Hope, when combined with fear, can be amazing to watch – particularly when it’s being priced on a market tick.
I walked through the following TRADE, TREND and TAIL lines of support in this morning’s EL:
- TRADE (3 weeks or less) = 1174
- TREND (3 months or more) = 1124
- TAIL (3 years or less) = 1039
From a risk management perspective, protecting against immediate term hope and fear is really not that complicated. We have made these overbought/oversold calls on the SP500 since we started the firm. They are tactical in nature and more about realizing where your risk/reward is from a time and price than anything else.
From our updated immediate term sell line (as of 11AM EST) we have outlined below at 1189, downside to our most immediate term level of TRADE line support is -1.3%. Downside to the TREND and TAIL lines are -5.5% and -12.6% respectively.
While we haven’t had many down days in the SP500 that are more than 1% since the February Freakout, this chart outlines the hope that that day isn’t closer today than it was yesterday.
Hope is not an investment process.
Keith R. McCullough
Chief Executive Officer