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History Doesn't Repeat Itself, But It Often Rhymes

Key Tactical Takeaways:

>  After our proprietary EA Risk Barometer raised a Level 2 caution signal on Wednesday, S&P futures are -0.25% this A.M., after Thursday's > anticipated 1-day decline of -3.51%. The near-term trend is now neutral for SPX. Therefore, pending a close above ..., risk of a ... will be on the table.


> Thursday's intra-day 10-Yr yield dip below 62bps was important, as it ... off of the August yield lows. As a result, a ... is now in play. In order for this scenario to gain traction, however, the benchmark 10-Yr yield must find ....


> With the VIX closing above its downside stop at 26.9 on Thursday, > 1-sigma ranges will be the norm in coming days for the S&P 500. Pending a close below ..., the risk of a move to... is now on the table.


> Thursday's sell-off forced us to protect small gains on our ... and ... longs, and to ...


Some Quick Thoughts:

If you've been in this business as long as we have, you've probably come to respect the old adage that says, "History doesn't repeat itself, but it often rhymes." Where are we going with this? Well, the caution signal delivered by our EA Risk Barometer after Wednesday's market close was important because of its reliability in preceding healthy drawdown periods within prevailing uptrends. While the conditions needed to trigger this signal rarely precede a major sell-off (i.e., > 10%) without some sort of retest of the recent highs first occurring, we as market participants must always respect the possibility that "this time is different."


Before we continue, we are not saying that.... We are simply saying that .... Sure, both the Fed and the White House are ready to start their respective PR machines at a moment's notice. However, if the right triggers are met, the ... before those machines have a chance to fire-up.


Bottom Line: Our favored scenario is that ...


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