Risk Ranger: SP500 Levels, Refreshed

POSITION: no positions in SPY or Sector ETFs


On this morning’s opening strength, I cut my US Equity exposure in the Hedgeye Asset Allocation Model back down to 0%. I had been at 6% and all of it was in Utilities (XLU), which continue to outperform every Sector ETF in the SP500.


A lot of people I speak with are focused on the SP500 not having breached its “lower-low” (on a closing basis) of 1119 (August 8th). That, on the margin, is a less than bearish signal, until it isn’t.


Don’t forget that the Russell 2000, Financials, Industrials, etc. have all breached their August 8th lows and have been the leading indicators for all of 2011.


What’s also interesting to point out is that if I stretch my model by a half of a standard deviation point (on my immediate-term TRADE duration), I register support at a lower-low of 1109. In other words, closing there would fit the definition of immediate-term possible.


In the chart below, I show two ranges: 

  1. Immediate-term TRADE resistance = 1144-1149
  2. Immediate-term TRADE support = 1109-1127 

After seeing this morning’s rally fail at my resistance range and with US Equities being in a Bearish Formation again (bearish TRADE, TREND, and TAIL), I’m not going to be betting on some Eurocrat to protect me from the possible. Not here, not now.



Keith R. McCullough
Chief Executive Officer


Risk Ranger: SP500 Levels, Refreshed - SPX

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