Even being in 100% cash, this market is still taking me on a wild ride just in terms of observing the day-to-day swings. All of yesterday’s gains have been erased, and then some, as the bulls failed to hold the promising bounce. Treasuries are breaking out to fresh highs, using TLT as a proxy, which is also likely putting pressure on equities. Furthermore, the Dollar is continuing to push higher, while the Euro has not stopped sliding. While an argument can be made that each of those respective trends are quite stretched, trying to bottom-pick the Euro or top-tick the Dollar and Treasures has been a clear losing proposition thus far.
On the bullish side, improved stocks like CMG and LULU are benignly consolidating yesterday’s gains with an inside day thus far. If we have bottomed, then bulls are going to want to see more and more stocks set up like that, in a good position to lead the next leg higher. However, I am still not interested in trying to be a hero in this market. In my view, feeling compelled to be in the market at all times is a recipe for failure in the long run. Although the bulls have had plenty of chances to bounce us higher, it looks like the course of action taking place is something we have been discussing in 12631–The idea of a “three steps forward, two steps back, three steps back, two steps forward” market, where not much is accomplished except chopping up traders forcing in low probability trades.
That said, I am still ready for anything with an open mind. While I am willing to turn on a dime as the market adapts, my main focus is on avoiding the roller coaster of a market we are seeing right now, where you might have fun trying to time each precise top and bottom, but when the ride is over you will get off feeling queasy with a lighter wallet.