Editor's Note: Hedgeye CEO Keith McCullough released the following note on April 01, 2014. The Nasdaq has fallen approximately -5% since 4/2. Follow Keith on Twitter @KeithMcCullough.
POSITION: 8 LONGS, 8 SHORTS
In my last SP500 Levels note, “Bubble Up” (March 26th) I signaled that we’d like re-test the all-time-bubble-highs. Now that bubble is signaling immediate-term TRADE overbought.
While buying-the-damn-bubble #BTDB felt pretty darn good at the beginning of last March, Biotech and Social Media stocks were only down -15-45% from that prior capitulation high. I trust no one forgets that. Risk happens fast.
Across our core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE overbought = 1885
- Immediate-term TRADE support = 1854
- Intermediate-term TREND support = 1823
In other words, you just saw 40 handles of straight upside from our 1842 oversold signal – and now you have 30 handles of downside from the overbought signal.
Don’t chase beta. Fade it.
Keith R. McCullough
Chief Executive Officer