Risk Management Time: SP500 Levels, Refreshed...

A lot of people seem to be getting nervous about US Equity prices up here. They should be.


In the chart below we outline the critical lines whereby we are proactively managing risk. The most obvious is the YTD high line up at 1110. Mr. Macro Market has tested and tried that line, flashing multiple Outside Reversals, since it was first established on November the 17th. We have yet to see a confirmation (higher-highs) of immediate-term bullish price momentum.


On the contrary, what we are seeing now in global equity and commodity prices are a series of lower-highs (gold, oil, Russia, China, etc.).


The immediate term TRADE lines of support/resistance that should be watched very closely for the next few days are:

  1. SPX = 1089 (dotted green line in the chart below)
  2. VIX = 23.79
  3. US Dollar Index = 75.31

As of 12PM EST today, only 1 of those 3 lines have been violated (US Dollar Index has made its move to the upside). If you see either (or both) of the other 2 lines violated, probability goes up that we see a more meaningful correction in the SP500 down to its intermediate term TREND line down at 1061.


While I was a net seller at the YTD highs, I am a better buyer now (covering shorts and finding new entry levels on longs). For now, I am giving the benefit doubt to the bullish side of the debate until at least 2 of the aforementioned 3 lines are eclipsed.



Keith R. McCullough
Chief Executive Officer


Risk Management Time: SP500 Levels, Refreshed...  - ddd


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