This is arguably the best place to sell stocks since the end of last December before the market fell -12%. Equity markets are crashing globally, the LONG-TERM trend for stocks is now down. The dollar remains in a strong long-term uptrend, commodities and deflation remains pervasive; and every economic data series is pointing to a recession except for the Jobs data which is always late cycle as payrolls will be the next part of the cycle to roll over. Corporate profits have been slowing for 2 consecutive quarters and every time that has occurred in the post world war era stock markets have been met with at least a -20% correction.
We made the call on Monday for an oversold relieving bounce in equities this week into Friday as the US Indexes appear to be on a 8.6 day cycle. We can see on the attached chart and I wrote about this here on Monday. Today’s location puts the Dow back up toward the top end of its INTERMEDIATE-TERM Risk Range as per the standard deviation regression channel. If you bought stocks well last week or you own them from the highs of last year this is the best opportunity to sell and or get short since late December. We sold out of most our long exposure in equities and we are short S&P Futures, short high beta ill-liquid small caps – i.e. the Russell 2000, short the Financials, Short High Yield, long Volatility (the VIX) and long the Long End of the US treasury Curve (Long 30yr Futures and Ultras).
If tomorrow gives us one more push we will certainly be fading it.