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POSITION: Long Utilities (XLU), Short Financials (XLF)

Moving off of ZERO percent asset allocation to US Equities on Friday (bought Utilities) was me acting on a signal that in the immediate-term I was going to be wrong (last week) and we were not going to re-test the prior August closing lows on the no QG3 news.

So now I’m still short Financials (XLF), long Utilities (XLU) and looking for my level to short the SP500 (SPY). Interestingly, but not surprisingly, I’ve had to re-model the upward bound of the immediate-term TRADE range multiple times this week. Primarily that’s because 2 of 3 factors in my core model (Price and Volatility) are pushing the upward bound higher at an accelerating rate.

Gravitationally, this makes sense. The market tends to rise and fall to the most immediate-term point that imposes the most amount of pain on the highest amount of market participants.

With month end markups in motion here (not including August data, since April the SP500 has averaged +0.7% price performance in the last 6 days of the month vs down -4.5% down in the first 6 days of the new month) and the 3rdfactor in my core model (Volume) not confirming this price rally, I’m now in wait and watch mode – selectively shorting single stocks and waiting on my SPY price.

Across all 3 durations, this market is still broken/bearish with the following resistance lines: 

  1. TRADE = 1234
  2. TREND = 1292
  3. TAIL = 1263 

The most bullish news I can give you is that we have taken out the most immediate-term call for a lower-YTD-low (below 1119). My immediate-term TRADE range is now 1, and I’ll manage risk around that range until 1203 is violated on the downside. If it breaks, I suspect the move down from there in the SP500 will be as swift as this 6 day move up.


Big Government Intervention continues to A) Shorten Economic Cycles and B) Amplify Market Volatility.


Keith R. McCullough
Chief Executive Officer

Month End: SP500 Levels, Refreshed - 1