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TODAY’S S&P 500 SET-UP - October 4, 2011

This Correlation Crash is now readily evident to anyone who didn’t think it could happen.  As we look at today’s set up for the S&P 500, the range is 50 points or -1.75% downside to 1080 and 2.80% upside to 1130Good news is that yesterday, US stocks finally moved into immediate-term TRADE oversold territory – so today Keith is makeing the 3rd major Short Covering Opportunity call he’s made since the 1st one on August the 8th.

SECTOR AND GLOBAL PERFORMANCE

THE HEDGEYE DAILY OUTLOOK - levels 104

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -2498 (-662) 
  • VOLUME: NYSE 1403.71 (+6.08%)
  • VIX:  45.45 +5.80% YTD PERFORMANCE: +156.06%
  • SPX PUT/CALL RATIO: 2.29 from 1.49 (+53.14%)

 

CREDIT/ECONOMIC MARKET LOOK:

YIELD SPREAD – it will be fascinating to hear Bernanke testify today that this is working; the TWIST is compressing the Yield Spread to a fresh YTD low this morning (153bps wide) and only perpetuating the pain on the front lines of this fear that the banks cash earnings are under siege – in this case, the fear is well placed. I remain long the US Treasury Flattener (FLAT)

  • TED SPREAD: 37.25
  • 3-MONTH T-BILL YIELD: 0.02%
  • 10-Year: 1.80 from 1.92     
  • YIELD CURVE: 1.56 from 1.67

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45 a.m./8:55 a.m.: ICSC/Redbook weekly retail sales
  • 9 a.m.: Fed Gov. Raskin speaks on foreclosures
  • 10 a.m.: Fed Chairman Bernanke to testify on economic outlook before Joint Economic committee of Congress
  • 10 a.m.: Factory orders, est. 0.0%, prior 2.4%
  • 11 a.m.: U.S. Fed to purchase $4.25b-$5b notes/bonds
  • 11:30 a.m.: U.S. to sell $30b 4-wk bills
  • 4:30 p.m.: API inventories
  • President Obama speaks on American Jobs Act in Mesquite, Texas, before heading to campaign event in St. Louis
  • 10 a.m.: House meets to consider Senate amended continuing resolution, which provides FY12 funding through Nov. 18

 WHAT TO WATCH:

  • Apple’s next iPhone may be showcase for improved voice controls, hinting at improved speech technology. Event at 1 p.m.
  • Belgium, France say they will act to prop up Dexia if necessary
  • Europe faces rising risk of double-dip recession, S&P says
  • Fed Chairman Bernanke testifies on economic outlook before Joint Economic Committee of Congress, 10 a.m.
  • U.S. regulators said to consider if as many as 4.5m foreclosure cases will be examined to determine if compensation is due: WSJ
  • General Maritime (GMR) is in talks with lenders, creditors on potential restructuring
  • Kinetic Concepts (KCI) unnamed bidder withdrew offer; co. expects to be taken private by Apax Partners for $68.50/shr
  • McGraw Hill (MHP) sells nine-station broadcasting group to E.W. Scripps (SSP) for $212m in cash

COMMODITY/GROWTH EXPECTATION                                                                    

COMMODITIES: crash in copper and oil continue; both immediate-term TRADE oversold (finally) at $2.95/lb and $76.09/barrel respectively

THE HEDGEYE DAILY OUTLOOK - daily commodity view

MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:

  • Goldman Cuts GDP Estimates; Sees German, French Recessions
  • Mordashov Expands Steel Output as Mittal Retrenches: Commodities
  • Commodities to Rally 20% on Emerging Markets, Goldman Says
  • Ivanhoe, Rio Reject Mongolian Bid to Change Oyu Tolgoi Deal
  • Oil Drops a Third Day as Goldman Cuts Forecast for Brent Crude
  • Gold Rallies for Fourth Day as Europe Crisis Spurs Haven Demand
  • BHP, Rio Bond Risk Soars to 2-Year High on Slowdown Concerns
  • Copper Falls for Fifth Day as European Crisis May Curb Demand
  • Record U.S. Gasoline Cargoes Drive 17% Gain in Tankers: Freight
  • Commodities to Extend Decline, Says Sarin: Technical Analysis
  • Oil Falls to Eight-Week Low on U.S. Supplies, Libyan Production
  • Copper Drops in London Before U.S. Factory Orders: LME Preview
  • Platinum-Gold Ratio Drops to Lowest Level Since at Least 1987
  • Sugar Production in India Delayed by Cane-Pricing Dispute
  • CME Group Increases Margins on Copper, Platinum Futures
  • Oil Speculation Rules Probed by Levin Panel as CFTC Nears Vote
  • Palm Oil Drops for Second Day on European Debt Crisis Concern
  • Gold Gains for Fourth Day as Europe Debt Concern Spurs Demand
  • Uranium Prices Rise as Fukushima Volatility Persists, Ux Saysd

CURRENCIES                                                                             

THE HEDGEYE DAILY OUTLOOK - daily currency view

EUROPEAN MARKETS

EUROPE: crash continues after DAX broke the line we signaled as critical support yesterday (5439); Italy (which we're short) = -38% since Feb.

DAX: the only line left (Germany’s TRADE line of support at 5439) is now gone and Ackerman (Deutsche Bank) is telling the world what we all know (the money-center banks of the world are going to miss badly and be forced to guide down)

THE HEDGEYE DAILY OUTLOOK - euro performance

ASIAN MARKETS

ASIA – crashing equities and currencies continue to be led by Hong Kong (down another -3.4% overnight; down -33% since

US Equities peaked in April!); KOSPI crash continued at down -3.6% (down -23% since May); Singapore -3%; Thailand -2.7%, etc.

THE HEDGEYE DAILY OUTLOOK - asia performance

MIDDLE EAST

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

Howard Penney

Managing Director