Looking at the chart below, you’ll see my refreshed levels to manage around if we don’t crash. Selling SP500 866 is the dotted red line – that’s where any immediate term “Trade” to the upside runs out of gas. Selling SP500 883 is the new intermediate term “Trend” line – make no mistake, its bearish out there. The US Financials, as a sector, are down -30% for the year to date!
The buy/cover for the immediate term “Trade” line is 803. If you’re in the SP500 crash camp, a 3 standard deviation move in my model will get you SP500 771. That’s another -4% more pain to carry (or risk) if you cover/buy at 803. This Crisis in Credibility has proven to be both well deserved, and painful to the stock market for 2009 year to date, but I still do not think the SP500 will make a lower low versus November’s 752.
Keith R. McCullough
CEO & Chief Investment Officer