View from the Top – Interim Report

I could give you an elaborate discussion this morning, with fancy charts and graphs. Or, I can just give you the bottom line. We were in the zone for the intermediate peak of the nominal 18-month cycle. We have been discussing the potential peak for a few weeks. All we needed was a catalyst. We never know what the catalyst will be – that is why we use stops.

This time, some Russian hackers just hacked, captured, and are now ransoming one of our largest oil pipelines – demonstrating our vulnerabilities. It does not take a lot of imagination to postulate what might be next – perhaps part of the power grid? 

This morning, gasoline has popped over $5 per gallon in California.  Add this to all of the rest of the inflation distortions currently underway in the economy. Inflation, without commensurate wage increases, destroys the purchasing power of our most vulnerable, lower-income citizens. The shifting sands have the potential to derail the recovery.

The NASDAQ 100 has now rolled over, taking out its 50-day line. The S&P 500 is rolling over this morning, taking out its 21-day line. With the news of the pipeline ransom mid-day yesterday, money stopped rotating and started exiting the market generally. The price action triggered our stops, taking us back to 100% cash, and that is where we find ourselves this morning.

I think it fair to assess that the 18-month cycle peak has arrived, and the more probable profits likely will be made shorting stocks and rallies for the next few months.

As bad as these events may be, it is time to profit from the ensuing decline.

As always, stay tuned.

A.F. Thornton