In the simplest form, CAT tells us a lot about the global economy. You can manipulate the macro data how you like. You can talk about how the elections will change face of our economic environment. Hell, you can even go as far as to believe what you tell yourself. At the end of the day we are sitting in the 21st century and facing an interesting path with lots of economic uncertainty. The fork in the road has been set some time ago, with the impending fiscal cliff, the mess in Europe, the questions about China, and so on. When the market is in its current elated state and macro news means nothing, paying attention to fundamentals airs on the side of stupidity. Though at one point, what goes up must come down, and when that day of reckoning comes one better not have forgotten about the black CAT suggesting grim things in the dark alley of our financial future.
Now obviously when someone states that one item stands as the barometer for global growth, that statement lends itself to be ridiculous. Though when putting the CAT story beside the tale of woe that encompasses the rest of the global economics, we have a bit of a problem. I have learned the hard way about fighting a uptrending market, just ask my buddy VXX how he’s feeling. As much as we have seen the market push higher, like a fat kid towards cake, one cannot forget about the items we consider barometers of global growth. A market bull can blame the recent CAT downtrend (like last few days) on the news out of China, but this CAT did not fall from above $115 just because of China. There is always more to the story and in particular this story. We have seen CAT slip multiple times this year, usually followed by the markets themselves. As we await the jobs numbers at the end of the week, it may benefit the smart trader to observe the transformation of this yellow cat to shades of black.