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TODAY’S S&P 500 SET-UP - March 11, 2011

Overnight China down on another sequentially accelerating monthly inflation reading (February (+4.9% CPI, +7.2% PPI).  We continue to hammer home the theme – Global Growth Slowing as Global Inflation Accelerates.  As we look at today’s set up for the S&P 500, the range is 32 points or -0.94% downside to 1283 and 1.54% upside to 1315.



  • 8:30a.m.: U.S. retail sales - Bloomberg estimate is 1%
  • 8:30 a.m.: Fed’s Dudley speaks in New York
  • 9:55 a.m.: U Michigan Confidence, est. 76.3, prior 77.5
  • 10 a.m.: Business inventories, est. 0.8%, prior 0.8%


  • APPL may sell 600,000 units of the second version of theiPad2 when it debuts this weekend
  • Saudi Arabia anti-government demonstrators have called for a “Day of Rage”
  • China’s inflation and industrial production exceeded forecasts in February
  • Libyan forces are mounting a full-scale attack on rebels, as NATO defense ministers said they lack the authority to impose a no-fly zone
  • President Obama will hold a news conference today to discuss rising energy prices   


As of the close yesterday we have 3 of 9 sectors positive on TRADE and 8 of 9 sectors positive on TREND.  The XLB was the 1st S&P Sector to break its intermediate-term TREND line since May, 2010.  The 3 Sectors that remain bullish on both TRADE and TREND durations are all low beta defensive sectors:

  • Healthcare (XLV)
  • Utilities (XLU)
  • Consumer Staples (XLP)
  • One day: Dow (1.87%), S&P (1.89%), Nasdaq (1.84%), Russell 2000 (2.64%)
  • Month-to-date: Dow (1.98%), S&P (2.42%), Nasdaq (2.92%), Russell (2.90%)
  • Quarter/Year-to-date: Dow +3.52%, S&P +2.98%, Nasdaq +1.82%, Russell +2.03%
  • Sector Performance: - Energy (3.6%), Materials (2.2%), Financials (2.1%), Tech (2%), Industrials (2%), Healthcare (1.6%), Utilities (1.2%), Consumer Disc (1%), Consumer Spls (0.7%),


  • ADVANCE/DECLINE LINE: -2188 (-1966)  
  • VOLUME: NYSE 1120.06 (+28.56%)
  • VIX:  21.88 +8.21% YTD PERFORMANCE: +23.27%
  • SPX PUT/CALL RATIO: 1.35 from 2.27 (-40.41%)


Yesterday, Treasuries were stronger for a second straight session with the heightened deterioration in the risk backdrop.

  • TED SPREAD: 24.66 +0.406 (1.672%)
  • 3-MONTH T-BILL YIELD: 0.08% -0.02%
  • 10-Year: 3.46 from 3.48
  • YIELD CURVE: 2.81 from 2.78


  • CRB: 354.45 -1.61% YTD: +6.50%  
  • Oil: 102.70 -1.61%; YTD: +9.82% (trading -1.43% in the AM)
  • COPPER: 419.75 -0.36%; YTD: -7.28% (trading -2.53% in the AM)  
  • GOLD: 1,407.80 -1.52%; YTD: -0.67% (trading +0.07% in the AM)  


  • Oil pared losses after the police in Saudi Arabia, the Middle East’s biggest producer of crude, reportedly opened fire at a rally in the east of the country. 
  • Gold fell the most in a week as a stronger dollar prompted some investors to sell the metal after unrest in the Middle East and northern Africa pushed prices to a record. 
  • Copper fell to the lowest in almost three months as imports slowed in China, the world’s biggest user, and amid rising concern that global growth may ease. 
  • Inventories of the grain will total 181.9 million metric tons as of May 31, up 2.3 percent from a February forecast, the U.S. Department of Agriculture said in a report today.
  • Cash cattle prices this week hit a record high at mostly $1.18 a pound on a live basis and from $1.86 to $1.93 dressed in Nebraska in active trading Wednesday.


