If the SP500 breaks down and closes through its long term TAIL line of support (1077) in the next few days, there may not be enough hands in the West Wing to plug the pricking of America’s last giant bubble - the Bubble in US Politics.
In the long run, I’ll take that short term stock market pain for America’s long term gain. Government’s heavy hand in markets is creating some of the highest levels of market volatility we have seen in generations.
In the meantime, I’ll keep playing the game that’s in front of me, no matter how conflicted or compromised some of the rules of this game of government sponsored volatility has become. The VIX is up +1.3% here to 30.57 and has ominously held its immediate term TRADE line of support (29.86).
Ominous is as ominous does. As a reminder, there is no upside resistance in the VIX to the 45.31 level. That means that any breach of the 1077 line in the SPX has plenty of probability to wreak some havoc on market prices.
In terms of upside resistance, nothing has really changed so far here in June. As of this afternoon’s price, the SPX is around flat for the month-to-date and the immediate and intermediate term TRADE and TREND lines of resistance remain overhead at 1109 and 1144, respectively.
Homebuilder Hovnanian (HOV) is down -13% in response to a -17% decline in net orders and bearish commentary on May demand trends (post homebuyer tax credit expiration). We put out a note titled “Shorting US Housing” yesterday and, at the same time shorted Toll Brothers (TOL). After being bullish on housing since around this time last year, we are making a call to get out.
If you’d like to take a look at Josh Steiner and Allison Kaptur’s work on housing, please email Jen Kane at . Being bearish on housing right here and now is not even in the area code of what this market is currently focused on. Lack of focus doesn’t mean opportunities on the short side cease to exist.
We remain short the SPY and QQQQ.
Keith R. McCullough
Chief Executive Officer