At this very moment so many hedge funds are positioned wrong -- short dollar/long commodities -- that they have to take the market down with their reversal of these positions.
Even though I do not believe that the dollar will stay strong, the ferocity and strength of Friday's employment report will cause the hedge funds who thought rates would stay low -- the guys who keep buying Treasuries at these auctions -- cannot take a chance this late in the year to see their profits drop.
So, if you were in that mind-set, here is what you have to do:
1. Sell your banks, as rates are going up, and these banks make money from paying you nothing and investing in shorter securities, carry trade, and that goes away without a concomitant increase in loan demand.
2. Sell your commodity stocks aggressively, because they are hedges against a weak dollar. That goes away.
3. Sell your oils for the same reason as above.
4. Declare the gold trade over, and gold goes from a long to a short, especially because it has been bid up by the gold companies that took off their hedges.
Now this switch will cause a host of confusion for people at home like me who think, "Isn't this what we wanted?"
The home-people are right; they just aren't right for this moment, and their confusion will cause even more selling.
So, let the hedge funds unwind their trades. Let them lock in their gains. Look for opportunities in tech (not associated with rates), health care (the president's agenda is stalling) and transports, which need stronger growth to maintain trajectories....
But recognize that a market that totally relies on artificially lower rates and stimulus is NOT a good, long-term sustainable market, but one that relies on improving earnings, better credit ratios, a slow series of tightening, IS! Of course, anyone who bought when the market is up is now freaking out, and there's nothing worse than a market that opens higher and reverses. One of the keys here is AAPL, and it is being hammered as a source of funds by the frantic hedge funds.
With AAPL at about 190 as of this writing, I am going to make my stand by buying April 200 calls at about 14, hopefully. This way, I am betting that when the smoke clears, the funds will come right back to these, and I will be in at better prices because of all of their desperate thrashing to get their gains locked in.....