Sunday, March 24, 2019

Weekly: Fed whipsaw, pieces of the top

It was a frustrating week. I got hit on both side, both by the big post-Fed rally on Thursday, and the sharp decline on Friday. Lost a little over 2% for the week. Boeing continued to be a problem as it made a new monthly low. The booming rally in some stocks, such as Apple had me scrambling. I kept rebalancing back to delta neutral. As volatility increased that didn’t work out.

Several pieces of a market top are now in place. The inverted yield curve, poor relative strength in the transports, lots of big IPOs coming to market, extended valuations as measured by CAPE and GDP to market cap (Schiller PE10 and the Buffett indicator). The one missing piece for a major top is popular sentiment. AAII weekly sentiment is still middle of the range. Stock market chatter at the local level seems muted.

A lot of birds are chirping online about the imminent recession. The inverted yield curve has a lot of people looking for a market down turn. This and the relatively good economy are what bulls can hang on to.

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