Risk Management Time: SP500 Levels, Refreshed...

This tape definitely has the continued potential to frustrate people. I think we are going to continue to trade in a range with a bearish bias.


Chasing the snap-back intraday rallies is going to be a monkey’s game. Shorting/Selling the high end of the range and Buying/Covering the low end should really drive some alpha. I outline this range (1044-1076) in the chart below. Unless we can clear and close above the 1076 line (dotted red), I think we’re going to keep grinding between 1044 and 1076.


Because plenty of the monkeys have been distracted with European sovereign debt news doesn’t mean the rest of global macro ceases to exist. There are 2 big game changers out there that are mutually exclusive to where Greek CDS trades on a tick:


1.       The US Dollar

2.       China


On the US Dollar front, the Buck Breakout looks poised to continue, making a series of intermediate term higher-highs and higher-lows. Staying ahead of Bernanke’s changing rate rhetoric should lead you to water on your US Dollar positioning. What is good for the dollar is bad for reflation trades, commodities, etc.


On the Chinese front, tonight we are going to get another inflationary CPI report. While the precedent for one of those inflation scares is backward looking (last month), it really started China’s recent -10% correction. It deserves your risk management respect.


China was up +1.1% last night and could easily get rocked tonight. If that happens, I’d consider an SP500 test of 1044 probable in the next 3 trading days.



Keith R. McCullough
Chief Executive Officer


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


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