  • EURO: 1.33820 -0.58% (trading -0.25% in the AM)
  • DOLLAR: 77.276 +0.72% (trading -0.11% in the AM) 


  • FTSE 100: (0.63%); DAX: (1.05%); CAC 40: (1.04%)
  • European markets opened lower on continuing unrest in NAME and after an 8.9 magnitude earthquake hit Japan.
  • Markets across the region saw a broad retreat with all sectors trading lower.
  • An EU leaders meeting today will discuss the Libyan crisis as well as EuroZone bailout fund, though it is unlikely that any final decisions will be made on the rescue package ahead of the leaders' Summit on 24-Mar.
  • Germany Feb final CPI +2.1% y/y vs prior +2.0%; Feb wholesales prices +10.8% y/y vs consensus +10.5%
  • UK Feb core PPI 3.1% y/y vs consensus 3.4% and prior 3.2%.


  • Nikkei (1.7%); Hang Seng (1.6%); Shanghai Composite (0.8%)
  • A major earthquake lasted 14 minutes before the close in Japan
  • Banks led China down after inflation data prompted fears of further tightening measures. An early afternoon rally was wiped out by the Japanese earthquake.
  • Australia was lower across the board.
  • South Korea fell as foreigners sold out of the market.
  • China February CPI +4.9% y/y vs consensus +4.8%. February PPI +7.2% y/y vs consensus +7.0%.

Howard Penney

Managing Director



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Hot As A Pistol . . . CEO Keith McCullough On Kudlow Tonight At 7PM

Hedgeye CEO Keith McCullough was on CNBC this afternoon discussing the market meltdown and what is next for the global financial system.  You can watch the clip here:


http://www.hedgeye.com/unlocked_ideas/12292 (copy and paste the link into your web browser to view)


This evening Keith will be joining Larry Kudlow on The Kudlow Report at 7pm eastern to accost more stock market bulls with our view that inflation is accelerating and growth is slowing. 


The key points Keith will be highlighting tonight include:


1.  Global Stock Markets - have been giving us Global Growth Slowing signals for 6 weeks – today’s China news shouldn’t be new news to anyone paying attention (we’ve been short Emerging Markets for the better part of 2011 and making money doing it)


2.  US Stock Market – casino is as casino does. The correlation risk between stocks and the USD is surreal right now – thanks go out to The Bernank. Sadly, your buy-the-dip stock promoter can’t afford what this country really needs: inflation slowing via a strong dollar (like you had today).


3.  Correction or crash? - we’ve been calling for a 3-6% correction since FUND FLOWS PEAKED in the week of February 14th – be my valentine little perma bull – here’s the 1st 3.5% of that correction. Our intermediate term downside support target for the S&P500 remains 1265.


4.  Oil – trade it with a bullish bias. We sold our LONG OIL position on Monday and bought it back today. We want to be long the Day of Rage and continue to think that the Middle East will be a longer term story than consensus thinks. Any oil price > $90/barrel is a significant consumption TAX on US Growth.


5.  US Economic Growth – sell-side forecasts for 2011 and beyond are still too high – US GDP of sub 3% for 2011 at oil > $90/barrel.



-Your Hedgeye Risk Management Team


Much ado about nothing.



As we mentioned in our note, GENTING SING: GOOD > BAD (3/1/11), we believe the sell side is overly concerned with Genting’s seemingly large receivable in 4Q.  When looking at it within the context of high growth in VIP direct volume, Genting’s receivable doesn’t look unusual.  As the charts below show, Genting’s 4Q receivable is 2.6% of direct rolling volume, which is actually lower than Marina Bay Sand’s 3.1%.  When compared to some of the Macau operators, Genting’s receivables are pretty much in-line.


So, take a deep breath, sell side.  For now, receivables shouldn’t be a worry, though a continuation of stagnant mass growth in Singapore may be.





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