Barber and I have re-run the math on today's intraday price moves enough times to drive myself squirrely. Good thing AB has a massive bag of Costco nuts on his desk!
When the US Dollar was down on the open and stocks REFLATED, that made sense. Intraday, the US Dollar has rallied, but remains down -0.57% at the time of this note. At the same time, all of the REFLATION trades have collapsed, leading the US stock market to its intraday lows - what gives?
Sometimes the answer is I don't know. Sometimes I just call it squirrely. All of the time, real-time prices end up discounting something that I can't quite see, yet...
Are we starting to discount the end of the inverse correlation between REFLATION and the US Dollar? At this juncture, that would be a very premature conclusion to make - we don't have anywhere near the amount of days or volumes in the data series to confirm anything other than what you see in front of you today. That said, extremely high r-squares like this aren't perpetual. When consensus hits its crescendo, correlations start to unwind.
Below I have outlined my immediate term TRADE line of support for the SP500 at 915 (dotted green line). At the time of my whacking these keystrokes, the SP500 is trading below that. In context, a drop down to the 904 line would be a 3-standard deviation move on the short term duration model I have been using. Those are hard to achieve - but when they do, something squirrelly is brewing.
From here, the market could go to 952 in a straight line and I wouldn't call that a squirrel. That's my immediate term line of upside resistance.
Confused yet? Have a nut.
Keith R. McCullough
Chief Executive Officer