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We had this right in November. We had it dead wrong in December. We are waiting for January to end.

Managing globally interconnected risk doesn’t happen in a vacuum. Globally, inflation is accelerating. Domestically, US Consumption has slowed materially in January versus December and that, alongside real-time inflation pressures, is why US Consumer stocks are underperforming.

We just covered our short position in Consumer Discretionary (XLY) because, at down -3.1% on the day, it’s immediate term oversold. If you’re looking for a line where we’d cover our SPY position, 1275 could be it. That would be our immediate-term TRADE view from here. If 1275 doesn’t hold, our intermediate-term TREND line of support remains all the way down at 1215.

From a long-term TAIL perspective, much like equities in Japan, all US Equities are doing here is debating where they’ll finally make their lower-high.

What was immediate term TRADE support this morning is now resistance at 1290. So 1 should provide some bearish fodder for the bulls to consider. Remember, consensus is still that US growth is “back” and that the SP500 is going to be up double digits in 2011.


Bearish: SP500 Levels, Refreshed - 3