POSITION: no position in SPY
No position could very well change by the end of the day/week. I am predisposed to be short here, but I need to manage that risk. The US stock market has been down for 3 consecutive days and 4 consecutive weeks, so mean reversion is a relevant bullish factor to consider.
What I am doing right here and now (1PM EST) is waiting and watching on a confirmation of a TREND line breakdown in the SP500 (1322). It’s already been confirmed by a broader intermediate-term TREND breakdown in the Russell2000 and many other Global Equity market barometers (Nikkei, Sensex, Hang Seng, FTSE, CAC, IBEX, etc). These breakdowns coincide with Global Growth Slowing.
Under most free market scenarios, a SUPPLY (more stocks for sale), DEMAND (growth slowing), and PRICE (TREND line breakdown) model should suffice. However, Americans have signed off on the 4th factor (The Bernank) and, while that’s sad, it’s still a very relevant risk.
What could the Fiat Fools do to keep this market levitating on low-volume above our intermediate-term TREND line of 1322? That’s easy - blow up the US Dollar. The USD is down today, so stocks are up – barely.
And that’s the longer-term point - defying the laws of SUPPLY/DEMAND/PRICE (or gravity) can only convince people for so long - and that’s why this market is still bearish on its longest of long-term TAIL durations (resistance = 1377, a lower long-term high)
If gravity takes over (1322 doesn’t hold), 1308 is now your immediate-term downside target of support.
Keith R. McCullough
Chief Executive Officer