In the chart below, we have outlined our TRADE and TREND lines for the SP500.
While there is an important immediate term TRADE line of resistance at 1110 (the closing high for the YTD that was established on 11/17), our Hedgeye Math Machine is spitting out a higher-high at 1117 (dotted red line). We Math Monkeys will be managing risk proactively toward 1117 being probable, in the immediate term.
Why is it probable? Well, primarily because the US Dollar has yet to breakout above it’s TRADE line at $75.57. The Bombed Out Buck has backed off it’s early morning highs and is currently trading at $75.11, so anything can happen here. For now, the US Dollar remains broken across all 3 of our risk management durations – we call this a Bearish Formation.
There is plenty of downside risk to manage toward, particularly if the Buck were to breakout. We have no support for the SP500 until 1083 (dotted green line). The more formidable bullish TREND line for the SP500 is down at 1051. A YTD peak to TREND line correction would be a -5.3% move. That would be tolerable.
Keith R. McCullough
Chief Executive Officer