Over the past month, there have been more calls for a significant market correction than at any time I can recall since the Great Recession in 2008-9. My evidence is anecdotal but for the first time in years, there has been concerns that lower interest rates may not save the markets from a worldwide economic slowdown.
It isn't just the usual perma-bears that have been predicting problems The negative narrative has gained traction among some new market pundits that question whether the Fed can extend the economic expansion beyond its normal time frame with a series of rate cuts. When interest rates collapsed, stocks went down rather than up which is a major change in character.
My methodology isn't to make major predictions about what happens next. My focus is on being ready to react quickly as conditions shift. In recent weeks I've raised a substantial amount of cash as stops were triggered and I found few new stocks to buy. If the market continues to rally from this point I will be under invested and will have to find some new long exposure but that isn't a big worry. If there are good setups I will buy them and build my market exposure. If I don't find much to buy then I'm not going to worry about the market going up without me.
Currently, the indices are at the top of a wide trading range with 2935 being the top of the range and 2830 being the bottom of the S&P 500 range. If we move higher from here it will have to occur in V-shaped fashion. It is possible that occurs but the more likely scenario is that the indices fall back deeper into the trading range.
I'm taking some indices shorts in the form of ProShares UltraPro Short S&P500 (SPXU) at this juncture with tight stocks. If I'm stopped out, I'll look to give it another try sooner or later. The technical setup of the market here doesn't suggest that the upside should come too easily. I expect some nervousness about what Jerome Powell might say at Jackson Hole on Friday.
Many market players believe that we are at crossroads and that we will see some significant shifts into the end of the year. I don't know how that will manifest itself but I'm mentally ready to react as conditions evolve.