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I shorted the SP500 (SPY) on this morning’s GDP report strength simply because this officially puts He Who Sees No Data (Bernanke) in a political box.

No matter what you think about the sustainability of a +5.7% GDP number, the immediate term reality is that it is unreasonable and unsustainable to maintain an “exceptional and extended emergency” Fed funds rate of ZERO percent. Particularly with year-over-year inflation now running up +3-4%.

The doves will say I am off base because “unemployment is at 10%”… I get it. That’s been the case the ‘zero is a perpetual investment return’ crowd has been making for months. Unfortunately (for them) both the currency and bond markets are telling the doves they are wrong.

I continue to think that bond yields continue to make a series of higher-lows (Rate Run-up) and that the Buck Breakout will continue as a leading indicator of the same.

This sea change in consensus expectations (Goldman’s Research Department says the Fed is on hold until they get their 2012 bonuses), is being reflected in a weak gold price (we are short GLD) and, finally, a TRADE and TREND breakdown in US Equities.

Below I have outlined TRADE and TREND lines for the SP500. The most important line is the thick red line of resistance at 1098. I might cover my SPY position on the way down to 1065. I might not. Unlike our politicized Fed Chairman, as the math changes, I will.

KM

Keith R. McCullough
Chief Executive Officer

Risk Management Time: SP500 Levels, Refreshed...  - km3