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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: 

  1. TAIL (long-term) resistance remains up at 1265
  2. TRADE (immediate-term) resistance is now 1173
  3. 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

Short Covering Opportunity: SP500 Levels, Refreshed  - SPX