Editor's note: This complimentary unlocked research note by CEO Keith McCullough was originally published February 24, 2014 at 13:02 in Macro. For more information on how you can subscribe to Hedgeye click here.
POSITIONS: 5 LONGS, 6 SHORTS @Hedgeye
Why the ramp right back to the all-time SPY highs? Surprisingly, there was a net short position (futures and options contracts) of 93,465 (Index + E-mini) in SPX on Friday’s close. Unwinding some of that happens on green, not red.
As for fundamental reasons, evidently the machines still love the smell of Burning Bucks (Dollar Down again today) as the hyper-mo-mo SPX vs USD inverse correlation (15 days) has moved to -0.94.
As for the fundamental reality of #InflationAccelerating’s impact on growth, like in Q1 of 2011 (when we made the same bearish call on US consumption), I don’t think the market cares, until it has to (which can start from today’s overbought price inasmuch as any other).
Across our core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE overbought = 1859
- Immediate-term TRADE support = 1816
- Intermediate-term TREND support = 1791
In other words, TREND support is -3.7% versus the price on your screen right now (#RealTimeAlert to short SPY = $186.11 at 12:19PM EST) , and I don’t think it will take this market much (a down day will do) to re-test that level of 1791.
If the US government burns its currency like Venezuela did, the SP500 could be up another +450% from here. But don’t worry about that. I’m sure that would be great for someone - just not for American GDP.
Keith R. McCullough
Chief Executive Officer