As I took a step back over the weekend, I was starting to feel more constructive towards the market. As I wrote over the weekend too many market participants are now positioned for a decline and even some of the most fervent bulls have turned tail.
I was strongly considering expanding longs but a large gap up was not what I was hoping for. A weakening economy makes it difficult to chase the market so I will likely just stick with my current exposure. If we did see some large cash M&A deals I would be more comfortable adding exposure, even at these levels or slightly higher.
Corporate investment grade spreads are still pretty tight and absolute corporate borrowing costs are scraping record lows. With stocks off significantly that makes acquisitions relatively more attractive than they have been in a while. If this does lead to cash M&A activity I think we could see more than just an oversold rally.