POSITIONS: Short Industrials (XLI)
To be, or not to be, priced in – remains the question.
I don’t think the economy (#GrowthSlowing in Q1/Q2 or #EarningsSlowing here in Q3/Q4) has been priced into the stock market all year. But that’s just me. Some people think the Fed has had nothing to do with the stock market not being the economy. Right.
Finally, the storytelling is hitting a fork in the road. The economy is colliding with both sectors and stocks (one at a time), and now we’re hearing the pundits who missed calling growth and earnings slowing to begin with say “it’s priced in.” Right, right.
Across our core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE resistance = 1442
- Intermediate-term TREND support = 1419
In other words, if and when fundamentals matter (they did Friday), there’s no reason why we shouldn’t test my 1419 line. Will that be this week, next, or in November? I don’t know. But the probability of that occurring is rising, not falling.
While some may forget the corporate margin cycle topping in Q3 of 2007, few will forget the SP500 was down -4.4% in November of 2007. When the stock market was up “double digits YTD” in October 2007, a few things apparently weren’t priced in.
Keep your head on a swivel out there. Risk happens fast.
Keith R. McCullough
Chief Executive Officer