The big news today was that S&P cut its long term outlook on US debt to negative. That’s the first shoe, but it is far short from an outright downgrade of the U.S. AAA bond rating.
It is easy to understand the S&P position though. If the Democrats won’t cut spending and the Republicans won’t increase taxes, the United States of America faces nothing short of destruction. The recent 1% cut of the Federal budget was claimed as a success by both sides. In fact, it is nothing more than a token for an embarrassingly stupid part of the electorate.
As you may recall we suggested that a breakdown might come soon. We had it today and I expect more down-days to follow. There is good news though; today’s price and volume move continues a trend of reduced magnitude of price and volume on down days, so we still are guessing that this correction will not be the big one that would take us back to the previous low 2-years ago. Since the Navigate the Stock Market (NTSM) system doesn’t give a definitive read on how big a correction we will have, I have a very defensive stance regarding the stock market.
NTMS switched to SELL on 22 February at S&P 500 = 1315. Since then, NTMS analysis has been Sell or Hold (it remained Hold today); therefore, I am still conservatively positioned with only 30% invested in stocks. I am 2xshort with 50% of my trading portfolio using QID and the Inverse Rydex 2xNazdaq fund.
