5 REASONS I MOVED TO A 100% CASH POSITION TODAY
The reasons I've moved to cash are as follows:
1. We are about to hit a substantial news cycle involving an avalanche of earnings. Earnings will be good. Guidance, however, will be cautious at best and pessimistic at worst. I outlined the fact that corporate executives are scared - just like everyone else - last night. This will be a sideways catalyst at best and a negative catalyst at worst.
2. For the first time today I have seen bloggers and market commentators giving credence to the fact that last Tuesday may have been the lows for the remainder of the year. I continue to believe that they are the lows. The realization of this by the trading and investing population is a marked change in psyche and signifies that bearish perceptions are changing. It also, more than likely, points to a short-term high within 20 points of today's close on the S&P 500.
3. S&P 1220 is like the black plague for stock market participants. It lasts for generations and keeps coming back to haunt those who thought they wouldn't have to experience it again. The parabolic nature of the move straight to 1220, followed by the manner in which we bounced right off of that level late today, signifies that the market is aware of the importance of this level. The 1220 level marks the point where the markets become choppy. This lends credibility to a sideways at best scenario over the next 5-7 trading days.
4. The shorts have been rinsed from the picture. This allows the market to flow more evenly from this point forward. Without the buying pressure from short sellers, the market will rely on "real buyers" for future advances. They will come, but more than likely once earnings season is coming to a close. Again points to a 5-7 trading day period of sideways action at best, with the possibility of a move down to 1150.
5. Any upside taking the S&P above 1230 will be so far outside the normal range of expectations based on past models that it cannot be taken seriously in current market analysis.
Bottomline: The best case scenario for the markets over the next 5-7 trading days is a sideways trading range that consolidates between 1190 and 1230. The worst case scenario for the markets over the next 5-7 trading days is a move down to 1150.
