1-Day: SP500 Risk Management Levels, Refreshed...

It’s certainly been an interesting week for the SP500:

  1. Monday – lowest-closing-low for the YTD at 1050 (down -13.7% from the 1217 peak)
  2. Tuesday – bear market rally of +1.1% to 1062
  3. Wednesday – failure to follow through on Tuesday’s lift, closing down -0.6% at 1055
  4. Thursday – massive +3% price squeeze on low volume to 1086

And after another 1-Day rally, the US stock market sells off once again to 1081 as of 230PM EST…

What do we do from here?

 

Stay short, watch, and wait.

The long term TAIL line for the SP500 is 1081. This line deserves the bearish benefit of the doubt until it doesn’t. There is significant immediate term downside to this Buy-And-Hope market simply because consensus is not yet Bearish Enough.

When 1-Day rallies stop empowering the perma-CNBC-bulls to actually cheer themselves on, this will change. Until then, 1-Day rallies should be taken as selling opportunities, not opportunities to hope-up a mini-bull market that is freshly broken.

We see no support for the SP500 down to the dotted green line in the chart below at 1039. That’s -4% downside from here versus immediate term upside to 1103 (2% upside). When risk outruns reward 2:1 and we have a bearish fundamental macro view, we’ll remain short the SPY.

Enjoy France vs. Uruguay.

KM

Keith R. McCullough
Chief Executive Officer

1-Day: SP500 Risk Management Levels, Refreshed...  - S P