If all you do into year-end is buy-the-damn-bubble #BTDB on dips, you’ll probably keep getting paid. But alongside this no-volume raging bull comes an increasing amount of mean reversion risk – so just know that.
What was best about today’s rip to new all-time highs was that it came on what’s really been driving the US stock market for the better part of the last 10-11 months. The ISM report’s growth components once again surprised on the upside (NOV's New Orders = 63.6 and Employment of 56.5 were the best monthly readings, respectively, of 2013).
Rates UP, Dollar UP today – and you know I like that. But the Fed doesn’t. Makes them look silly for not tapering (that’s what not being data dependent gets you into – a good ole politicized pickle!). So prepare for more @FederalReserve storytelling as they continue to pander to the Bond Bull Lobby @PIMCO.
Across our core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE overbought = 1816
- Immediate-term TRADE support = 1782
- Intermediate-term TREND support = 1726
In other words, now you have 90 $SPY handles of mean reversion downside, or -5%, to my 1726 @Hedgeye TREND line. And every time it feels like we’re not going to correct, that’s about how much we’ve corrected (3 separate 5% corrections in 2013 YTD).
So keep your eyes on your fries and keep moving out there,
Keith R. McCullough
Chief Executive Officer