This morning’s early morning flushout is helping to push sentiment to negative extremes which is necessary for short term stabilization for the equity markets. Our very high cash levels will help us to keep our emotions in check but the fear of an out of control Ebola epidemic could likely end any short term rallies at this juncture.
To be quite blunt, the markets are broken right now. Our hedging oscillators reflect this dysfunction and are untradeable.
At present our largest position is the “TMF” which is a leveraged Treasury Bond ETF. The TMF will benefit from the rampant fear that presently exists be it due to economic weakness in the US, Europe or Ebola. Today’s wicked spike higher is a reflection of the panic existent for the time being and is doing a very credible job of hedging our remaining equity holdings.
We continue to sell equities on rallies only at this stage. A case could be made that this mornings plunge in stocks may mark at least a short term bottom that we can rally from. Its too late to sell into weakness but too early to buy as well.
Be careful out there.
Brad Pappas
Long TMF