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
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.
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
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
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.)
MIDDLE EAST
Howard Penney
Managing Director