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POSITION: Long Utilities (XLU), Short Consumer Discretionary (XLY)

This is what I call down-shifting my beta at the top of my intermediate-term range. I’m no longer long the Financials or Energy Sectors. After double digit YTD ramps, those Sectors have the most mean reversion risk to any downside correction in early March.

Will we ever have a correction? That, of course, is a silly question – and the only time you tend to start asking yourself that question is when the VIX is testing 15-16. It’s human nature. We have yet to have a -1% down day in the SP500 YTD. That will change.

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

  1. Immediate-term TRADE overbought = 1376
  2. Immediate-term TRADE support = 1364
  3. Intermediate-term TREND support = 1280 

In other words, there’s little upside left on my immediate-term TRADE duration and if we break through and close below 1364, you’ll see an open window of beta risk to be managed towards 1280 (-7% from here). Don’t believe the risk of the range can change in 90 minutes of trading? Look at Gold today.

There is short-term career risk in saying something is going to happen before it actually happens. We get that. That’s why we talk about the probabilities of risks and what would ramp or reduce those probabilities.

Into Month-End Markups, risk of a correction rises as stocks do.


Keith R. McCullough
Chief Executive Officer

Month-End: SP500 Levels, Refreshed - spx.02.29