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TODAY’S S&P 500 SET-UP - August 3, 2011

Fear sells!

And while I don’t think anyone who really understands what we do thinks we sell fear, I can tell you yesterday was the busiest day of what we call “new subscriber demand” – probably a contrarian indicator.  As we look at today’s set up for the S&P 500, the range is 4 points or -0.16% downside to 1252 and 0.16% upside to 1256.

SECTOR AND GLOBAL PERFORMANCE

THE HEDGEYE DAILY OUTLOOK - levels 83

THE HEDGEYE DAILY OUTLOOK - daily sector view

THE HEDGEYE DAILY OUTLOOK - global performance

EQUITY SENTIMENT:

“on a day like yesterday, I usually start hearing some of the most qualitative things I hear all year – “this guy blowing up… volume/OIS doing that… look at this” – yesterday, was nothing like the usual storytelling – more like oh my god” - KM

 

  • ADVANCE/DECLINE LINE: -1750 (-1945)  
  • VOLUME: NYSE 1252.18 (+12.77%)
  • VIX:  24.79 +4.78% YTD PERFORMANCE: +39.66put%
  • SPX PUT/CALL RATIO: 2.10 from 2.41 (-12.97%)

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 21.87
  • 3-MONTH T-BILL YIELD: 0.06% -0.04%
  • 10-Year: 2.66 from 2.77    
  • YIELD CURVE: 2.33 from 2.39

MACRO DATA POINTS:

  • 7 a.m.: MBA Mortgage Applications, prior (-5.0%)
  • 7:30 a.m.: Challenger Job Cuts, prior 5.3%
  • 8:15 a.m.: ADP Employment Change, est. 100k, prior 157k
  • 10 a.m.: ISM Non-Manf. Composite, est. 53.5, prior 53.3
  • 10 a.m.: Factory Orders, est. (-0.8%), prior 0.8%
  • 10:30 a.m.: DoE inventories

WHAT TO WATCH:

  • Moody’s, Fitch affirm U.S. AAA ratings while warning of potential downgrades
  • Swiss central bank unexpectedly cut interest rates in effort to stem surge in its “massively overvalued” currency
  • Italian PM Berlusconi will address country, Senate in attempt to shore up confidence as bond yields hit euro-era records
  • HEDGEYE LEVELS – away from Venezuela and Russia, there is not 1 global equity market that scores bullish on both TRADE and TREND on the COUNTRY style factor in the Hedgeye global macro model; that means you need to tighten up your net exposure on rallies

COMMODITY/GROWTH EXPECTATION

THE HEDGEYE DAILY OUTLOOK - daily commodity view

COMMODITY HEADLINES FROM BLOOMBERG:

  • Commodities Fall for a Sixth Day on Concerns Economy May Slow
  • Corn, Wheat Fall as Slowing U.S. Rebound May Cut Into Demand
  • Coffee Rises for Fourth Day on Delayed Exports; Raw Sugar Gains
  • China Soy Demand to Gain on Higher Hog Numbers, Boosting Imports
  • Copper Declines 0.6% to $9,620 a Ton on London Metal Exchange
  • Paulson, BlackRock, UBS Lead London Mining Analyst Hiring Spree
  • Rubber Rallies as Much as 2% as Rain in Thailand May Cut Supply
  • Egypt Seeks to Broaden Wheat Imports as Russian Prices Climb
  • Iron Ore Swaps, Aided by Deutsche Bank, Surge Fourfold to Record
  • Anchor Ship May Double Fleet to 50 on China’s Iron-Ore Demand
  • Guangxi Steelmakers Halt Output on Power Shortage, Xinhua Says
  • Diamond Jewelry Demand in India May Slow After Gem Prices Surge
  • Global Gold Hedges Increased 4.1% in First Quarter, GFMS Says
  • FAO Pares Record Rice Production Forecast for 2011 on U.S.n

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

EUROPEAN MARKETS

  • EUROPE: learn most on "recovery" days in a bear market; today’s shows the squeeze tapes up (Italy) and the pseudo quality (Germany) down = bad
  • July final Services PMI - France 54.2 vs prelim 54.2; Germany 52.9 vs prelim 52.9; Eurozone 51.6 vs prelim 51.4; UK Jul Services PMI 55.4 vs consensus 53.2, prior 53.9
  • UK Retail prices rose 2.8% YoY following a 2.9% in June according to BRC and Nielsen Co.  On the month, prices fell 0.2% after increasing 0.5% in June.

THE HEDGEYE DAILY OUTLOOK - euro performance

ASIAN MARKETS

  • ASIA: CHINA – closed down a whole 3 basis points in the face of a sea of global equity selling; this is interesting not only because it registers as a positive divergence, but doesn’t tell you the world’s entire demand construct is imploding – at least not today
  • Australian retail sales unexpectedly declined in June for a second straight month  by 0.1%

 THE HEDGEYE DAILY OUTLOOK - asia performance

MIDDLE EAST

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

Howard Penney

Managing Director