BotTrigger Trade Alert:
→ $SPY $TLT & $XHB: Conditional Order to add/buy to the following if within the last 30 minutes of today's trading the following are below the below prices:
→ SPY June 2018 $290 Puts | 5% if SPY is below $259
→ $TLT January 2019 $125 Puts | 5% if TLT is below $118
→ $XHB September 2018 $45 Puts | 5% if XHB is below $41
Are we witnessing a bull market correction or is this the beginning of a bear market? A bull market correction is typically technical in nature whereas a bear market occurs because of fundamental reasons. This appears to be evolving into a fundamental concern over debt in addition to the technical overvaluation. Last night, Senator Rand Paul gave a token attempt at reminding republicans of their fiscal responsibility but his words failed to produce any change. After passing a 2-year increase to the debt ceiling, Moody’s warned: ‘The stable credit profile of the United States (AAA stable) is likely to face downward pressure in the long-term, due to meaningful fiscal deterioration amid increasing levels of national debt and a widening federal budget deficit...Moody's has already indicated that rising entitlement costs and rising interest rates will cause the U.S.'s fiscal position to further erode over the next decade, absent measures to reduce those costs or to raise additional revenues. The recently-agreed tax reform will exacerbate and bring forward those pressures. Moody's current baseline forecast is that the sovereign balance sheet will continue to weaken over the coming decade. Absent corrective fiscal measures, the U.S.'s AAA rating will rely increasingly on its unparalleled economic base and the central role it plays in the global financial system.’
It’s popular for money managers right now to tell clients that the lesson of 1987 was to stay invested in the market and wait for the eventual recovery. I would caution this is not 1987. The market was not overvalued in 1987. There were no bubbles in 1987. Today we’re dealing with bubbles in stocks, bonds and real estate. This is a whole new ballgame. And for whatever it’s worth...new Fed Chairman Jay Powell is part of the Bush inner circle. Powell was appointed by George H. Bush to serve as undersecretary to the Treasury and then joined H. Bush at Carlyle Group where the firm invested heavily in the rebuild of Iraq following 9/11. Not sure President Trump knew he was bringing in a Bush insider when he appointed Powell as Fed Chairman. The Bush’s don’t like Trump. After two weeks, it seems Powell is content to shelf the plunge protection team. So yes, there’s a chance this is the beginning of a bear market. Time will tell.
We like the idea of having portfolio exposure to the bursting bubbles in stocks (SPY puts), bonds (TLT puts) and real estate (XHB puts). At today’s close we are prepared to add 5% allocations to each if SPY is below $259, TLT is below $118 and XHB is below $41.