by Jeff Clark
There’s nothing wrong with being cautious. And there’s nothing wrong with trimming some long positions and raising some cash.
But betting aggressively on the downside right now is probably a mistake.
Yes, stock valuations are stretched. Yes, we’re in the seasonally weak period of September and October. And yes, there’s a bunch of political chaos that could add uncertainty to the financial markets.
But until the high-yield bond market breaks down, the stock market isn’t going to crash.
Traders, though, should keep an eye on junk bonds for the next few weeks.
If HYG starts to break down and lose the support of its MAs, then we’ll be setting up for a more significant decline in the stock market. That will be the time for traders to add short exposure.
It will happen at some point… just not right away.
Source: Jeff Clark Trader
https://tradesoftheday.com/2024/09/11/i ... e_vignette
