Author: Doug Kass

Source: Tip Ranks

When are you gonna come down?
When are you going to land?
I should have stayed on the farm
I should have listened to my old man

You know you can’t hold me forever
I didn’t sign up with you
I’m not a present for your friends to open
This boy’s too young to be singing
The blues, ah, ah

So goodbye yellow brick road
Where the dogs of society howl
You can’t plant me in your penthouse
I’m going back to my plough

Back to the howling old owl in the woods
Hunting the horny back toad
Oh, I’ve finally decided my future lies
Beyond the yellow brick road
Ah, ah

– Elton John, “Goodbye Yellow Brick Road”

My baseline expectation is that the Federal Reserve will increase rates by a quarter basis point this afternoon.

I expect relatively hawkish comments from Chairman Kevin Warsh – as he reiterates his job of getting inflation down:

* Equities could initially respond positively to what is perceived to be responsible monetary policy in the face of sticky inflation. I don’t expect the rally to be sustained and I plan to short Indices on a ramp higher.  

* Bonds might also respond well… with yields could decline by 5-10 basis points.

There are multiple reasons why I expect an equity rally to be short lived – which I have covered fully recently in my most recent “Market Outlook” column.

But market participants could soon realize that even a multiple rate rise will not dampen inflation (and that there are likely adverse consequences, especially as seen in the housing market).  Rather, the problems of inflation are supply chain, fiscal policy and geopolitical based — not interest rate based.    

And the anticipated tightening policy (of perhaps two more hikes by January, 2027) will cause more damage than good.

As noted on Tuesday, I believe we have already seen a top in the S&P and Nasdaq Indices for the year.

Summary

Goodbye Yellow Brick Road and say Goodbye to Rosy Scenario. Kass: Welcome to the ‘Rosy Scenario.’ What Could Possibly Go Wrong?

Positions: None.

Knowledge@Wharton:

Is Overreliance on AI Causing Agency Decay? – Knowledge at Wharton

Position: None

While the bullish cabal see the foundation of the next bull leg to be EPS, we are at odds with that notion…

Expectations for earnings growth for small and midcap companies have declined sharply from earlier estimates of near 60% growth. With high input costs, these forward projections may come down further.@ISABELNET_SA pic.twitter.com/4qqMAgCBUg

— Lance Roberts (@LanceRoberts) September 16, 2026

Position: None

Why the Semis Rally Is More Fragile Than It Looks https://t.co/JUnaLaNmni via @hedgeye

— Keith McCullough (@KeithMcCullough) September 16, 2026

Position: None

* Slowing economic growth and persistently high inflation = slugflation!

With oil over $100 per barrel inflation is not going down any time soon. DoubleLine’s inflation model suggests a 4 handle CPI Y-0-Y in the next report.

— Jeffrey Gundlach (@TruthGundlach) September 16, 2026

Position: None

The S&P Short Range Oscillator remains in oversold territory at -4.72% vs. -4.56%.

This sentiment gauge coupled with the recent price weakness have partially been responsible for having me tactically cover my index shorts (for a profit) and resulted (in the past week or so) of selling rips and covering dips.

The deterioration in market breadth (“not broadening”) that we have been highlighting since July (in the Russell, Equal Weighted S&P and McLellan indicator) presaged the recent broader market weakness.

As noted in my recent Market Outlook column I remain bearish and intend to reestablish my index shorts subject to price and the fundamental backdrop — probably sooner than later.  

Ergo, the absence of index shorts in Seabreeze’s portfolio is likely a very temporary condition!

Position: None 

Closing Volume

– NYSE volume 4% above its one-month average 

– NASDAQ volume 7% above its one-month average

– VIX index: up 1.05% to 17.28

Breadth

S&P 500 Sectors

% Movers

Heat Maps

Position: None