Bullish hope in any bear market is fleeting. After an early morning run-up, another 2-day bounce in the SP500 is fading. The question now is can the US stock market make another lower-low (YTD closing low for the SP500 was established last Friday at 1022)?
In our risk management speak, we’d call the probability of seeing a fresh YTD low probable. In the chart below we show our refreshed immediate term TRADE line of support down at 1006. That means it’s probable that the SP500 could lose 55-60 points in a day. That would leave a mark.
Since every single line in every single major market outlined in our Q3 Macro Theme presentation (slide 25) remains broken AND we see a probability of an immediate term drop of this magnitude, we are going to stick with the ZERO percent asset allocation to US Equities that we moved back to yesterday.
If you are looking for a catalyst for weekend news-flow, tomorrow kicks off the National Governors Association (NGA) meetings in Boston (2010 Annual Meeting, July 9-12). Our Q3 Macro Theme of American Austerity will be a front and center topic of discussion given that Governors know this national deficit and debt situation as well as anyone trying to balance a budget. The numbers don’t lie like some politicians do.
Keith R. McCullough
Chief Executive Officer