No Thrust

After the strong rally on Tuesday, when the S&P closed at 2452, a crowd of bulls came out of nowhere to declare the end of the pullback and a march towards new highs.  As I mentioned before, that is uncommon even during this long bull market.  The first big rally day after a pullback has usually been met with some skepticism or expectations that its a one day wonder.  Then we promptly managed to have 2 small down days before today's pre Jackson Hole gap up.

You can basically treat this Jackson Hole event like a non press conference Fed meeting, important, but not that important.  And usually the market gaps up on Fed days.  I don't expect any fireworks at this Fed meeting, I mean Jackson Hole conference, because Yellen will not want to be too dovish despite the weak CPI numbers, because of the weakening dollar, and Draghi doesn't want to be too hawkish because of the strengthening euro.  In that battle, I expect a stalemate, with the market left to go on its own path, which I believe to be a choppy pullback that stays between SPX 2455 and 2410.

The market is currently not too focused on Trump's words about a government shutdown if he doesn't get border wall funding.  But if there is one thing about Trump, he doesn't like to back down from confrontation.  Add to that the debt ceiling debate and there are negative catalysts waiting to be focused on at any sign of weakness.

Since we are near the upper end of that SPX range, I would favor either cash or a small short.  As for bonds, I would favor being long for the next few days as the SPX goes to the lower end of that range.