Yesterday I told you that when the market makes a seasonal low in March or April, there’s a good chance we’ll see a second low in August — and that quiet, no-news weeks like this one often mark the start of that setup.
If you missed that, you can catch up here.
Today, I want to go a step further.
Because it’s not just the calendar that’s raising red flags — it’s the tape.
We’re sitting near all-time highs in the S&P, Nasdaq and even the lagging Dow… but what exactly is holding that up?
- Earnings haven’t been that strong.
- The job market’s sending mixed signals.
- The grain market just got slammed on more trade tension headlines.
- And there’s no obvious catalyst besides noise and narrative. (headlines, basically)
That’s not a recipe for a crash — but it sure looks like a setup for a healthy 5% shakeout.
And when I see the market this extended, with this little real news behind it?
I start looking for protection.
Some traders trim positions or go to cash. Others sell premium. But you probably know by now, I like pocket puts.
They’re cheap, out-of-the-money SPY puts I keep in my portfolio when the market’s stretched like it is now.
And they function just like car insurance. Most of the time you’re going to buy them — and just like car insurance, you’re never going to use them — they’ll expire worthless…
But when they pay? They can pay big.
Back in March, when the market dropped hard, the batch I bought paid off to the tune of over 350%. That kind of protection lets me stay flexible while others panic.
So yeah — this isn’t a crash call. But it is a wake-up call.
The tape’s loud, the news is quiet, and July is exactly the kind of month where cracks could start to show.
Stay sharp,
— Geof
