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TODAY’S S&P 500 SET-UP - August 10, 2011

USA stocks aren’t expensive; they aren’t cheap - they are perfectly priced for storytelling.  We are hosting a conference call at 11AM today key topics we will be addressing: 

  • Does the S&P500 off over 15% from its YTD highs present a short covering opportunity?
  • Given our outlook for the global economy, what are the key drivers over the intermediate term?
  • Sovereign debt issues and the likelihood of resolution, both in the United States and Europe.
  • Update of Hedgeye's quantitative and fundamental view of key assets classes - e.g. U.S. dollar, oil, gold, treasuries and copper.
  • Hedgeye's top macro and asset allocation ideas. 

As we look at today’s set up for the S&P 500, the range is 117 points or -4.99% downside to 1114 and 4.99% upside to 1231.

SECTOR AND GLOBAL PERFORMANCE

THE HEDGEYE DAILY OUTLOOK - levels 810

THE HEDGEYE DAILY OUTLOOK - global performance

THE HEDGEYE DAILY OUTLOOK - daily sector view

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: +2651 (+5719)  
  • VOLUME: NYSE 2409.64 (-5.28%)
  • VIX:  35.06 -26.96% YTD PERFORMANCE: +97.52%
  • SPX PUT/CALL RATIO: 2.64 from 2.04 (+28.96%)

CREDIT/ECONOMIC MARKET LOOK:

TREASURY YIELDS – obviously some big league career risk management buttons were pushed (BUY) at S&P500’s 1,100 intraday test yesterday (a sub 1,100 move puts S&P500 in crash mode), and immediately after the rally you had everyone and their brother say “because Bernanke wants you to chase yield.” The 10yr yields heading toward 2008 all-time lows are NOT a bullish economic signal!

  • TED SPREAD: 25.30
  • 3-MONTH T-BILL YIELD: 0.03% -0.02%
  • 10-Year: 2.20 from 2.40    
  • YIELD CURVE: 2.01 from 2.13

MACRO DATA POINTS:

  • 7 a.m.: MBA Mortgage Applications, prior 7.1%
  • 10 a.m.: JOLTs Job openings, prior 2974
  • 10 a.m.: Wholesale Inventories, est. 1.0%, prior 1.8%
  • 10:30 a.m.: DoE inventories
  • 1 p.m.: U.S. to sell $24b 10-yr notes
  • 2 p.m.: Monthly budget statement, est. (-$135b, prior $165b)

WHAT TO WATCH:

  • BofA CEO speaks on conference call hosted by Fairholme Capital. Moynihan said yesterday he has no plans to step down.
  • China’s stocks rebounded from a more than one-year low on speculation the government may delay interest-rate increases
  • Goldman sued by U.S. over credit-union losses: WSJ
  • FCC to tie review of AT&T bids for T-Mobile, Qualcomm assets
  • Walgreen to sell health insurance: CNN

COMMODITY/GROWTH EXPECTATION

COMMODITIES – not crashing on the 19 component CRB Index, yet (CRB down -15% since May). But this one is in motion. Oil has crashed and that’s not an inconsequential global demand signal. As a reminder, both Copper and Oil have snapped my TAIL lines of $92 and 4.10, respectively. When my TAILs snap; tail risk becomes probable.

THE HEDGEYE DAILY OUTLOOK - daily commodity view

COMMODITY HEADLINES FROM BLOOMBERG:

  • Being Like Soros in Buying Farm Land Reaps Annual Gains of 16%
  • Brent Drop Below $100 Risks OPEC Cuts on Price: Energy Markets
  • Oil Rises From 10-Month Low on Fed Comments; IEA Sees 2012 Risks
  • Bets on Iron-Ore Swaps Show Vale, Rio ‘Cheap’: Chart of the Day
  • Gold Advances After Federal Reserve Pledges to Keep Rates Low
  • China Copper Imports Rise to Six-Month High on Restocking
  • Commodities Rebound From Eight-Month Low on Fed’s Rate Pledge
  • South Africa Drives Trade Away With Port Costs: Freight Markets
  • Copper Climbs for First Day in Six After Fed’s Low-Rates Pledge
  • Palm Oil Stockpiles in Malaysia Decline on Record Exports
  • Gold Surges to Record for Second Day as Fed to Keep Rates Low
  • U.S. Mint’s Gold Coin Sales Up to 39,000 Ounces So Far in August
  • China’s Soy Imports at Highest This Year as Hog Herds Expand
  • Gold Futures Advance 0.9% in New York; Silver Reverses Decline
  • Palm Oil Gains as Commodities Rally on Fed’s Pledge to Low Rates
  • China Won’t Sell Pork Reserves to Push Down Prices, Radio Says
  • Oil Falls to 10-Month Low as Fed Rules Out Immediate Stimulus

CURRENCIES

 THE HEDGEYE DAILY OUTLOOK - daily currency view

EUROPEAN MARKETS

  • EUROPE: nasty wet Kleenex market remains; Italy follows up on USAs ragger with a down day! (crash continues); Russia was the leader, today lags

THE HEDGEYE DAILY OUTLOOK - euro performance

ASIAN MARKETS

  • ASIA – really disappointing level of “follow through” across Asian Equities last night after Singapore CUT their export growth forecast to 6-7% vs. 8-10% prior (Singapore closed down -1.9% and this matters as they are China’s trusted economic advisor – sorry Timmy G.)

THE HEDGEYE DAILY OUTLOOK - asia performance

MIDDLE EAST

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

Howard Penney

Managing Director