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    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Takeaway: It’s tough to call the SP500 safe and clear.

POSITIONS: Long Bonds and the Dollar (TLT and UUP), Long Utilities (XLU), Short Industrials (XLI) and The Euro (FXE)

Climbing back above my long-term TAIL line (1364) on no-volume is less bearish than it is bullish, until it isn’t. If I broaden the risk management survey to the Dow, Nasdaq, and Russell2000, their TAIL lines are all broken. So it’s tough to call the SP500 safe and clear.

This is not good. The average up day volume this week has been 23% below the average down day volume for the last 2 months of the correction. And, US Equity Volatility (VIX) while an imperfect index, tested 14 today – and that’s been a clean cut sell signal for stocks and commodities for 5 years.

Across our core risk management durations:

  1. Intermediate-term TREND resistance remains overhead at 1419
  2. Immediate-term TRADE resistance is baking in lower-highs at 1398
  3. Long-term TAIL support = 1364

In other words, you have maybe +0.7% of immediate-term upside left in this mean reversion bounce and at least -1.7% downside. But (and this is an important but), if we snap 1364 again, there’s no longer-term support to 1258.

The high probability pitch to swing at here is buy what’s been working for 2 months – Bonds and The Dollar.

KM

Keith R. McCullough
Chief Executive Officer

Not Good: SP500 Levels, Refreshed - SPX