I’ve only made two moves in the Hedgeye Virtual Portfolio today – both were shorts – both buttons were pressed on market strength. I think you are going to continue to be well served fading this market’s daily direction within the risk management band that Darius Dale and I have outlined below (1144-1186) until we make a real move on real volume above/below one of those lines.
The bearish news is that the immediate term TRADE line (1186) remains a lower-high versus both the YTD closing high (1217) and the upward bound we established at the beginning of Q2 when we introduced the idea of May Showers (1214).
The bullish news this week is that the SP500 has been able to steady itself and close above the intermediate term TREND line (1144). While I continue to believe that there will be a swift -3% drop from 1144 if the SP500 closes below that line, for now the best daily risk management strategy is to understand the game that’s in front of you and trade the range.
As a final risk management note, here’s the link to Erik Schatzker doing a solid job interviewing one of my favorite risk managers in this profession, Taleb.
Keith R. McCullough
Chief Executive Officer