POSITION: Short SPY
This is the 4th consecutive down day for the SP500, virtually every sell-side strategist is cutting their US GDP Growth estimates, and the market is now down for the month-to-date. These shouldn’t be surprises. So don’t freak-out here – this is where you get paid to manage risk.
One of the hallmarks to effective risk management isn’t having it in you to short things when they are up – it’s to cover them when they are down. We did that on March 16th and I think it’s a good idea to do that again right here and now. Don’t worry about your cost basis – the market doesn’t care about your cost basis. Worry about what isn’t happening yet - the bounce.
Short Covering Opportunities aren’t raging bull calls to action. In this case I see every opportunity for the SP500 to bounce to another lower-long-term-high and lower-immediate-term high up at 1329. Then you start making sales again.
If 1310 breaks and the VIX breaks out above $18.26 (intermediate-term TREND line resistance), this call to cover shorts will likely be a bad one. Don’t dismiss that the world’s reserve currency has gone no bid. This game of gaming The Bernank is going to be volatile.
Keith R. McCullough
Chief Executive Officer