Consumer (Lack Of) Confidence

The consumer confidence just came out and it is at multi-decade lows (64.5 now vs. 110 in July 2007).  This is very correlated with the S&P 500.  The S&P is down about 80 as I write.  A couple of things pop out to me.

First, this is a lagging indicator.  So, we know people feel lousy right now.  That’s how recessions are.  The stock market eventually focuses on the future.  When you’re in a trough (recession), the next thing you start looking forward to is expansion.  Since it’s lagging we need to be in front of it, not trading it after it comes out.

Secondly, this is really what we need for a test.  We need the market to pull back on weak internals.  Low volume, low downside volume, etc.  We also need to see buyers really step up and take advantage of the “bargains”.  You don’t want a market that run away from you.  We need 3 steps forward and 1 back.  We’ll see how today and the next few days shape up.

I’m still short and owning a lot of cash in addition to my longs. 

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