Covering: SP500 Levels, Refreshed

02/10/12 10:58AM EST

POSITION: Long Energy (XLE)

With the SP500 holding my immediate-term TRADE support line of 1337 this morning, I covered-the-dip.

We believe that hedge funds should hedge. That’s why I trust the process that has served me better than poorly in the last 4 years – it takes out (some of the) emotion. When you’re in the middle of February and the SP500 hasn’t had a down day of more than -0.57%, that emotion isn’t going away.

Across all of my core risk management durations, here are the lines that matter to me most:

  1. Immediate-term TRADE overbought = 1362 (lower long-term high)
  2. Immediate-term TRADE support = 1337
  3. Long-term TAIL support = 1267

My call has been that if we start to see Inflation Readings Accelerate and Growth Readings Slow, the SP500 will make a lower long-term high versus its 2011 closing high of 1363. Today, with all of the high frequency growth data slowing sequentially (China and US Consumer Confidence in particular), I’ll reiterate that view.

I’m covering SPY because 1337 holds. If it doesn’t, I won’t be sitting on my hands.


Keith R. McCullough
Chief Executive Officer

Covering: SP500 Levels, Refreshed - SPX

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