Just so you know.

The old playbook that worked from January through mid-May isn’t working anymore.

Two reasons – first, US stocks are now coping with rising interest rates and the bond back-up. No one knows whether or not that’s done for now. The yield on the 10-year, at 2.29%, is sitting at 14 month highs. Can’t be ignored.

This means the yield plays at best can stabilize but should probably not be loaded up on.

Secondly, we’re starting to pay more attention to the overseas stuff. We ignored the fact that European stocks, relative to US stocks, had peaked last December. We also ignored the China decline, month after month.

Not anymore. Look at this morning’s action in Citigroup. It was everybody’s favorite bank turnaround story, just as the XLF sector SPDR was starting to lead the market. Now we get chatter of a massive currency-related loss and that whole bank leadership heuristic gets thrown for a loop.

The new drivers of fear in US stocks are emerging markets and Japan. Today’s sell-off comes courtesy of an EM bond / currency rout overnight combined with a lack of new action from the Bank of Japan.

What this means is that elevated volatility needs to factor into your decision-making. I’d say position-sizing should probably come down as well. Lastly, I’d imagine that getting accustomed to gap-up and gap-down opens would be a good idea as well. We hadn’t seen a lot of those until the international stuff came back into focus, but if you remember this type of trading from years past, then you remember the frustration of markets that didn’t move all day, only in the futures markets before the open.

This is where we are, just so you know.