POSITION: Long Utilities (XLU)
Einstein said that “everything should be made as simple as possible, but not simpler.”
Put simply, this is called a Short Squeeze from an immediate-term TRADE oversold low. You either recognized the Short Covering Opportunity when you should have or you didn’t. No matter where you go right here and now, this short squeeze isn’t over, yet…
Where could it end and what could end it? As a Chaos theorists, I’ll have to go with time and space.
In my model, space is usually simpler (but not simple) to solve for. How fast we travel across a price range is often determined by explicit or implicit markets catalysts. In terms of space to the most relevant line of immediate-term TRADE resistance, the SP500 is 13 points (or +1.1% away) from a very consequential TRADE line of resistance up at 1171.
In terms of time, the next big catalyst is the September US Employment report (830AM EST tomorrow morning). While I think the Sell-Side’s expectation for the payroll number is too high (+50,000 adds), I’m not going to have to make a call on that. Mr. Macro Market personally does not care about what I think.
So, I’m going to let the market tell me what to do. If it tests 1171 and fails: A) there’s plenty of space that opens up on the downside to 1099-1101 support and B) the reflexive nature of our minds will undoubtedly call that employment print out as to why.
Simple is as simple does.
Keith R. McCullough
Chief Executive Officer