Risk Management Time: SP500 Levels, Refreshed...

02/08/10 02:31PM EST

On strength this morning, I sold the long position I took in the SP500 on Friday’s weakness. Anytime I can book a gain on the long side of a market that remains in an bearish intermediate term position, I will.

In addition to the SP500 having broken my intermediate term TREND line of 1099 (thick red line in the chart below), here are some important risk management factors to consider intraday:

  1. Volatility: VIX remains in a bullish TRADE and TREND position, with newly established intermediate term TREND line support = 22.32
  2. Financials: XLF is the worst performing sector in our SP500 Sector Model today, and remains broken on both TRADE and TREND durations
  3. US Dollar: UUP continues to be in a bullish TRADE and TREND position, showing no signs of backing off after closing up for 3 straight weeks

At 2PM EST the SP500 is trading right in the middle of a new range that I think we will trade in for now (1052-1082). After 4 consecutive weeks of the SP500 closing down on a week-over-week basis, there is plenty of revisionist bearishness to support buy-to-cover rallies back up to what is becoming significant resistance.

This is definitely turning into a risk manager’s tape. Be patient, and pick your spots. If the SP500 starts churning here, a lot of weak hands will get frustrated and flushed out.

KM

Keith R. McCullough
Chief Executive Officer

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

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