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 1130. Good 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
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
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
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)
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.
MIDDLE EAST
Howard Penney
Managing Director
