Yesterday, I stated plainly that I was not a buyer of weakness (provided that the SP500 remained below 1040). With the dominant driver of the REFLATION trade burning lower again this morning (US Dollar down -0.52% at $76.26), that obviously makes me wrong.
The best way to solve for being wrong, is to change the Game Time playbook. Here are the facts that have changed in the last 24 hours, to the bullish side for US Equities:
- The VIX is breaking down through its intermediate term TREND line of support ($26.16)
- The SP500 is making a charge for intraday breakouts above important immediate term TRADE resistance lines (1042 and 1047)
- The US Dollar is making lower-lows on the day
So – what am I doing? Definitely not shorting strength!
I am, however, tactically making long sales and taking down my US Equity Exposure. At the start of the day I had 23 longs and 11 shorts. Now I have 20 longs and 11 shorts (sold PSS, AMGN, and QGEN).
While the USD is down, its making a higher-low. While the SP500 is up, its making a lower-high (YTD closing high = 1071). If those facts change, I’ll change my Game Time playbook again. Risk Management is a real-time, multi-factor, exercise.
Keith R. McCullough
Chief Executive Officer