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WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Negative / 0 of 10 improved / 6 of 10 worsened / 4 of 10 unchanged
  • Intermediate-term (MoM): Positive / 2 of 10 improved / 5 of 10 worsened / 3 of 10 unchanged
  • Long-term (150 DMA): Negative / 0 of 10 improved / 6 of 10 worsened / 3 of 10 unchanged / 1 of 10 n/a

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - Summary

 

1. US Financials CDS Monitor – Swaps were mixed to negative in the US last week, widening for 23 of the 29 reference entities and tightening for 6. 

Tightened the most vs last week: C, WFC, COF

Widened the most vs last week: CB, TRV, MBI

Tightened the most vs last month: AXP, COF, SLM

Widened the most vs last month: PMI, MBI, AGO

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - US cds

 

2. European Financials CDS Monitor – In Europe, the pattern was more positive for bank swaps.  Swaps widened for 13 of the 39 reference entities and tightened for 26.    

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - Euro cds

 

3. Sovereign CDS – Sovereign CDS rose 7 bps on average last week.  Ireland and Portugal improved substantially, while Greece continued to worsen, pushing back above its August highs.   

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - Sov cds

 

4. High Yield (YTM) Monitor – High Yield rates rose sharply early last week, closing at 8.18 on Friday.  

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - high yield

 

5. Leveraged Loan Index Monitor – The leveraged loan index put in its second consecutive down week, falling 5 points versus the previous Friday.   

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - lev loan

 

6. TED Spread Monitor – Last week the TED spread fell slightly, closing at 15.5 bps.

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - ted spr

 

7. Journal of Commerce Commodity Price Index – Last week, the index fell 8 points, closing at 18.9.

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields held close to flat, ending the week 17 bps above last week’s close.

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - Greek bonds

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices.  Spreads closed the week at 182 bps.     

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - markit mcdx

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Last week the index fell 16 points, closing at 215 versus 231 the prior week.  

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - Baltic Dry

 

11. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows: 0.8% upside to TRADE resistance, 0.3% downside to TRADE support, 2.25% downside to TREND support. 

 

WEEKLY FINANCIALS RISK MONITOR: REMAINS NEGATIVE ACROSS ALL THREE DURATIONS - XLF

 

 

Joshua Steiner, CFA

 

Allison Kaptur


No Timeouts

“I think I have a natural ability to lead."

-Mark Sanchez

 

Some people confuse a young winner’s conviction with their own insecurity. Most of those people can’t do what it is that winners repeatedly do at the highest levels of American life. We need to embrace our young Americans who have a natural ability to lead. They are our future.

 

Yesterday, after seeing his New York Jets blow a 16-point lead in the 4th quarter, 24-year old quarterback Mark Sanchez found himself an opportunity to be accountable. His team was trailing the Houston Texans 27-23. There were 49 seconds left on the clock. No timeouts.

 

He didn’t pout or point fingers. He didn’t blame depression or deflation either. He tied up his chin strap, marched the ball 72 yards down the field in 45 seconds, and stuck the ball in the end zone for the winning touchdown. Jets 30, Houston 27. That’s the kind of American leadership we can believe in.

 

Never mind the Pretended Patriotism and obfuscation of facts that we hear from conflicted and compromised politicians. Whether they be Irish, Greek, or American, they are embarrassing their last names. There never was a depression in this country. There will be if we continue to let a failed old-boy political network intervene in our markets.

 

These are early days, but last week showed continued progress. Closing up +0.54% week-over-week, the US Dollar was up for the 3rd consecutive week. As a result, the commodity inflation that’s starving the world’s middle and lower-class abated.

 

That’s right Mr. Protectionist, we are the world’s free-market leader until we bow down to crony-socialism. We hold the world’s reserve currency in the palm of our hand. It’s time to start wearing the Strong Dollar American jersey with some pride.

 

With the US Dollar up on the week, here’s what went down week-over-week:

  1. CRB Commodities Index = -1.7%
  2. Oil = -3.4%
  3. Volatility = -12%

For most Americans, these are good things. Playing a game of global chicken (Quantitative Guessing) with inflation isn’t.

 

Over the course of global economic history there’s never been a world power that’s devalued its way to prosperity. With each and every incremental government intervention attempt (printing money and incurring debt), Japanese, European, and American consumers see:

 

A)     Shortened economic cycles

B)     Amplified levels of volatility

 

Normal Americans who hate everything about socializing the losses of Big Auto and Big Banker may not have a sophisticated charting system to show this with a picture rather than prose, so Darius Dale will do that for you this morning in the Hedgeye Chart of The Day. Look at what the VIX (Volatility Index) has done since Ben Bernanke took over the wheel at the Fed in 2006. How’s that for upholding his said objective of “PRICE STABILITY!”

 

Since Bernanke pandered to the political wind and cut interest rates too early in 2007, this humble looking man has overseen both the highest and most sustained levels of US stock market volatility in American history. Maybe he looks humble when it comes to understanding real-time markets for a reason.

 

Thankfully, both Americans and the world are figuring this out. This is the advantage of YouTube, Twitter, and a 24-hour news cycle that is starting to hold decision makers accountable.

 

Better late than never: The Economist spent a very large amount of newspaper space this weekend attempting to teach people what both American and Japanese style Keynesian experiments have turned into. On page 87 of The Economist was a small but important introduction to a question Hedgeye asks every day: “Why is the Austrian explanation for the crisis so little discussed?”

 

While hope is not an investment process, I can only hope that America’s youth climbs ambition’s proverbial ladder of knowledge and grounds this Heli-Ben of failed academic dogma for good. The debt clock is ticking. The entire world is watching. America, like Ireland, has no more timeouts.

