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
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
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
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.
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%
MIDDLE EAST
Howard Penney
Managing Director
