Risk Management Time: SP500 Levels, Refreshed

Paul Volcker is reminding the willfully blind on the Senate Banking Committee right now that they live and operate in a Bubble of US Politics. His basic message is that everyone at Investment Banking Inc knows exactly what prop trading is, and that it shouldn’t be back-stopped by the government.

In the end, I think the Volcker Rule makes the American Financial System a less volatile and less cyclical place to transact. So, I support Volcker’s basic demand here – get London on board and get it done. That’s my long term (TAIL) view.

For the immediate term TRADE and intermediate term TREND in the SP500, the answer is less clear. I have basically been selling the entire way up this week, and now the SP500 is jumping above what I call the Shark Line (the 1099 line). A close above that line gives my short position in the SP500 pain until 1116, where I plan on shorting it again. All we are doing here is making a series of lower-highs.

A close below 1099 puts 1071 in play on the downside.  

KM

Keith R. McCullough
Chief Executive Officer

Risk Management Time: SP500 Levels, Refreshed - sp22