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Risk Management: SP500 Levels, Refreshed...

So far, today’s intraday low for the SP500 flashed at 1057. With the US Dollar UP since early this morning, the reason for pressure on anything priced in Dollars is the same as it has been since March. This afternoon, the US Dollar is up less than it was this morning, so stocks are down less than they were this morning. Simple is as simple does.

The weakest of the 9 SP500 Sectors in our Sector Views Risk Management product are the 3 that anchor most on whether the Buck is Burning or not: XLB (Basic Materials), XLE (Energy), and XLF (Financials). With the SP500 at 1063 (at the time of my writing this), all 3 of those sectors are down -1% or more on the day.

Can the Federal Reserve stop the Buck from Burning on Wednesday? Of course they can. Signaling reality gets rates something north of ZERO. Something north of ZERO = US Dollars up, and everything REFLATION toned down…

XLV (Healthcare) is the only sector we are currently long in US Equities. It’s also the only sector of 9 that is up on the day. It’s defensive. After the SP500 makes a YTD high (Friday), we like defensive. We also like buying sectors that are offensive when they are down.

Where do we go next? Our Risk Management matrix has the immediate term TRADE lines of resistance and support at 1078 and 1054, respectively.

Prior to this morning’s open I said that the risk was outweighing the reward. However, as prices and other factors in my models change, I do. If 1054 on the SP500 holds, the reward will once again outrun tomorrow’s risk.

KM

Keith R. McCullough
Chief Executive Officer

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