One of the hallmarks of bear markets is that they rise to lower-highs on low-volume bids. We affectionately refer to this as hope.
Hope, unfortunately, is not an investment process…
After a low-volume rally on this morning’s open, the SP500 could not hold above our most immediate term TRADE line of resistance (1082). All the while, the dominating intermediate term TREND line up at 1144 continues to cast its shadow of doubt.
While we won’t see any of the shadow inventory in tomorrow’s US Existing Home sales report for July, we’ll see plenty of reported inventory. Don’t forget that despite the tax credit in the June data, housing inventory was already moving up into the right hand corner of your charting system.
The overall market is a very dynamic ecosystem that absorbs both inside and reported information. That’s why we apply the principles of chaos theory to manage risk around it. Our refreshed risk management level of immediate term TRADE support is 1059.
We continue to be short both the SP500 (SPY) and Russell 2000 (IWM) in the Hedgeye Virtual Portfolio. We think this week’s US housing data will be plenty Bearish Enough.
Keith R. McCullough
Chief Executive Officer