My net exposure is currently ~3%, an all-time low. I think the 3 macro conundrums I highlighted a few weeks ago still drive the markets, none of which have given an "all-clear" signal. If anything Europe seems like its running out of options.
I was surprised, however, that the U.S. Congress was able to get their act together and the government did not shutdown for lack of reaching a stop-gap funding measure at the end of September.
Soft-signs that I'm closely watching are Crude and Copper (which are making year-low's as I write) and BNP Paribas (a pulse on Europe's financial system).
All this being said, it makes me uncomfortable to bet against the Oracle who maintains that it's "very, very unlikely" to have a double dip.
Why such a low net exposure?
The price movement of the S&P has been extremely concerning as the bounce on 9/26 and 9/27 failed to recover to the prior highs on 9/16 or even 8/31. This pattern looks like lower highs and lower lows. This occurs until the S&P breaches 1100 where it has received support on 3 separate occasions (8/8, 8/19 and 9/22). I think all the traders out there know that if the S&P cracks 1100, the floor may fall out and the S&P may lose a lot in a short period. This all lines up in October, which is already known as a spooky month for investors (e.g. Black Tuesday which lead the way to the Great Depression, occurred on 10/24/1929, Black Monday where the U.S. index fell 23% in a day on 10/19/1987). I think a stock market crash is a possibility in the coming days and weeks and I'm positioned for it.
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