The Dow Jones Industrial Average (DJIA) hit a new all-time high today. Hedgeye CEO Keith McCullough signaled sell it in Real-Time Alerts. If you’re sticking to the Hedgeye process and following the data (not your feelings), this shouldn’t come as a surprise.
“It’s not because I was feeling anything. It is not because of anything qualitatively,” McCullough says in the above video. “It is all process.”
Here’s the set-up in the Dow:
- The Dow hit the top end of our quantitative risk ranges
- Wall Street consensus is now more bullish on the Dow than any other major asset class, according to CFTC data on big bank/hedge fund positioning
- Based on our reading of positioning in futures and options markets, the Transports, which is a major component of the Dow, has an implied volatility discount (i.e. bulls are getting complacent and bears have capitulated).
Bottom line? Follow the data, not your feelings.
