Bear/Bull Battle: SP500 Levels, Refreshed...

Finally, after an +11% melt-up, the US stock market perma-bulls are back. Crank up the volume and get them on stage to spew it out. Just like in early April (beginning of a new quarter), the more of them the merrier. An abrupt crash-like correction won’t be possible without their wholehearted participation chasing these prices.

Make no mistake, in their guts the perma-bulls that blew up in 2008 are half-baked. They have no competence in calling crashes or corrections so the best they can do is have their hearts and minds hoping for QE year-end bonus-ing. All the while, the world is Burning The Buck.

On the heels of Fed Head Bullard literally co-hosting CNBC to talk up QE during the employment report this morning (how pathetic is that?), the US Dollar Index is down again on the day – down for the 16th week out of 19, as US Treasury yields hit all-time lows with 2-years yielding 0.34% intraday.

I’m not brave or forgetful enough yet to forget how October of 2007 ended. That’s helped me not get squeezed like I did in September 2007, but it certainly hasn’t made me feel any more confident in the in the said leadership of the American financial system. Sadly, Wall Street has learned very little from its mistakes. Groupthink is as pervasive as it has ever been.

The biggest mistake perma-bulls made in October of 2008 is the same one they are making right here and now. Putting 100% of this market’s daily beta in the hands of Bernanke. I don’t know how or why it is that people don’t get this yet. But it will end very badly. Most price complexes that hinge on government supports do.

What do we do with all this? Whine, Wait, and Watch.

The 2 lines I have been focusing on for US Equities remain:

  1. SP
  2. VIX 20

As we melt up in the SP500, I’m registering an immediate term TRADE line of resistance now at 1169 (another lower-high). As I wait on that to get short, I’ll keep selling things with extremely high inverse correlations to DOWN DOLLAR (I sold our long positions in Corn and the British Pound today).

That’s the best I can do. Betting on myself is better than betting on Bernanke. That much I have figured out.

KM

Keith R. McCullough
Chief Executive Officer

Bear/Bull Battle: SP500 Levels, Refreshed...  - spxx