POSITIONS: 15 LONGS, 5 SHORTS @Hedgeye
After the biggest 1-day move in US Equity Volatility since August of 2011 (+39% intraday), the VIX is coming in fast today. If it continues to come in (and holds below my TREND line of 17.18) we may have just witnessed another government sponsored head-fake (#Italy).
Lower-highs in long-term volatility make as much sense as lower-highs in Gold and Treasuries. It’s all the same thing to me. People are freaking-out about what we didn’t have from March to November of 2012 – global growth. I still think Strong Dollar Commodity Deflation stabilizes that.
Across our core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE resistance = 1499
- Immediate-term TRADE support = 1479
- Intermediate-term TREND support = 1463
In other words, the bullish intermediate-term TREND we have been amped up on for Asian and US Equities since late-November is still very much intact. We are experiencing an immediate-term TRADE headwind however (1499 support is resistance until it is support again).
A close above 1499, puts the YTD highs (1530) back in play, probably as fast as yesterday’s lows were. Especially if the VIX breaks down hard in March (like it did after the late DEC government sponsored volatility scare – that time it was Congress).
Keith R. McCullough
Chief Executive Officer