Risk Management: SP500 Levels, Refreshed...

A lot of people seem to be waiting for a pullback that just won’t come. After seeing the SP500 trade up 6 out of the first 6 trading days of 2010, today’s -0.6% is hardly a pullback that inspires my bearish instincts.

 

The good news is that we don’t use instincts in managing risk anyway. We use fractal math.

 

Here are the refreshed lines of support that my macro model has as of 11AM EST today:

 

1.       Daily TRADE resistance at a higher-high = 1154

2.       Daily TRADE support at a lower-high = 1135

3.       Immediate term TRADE support = 1118

    

The way to read that is:

 

A) if 1135 holds, then there is a higher probability that this market tests making higher-highs (the YTD closing high is 1146).

 

B) if 1135 breaks, then there is a higher probability that this market tests 1118 (that would = -2.4% pullback).

 

Altogether, the immediate term TRADE line (1118) and the intermediate term TREND (1089) are bullish factors underpinning the SP500’s current price momentum.

 

As prices change, we will. For now, we are buying longs and covering shorts.

KM

 

Keith R. McCullough
Chief Executive Officer
HEDGEYE RISK MANAGEMENT

 

Risk Management: SP500 Levels, Refreshed...  - cha


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