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POSITIONS: 6 LONGS, 2 SHORTS

If nothing else, watching 2014 macro markets (not just SPY!) and all of the storytelling embedded within their weekly moves is a crash course in #behavioral economics.

That said, with both growth and inflation expectations slowing (that’s why our Best Macro Idea remains long the Long Bond), the question remains as to when they attack the SP500’s intermediate-term TREND line (like they did in October).

My answer? Not yet.

The main reason for that answer isn’t some divine survey – it’s my #process. And, across all 3 of its core risk management durations, here are the levels that matter to me most:

  1. Immediate-term TRADE resistance = 2065
  2. Immediate-term TRADE support = 2040
  3. Intermediate-term TREND support = 1998

S&P 500: Levels Refreshed - 12 09 14 SP 500 Levels Refreshed

In other words, as they test and try that 2040 line, I expect volatility to get immediate-term TRADE overbought. If that line holds (on a closing basis) probability rises that SPY bounces. If that line breaks, probability rises that SPY retests 1998 TREND support.

As I outlined in my Early Look this morning, “Bayesian Answers”, that’s my probability-weighing #process and I’m sticking to it. I only know what the market tells me – beyond that I read every #history that I can find, just to remind me what very little I know.

Sell green, buy red.

KM