Strategy Central

[shortterm]

I have two likely scenarios:

The sell off goes around the world and the US gaps down and keeps going. Or there is a small attempt to bounce which gets sold off.

What I would consider less likely at this point is a sharp bounce up. I just don't see what could cause that. US interest rates expectations up --> bad for equities. US interest expectations down --> the economic slowdown has finally taken root and the earnings estimates must come down.

It's pretty much accepted that US consumer demand is falling off. The mantra has been that business demand will pick up the slack. One company in the right area of business coming out and saying that they see softness in business demand will really kill the whole market.

I guess dollar rallied on the $1 billion better than expected trade gap. That's one billion when US needs about 12 billion of inflows to keep the dollar exchange rate stable. Also, forex markets are several trillion dollars a day.

We live in interesting times and I'd expect the volatility to increase, not decrease. Btw. oils seems to be ready to make a run to a new high.