Hedgeye - THE HEDGEYE DAILY OUTLOOK

THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - August 25, 2011

With the exception of inflation in Vietnam being reported at +23% y/y for August (US centric stock market people will say that’s not inflationary, for them), global economic data around the world this morning is very light.

For the immediate-term TRADE, Gold down and UST Yields up is the same trade. Both are screaming that La Bernank is in a box and won’t be doing QE3 tomorrow (that’s a good thing for America). We are not short the SP500 yet, but very well could be by day’s end.

As we look at today’s set up for the S&P 500, the range is 83 points or -5.91% downside to 1108 and 1.14% upside to 1191.

SECTOR AND GLOBAL PERFORMANCE

Yesterday’s rally, put the XLU positive on TRADE and TREND.

EQUITY SENTIMENT:

ADVANCE/DECLINE LINE: +1173 (-946)
VOLUME: NYSE 1109.47 (-10.58%)
VIX: 35.90 -1.02% YTD PERFORMANCE: +102.25%
SPX PUT/CALL RATIO: 1.73 from 1.78 -2.99%

CREDIT/ECONOMIC MARKET LOOK:

TED SPREAD: 31.94
3-MONTH T-BILL YIELD: 0.02% +0.01%
10-Year: 2.29 from 2.15
YIELD CURVE: 2.06 from 1.93

MACRO DATA POINTS (Bloomberg Estimates):

8:30 a.m.: Initial jobless claims, est. 405k, prior 408k
9:30 a.m.: IMF bi-monthly press briefing
9:45 a.m.: Bloomberg consumer comfort index, est. -49
10:30 a.m.: EIA natgas storage, est. +74
11 a.m.: Fed to purchase $250m-$500m TIPS
1 p.m.: U.S. to auction $29b 7-year notes

WHAT TO WATCH:

Greek spreads vs Bunds hit record highs on bailout concerns
Hurricane Irene is passing over the Bahamas and may be near North Carolina this weekend and New England next week
ECB “stands ready” to ease tensions in U.S. dollar funding of European banks if they arise, Bundesbank’s Andreas Dombret says
Bernanke unlikely to promise new action by Fed - WSJ

COMMODITY/GROWTH EXPECTATION

GOLD –We can look at yesterday’s move this with a fresh pair of risk management eyes; the Hedgeye immediate-term TRADE line of support has not yet been breached ($1705) and we will likely buy it there if all else remains intact.

MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:

Tony Hayward Gets a Life Post-BP as Investors Write Blank Check
Hurricane Irene Strikes Bahamas on Path Toward U.S. East Coast
Glencore First-Half Profit Rises 57%; Asian Demand ‘Strong’
Gold Drops for Third Day After Margin Boost as Equities Advance
Comex Increases Gold Margins After Sharpest Drop Since 2008
Oil Trades Near Two-Day Low; Standard Chartered Cuts Forecasts
Driver Shortage Shows Gain in U.S. Truck Cargo: Freight Markets
Rising Potash Means Lower Debt Cost for Uralkali: Russia Credit
Burger King Adds Mom-Friendly Food as Whopper Lovers Lose Jobs
Gasoline Use at Nine-Year Low as Economy Falters: Energy Markets
Irene Threatens North Carolina Prompting Evacuations From Coast
Copper Gains for Third Day as Data Reports Boost Demand Outlook
China Bonded Copper Stockpiles Fall About 50%, Glencore Says
Crude Futures Advance on Fed Speculation, Supply Decline in U.S.

CURRENCIES

EUROPEAN MARKETS

EUROPE/GREECE – the country isn’t going away, but their bond and stock markets are – and what I mean by that is that no one real invests in illiquidity like this; and this is how the Fiat Fool story ends. Greece down -48.5% since FEB and hitting new lows…
Germany Sep GfK consumer sentiment 5.2 vs consensus 5.2 and prior revised 5.3 from 5.4

ASIAN MARKETS

ASIA/CHINA – big short squeeze in Chinese stocks overnight of +2.9% (that’s the only equity market worldwide that we are long, and we are nervous about it), but the rest of Asia didn’t follow – Korea is still in crash mode and Indonesia, India, Thailand, and Malaysia all closed down on the session. Global growth continues to slow.

MIDDLE EAST

Howard Penney

Managing Director