THE HEDGEYE DAILY OUTLOOK
TODAY’S S&P 500 SET-UP - August 24, 2011
There’s nothing quite like an entire profession is being forced to “bet” on black or red into a man-made event at Jackson Hole. It’s pathetic and sad that a said “free market” has come to this. As we look at today’s set up for the S&P 500, the range is 57 points or -4.68% downside to 1108 and 0.23% upside to 1165.
SECTOR AND GLOBAL PERFORMANCE
Yesterday’s 3.43% rally in the S&P 500 to another long-term (and immediate-term) lower-high didn’t change anything in our multi-duration S&P Sector Risk Management Model. All 9 Sectors closed below both their TRADE and TREND lines for the 15th consecutive day. Managing risk around ranges in US Equities with a bearish bias remains our strategy from today’s closing price. On any follow through strength ahead of Jackson Hole, we want to be shorting Financials (XLF) and Industrials (XLI).
EQUITY SENTIMENT:
- ADVANCE/DECLINE LINE: +2119 (+2475)
- VOLUME: NYSE 1240.16 (+4.13%)
- VIX: 36.27 -14.54% YTD PERFORMANCE: +104.34%
- SPX PUT/CALL RATIO: 1.78 from 2.01 -11.38%
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 31.18
- 3-MONTH T-BILL YIELD: 0.01%
- 10-Year: 2.15 from 2.10
- YIELD CURVE: 1.88 from 1.87
MACRO DATA POINTS (Bloomberg Estimates):
- 7 a.m.: MBA mortgage applications, prior 4.1%
- • 8:30 a.m.: July durable goods orders, est. 2.0%; July durable goods ex-transports, est. (0.5%)
- • 10 a.m.: June house-price index M/m, est. 0.2%; 2Q house price purchase index Q/q, est. (0.4%)
- • 10:30 a.m.: DoE weekly inventories, crude est. build 1.5m bbl
- • 1 p.m.: U.S. to auction $35b 5-year notes
WHAT TO WATCH:
- Bullish sentiment decreases to 40.9% from 46.2% in the latest US Investor's Intelligence poll
- Japan’s sovereign credit rating cut one step to Aa3, banks’ ratings lowered by Moody’s; Japanese govt to release $100b to fund loans by Japan Bank for International Cooperation, in an effort to cope with yen’s appreciation, Finance Minister says
- German business confidence index drops to lowest level in more than a year
- Biden says he “didn’t come to explain a damn thing” to China
- German Chancellor Angela Merkel rejects demands that Greece provide collateral for emergency loans as splits emerged in her Cabinet, reflecting euro-area divisions on issue
COMMODITY/GROWTH EXPECTATION
- COMMODITIES: we sold our Silver on 8/19 so now we can wait/watch for support = $40.18
- COPPER – still sees no QG3 and neither does oil. If Bernanke was going to save everyone’s P&L on Friday, OIL?COPPER would be recapturing at least their long term TAIL lines of support; neither are in the area code of that. Both remain BEARISH/BROKEN.
MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:
- Merkel Rejects Seeking Collateral in Bailouts as Splits Emerge
- BHP Second-Half Profit Climbs to Record on Prices, Output
- Central Banks Seen Retaining Gold as Debt Crisis Escalates
- Gold Rallies After Dropping From Record as Investors Seek Haven
- Oil Slides From Four-Day High in New York After Japan Downgrade
- Hurricane Irene Bearing Down on Bahamas on Way to North Carolina
- Codelco Bets China Growth Will Justify $20 Billion Investment
- Irene Likely to Be a ‘Major’ Hurricane Later Today, NHC Says
- Copper May Drop on Concern Global Growth to Slow, Damping Deman
- Drought-Baked Fields Curb 2012 U.S. Wheat Outlook as Prices Gain
- Usiminas Port Bid Seen Quadrupling Its Iron Ore: Freight Markets
- Bunge Says Syngenta Suit May Jeopardize Chinese Corn Exports
- Glencore Cash Offer Values Minara Resources at A$1.02 Billion
- Sino-Forest Downgraded by S&P on Delay to Probe, Profit Decline
CURRENCIES
EUROPEAN MARKETS
- EUROPE: what a mess; no bounce after the US tries its best to hold a 1 day move; Denmark and Poland down 1% this morn as the bear broadens
- EuroZone Jun Industrial New Orders +11.1% y/y vs consensus +12.1%, prior revised +13.8% from +15.5%; EuroZone Jun Industrial New Orders (0.7%) m/m vs consensus +0.5%, prior +3.6%
ASIAN MARKETS
- JAPAN – finally moves into crash territory overnight on the “news” that Paul Krugman/Bernank advice in 1997 to “print lots of money” has another side to the “bet”; Japanese stocks down -20.4% since FEB 2011.
- KOSPI – after a 1-day relief rally like the US had, Korea continues to crash (down -1.2% overnight and down -21.3% since May 2nd which is the same day German DAX peaked and started crashing from – Korea and Germany are huge lead indicators on global industrial growth slowing).
MIDDLE EAST
Howard Penney
Managing Director
