The market has traded down ever since Fed Chair Powell was at the conference in Jackson Hole. The Ivory Hill RiskSIGNAL is still red (since January) and we are sitting on roughly 70% cash, and we’ll likely raise more cash as our technicals dictate. This is a trader’s market, short and simple. Volatility is in chop mode, which means going long on anything can be risky if you do not have a process for this market. If you are shorting stocks or ETFs here, you have lots of room to get chopped up as bear markets make fools of bulls and bears.
If you’re trading in this market, you’ll need to move quickly and take small wins. We have a substantial amount of cash on hand, and in volatile markets, patience is a virtue.
We are barely holding any bonds right now. In the past, when the stock market was performing poorly, bonds were a terrific area to hide, as you could make money while protecting your downside risk. The 20-year Treasury ETF (TLT), which holds bonds backed by the US government, is down 30% from its all-time highs. When the Fed signals that it is halting interest rates, which could take some time, bonds at the longer end of the curve will be a terrific location to start layering into before equity markets turn up. Since the market is usually way ahead of this, I would expect to start seeing a positive movement in Treasuries before the Fed pauses rates.