I hate when the ugly stick is out. Ever since the Crash of 1987, I have feared the ugly stick, and you should too. Very few places to stick your head out, and when you do….whack !! Treasuries seem to be the only place to hide at these times. If you follow me, most of you know, I maintain a higher bond allocation (17.5%, since forever), and since early August…. a higher cash allocation (40%) than most of my peers. I always have, however been bond heavy. Gets me out of a tough scrape every now and then. Most of that, thankfully is in Treasuries. Every time I think about cutting back on that allocation, within a few days time I find myself glad that I did not pull that trigger. I currently have precious metals at 2.5%, and equities at 40%, and on a day like yesterday, even a fairly low percentage of equity leaves a nasty mark. I’m thinking, not acting, but thinking of taking precious metals to 7.5%. May need the counsel of Dave Williams from Strategic Gold on that thought.
US futures markets have been all over the map this morning. Where they are, as I bang out this note probably has no bearing on where they’ll be at the opening bell. There really are so many landmines to avoid. Health Care is not the trustworthy space that it had been, not even close. Mining is a mess. Construction Materials is ugly. Energy is well….. energy. Commodities. China. You know, Catherine Murray asked me in a live interview at BNN (Canada’s financial network), a couple of weeks back, if I traded the Biotech space. I told her that I did not. She asked me why, and I told her that those stocks scare the heck out of me, that I leaned my lesson years ago. Boy, am I glad I’m too scared to trade that group. I know that I would have jumped in too early. That’s why we who trade, make rules for ourselves…..and we never break them. Never.
With all of these potholes in the road, it’s a good thing that our legislative leaders seem like a swell bunch of guys who cooperate well, and our Federal Reserve Bank seems clear on the immediate direction of monetary policy. At least there’s no uncertainty there. Think like the kid on the cover of Mad magazine. “What me worry?”.
You guys want to talk about macro today? Me neither. You do need to be cognizant that the weekly Redbook is due at 08:55 ET, July Case-Shiller is up at 9am ET (Consensus: 5.2% y/y), and Consumer Confidence (not Consumer Sentiment) is a10am ET release. Consensus for that one is around 96.1. There, we did macro.
OK, gang. I know that you’re anxious. Take it slow. Don’t do anything in reflex, make sure you have a reason, any reason. I know it hurts, and it’s hot, and it makes your head itchy, but keep your helmets on….and buckle those chinstraps. We don’t need any John Waynes out there. It feels like the market wants to test the August lows, but honestly the only thing we know about today’s equity markets is that they won’t close unchanged.
Sarge’s TRADING LEVELS
SPX: 1915, 1909, 1902, 1895, 1889, 1880, 1867, 1862
RUT: 1110, 1104, 1099, 1094, 1088, 1084, 1075, 1068