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Takeaway: In other words, this market can easily bounce to 1867. But the bigger question is what does it do from there?

POSITION: 10 LONGS, 3 SHORTS @Hedgeye

After tagging last week’s immediate-term TRADE overbought bubble highs (1881 SPX on Tuesday), the SP500 had a brisk -2.1% correction to immediate-term TRADE oversold as both Gold and VIX signaled overbought. #TextbookBounce

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

  1. Immediate-term TRADE resistance = 1867
  2. Immediate-term TRADE support = 1845
  3. Intermediate-term TREND support = 1815

In other words, this market can easily bounce to 1867. But the bigger question is what does it do from there? A close above that TRADE line would be bullish inasmuch as a close below it would be bearish.

With #InflationAccelerating (should be > 2% by Q3) and US #GrowthSlowing (might drop < 2% in 1H14), there’s no reason to chase the +1% up days, but there’s no need to sell on oversold days either.

Stick to the process. Buy/cover on oversold signals. Sell/short on overbought ones. Don’t chase.

KM

Keith R. McCullough
Chief Executive Officer

Textbook Bounce: SP500 Levels, Refreshed - SPX