The market has experienced many pullbacks in the past few years that have had many pundits questioning whether we are in the long awaited stock market correction, only to see the market bounce and make new highs. As we are experiencing another pullback: off the highs of the year with the Dow : -5%, SP500 : -3%, NDX: -4% is this finally the time we see a further decline?
The preconditions of this move are more ominous than the past. Transports, Dow Theory has all triggered classic warning signal. But there are other macro signs that say the probability is high that we are in the midst of a move toward correction territory:
1) Commodity price declines, 2) China’s struggles to manipulate support for its stock markets and its implications for growth 3) the aftermath of the Greek bailout – kicking the can down the road. 4) US monetary policy 5) dollar strength. 6) global liquidity asset bubbles
Finally, certain widely held stocks such as Apple are on critical support levels (120) which if broken would lead the market lower. From our vantage point the catalysts for higher prices are few and far between and we put the highest probability so far we are in store for the long awaited correction, as such we have the largest cash position in years, and converted our two favorite positions $DIS and $FB into options strategies. This is the first time we have not bought the dip and may as many in the past been wrong about this bull, but we are not willing to bet on it for now.