Some Thoughts On U.S. Equity (S&P 500)

With European debt fears on the downplay (yet still posing significant risk), U.S. equities have been continuing their multi month rally, disregarding poor American economic reports. Recent ADP and unemployment claims have been suggesting a slowdown in the American job market, and yet money continues to flow into riskier assets. Why? I can attribute this to many factors:

-The U.S. simply looks like a better place than most countries around the globe.
-Bond market remains unattractive to most investors with U.S. treasuries yielding the lowest in decades, forcing investors to put their money in riskier assets
-Europe’s picture has gotten better in comparison to last year’s volatility
-The fed continues to back the market with liquidity

Now I ask myself, what would cause this process to cease? We would need to see another dip in Europe, or a harsher slowdown in the U.S.. Continuing fears in Europe would cause the market to correct via spill over fears, and a harsher slowdown in the U.S…. well, it should cause the market to fall. Until one of these two events occurs, it makes sense to hold long into highs.

The market is holding up when it should be falling. Prepare for a significant move in the S&P 500, either up or down. Right now I have a slight bias to higher prices, but should we start to roll over, look out below. I am looking to purchase protection and volatility through puts.