POSITIONS: Long Consumer Staples (XLP), Short SPY
The SPY is up on a rope as the US Dollar is getting burned at the stake. Correlation Risk, all the while, is moving right back to where it has multiple times in the last 5 years (0.9). Correlation Risk between Gold/USD is even higher than that.
But, bullish is as bullish does, until the music stops – and the musician himself has quite the set of expectations to deliver on tomorrow, so I’ll stay with the defensive position (Long Staples, Short SPY) into that.
Across my core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE resistance = 1445 (+0.55% upside)
- Immediate-term TRADE support = 1433 (-0.27% downside)
- Intermediate-term TREND support = 1419
In other words, everything is fine until it isn’t, so it’s worth waiting on Bernanke’s Weimar river card. I can handle a few 100bps of pain if it means we get a blow off top. It’s the price you pay for insurance against buying tops pre the next 10% draw-down.
If he prints to infinity, Oil probably rips to $125-130 again (like it did in February post his 0% rate push to 2014 on January 25th). Then #GrowthSlowing picks up its pace on the downside again too.
Keith R. McCullough
Chief Executive Officer