SP Monthly Yikes!!!
As we warned in earlier post we sniffed out the Nikkei’s lead and technical weakness, coupled with the complacency of ignoring the global supply chains constraints. Well today’s quarter end window smashing did some major technical equity market damage. Here is the SP500 and we know the 4400 area is a major technical top in the making and we don’t care how much the central banks print, global supply disruptions pose some real life risks that aren’t easily resolved. Real businesses ones that can’t rely on open lines of endless debt have real input costs and ongoing operational costs. As we noted earlier, higher input costs are one thing, having zero access to actual “inputs” or “resources” is an entirely different thing, sorry central banks can’t print semiconductors and in a world that clamors for full connectivity sometimes we just have to reap what we sow.
Anyway, selling this equity market has been a widowmakers trade, so let’s not be irresponsible. There are smart ways to do this, you can use hedged correlation trades, you can use options spreads, you can use cross asset allocation strategies, but best of all you have to be patient and sell rallies. Selling in the hole never works and thus you have to be creative, but most of all you have to have discipline. The majority of young quants whose bastion of computer algos control flows have never seen a down market. All they know is go long and short puts, it works until it doesn’t and we suspect excuses will be many. We suspect cannonball vol of vol sellers to be carted out with expediency.
Alright here is the SP500 monthly chart, enjoy, or not:
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