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TODAY’S S&P 500 SET-UP - June 20, 2011

Delaying a European decision is not what markets wanted this morning.  Confusion is starting to breed contempt across asset classes as a result: oil collapsing, Spanish and Italian equities getting tagged and UST Bonds bid higher.  While it's difficult to discern whether this immediate-term TRADE breakout in the US Dollar is due to QG2 ending, a Debt Ceiling compromise in July, or European contagion ending - the answer is probably all of the above.

The line that matters for the EURO/USD = 1.42. That's my intermediate-term TREND line, and if it breaks (and sustainably holds below 1.42), there's a heightening probability that we see a 1.36 test by sometime this summer.  That would be very USD bullish and will continue to Deflate The Inflation (which will be good for Equities in the end - after prices deflate). 

As we look at today’s set up for the S&P 500, the range is 34 points or -0.98% downside to 1259 and 1.69% upside to 1293.

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

THE HEDGEYE DAILY OUTLOOK - global performance

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: +773 (+1093)  
  • VOLUME: NYSE 1604.51 (+52.53%)
  • VIX:  21.85 -3.87% YTD PERFORMANCE: +23.10%
  • SPX PUT/CALL RATIO: 2.03 from 1.92 (+5.96%)

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 22.11
  • 3-MONTH T-BILL YIELD: 0.04%
  • 10-Year: 2.94 from 2.93
  • YIELD CURVE: 2.56 from 2.55 

 

MACRO DATA POINTS:

  • 11 a.m.: Export inspections: corn, soybeans, wheat
  • 11:30 a.m.: U.S. to sell $27b 3-mo., $24b 6-mo. bills
  • 4 p.m.: Weekly crop conditions

WHAT TO WATCH:

  • European finance chiefs say further aid for Greece hinged on embattled Prime Minister George Papandreou delivering budget cuts in the face of domestic opposition
  • BASF falls as much as 2% in Frankfurt after board member Michael Heinz says he sees demand weakening in China, according to an interview with Finanz und Wirtschaft - June 18.
  • Microsoft May Stall Without Strategy Shift: Barron’s
  • CBS Shares Not Expensive: Barron’s
  • Barron’s says RIM is its worst pick of the year Allstate, Travelers, Chubb Hurt by Tornado Damage: Barron’s
  • VF, Timberland a ’Beautiful Fit’: Barron’s
  • Blackstone Mulls $1.6bn Northern Rock bid: Observerek

COMMODITY/GROWTH EXPECTATION

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COMMODITY HEADLINES FROM BLOOMBERG:

  • Corn Stocks Plunging to 1974 Low as China Adds Brazil-Sized Crop to Demand
  • Commodities Tumble to Six-Week Low as Oil Declines on European Debt Crisis
  • More Rains Predicted for China Seen Helping Grain Crops After Drought Ends
  • Oil Drops to Four-Month Low, Trades Below 200-Day Average on Europe Crisis
  • Rubber Declines to Four-Week Low as Oil’s Drop, Greek Crisis Lower Appeal
  • Thai Rice-Buying Plan Threatens Shipment Target, Exporters’ Group Says
  • Copper in London Resumes Decline on Concern That Greek Crisis May Worsen
  • Gold May Advance as Greek Debt Crisis Increases Haven Demand; Silver Gains
  • Palm Oil Gains as Exports From Malaysia Climb on Chinese Seasonal Buying
  • Copper Cable Shipments From Japan Gain First Month in 3 on Reconstruction
  • Soybeans in Chicago Rebound After Touching One-Month Low; Corn May Climb
  • Hedge Funds Raise Bets on Heating Oil to Seven-Month High: Energy Markets
  • Funds Reduce Long Positions in Commodities in Bet Global Growth to Decline
  • Europe Commodity Day Ahead: Corn Stocks Plunging to 1974 Low on China Use

CURRENCIES

THE HEDGEYE DAILY OUTLOOK - daily currency view

EUROPEAN MARKETS

  • EUROPE: what a mess; across the board selling of who's next down the most (Italy -2.5%, Finland -2.5%, Spain -1.9% ), were short Spain

THE HEDGEYE DAILY OUTLOOK - euro performance

ASIAN MARKETS

  • ASIA: ugly with selling across the board; India hammered for another -1.8% drop to -14.4% YTD; China (were long) down -0.8% to -6.7% YTD

THE HEDGEYE DAILY OUTLOOK - asia performance

MIDDLE EAST

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

Howard Penney

Managing Director