Too Hot, Too Horrible

The market blows today and the proximate cause has nothing at all to do with Greece.  Okay, a little bit to do with Greece indirectly insofar as HSBC’s China flash PMI was so weak and China’s biggest export market is Europe.

But what you’re witnessing in today’s 200+ point slide in the Dow is a realization that we are grinding to a halt here in the United States and many of our (and I mean their, not mine) assumptions are simply too high – for GDP growth, for employment, for retail and for employment.

This sell-off is not about systemic fear, it’s about the prospects of 1.5% GDP growth and what that will mean in the context of a Federal Reserve that has pulled almost every lever in the factory. This is the reason cyclicals and industrials cannot be owned and financials largely should not be owned.  It is the reason why the commodity trade and all available equity derivatives it encompasses continues not to work.

At a certain point, maybe soon, the market will have priced in a little too much gloom and we will rally.  But the question investors need to ask themselves whether or not the relief rally will truly mean anything against the backdrop of the larger trend.  Are we good enough to catch a 10-day countertrend rally?  Do we need to?  Or is defense still the posture that wins this game until the data convincingly turns around?

I’m trying to be constructive in adding to favorite positions on weakness here and there (nibbles, not gulps) – but outside of that, it’s simply too hot and too horrible to get much more bullish than that.

Oh yeah, and there’s that chatter about Moodys downgrades of everything that casts a shadow…maybe after the bell today, so I’m told.



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