The August high in the S&P should have never occurred. The market had all the momentum necessary to move up beyond some relatively trivial resistance levels, making its move to 4500ish.
The fact that it did occur, slicing its way through every conceivable support level and marker on its way down to 3900 in a relatively short amount of time was the first indication that something wasn't right.
Now we are beginning to catch glimpses of what the problem might be.
Inflation isn't where any of us would like it, least of which the Fed.
A 100 basis point hike is on the table for next week after today's CPI.
Perhaps more jarringly, there is chatter now that a 4% target Fed Funds rate might not be enough.
Let me say that again...a 4% Fed Funds rate isn't enough, meaning the target rate may end up being much higher. Further meaning that we don't know when this ends.
And this is why we are in the situation we find ourselves in today more than anything else.
Markets hate not knowing. As of today, there is a whole lot more that we don't know about the Fed, interest rate and inflation moving forward than a week, a month or even two months ago.
You can see how well the market cleared resistance during August only to fail miserably into September.
Now we have our wheels spinning in the mud, with the ultimate threat of running out of gas and seeing the markets make another leg lower over the next few weeks.
This is a sloppy area. It's an area where excessive risk makes no sense, as there is a possibility for some real downside given the time of year and general environment we find ourselves in.
We remain in cash.
Looking to buy lower...perhaps significantly so.
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