Bear Market Macro: SP500 Levels, Refreshed...

As of 3PM EST, the SP500 continues to trade within the daily range that we outlined in both this morning’s Early Look note and on this morning’s Macro Call (1117-1133), with the low of the day actually being 1117.

What was immediate term TRADE resistance for the last 5 days is now support. This is an important risk management reality to acknowledge. It doesn’t mean that the intermediate term TREND (1144) in the SP500 isn’t bearish. It simply means that the immediate term TRADE has a support line that I am going to respect until the math tells me not to.

As a result, all you’ve seen me do today is cover 2 short positions (RT and DBB) and buy 2 long positions (WMS and IDX) in the Hedgeye Virtual Portfolio. There is no bullish catalyst for making these 4 moves that’s more important than price.

If the SP500 breaks down through (and closes below) 1117 again on the downside, I’d expect to not look so smart with these risk management decisions as there is no significant support line for the SP500 until 1089.

On the 16.5% of the time that I am wrong on my short positions (our batting average is 83.5% on the short side since Hedgeye’s inception in 2008), you’ve probably figured out that when I capitulate and cover some of my shorts for losses, it’s right around intermediate term tops.

Since I use stop losses, that’s a risk management reality of life that I am aware of, not often happy about, but willing to live with.

KM

Keith R. McCullough
Chief Executive Officer

Bear Market Macro: SP500 Levels, Refreshed... - 1