TAIL Risk? SP500 Levels, Refreshed

POSITIONS: Long Consumer Discretionary (XLY), Short Consumer Staples (XLP)

With my long-term TAIL line of resistance under assault this morning, what we’ve defined as TAIL Risk is right back on the table (defined as the proactively predictable). It’s just as powerful on the downside obviously as it is on the upside, so watch my TAIL line very closely. 

  1. Immediate-term TRADE overbought = 1294
  2. TAIL = 1267
  3. Immediate-term TRADE oversold = 1247

The TAIL (1267) is sandwiched in between 1247 and 1294, so this is a very difficult spot to deal with – particularly with the immediate-term factoring of month-end markups. In the next 72 hours, this market could go either way and I wouldn’t be surprised. So I’m happy with letting the market tell me what to do next.

From the longest of long-term perspectives, all the US stock market is doing is making a series of lower-long-term highs (at 1267 we’re still -19.0% from the 2007 highs and -7.0% from the lower-long-term high established in April of 2011), so long-term investors should just keep that in mind.

Since I score my model on a 3-factor basis, what’s critical to acknowledge is that last week’s up move was not confirmed by either long-term VOLUME or VOLATILITY signals.

For now, long-term volatility and structurally impaired volume (inflows) looks like it’s here to stay.

KM

Keith R. McCullough
Chief Executive Officer

TAIL Risk? SP500 Levels, Refreshed - SPX