The Bully Is Flinching & Television

The bully has flinched and we have to respect the fact that he might actually hit us.  I was never picked on in school nor was I the one doing the picking.  But, we all saw the bully that went around and flexed his muscles and flinched to get a rise out of everyone.  If the kid getting picked on didn’t move, that would only antagonize him even more.  Then, the bully would actually punch the kid.  The bully is flinching right now.  I’m not going to assume he’s not going to hit me just like I’m not going to assume the market isn’t going to sell off a quick 10%.  When it looks like it’s going to go down, I react. 

Over the past few days, I’ve been writing and commenting that the stock market has shown me some various red flags that we have to take seriously.  We’ve had two down days in a row and today was more intense than yesterday.  Volume was light and we do have to take that into consideration because we’ve been going up on heavier volume and down on lighter volume.  That’s bullish but I don’t want to be down 10% and telling my wife “it was on light volume”.  So, today, I lightened up on some positions.  One of the areas was the agribusiness stocks.  They haven’t participated in the rally the way I think they should have but they have been participating on the downside.  After the bell, Mosaic reported earnings that weren’t that good and apparently the agribusiness companies are having trouble raising prices.  So, most of those stocks are down 10% after hours.  I also sold some financials after the huge run they’ve had.  I agree with Meredith Whitney that I wouldn’t be shorting them but they may be dead money for a while.  Reducing exposure is the key right now however you do it.  That may be selling some stocks/funds/ETFs or hedging with some of the bearish ETFs, or a combination of both.  However you do it, I’d be reducing my exposure to equities just in case that fist comes flying at us.  Duck.

Even if we continue higher from here, the risk has gone up in the very short term.  Many oscillators I watch are overbought, there are some negative divergences.  Again, all this means is there are some red flags.  With the big move we’ve had, we have to take these days seriously.  There are many people running around saying they called the bottom when the S&P was in the mid 600s.  They may have but if we simply test those levels, we could fall 20%.  That’s not a drop I want to be a part of.  You and I have no rules how often we can trade or how little.  This is a time to do more work and ask questions later.  If the market stabilizes and the risks go down, I’ll be purchasing more equities.  But for now, I’m in selling mode for the short-term.


I’ll be on Fox Business tomorrow morning (Wednesday) at 8:10 a.m. & 8:30 a.m. CST.  In addition, I’ll be on CNBC Asia from 6:10 p.m.-6:30 p.m. (CST).  Make sure you tune in.

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