Delta and China

The two fear variables of the day are the Delta variant and China.  It doesn't matter what I feel about both (non factors in the intermediate to long run), because they can bring about brief but sharp dips in risk assets because of the positioning and complacency.  

Institutions are what moves markets, the major markets anyway.  I am not talking about stocks like AMC or the small cap stocks that are daytrader plays and retail dominated.  And during the slow August month, ahead of the usually feared September and October, most institutions who are heavily in equities and with historically low bond exposure aren't likely to chase this market higher. Not after 17% up on the year in the SPX and near all time highs.  

And with no new stimulus checks and federal unemployment checks ending in September, the endless retail bid for meme stocks, and assorted Wall St. garbage should slow down in the coming months.  According to research I've seen the last couple of weeks, retail investors were big buyers of that dip on July 19 and have been big buyers of Chinese stocks that have been dumped wholesale by fund managers. I would guess their firepower will be more limited in the coming weeks.  

This week, we are starting to see the SPX struggle to make new all time highs and stay up there.  There has been some volatility during the overnight market hours, as we've seen fairly large drops during Asian hours only to see the dips quickly bought.  When you start seeing the intraday volatility go up as the market goes sideways after a big V move higher, it is a subtle warning sign that the next big move is much more likely to be down than up.  

I'm not interested in shorting the SPX here, I have a few individual stock shorts which will probably go down much more than the market if we get a move back down to 4250.  Even though I expect a parabolic move up in the 4th quarter, its likely that during the seasonally worst part of the year coming up, a consolidation between 4200 and 4400 is the highest probability scenario.  I am waiting for the dip but will not bet on it.  

I am noticing that commodities are very well bid and rallying despite the SPX going sideways this week and even with Delta and China scares.  From a big picture perspective, the commodities are the most undervalued assets as they've gone sideways for the past 15 years even though the USD money supply has tripled during that time period.  An explosive commodity bull market is probably just right around the corner.