Overbought (finally): SP500 Levels, Refreshed

Takeaway: The market is overbought and it’s a safer place to cut gross long exposure and/or start tightening your net exposure than it was last week.

POSITION: 9 LONGS, 6 SHORTS @Hedgeye

Finally, anywhere north of 1657, the SP500 is immediate-term TRADE overbought. I have been waiting to send you this overbought email all week – but my machine didn’t give me the explicit signal until today. I listen to my wife, and my machine.

This doesn’t mean I am trying to call a top. This simply means what it says – the market is overbought and it’s a safer place to cut gross long exposure and/or start tightening your net exposure than it was last week.

The fundament bull case of #StrongDollar hasn’t been better obviously (USD is at its YTD high here intraday), but it too is immediate-term TRADE overbought. SPX vs USD has a positive correlation on our TREND duration of +0.81.

Across our core risk management durations, here are the lines that matter to me most:

  1. Immediate-term TRADE overbought = 1657
  2. Immediate-term TRADE support = 1629
  3. Intermediate-term TREND support = 1545

In other words, we are up on a rope. Sell some high – buyem back on red, and keep doing more of what’s been working.

KM

Keith R. McCullough
Chief Executive Officer

Overbought (finally): SP500 Levels, Refreshed - SPX