Bear Market Macro: SP500 Levels, Refreshed

It’s been a great week for the proactively prepared. This week’s action in the SP500 reminds us that managing risk works both ways.

While the SP500 remains broken across all 3 of our investment durations (TRADE, TREND, and TAIL) it’s also proving to have some predictability in terms of how it behaves on the downside.

In my Early Look note this week titled “Focus On Risk”, this is how we laid out Risk/Reward:

“Risk/Reward: For the sake of this illustration I’ll use the SP500 (SPY) short position – moving to a 3 standard deviation level of downside support I was coming up with 1040 (the 2.5 standard deviation level = 1053), and in terms of immediate term TRADE upside I was registering 1077 on a 2 standard deviation move.”

Now that partly explained why I covered some short positions on the drawdown to 1040 (the intra-day and intra-week low for the SP500 was 1041). The next risk management question is obviously where do we put our short position in the SPY back on? My answer as of 3PM EST is 1067. That’s our refreshed level of immediate term TRADE resistance. A close above that puts 1092 in play, in short order. A close below that, puts 1035 in play on the downside.


Keith R. McCullough
Chief Executive Officer

Bear Market Macro: SP500 Levels, Refreshed  - S P