It’s been a fun quarter. Fortunately we didn’t get stopped out of any of our Q110 Macro Theme calls: Buck Breakout, Rate Run-up, and Chinese Ox In A Box. From time to time we’ve made overbought/oversold calls on the SP500 where our proprietary multi-factor model has signaled to do so. On the short side, not losing money in an up tape continues to be our daily risk management challenge.
While the SP500 was up yesterday, we said the SP500 would be overbought in the 1175-1178 range. Apparently it was. Since our model refreshes every 90 minutes of trading, we are getting a lot of questions as to what we see right here and now. As of this morning’s opening hour of trading, the SP500 has corrected -0.7% from our refreshed immediate term TRADE line of resistance up at 1177. We are seeing a controlled level of selling.
There is plenty of bullish support in this market across durations. In the chart below we have shown the immediate term TRADE and intermediate term TREND lines of support down at 1159 and 1120, respectively.
We aren’t calling for a crash. We, as risk managers, are simply telling you where the important thresholds are for the pain trade (which remains up).
Bull markets do in fact get immediate term overbought. Overbought is as overbought does.
Keith R. McCullough
Chief Executive Officer