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Takeaway: If 1728 breaks, 1671 is in play.

POSITION: 4 LONGS, 10 SHORTS @Hedgeye

I moved to net short yesterday and sold the open today too. The reasons are twofold:

  1. Burning Buck
  2. #RatesFalling

We have zero monetary policy in this country to defend against those two bond bull lobby factors. So, congrats – now we are all hostage to their combined implication = #GrowthSlowing. That’s why slow growth Utilities (XLU) are +0.9% and the Financials (XLF) are -0.9% today.

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

  1. Immediate-term TRADE resistance = 1754 (the all-time closing high)
  2. Immediate-term TRADE support = 1728
  3. Intermediate-term TREND support = 1671

In other words, the fundamental case for Bernanke messing this up (not tapering) is in. The only question that remains now in my model is when (and if) the quantitative levels that matter to this epic bullish stock market momentum break. If 1728 breaks, 1671 is in play.

It’s really sad to watch. The Fed has never understood why Down Dollar Inflation expectations = slow growth. And I don’t suspect they will until it is too late. Gold, Bond, and Utilities bulls, Unite!

KM

Keith R. McCullough
Chief Executive Officer

Not Good: SP500 Levels, Refreshed - SPX