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This market continues to rally on low volume to lower-highs as volatility (VIX) continues to make higher lows. Combined, these 2 factors are bearish for US Equities. Respect yesterday’s rally from the YTD low for what it was – a rally from the YTD low.

Notwithstanding this intraday headline “North Korea says situation is so grave that war may break out at anytime—KCNA”, there remain plenty of reasons to remain short US stocks into month end. The biggest reason remains the Sovereign Debt Dichotomy. We continue to believe that the sovereign debt problems in Europe are going to manifest in the US within the next 3-6 months.

In terms of levels, the SP500 remains broken from both an immediate term TRADE and intermediate term TREND perspective. The intermediate term TREND line of resistance (1144) still leaves plenty of room for the bulls to buy-and-hope, but that also puts more downside risk to this market if our long term TAIL of support at 1074 is violated in June. Nothing makes markets go down faster than bulls having to reduce their gross long exposure.

We’ll be holding our risk management call on Korea at 1PM with renowned Yale Professor, Charlie Hill. If you’d like access to the call please email . Given the intraday headlines coming out of North Korea, the timing of this call is going to help you proactively prepare ahead of the long weekend.

About Professor Hill
Professor Charles Hill was a career minister in the U.S. Foreign Service and is a research fellow at the Hoover Institution. Hill was executive aide to former U.S. Secretary of State George P. Shultz (1985-89) and served as special consultant on policy to the Secretary-General of the United Nations from 1992 to 1996. Professor Hill has served as Chief of Staff of the State Department, a State Department political officer in Hong Kong, a cultural exchange negotiator in China, and a Chinese-language officer in Taiwan.

Keith R. McCullough
Chief Executive Officer

Risk Management Time: SP500 Levels, Refreshed - S P