POSITION: Long Consumer Discretionary (XLY)
I don’t have a short position in either SPY or a Sector ETF here. That needs to change. But it likely won’t today. The Year End is being TimeStamped right around where the SP500 started.
While it requires some serious storytelling on why a Perma-Bull is long now (‘Europe priced in, stocks are cheap, etc’) versus why they were long then (‘US Growth 3-4%, Sales Growth Accelerating, etc’), history will mark its spot in t-minus 5 hours of trading. Growth Slowing will have equated to multiple compression across Global Equities.
Looking forward, here are the lines that matter most across our 3 risk management durations:
- Long-term TAIL resistance = 1270
- Immediate-term TRADE support = 1249
Not unlike the end of July and October of 2011, what’s interesting about my long-term TAIL is that it rests above the 200-day Moving Monkey. We call it that because that’s where 1-factor price momentum chasers have been getting sucked in (repeatable process!).
If there’s one quantitative risk management lesson from 2011, it’s the same lesson learned in 2008: Simple moving averages like the 50 and 200 day do not proactively predict risk – they force emotional reactions.
Signing off for 2011,
Keith R. McCullough
Chief Executive Officer