POSITION: No Position SPY
We are getting a lot of inbound request for levels. That’s a signal in and of itself, but the timing of the requests is very appropriate. With the VIX immediate-term TRADE overbought at 22.01, we are testing the SP500’s intermediate-term TREND line of support.
For scenario analysis purposes, I stress tested some of the volume, volatility, and duration assumptions in my model to make sure I am not hanging on 1319 instead of a tighter range of probabilities. What I come up with instead is a 1 range of intermediate-term TREND line support that I am comfortable managing risk around.
The core tenant to our “Risk Ranger” Theme for Q3 plays right into this. If we go bearish TREND, I’ll get more aggressive on the short side. If we remain bullish TREND, I’ll lean longer (like I am now).
Put another way:
- If we breakdown and close below 1316 (closing prices), I sell
- If we hold and close above 1316 (closing prices), I buy
Our long-term TAIL durations of support and resistance wrap around immediate-term TRADE range of 1.
- TAIL resistance = 1377
- TAIL support = 1251
So, again, those are your fractal points of reference above or below 1316.
This is manageable.
Keith R. McCullough
Chief Executive Officer