THE HEDGEYE DAILY OUTLOOK
TODAY’S S&P 500 SET-UP - October 13, 2011
After a serious short squeeze (and 2011 has had many), we’re back to the Global Macro fundamentals this morn, and they are not good looking at China, Copper and the Euro. Today, JPM earnings are what matters most. If Jamie Dimon tells the truth about his interconnected exposures from FX, to NIM, and counterparty risk in Europe, yesterday’s selloff into the close will make sense. If he says everything is fine, SP500 can suspend disbelief to 1229.
As we look at today’s set up for the S&P 500, the range is 58 points or -3.25% downside to 1168 and 1.55% upside to 1226.
SECTOR AND GLOBAL PERFORMANCE
- ADVANCE/DECLINE LINE: 1791 (+1448)
- VOLUME: NYSE 1066.01 (+20.83%)
- VIX: 31.26 -4.87% YTD PERFORMANCE: +76.11%
- SPX PUT/CALL RATIO: 1.70 from 1.90 (-10.54%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 38.56
- 3-MONTH T-BILL YIELD: 0.02%
- 10-Year: 2.24 from 2.18
- YIELD CURVE: 1.95 from 1.86
MACRO DATA POINTS (Bloomberg Estimates):
- 8:30 a.m.: Trade balance, est. (-$45.8b)
- 8:30 a.m.: Jobless claims, est. 405k
- 9:45 a.m.: Bloomberg consumer comfort, prior (-50.2)
- 10:00 a.m: Freddie Mac mortgage
- 10:30 a.m: EIA natural gas: est. 102
- 11:00 a.m: DoE inventories
- 1:00 p.m.: U.S. to sell $13b 30-year bonds (reopening)
- 2:30 p.m.: Fed’s Kocherlakota speaks in Sidney, Montana
WHAT TO WATCH:
- Treasury Secretary Geithner will tell European counterparts at G-20 finance ministers meeting to act forceful
- Slovakia may approve Europe’s enhanced bailout fund today or tomorrow, finishing ratification process
- DuPont is seeking buyers for a polyester-film joint entire and a business that makes powder-based paint.
- RIMM said customers in Canada and U.S. still face delays to its Blackberry network.
- Galleon’s Raj Rajaratnam will be sentenced today for masterminding the biggest hedge-fund insider trading scheme in U.S. history.
COPPER – The Hedgeye TRADE/TREND/TAIL lines are all overhead with immediate-term TRADE resistance closest at 3.59/lb and no legitimate support until 3.01/lb; this recent gap up on no volume looks like a very dangerous air-pocket (like most thing equities and commodities do)
MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:
- Congress Approves Biggest U.S. Free-Trade Agreement Since 1994
- Australians Fret About Crash With Fortescue Metals Growth Stock
- Thai Flooding Threatens Bangkok, May Cut Deeper Into Growth
- Coal to Drop in Asia After 2011 ‘Perfect Storm’: Energy Markets
- Zinc Bear Market Seen Ending as China Absorbs Glut: Commodities
- Oil Falls a Second Day on Speculation U.S., China Demand to Slow
- Clive Fund Said to Erase Year’s Loss With 11.4% September Gain
- Best Mining Deal Seen With Sundance China-Africa Ties: Real M&A
- China Copper Imports Gain to 16-Month High as Price Tumbles
- China Copper Stocks at Record 1.9 Million Tons at End-2010
- Codelco Plans Anglo American Option After $6.75 Billion Loan
- Rice Farmers in Japan Set Tougher Radiation Limits for Crops
- Gold Falls in London Trading as Dollar’s Rebound May Curb Demand
- China’s September Foreign Trade by Commodity (Table)
- Copper Declines After Rally to Two-Week High Seen as Excessive
- Copper Falls in London After China’s Exports Cool: LME Preview
- COMMODITIES DAYBOOK: Oil Slides on Demand Concern; Copper Drops
- Gold Eclipses Cocaine as Rebels Tap Colombian Mining Wealth
EURO – understanding that this is one of the largest short positions left in the hedge fund community, yesterday’s attempts to scare the shorts really only did one thing - open the gap on the downside to 1.30 now – in other words, it should be considered probable that that could happen over the span of 1-3 days. Yes, that would be bad
SLOVAKIA: Slovak parties reached an agreement to approve Europe’s enhanced bailout fund, paving the way for a second vote this week that will complete its ratification process across the 17 euro countries. A second vote will be held on the European Financial Stability Facility tomorrow or on Oct. 14 after lawmakers failed to approve the legislation yesterday, Robert Fico, head of the largest opposition party Smer, said today. Party leaders agreed on elections to be held on March 10, he said.
CHINA – reported a bomb of an export report for the mth of SEP this morning showing a drawdown to +9.8% exports to Europe vs +22% in August; this is why the Chinese and HK stock markets (or any market in Asia for that matter other than Indonesia who cut rates this wk) remain in Bearish Formations; it tells you most of what you need to know on why Copper is still in crash mode too (down -1.3% this morn)
Add Singapore to the list of Asian economies that have introduced or implemented policy focused specifically on boosting domestic demand in recent months. This is a trend we’re seeing across developing Asia (China, Singapore, Indonesia, Thailand, Philippines, Malaysia thus far) and will eventually be bullish for their equity markets – especially given that they have the fiscal space to implement such policies (whereas the U.S./E.U./Japan remain largely constrained by large deficits and debt burdens).