A Game of CAT and Mouse
World equity markets were slightly higher, though pretty much a nonevent once again, even as European debt markets were a little bit weaker as economic pain in Spain, Greece, and Portugal continues to intensify. Stocks here gained about 0.5% in the first couple of hours despite a preannouncement from Caterpillar, which has been impacted by cutbacks in spending, most specifically in the base metals, as a consequence of economic weakness in China and the world over.
Caterpillar's announcement isn't exactly new news, so perhaps that is why it was initially ignored, save for a decline in CAT itself. That is, until Joy Global echoed the same theme around mid-session, which helped the tape fall apart, leading to small losses by early afternoon. While the market didn't lose that much today (1%, plus or minus), many Nasdaq high-flyers reversed ground, which may indicate that the easy upside gains for stocks have been seen. Perhaps bad earnings news will start to matter, at least for a while.
Thus, I decided to short a few names in modest size to see if the downside has any traction. I also sold my tiny TBT position for a fractional loss (but kept my similarly small 10-year short), thinking a weak stock market may boost bonds. This is all just guesswork that I am doing gingerly to see what ideas work.
Away from stocks, the dollar was flattish and fixed income was higher, while oil and the metals were slightly lower.
Positions in stocks mentioned: none.
About Bill Fleckenstein
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