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Position: 11 Longs, 6 Shorts

Back on 7/1, with the index overbought and the setup for pro-growth exposure at the beginning of July beginning to look a lot like it did back in March, we issued a fresh Sell Signal at 1208 on the Russell. (Selling: Russell Levels, Refreshed)     

After a big drop Monday, the Russell tested its Intermediate-Term TREND line for two sessions before breaking through on the open.  

Looking across both sectors and asset classes, prices are telling a cohesive, slow-growth story:  

  • Bonds bid; yield-spread compression
  • Gold +1% (+1.7% on the week)
  • Consumer Discretionary (-0.6%)
  • Utilities (+0.8%)

REITs and Gold Miners outperforming vs. consumption driven sectors (consumer retail getting crushed) as our cyclical bearish call on U.S. consumption growth continues to unfold in sector divergences.

Tomorrow in our Q3 Macro Themes call (ping for access) we’ll outline our bearish thesis on the U.S. consumer into in the back half of the year. We continue to like Gold, Treasuries, and defensive sectors (XLU, REITs, XLE) in the face of further #Dollar Devaluation crushing already thin consumer margins. #Q3Slowing will be our first theme in the deck on tomorrow’s call.

Our core risk management levels on the RTY, with their respective durations, are as follows: 

  1. Intermediate-Term TREND Resistance = 1173
  2. Immediate-Term TRADE Oversold = 1154  

In other words, after an expedited -4% slide from the 1208 overbought signal, we got most of the correction we we’re looking for.  From here, we’ll remain better sellers of consumer centric, small-cap growth style factors on strength. 

Russell 2000: Levels Refreshed - Russell Levels 07.10.14