There were plenty of signs -- too many
The signs were there. We were far from the only people who pointed out the divergences over the past week.
The retracement in the dollar was a clear sign as was the drop in metals and Treasury yields. The VIX rising relentlessly was another warning sign. Yesterday's reversals in TSLA and AAPL were probably the clearest ones.
Pointing to it all now isn't just hindsight.
The reality is that the timing is tough. There have been plenty of signs that were blown out by dip buying and the relentless march higher in tech stocks. There was no reason that today had to be the day and there was no trigger today. Even with a 5% decline in the Nasdaq it's only back to where it was on Aug 25. The chart of it is humbling if only to demonstrate how small a 5% drop can appear.
So what's next? The signs aren't all bad. The rally in the dollar hasn't been substantial and Treasury yields haven't fallen into any kind of abyss. Rates are still low and will stay that way. If we get a few more days of this, the Fed might even do more in September.
Ultimately, this will be another dip to buy. The trick -- as always -- will be the timing. If you're looking for a positive sign, note that emerging market currencies are up today against the dollar including BRL and MXN.
