This note was originally published December 13, 2012 at 11:11 in Macro
POSITION: Short Commodities, Long Consumer
This US stock market is back in a Bullish Formation for the right fundamental economic reasons. Deflating commodity inflation is one of the very few policies the government has tried yet. That, of course, is because it would require them to get out of the way.
Across our core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE resistance = 1435
- Intermediate-term TREND support = 1419
- Long-term TAIL support = 1366
In other words, bullish is as bullish does until it doesn’t. The volume signals in this market are beyond alarming at this point. I get that, but also get that consensus hedge funds tend to capitulate and cover at no-volume lower-highs when the VIX hits 14.
So there’s plenty to consider as you risk manage this very manageable Risk Range (1419-1435). What was TREND resistance (1419) is still confirming itself as newfound support.
If it doesn’t hold, we’ll change our position.
Keith R. McCullough
Chief Executive Officer