Shorting The Market: SP500 Levels, Refreshed...

Some people say you can’t make market calls. I agree. Some people can’t.

There is actually a big difference between making a market call that’s based on math (probabilities, standard deviations, mean reversions, etc…), and combining that math with a repeatable global macro research process, versus licking one’s almighty finger to test the ferocity of a bull’s wind.

Ten years ago, I thought I was Captain Stock picker at a hedge fund that was changing its name from Dawson Samberg to Dawson Giammalva. The guys I worked with knew what they were doing. They still do.

Today, I realize that there is a huge difference between stock picking and managing global macro risk. That’s why I concentrate most of my incremental time to trying to evolve the risk management process that surrounds my investment team’s stock picking.

My macro model isn’t based on a 200-day moving average. Nor is it based on calling up Stan or Fibonacci for their reads. It’s my own. I build it; I break it; I call it names – but the one thing I love about it is that it’s flexible and able to change, dynamically, as market prices and the quantitative factors that drive them do.

One function of the model that I have recently learned a lot about is the high correlation between declining volatility and tightening ranges. What I mean by that is that the higher the SP500 (SPY) goes, and the lower Volatility (VIX) goes, the more proactively predictable the top ends of my immediate term TRADE ranges become. That’s why I am brave enough to put my daily range for the SP500 in my daily note.

The immediate term TRADE lines of support and resistance for the SP500 are now 1170 and 1180, respectively. The more significant lines of support below 1170 are outlined in the chart below. I shorted the SPY at $118.00 this morning. My position is on the board for everyone to see, and I am accountable to this view.

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

Shorting The Market: SP500 Levels, Refreshed...  - S P