WRONG SIDE OF THE TRACKS
Today wasn't supposed to happen. It was in the lower ring of any possible outcome given where the important market averages were sitting. It was anomalous. A cancer. A complete and total foreign body. And it must be respected.
Every move the market makes tells a story of its past experiences and its future expectations. There is very little that occurs without some sort of underlying intention. There are degrees of intensity that translate into importance within the grande scheme of a short, intermediate or long-term move. However, nothing simply occurs for the sake of occurring. Meaning is littered throughout the averages and individual stock prices.
When a cancer (otherwise known as a statistical anomaly) appears in the markets, it has to be assumed that the carrier itself is not functioning as it should in one capacity or another. Take 2008 as an example. There were multiple periods of time where the market should have behaved a certain way at important points of support. Instead, anomalous event after anomalous event took place, warning those who do not simply subscribe to the countless mindless market memes in existence, that there were serious underlying problems in the market. It was a diseased body looking for a place to collapse.
Far too often, there are those who adjust their expectations according to the anomaly. In other words, the anomaly is stripped of its repugnant nature and acknowledged as an event that falls within the normal range of expectations. A minority of investors will realize, in time, that anomalous events are the equivalent of a canary in a coal mine. Ignore the canary and your entire party is doomed.
I mentioned in the weekly analysis that I DID NOT want to see the S&P 500 fall into a certain range. Unexpectedly, we did exactly that, reaching beyond any reasonable point I had in mind for this pullback.
Understand I am not bothered because I have an abundance of exposure. I don't. I am market neutral here, sitting on a majority cash position. What is bothersome is that I am getting further and further away from the possibility of putting any cash to work. Furthermore, it is beginning to look like the possibility exists that my long-term trend indicator will flip to "sell" forcing the portfolios into a 90%+ cash position.
On a positive note, halfway through the month the portfolios are up nearly 3% this month, mostly as a result of TZA moving up in price while the remainder of the portfolio has basically sat flat. One thing to smile about.
