Enter The Selling Zone

We have entered the selling zone — S&P 3025-3100 — to execute the Get Shorty trade.  This also provides an excellent opportunity for long-term investors to start cutting back on risk if they have not already been doing so.

You know our view.  Rarely should LT investors reduce risk in a significant manner, maybe just three to four times during their working lives, but this is one of those times, we believe.

Structural Problems 

The tectonic plates of the global international economic order are breaking apart and moving in the wrong directions and valuations are at historic extremes.

Not to mention the absurdity of negative interest rates and the Fed will take the unprecedented action of cutting rates next week with stocks at historical highs and inflation marching higher.   That signals, to us, at least, a Fed gone political. 

We expect the summer Friday afternoon ramp into the close, which will be an opportunity to start letting some go or setting some up.

Stocks Out Of Runway

The charts below illustrate that history dictates that stocks have very little room to run to the upside from current levels.    We could be wrong, and ‘this time may be different.  We seriously doubt it but that is why we have a hard stop at 3125 to cover shorts.

Long-term investors that do sell should have a Plan B to get reinvested if they are wrong.

Good luck, folks.   See ya’ thirty-plus percent lower.

Micro Metrics

Hat Tip: Antonio Pérez Algás  @apanalis

Hat Tip:  Kevin C. Smith, CFA  @crescatkevin

Macro Metrics