TODAY’S S&P 500 SET-UP - August 5, 2011
From a research/risk management perspective yesterday was one of the best day’s we’ve had versus our sell-side competition since 08. It was also the biggest down day for stocks since 08, so that makes sense. Having 0% asset allocation to US/European Equities helps!
Every bear market gets immediate-term TRADE oversold, and that’s what I see this morning. That said, I want to be crystal clear on this, sell all rallies in Equities/Commodities because the Street is still too long and needs to take down gross and net exposures.
As we look at today’s set up for the S&P 500, the range is 91 points or -2.92% downside to 1165 and 4.66% upside to 1256.
SECTOR AND GLOBAL PERFORMANCE
EQUITY SENTIMENT:
- ADVANCE/DECLINE LINE: -2818 (-3263)
- VOLUME: NYSE 1821.32 (+34.71%)
- VIX: 31.66 +35.41% YTD PERFORMANCE: +78.37%
- SPX PUT/CALL RATIO: 2.24 from 1.51 (+47.70%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 26.94
- 3-MONTH T-BILL YIELD: 0.02%
- 10-Year: 2.47 from 2.64
- YIELD CURVE: 2.31 from 2.33
MACRO DATA POINTS:
- 8:30 a.m.: Change in Nonfarm Payrolls, Jul, est. 85k, prior 18k
- Change in Private Payrolls, Jul, est. 113k, prior 57k
- Change in Manu Payrolls, Jul, est. 10k, prior 6k
- Unemployment Rate, Jul, est. 9.2%, prior 9.2%
- 1 p.m.: Baker Hughes Rig Count
- 3 p.m.: Consumer Credit, Jun, est. $5.00b, prior $5.08b
WHAT TO WATCH:
- WSJ is lukewarm on Kraft Foods
- Payrolls probably climbed by 85k workers in July, failing to create enough jobs to reduce 9.2% unemployment rate, economists’ forecast ahead of today’s report
- Google+ may grow to claim 22% of online U.S. adults in a year, surpassing Twitter, LinkedIn to be 2nd-most-used social site after Facebook, survey from Bloomberg/YouGov found
- 2-yr note yield hits record low of 0.3039%
COMMODITY/GROWTH EXPECTATION
COMMODITY HEADLINES FROM BLOOMBERG:
- Commodities Post Worst Run Since 2008, Erasing Gains for Year
- Copper Slumps to Five-Week Low on Concern Growth Will Falter
- Gold Gains in London as Financial Turmoil Boosts Investor Demand
- Oil Drops to Lowest in Eight Months Amid Global Rout on Economy
- China Said to Be Planning Soybean Sale to Rotate State Inventory
- Indonesia May Surpass Japan as Biggest Wheat Buyer in Asia
- Palm Oil Drops as Commodities Plunge on U.S. Recovery Concern
- Rubber Slumps Most in Almost Six Weeks as Economic Concern Grows
- AngloGold Plans Trial to Tap $118 Billion of 3-Mile Deep Ore
- Palm Oil Inventory in Malaysia Climbs to 19-Month High on Output
- Goldman Raises Corn, Wheat Targets on ‘Remarkably Hot’ Spell
- Escondida Workers Vote on Proposal to End Chile Mine Strike
- Wheat, Corn Decline as Economic Recovery Concern Dampens Demand
- Crude Oil May Fall on Slowing Economy Concern, Survey Shows
- Japan Considers Additional Steps to Contain Tainted Beef Crisis
- Copper Seen Above $4 a Pound on China Recovery, Codelco Says
- Zimbabwe Diamond Production Surges After Marange Sales Allowed
CURRENCIES
EUROPEAN MARKETS
- EUROPE: same scary divergences; all "rallies" trying to come out of the lowest quality markets while the pseudo safe get smoked (Germany)
ASIAN MARKETS
- ASIA: China down the least of the majors in the world this week (down -2.1% last night), and that’s about the only constructive thing I can say
MIDDLE EAST
Howard Penney
Managing Director