 

My immediate term support and resistance levels for the SP500 are now 1192 and 1225, respectively. If 1192 holds, that’s immediate term bullish. If it doesn’t, that’s bearish. We are neither short nor long the SP500 as of this morning’s US market open.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

No Timeouts - bernankeprice


THE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - November 22, 2010

As we look at today’s set up for the S&P 500, the range is 33 points or -0.64% downside to 1192 and 2.11% upside to 1225. Equity futures are trading higher after Ireland agreed to accept a three-year bailout package from the EU and IMF easing concern over the state of the Euro zone.  No important economic data is expected today.

  • Dover Corp. (DOV) may rise as much as 30% as it cuts costs, expands in emerging markets, Barron’s reports, citing analysts
  • Dynegy (DYN): Blackstone Pres. Tony James said $5-shr offer for Dynegy is full and fair, not prepared to raise, in CNBC interview
  • Genzyme (GENZ) said it is on track to meet Nov. 28 deadline to move finishing and filling ops for U.S. products out of its Allston, Mass., plant
  • Merck (MRK)’s cholesterol drug Vytorin safely lowered risk of heart complications in kidney disease patients in study. Jury found in its favor in Fed. Fosamax case
  • Time Warner (TWX)’s “Harry Potter and the Deathly Hallows -- Part 1” opened with $125.1m in U.S. and Canadian ticket sales, a record for series and sixth-best of all time, missed BoxOffice.com est.

 PERFORMANCE

  • One day: Dow +0.20%, S&P +0.25%, Nasdaq +0.15%, Russell +0.49%
  • Month-to-date: Dow +0.77%, S&P +1.39%, Nasdaq +0.43%, Russell +2.99%
  • Quarter-to-date: Dow +3.85%, S&P +5.13%, Nasdaq +6.31%, Russell +7.13%
  • Year-to-date: Dow +7.44%, S&P +7.59%, Nasdaq +10.97%, Russell +15.83%
  • Sector Performance: Materials +0.80%, Energy +0.84%, Consumer Discretionary +0.47%, Industrials +0.31%, Tech +0.29%, Consumer Staples +0.07%, Healthcare +0.09%, Financials (0.04%), and Utilities (0.38%)

 EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 534 (-1360)  
  • VOLUME: NYSE - 1101.70 (+8.13%)
  • VIX: - 18.04 -3.79% - YTD PERFORMANCE - (-16.79%)
  • SPX PUT/CALL RATIO: - 1.09 from 1.19 -8.45%  

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD - 15.46
  • 3-MONTH T-BILL YIELD 0.14% -0.01%
  • YIELD CURVE - 2.36 from 2.38

COMMODITY/GROWTH EXPECTATION:

  • CRB: 298.89 +1.2%
  • Oil: 81.98 -0.53% - NEUTRAL
  • COPPER: 384.25 +0.10% - BEARISH
  • GOLD: 1,353.90 +0.15% - BEARISH

CURRENCIES:

  • EURO: 1.3673 +0.43% - NEUTRAL
  • DOLLAR: 78.504 -0.14%  - BULLISH

OVERSEAS MARKETS:

 

European markets:

  • FTSE 100: +0.22%; DAX: +0.47%; CAC 40: 0.27%
    European markets are trading higher in light of Ireland's decision to formally request financial help from its European partners.
  • The request was officially welcomed by the European Union. Sources close to the deal point to a probable 3-year package which will be financed from the EFSM and the EFSF and expected to be in the order of €80-90B.
  • The IMF says it is also ready to join the support program. Contributions from Sweden and UK are also anticipated. Negotiations over the detail of the deal are not expected to conclude before the end of November

Asian markets:

  • Nikkei +0.93%; Hang Seng (0.4%); Shanghai Composite (0.15%)
  • Asian markets mostly rose today on positive sentiment generated by an apparent rescue of Ireland.
  • Construction sent Taiwan higher on news that the government plans to improve housing stock across the island.
  • QR National’s rose 4% on its trading debut to support Australia.
  • South Korea inched up on tech gains, but shippers and financials fell to restrain the overall market.
  • Defensive stocks went up in China, but they weren’t enough to overcome weakness in banks, which fell 1% after their reserve requirement ratios were raised 19-Nov.
  • Property stocks took Hong Kong down after the government imposed new measures to reduce speculation in the real-estate market. 

Howard Penney
Manging Director

THE DAILY OUTLOOK - levels and trends

 

THE DAILY OUTLOOK - S P

 

THE DAILY OUTLOOK - VIX

 

THE DAILY OUTLOOK - DOLLAR

 

THE DAILY OUTLOOK - OIL

 

THE DAILY OUTLOOK - GOLD

 

THE DAILY OUTLOOK - COPPER



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A SOLID OCTOBER ON THE STRIP

McCarran Airport volume increased 2% YoY in October.

 

 

The calendar was similar to last year and while the hold last year was normal, weak table drop last year provides an easy revenue comparison on the Strip.  Last October, a 9% decline in table drop per visitor contributed to a 10% Strip revenue decline. 

 

We are estimating Strip revenues increased a solid 2-5% in October 2010.  Our growth estimate would’ve been even higher but October 31st fell on a Sunday which means weekend slot revenues won’t be counted.  Slot handle will be counted so the hold percentage will appear low.  This will reverse in November.

 

Here are our estimates broken down by metric:

 

A SOLID OCTOBER ON THE STRIP - nevada1


The Week Ahead

The Economic Data calendar for the week of the 22nd of November through the 26th is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.

 

The Week Ahead - cal1

The Week Ahead - cal2


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Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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