Written by Richards and Jagger, the song reached #2 on the U.S. Billboard chart.

Jagger came up with the title first and then wrote the lyrics around it. The record, like many of the Stones early songs, was produced in mono sound.

The single's "B" side in the UK, "As Tears Go By" was pretty good too!

The song, which forms the title of this column, came to me as the market for the nineteenth time sold off on some negative news regarding the China/U.S. trade negotiations.

In the previous eighteen times, Mr. Market has rallied back (more often than not based on some optimistic comments from my pal Larry Kudlow, Treasury Secretary Steve Mnuchin, or by other members of the Administration).

Today the S&P, after dropping by about 30 handles (and it looked like it would cascade lower), the same pattern was repeated - and it was the 18th time that the market rallied from adverse trade "news."

But, I suspect that the next time, as we move out further in time and closer to the mid-December tariff decision, to year-end and, indeed, closer to the November 2020 election - and given that this is the easiest part (Phase One) - my sense is that many are coming to the realization (as I did a year ago) that there will be never be a substantive trade agreement with China.

"There is an old saying in Tennessee
I know its in Texas
Probably in Tennessee
Fool me once, shame on you
Fool me, you can't get fooled again."

- President George Bush

I am sticking with my (SPY) puts and my large SPY short.

Another leg down for AT&T (T) today - the day after MoffettNathanson lowered their analytical boom.
As mentioned recently, I passed on the name after doing quite a lot of research.
I still wouldn't buy the name in the mid to high $30s.
However, a price in the low $30s will yield a different answer.

Just up is a very thoughtful and direct column by Jim "El Capitan" Cramer on the new digital world we invest and live in.

It's a must read.
More importantly, the leading companies Jim has highlighted are where you want to look to invest if this market comes down to Earth.

Stocks fall abruptly and sharply as Phase One of the trade deal may not be completed this year.

History doesn't repeat itself, but it sure as hell rhymes:

On my short term trading, I am focused on the market breadth - which just turned slightly negative after having a 100-300 plurality of advancers over decliners during the morning trading hours.

Let's see if the very short term momentum pressures the market lower this afternoon.

I am offering (slightly above last sales) shorts in (BX) , (KKR) , (CAT) , (DIS) and (MU) .
I am bidding (slightly below last sales) longs in (M) , (KHC) and (TWTR) .

I am taking a large position in the (SPY) $307, $308, $309 and $310 December 2 weekly puts (12 days to expiration).

I concur, what a wonderful call by Mark Sebastian:

Safari Dad

Shout out to fellow RM columnist Mark Sebastian on his Target (TGT) recommendation yesterday! Boo-yah!

As to your "Color me Bearish", I'm looking at SPY puts (SPY) , or Put spreads, but further out in 2020, maybe April. Just concerned I'm overpaying. It stands to reason that P/E's don't grow to the sky, especially if overall earnings are flat or disappointing, no matter how many shares are bought back.

"I think what I thought.... We find them, you figure them out."
- John Roque
My pal Barry Ritholtz interviews another old friend John Roque on "Why Technical Trading Signals Stopped Working".
John believes old indicators have lost their predictive nature because of the structural market change (the increasing dominance of machines and algos) - something Rev Shark and I have recently debated.
In the above interview John says market participants are using "human language" to describe what is happening in the markets but most of what is now occurring is not corresponding to "human language." So, John is looking less at short term charts and more at longer term charts.
Read Rev Shark's view on this subject.

An interesting morning:

On the Hong Kong legislation news in the US Senate, most of Asia was red and which is leading the rest of the world. In particular the Hang Seng was lower by .75% while the Shanghai comp and the H share index was down by a similar amount. Who knows now what this means for the trade discussions. Obviously getting to the finish line is the big challenge here. Global bond yields are falling across the board.

This is what Hu Xijin, the editor of the Global Times, tweeted 4 hours ago: "Few Chinese believe that China and the US can reach a deal soon. Given current poor China policy of the US, people tend to believe the significance of a trade deal, if reached, will be limited. China wants a deal but is prepared for the worst-case scenario, a prolonged trade war." Many believe he speaks for the CCP.

So Home Depot did their best in their conference call to say their comp miss relative to expectations was not a consumer spending issue and was more an internal one in terms of a delay in the payoff with some of their recent investments. They said "the macro and housing environments have played out right in line with our expectations, and the description we would use is housing is healthy and stable." Lowe's missed Q3 comp estimates and tweaked its guidance while beating eps and missing on revenue. In its release they said "We were pleased with the performance of our US home improvement stores, which reflects a solid macroeconomic backdrop and continued progress in our transformation driven by investments in customer experience..."

