Squeeze Me: SP500 Risk Management Levels, Refreshed

This morning, I’m the one getting squeezed. On the SPY short position I put on into yesterday’s close that is. That’s what we You Tuber’s of America call a mistake and that’s no one’s fault but my own.

 

When you make a short term mistake, the goal is to not immediately make another one. Over the immediate and intermediate term, compounding your mistakes gets easier if you don’t have a proactive risk management plan.

 

My plan in shorting the SPY yesterday was to short strength up to the two lines in the chart below: 

  1. Immediate term TRADE line resistance = 1101
  2. Intermediate term TREND line resistance = 1144 

While the long term TAIL line of support has held (1074), that doesn’t mean it can’t be broken. When markets that are broken on short and intermediate term price momentum rally to lower-highs on decelerating volume, the probability of long term support being broken increases.

 

Probability and scenario analysis needs to be measured dynamically if you want to have a shot at winning this game. I personally learn a lot more from my losses than I do from my wins. Today’s mistake is different than ones I’d make 3 and 5 years ago, in that time and mistakes help a man’s risk management model evolve.

 

If SPX 1074 breaks and VIX $26.19 holds, there will be a very high probability that we see 1048 in the SPX in the very near term. We shorted QQQQ on this morning’s opening market strength as well.

 

Keith R. McCullough
Chief Executive Officer

 

Squeeze Me: SP500 Risk Management Levels, Refreshed - S P


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