Let me be clear, I am not trying to get cute with this Jaws metaphor. I am trying to help you manage risk. The last +15% of a short squeeze reminds us all that risk isn’t just managed on the downside. Given that the one thing I heard most from clients used to be “I don’t Trade like you do”, with each passing day I seem to be earning some respect that trading is the most proactive form of risk management one can employ in a Bear Market.
Importantly, overhead resistance within this Bear Market is formidable up at the intermediate TREND line of 829. From an immediate term TRADE perspective however, I now see upside to 804, and it could happen in relatively short order. Continued Technology M&A is a pending catalyst, and we just learned with IBM/JAVA this morning that the bid you see in Tech is real. In an environment where cost of capital is moving higher, the best way for mature companies to grow is to buy someone.
If the SP500 breaks down and closes below the Shark Line (759), those buying/covering (like I have been all morning) will drown to that 665-734 buying range. Shark hunting is not for the faint of heart.
Keith R. McCullough
CEO & Chief Investment Officer