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POSITION: Long Consumer Discretionary (XLY), Long Healthcare (XLV)


I covered my short position in SPY this morning and bought Consumer Discretionary (XLY), taking my asset allocation in the Hedgeye Asset Allocation Model to US Equities up from 3% (on yesterday’s open) to 9%.

With the EUR/USD oversold on a catalyst (EU Summit) we were calling for, everything has a time and price. As the US Dollar strengthens, US Consumer Confidence continues to strengthen (Michigan Consumer Confidence reading was up to 67.7 in DEC vs 64.1 in NOV). Like it did in our US Consumption models in 2009, Deflating the Inflation has its perks.

I know the Keynesians want exports. I just want them to go away. This is not an export economy. It’s a Consumption economy. And whoever figures out that political message first will start to get the political economy right too.

Across all 3 durations in our risk management model, I stand by the note I wrote on Wednesday:

  1. On up days towards long-term TAIL resistance (1270) = sell/short
  2. On down days towards immediate-term TRADE support (1231) = buy/cover

It’s a multi-factor, multi-duration view. It’s what we do. And it should continue to help you think about doing what seems logical in this environment of Big Government Intervention and Volatility – buy low and sell high.


Keith R. McCullough
Chief Executive Officer

Bullish TRADE: SP500 Levels, Refreshed - SPX