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There is a lot of pin action this morning in and around the Dow's intermediate term TREND line (8,235).

In the chart below, we have outlined the two lines that we think matter - the longer term TAIL (3 years or less) and the TREND (3 months or more).

From a long term TAIL perspective, fully loaded with the Dow's Departed (AIG, GM, and C), the Dow Jones Industrial average remains broken. That TAIL line is at 8,890, and unless I see a sustainable close above that line, I am being reminded by Mr. Market that the REFLATION trade is a trade, and we better keep it one.

The Dow is a narrow index of companies that auger to US financial leverage. Since 1971, when Nixon abandoned the gold standard and we established a global capital market system of limitless credit creation, we have taught American and International investors that levered returns are what gets you paid. That's not a perpetual entitlement, and neither is the currency that backs 54% of the world's debt. The world is changing, and so is the attractiveness of the Dow as the beacon of American style capitalism.

We remain short financial leverage via the Dow (DIA) and long liquidity via the Nasdaq (QQQQ).

KM

Keith R. McCullough
Chief Executive Officer

Chart Of The Week: The Dow's Departed - aigch