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POSITIONS: Long Utilities (XLU), Short Industrials (XLI)

What a rip that was. Our old friend Squeezy The Short Seller’s Shark has returned.

This week was the 2nd up week out of the last 4 for the SP500. That puts it down for 6 of the last 8. So what to do with that? Embrace being Duration Agnostic. In Hedgeye speak, we’ll call this market Bullish TRADE and Bearish TAIL. 

  1. TAIL (long-term) resistance = 1265
  2. TRADE (immediate-term) resistance = 1220
  3. TRADE support = 1182 

In the end, the TAIL trumps the TRADE (that’s why we still have a big Cash position). But that doesn’t mean that in the right now that the TRADE can’t impact your returns. So the way I think about this from both a gross and net exposure positioning perspective is simple. 

  1. If the TRADE line of 1182 holds, I’m ok with expanding my gross and my net exposures on weakness
  2. If the TAIL line of 1265 holds, I’m ok with selling down gross exposure and tightening my net on rallies to TRADE line resistance 

That’s exactly what I did today. The best I can do from a net exposure perspective is use my LONGS minus SHORTS in the Hedgeye Portfolio as a hybrid way to express my risk management view in real-time. I realize that’s far from perfect, but I’m trying to communicate the general idea.

At this time yesterday, I had 14 LONGS and 7 SHORTS. Into this morning’s Squeezy covering to 1219, I moved back to 11 LONGS and 8 SHORTS.

Enjoy your weekend,

KM

Keith R. McCullough
Chief Executive Officer

Squeezy Returns: SP500 Levels, Refreshed - SPX