The Crayon Has Limits

I am of two minds here. One, ZB and TLT aren't dusted yet. This is an area from which a rally can begin and that comports with a very bearish outlook for equities and my forecast of deflation hitting.

The second thought is that normalizing monetary policy requires permanently higher interest rates. In one sense, the Federal Reserve's QE policy is life support for the bond bull market over the intermediate-term, arguably long-term if we're talking about financial market cycles. In the immediate present, running QE in reverse (QT) at around 80 percent of peak asset buying should be highly deflationary and push rates lower. Evaporating buying from the Fed will initially be overwhelmed by "safe-haven" buying by traders, seculators and investors.

My Nasdaq WAG is complete. I don't expect a crash lower, but I do think the best time to short was August 15 and 16. My last major trades ahead of vacation were on August 15, adding more AAPL 140 puts and SPY 380 puts for October.

Crude oil has been quite volatile. I still expect there will be a $60 handle sooner rather than later.