Bubble Up: SP500 Levels, Refreshed

03/26/14 12:26PM EDT

POSITION: 11 LONGS, 6 SHORTS @Hedgeye

I’ve seen a lot in trying to trade markets for the last 16 years, but I haven’t yet seen something like this. For 3 months I feel like we’ve been watching the entire construct of consensus bang its head against the #OldWall, debating whether the US stock market is going to be -2/+2% YTD.

So let’s bubble this sucker right back up to the all-time-high into quarter-end and get on with it. From a #behavioral perspective, what we know is that consensus hedge funds will get net long up there (after tightening exposure on every selloff). Don’t be consensus.

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

  1. Immediate-term TRADE overbought = 1881
  2. Immediate-term TRADE support = 1844
  3. Intermediate-term TREND support = 1815

In other words, the all-time-bubble-high of 1878 SPX (on a closing basis) is in play and if/when we tag that, the SP500 can then mean revert (lower) for another 35 handles once consensus is leaning too long (again).

De-stress and keep moving out there. Fading Beta within a risk range is a good business.

KM

Keith R. McCullough
Chief Executive Officer

Bubble Up: SP500 Levels, Refreshed - Slide2

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