Target's numbers were impressive vs estimates and while they didn't say anything about the consumer in their press release, the CEO's interview on CNBC reflected an optimistic view on the consumer on the quarter ended. We'll see to what extent in the holiday season over the next month.

Urban Outfitters stock is a mess after numbers after both top and bottom line missed estimates. What is company specific and what is not, I don't know but I assume it's more the former.

I mention these retail results for the obvious reason that the US consumer is what is keeping the US economy afloat in terms of growth.

The Bull/Bear spread in the weekly Investors Intelligence number is back above 40 at 40.1 which matches the last peak on July 31st. Bulls did slip by .4 pts to a still elevated 57.2 but Bears fell by .8 pts to just 17.1, a 5 week low. Those expecting a Correction got the 1.2 pts and rose off the lowest level since October 2018. We've seen a variety of data points that reflect a very optimistic market crowd and this is one of them. There is a glaring bifurcation between the economic earnings trajectories and the hopes for a trade deal, Fed engineered soft landing and the psychological impact of the Fed's QE or not QE program going on right now.

With a slight drop in the average 30 yr mortgage rate to 3.99% for the week ended November 15th, mortgage applications fell 2.2% w/o/w. Purchase apps were the bright spot, rising by 6.7% w/o/w but the y/o/y increase was a similar amount, up by 7.3%. Keep in mind, seasonally speaking buyers and sellers try their best to get things done before Thanksgiving because things slow down a lot thru year end. Refi's fell by 7.7% but after jumping by 13% last week and are still up by 152% y/o/y with the sharp y/o/y drop in rates.

There will be a lot of focus on today's FOMC minutes from their meeting 3 weeks ago but Jay Powell told us everything he thinks about the state of policy and the world last week in his Congressional coffee talk so it should be a non event.

Japan's exports in October fell 9.2% y/o/y, below the estimate of down 7.5% and which is the 11th straight month of y/o/y declines. A fall in auto, steel and semi exports led the way and exports to China were down by 10.3% and to the US by 11.4%. Imports dropped by 14.8% y/o/y, slightly better than the estimate of -15.2%. Bottom line, there is still no stabilization in the fall in global trade. The JGB yield fell 2.6 bps to -.11%, a 2 week high. Just a week ago we were oh so close to zero. The Nikkei fell by 2/3 of a percent while the yen is flat.

Following the modest 5 bp cut in short rates a few days ago in China, the 1 yr and 5 yr loan prime rate today also fell by 5 bps. Call this tweaking as the Chinese know they have an excessive debt and bad loan problem so they are trying to thread a needle here in hoping to help cushion the growth decline at the same time not trying to encourage too much debt accumulation.

I remain of the view that upside reward is dwarfed by the downside risks.
As expressed recently, to be bullish on stocks is to be bullish on corporate profits and profit margins as the entirety of the 2019 market advance was based on a reset of valuation (and higher price earnings multiples).
I am neither optimistic about 2020 S&P EPS nor of an expansion of price earnings multiples given the plethora of possible outcomes (many of them adverse).
Market structure exacerbates the downside risks - even as we enter a period of performance chasing, possible seasonal strength and potential year end "markups".
These conditions are reflected in my net short exposure.

I wrote this post on Home Depot (HD) late in the day Tuesday.

In case you might have missed it:

Hammer Swings at Home Depot

"Just one more thing."
- Lt. Columbo

A few words on the Home Depot (HD) quarter...

While EPS beat by $0.01 (aided by some below-the-line items), sales were below expectations and guidance was weak.

U.S. comps +3.8% were respectable in light of general retail conditions -- up from +3.1% in the previous quarter. But they failed to accelerate as quickly as consensus expected, between +4.0% and +4.5%. Same-store sales also slowed compared to the last two to three years.

With the shares up 16%, more than twice the gains in the averages since the second quarter EPS release, the stock was vulnerable to anything except a beat, and suffered.

From a profitability standpoint, the benefit of a number of company initiatives failed to register. In general, most analysts will likely suggest the misses were company-specific.

Comp estimates for the second half are now running about +4.0% to +4.2% (way down from +5.3% to 5.5% previously forecast). This implies about +4.8% fourth quarter comps, which would make full year same-store sales at +3.5%, well below prior guidance of over +4.0% and for long-term guidance of +4.5% to +6.0%. It sounded to me like the exit rate or cadence of comps into the fourth quarter wasn't particularly robust (the company cited promotional events and timing).

I would not be a buyer of Home Depot.

--The collapse of the information ecosystem.--The need to fix online advertising.--The ten emerging technologies of 2019.

From Knowledge@Wharton, The Middle Class Tax Cut.

