POSITION: Long Utilities (XLU), Long Healthcare (XLV)
This morning’s rally “off the lows” didn’t surprise us. Neither did the selloff from the intraday highs. Bottoms, like tops, are processes - not points. And this one looks to be finally establishing a manageable immediate-term TRADE range at higher-lows (versus the YTD closing low of 1119).
To review the lines/levels that matter most across our risk management durations:
- TAIL (long-term) resistance remains up at 1265
- TRADE (immediate-term) resistance is now 1173
- TRADE support = 1135
In other words, trade the 1135-1173 range.
Interestingly, but not surprisingly, pre-market open downside support signaled a line of 1126 and now my immediate-term TRADE line of support is 9 points higher than that at 1135. So even when I really tighten up the duration, volatility, and standard deviation scenarios in my model, I’m coming to the same conclusion.
This is a Short Covering Opportunity, much like the one we called on August 8th, 2011.
Keith R. McCullough
Chief Executive Officer