Risk Management Time: SP500 Levels, Refreshed...

Both our immediate and intermediate term risk management lines of resistance are starting to converge around the 1103 line. Most of the time when this occurs we are setting up for a period of increased volatility. Since there is plenty of immediate term upside in the VIX right now (up to 28.67), this is all starting to rhyme.

I am currently short the SP500 (SPY) right around today’s intraday price. So I’m positioned for what I think is going to be a test of the dotted green line in the chart below (the immediate term TRADE line of support = 1074).

The risk management question to ask is what happens if we breakdown through 1074 and close there? If it’s on accelerating volume and volatility studies, the answer (for the bulls) won’t be a pretty one. There is no other line of support in my macro model for the SP500 until 1048.

Immediate term macro calendar catalysts are hawkish. Both the PPI and CPI inflation reports for January are due out tomorrow and Friday morning, respectively.


Keith R. McCullough
Chief Executive Officer

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