A Simple Line

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Just as with everyone else and your portfolio, a trendline is only as good as the market tells you it is. In the case of the S&P 500, those of you who have consistently followed me know that I have not changed the trendlines from the prior multi-month trading range in quite some time. Instead, despite another morning gap down, the bulls have yet to really suffer so much as a flesh wound. In other words, set against the backdrop of many calls for a 10% broad market correction, that simple prior resistance trendline is still holding as support. Now, even if the bulls lose it, it will not necessarily be a terribly bearish event. Rather, it would signal a probable return to a trading range type of environment.

Given that backdrop, you would think that we should all load up the boat with longs right here, right now. Well, I still many charts that could use some time to firm up. Thus, I want to draw a distinction between being in heavy cash, versus being aggressively short. With the heavy cash strategy, you can afford to be as objective as possible, and you do not get nearly as punished for a “surprise” rally in this situation as the bears do.

A few names to watch on the long side: DFS (Hat Tip: 12631 Member @kipper) CREE EXPE FFIV HHC