A flat market can make any real-time risk manager fidgety because, in the end, a market won’t perpetually stay flat.
The week-to-date, and ever since we shorted the SP500 on Friday at the 1139 for that matter, has been virtually flat. Yes, we have had fits and starts of intraday strength and weakness; and, yes, the bullish side of this market continues to deserve the bullish benefit of the doubt; but on a closing price basis, it’s been basically flat. I do not expect this to continue beyond this 3-day period.
In the chart below I have outlined both levels that I think can be attained. While there is more immediate term downside here than there is upside, in the face of another horrendous consumer confidence report this morning (ABC/Washington Post report came in at down -49 versus -49 last week, despite the SP500 being up +3.1% last week) and President Obama’s approval rating hitting a new low this morning (The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-three percent (43%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -21. That matches the lowest Approval Index rating yet recorded for this President), the SP500’s pain trade remains UP (1154).
In terms of down side support, the bullish intermediate term TREND line of support is now at a higher-low of 1108 (or a -4% correction level from 1154 if this market is actually able to make up its mind and close at that higher-high).
My immediate term strategy is to not try to be a hero on the short side, but wait and watch. If I see 1154, I’ll likely short more SPY up there. If I don’t, well that will make us right on our current short position and… I guess I’ll be less fidgety.