Danielle DiMartino Booth on China data:

• Until recently, China was the top foreign holder of Treasury securities, but has since fallen behind Japan; over the years, China's trade surpluses have resulted in $3 trillion in foreign exchange reserves, of which roughly $1 trillion is comprised of U.S. Treasuries
• Tariffs have resulted in the persistent decline in China's exports to the U.S. over the last four quarters, which has coincided with a dissipation in China's Treasury holdings; forward-looking surveys for new export orders have been mixed, rendering the future an unknown
• Tariff relief from the Trump Administration would likely catalyze an uptick in exports to the U.S., thereby reversing the weakening trends in Chinese Treasury holdings; the bull case calls for a stronger Chinese export signal validating the priced-in global reflation trade

The multiple-camera method of video production employs several on set cameras simultaneously recording a scene. Generally, two outer cameras shoot close-ups of the most active characters, while two central cameras shoot wider master shots to capture the overall action. When the production stars align, multiple shots are obtained in a single take without having to start and stop the action. In the 1970s, the late Garry Marshall was credited with adding the fourth camera for the series Mork & Mindy. The great actor Robin Williams could not stay on his marks due to his (hyper)active improvisations, so Marshall had them add the fourth camera to fully capture Williams' moves.

We apply the same methodology to chart production. Today's graph du jour, depicting four separate camera angles for China's export mosaic, is a case in point. Three of the data series are straightforward, while the fourth requires a little more explaining. But first, some background.

Time for your close-up. China is the largest export economy in the world. Fitting with today's opening paragraph, we made a brief visit to the Observatory of Economic Complexity (https://oec.world/en/). In a twist of irony, we learned that in 2017, China's top exports were none other than broadcasting equipment.

Zooming back out for the master shot, every month, China's holdings of U.S. Treasuries garner an inordinate amount of attention via the release of the Treasury International Capital System report. That's TIC for short. The reason for the spotlight? China is the second largest foreign holder of Treasury securities behind Japan. (It's critical to note at this juncture that China had been the top holder until recently). Nonetheless, both countries are the only two major holders that top $1 trillion. The U.K. is a distant third, with $346 billion in September 2019.

For years, China primarily has been a global hub for manufacturing and an export-driven economy. And for decades, China has been running an enormous trade surplus with the U.S, meaning that China has sold more goods and services to the U.S. than the U.S. sold to China. Chinese exporters received U.S. dollars (USD) for their goods sold to the U.S., but they needed Renminbi (RMB) to pay their workers and store money locally. Ergo, they sold the dollars they received via exports to get RMB.

But selling export goods and paying workers was not a one-for-one relationship. Dollars were left over. And the cumulative effect of China's past trade surpluses has manifested in over $3 trillion in foreign exchange reserves, about $1 trillion of which landed in U.S. Treasuries.

Most of the time, market participants and the financial press will express the level of China's U.S. Treasury holdings as the "headline" number. However, when you transpose the series to a year-over-year growth rate, it's a stellar tracker for China's export trends over time.

The persistent decline in China's exports to the U.S. over the last four quarters has been exacerbated by the imposition of escalating tariffs. Double-digit declines in 2019's third and fourth quarters introduce downside risk for the already weakening trend in China's Treasury holdings, which have fallen in the mid-single-digit range for about a year. The next few TIC reports will be checks against this risk.

More visible and leading export indicators can be obtained from manufacturing surveys sourced from IHS Markit and the China Federation of Logistics & Purchasing (CFLP). The former is geared toward private sector firms and covers more small- and medium-sized Chinese firms; the latter depicts larger state-owned enterprises.

Both surveys include a metric for new export orders, which gauges external demand. At the start of the fourth quarter, CFLP is underperforming Markit, and the preliminary signals for the final three-month period of the year are mixed.

CFLP export orders continue to track in the red zone, extending their run in the high 40s to six quarters. On the flip side, Markit export orders have shown signs of life, with a modest uptick into expansion territory. If sustained through December, Markit's 51.1 print for October would make the fourth quarter the strongest since 2018's first quarter.

A deal-breaker seemed in order. So, we looked to Singapore, an ideal prism into Asian trade flows. In October, its non-oil exports disappointed to the downside, sinking 12.3% and extending its run in the red to nine of the past 10 months. But here's the money: exports to China fell by 5.5%.

We're more than aware of the non-stop headlines. China is demanding tariff relief to play ball. Moreover, lifting the tariff headwind on China's exports would also give a perceived lift to China's holdings of U.S. Treasuries. The Fed's "not-QE" of T-bill purchases could thus inadvertently coincide with a stronger Chinese export signal, and by extension a win-win for the global reflation trade. Ready for the close-up?

Ontario has been the cannabis bottleneck -- but things may have just improved.

As a reminder, I am visiting companies over the next few days so my posts will be shorter and less frequent.

Volatility, at 11.94, is at the lowest level since early October, 2018: