POSITION: Long Consumer Discretionary (XLY), Short Consumer Staples (XLP), Short SP500 (SPY)
Short high. On our way up to 1266, that is…
I was leaning long for the better part of last week (12 LONGS, 7 SHORTS on Thursday), and now I’m taking that net exposure right back to neutral (10 LONGS, 10 SHORTS). While it’s never easy to pick your spot from a beta perspective, I do not think this spot is very difficult to choose.
- The TAIL (1266) remains broken
- The TRADE (1) is now immediate-term overbought
- The Catalyst (EU Summit decisions Wednesday) looks like it could very well be bearish relative to expectations
Every market has a time and price that bakes in some level of expectations. The heartache usually occurs for the largest amount of people at the most unfortunate time. While the Pain Trade has been higher since the SP500 moved to bullish TRADE 2 weeks ago, now I think it could move to lower – in a hurry.
Immediate-term TRADE support at 1218 is what I’m looking for. If that breaks on event risk, there will be a sharp 40-50 points of SP500 downside risk that appears very quickly. If 1218 holds, just cover shorts there and trade the range.
Keith R. McCullough
Chief Executive Officer