We are in the 6th day here of a bear market bounce. At 1096 in the SP500 this easily makes me feel as uneasy as I have felt… well… in 6 days.
From an intermediate term TREND perspective, unless the SP500 closes above 1131, this will remain a bear market by Hedgeye’s definition. That doesn’t mean that the bulls can’t annoy me and/or test the validity of either of our American Austerity of Housing Headwind Q3 Macro Themes in the meantime.
Quantified, a close above 1096 puts the probability of a move to 1131 in play. That’s why I have been doing a lot of waiting and watching today. The long term TAIL line of resistance for the SP500 is 1096 and the long term TAIL line of support for the Volatility Index (VIX) is 23.69. As of 3PM EST, we are trading right at these lines.
What was TRADE line resistance is now immediate term TRADE support at 1074. While the 1004 level of downside support is still what we would consider probable on a 3-day probability model basis, its also what we would call less probable than what we called it yesterday.
As the markets change we will continue to, but we need these SP500 and VIX levels to confirm for at least 3 days on a closing basis to change our positioning.
Keith R. McCullough
Chief Executive Officer