THE HEDGEYE DAILY OUTLOOK
TODAY’S S&P 500 SET-UP - October 18, 2011
It’s easier to say that markets aren’t moving on “fundamentals” until they do. Singapore said it yesterday, and both the Koreans and Aussis said it again last night (dept store sales in Korea went negative y/y for SEP at -6.5% while vehicle sales in Australia dropped to -1.3% y/y in SEP vs +4.6% AUG); Our Big Macro call for 2011 remains Growth Slowing – and, like in 2008, some US centric investors are still missing this when staring at the Dow. Earnings matter and the 3Q11 earnings season is not off to a good start. The financials (JPM, WFC, and C) have led us lower so far and I don’t expect things to improve as we get into lower quality EPS from BAC and MS.
As we look at today’s set up for the S&P 500, the range is 42 points or -1.15% downside to 1187 and 2.34% upside to 1229.
SECTOR AND GLOBAL PERFORMANCE
In Chaos Theory, time and patterns dominate. With time, history has proven that a Strong Dollar equates to a Strong America (lower unemployment and higher consumption). Today, with the US Dollar up for the 4thweek in the last 5, the Sector Studies continued to heal. Bottoms are processes, not points.
With time, 3 of 9 Sectors have now gone bullish TRADE and TREND: Utilities (XLU), Tech (XLK), and Consumer Discretionary (XLK). That’s the good news. The bad news is that 6 of 9 Sectors (and the SP500 itself) are bearish TREND – and TRENDs override TRADEs.
- ADVANCE/DECLINE LINE: -1887 (-3923)
- VOLUME: NYSE 905.53 (+6.89%)
- VIX: 33.39 +18.24% YTD PERFORMANCE: +88.11%
- SPX PUT/CALL RATIO: 1.40 from 1.70 (-17.69%)
CREDIT/ECONOMIC MARKET LOOK:
FIXED INCOME: massive 1 day move in 10s (UST), down -17bps day-over-day and yield curve compresses the same
- TED SPREAD: 38.55
- 3-MONTH T-BILL YIELD: 0.04%
- 10-Year: 2.18 from 2.26
- YIELD CURVE: 2.05 from 1.71
MACRO DATA POINTS (Bloomberg Estimates):
- 8:15 a.m.: Fed’s Rosengren gives welcome remarks at Boston Fed conference
- 8:30 a.m.: Producer Price Index, est. 0.2%, prior 0.0%
- 9 a.m.: Net long-term TIC flows, est. (-$20b), prior $9.5b
- 10 a.m.: NAHB Housing Market, est. 15, prior 14
- 11:30 a.m.: U.S. to sell $30b 4-wk, $25b 52-wk bills
- 1:15 p.m.: Fed’s Bernanke speaks in Boston
- 4:30 p.m.: API inventories
- 6:30 p.m.: Fed’s Lockhart speaks in Tenn.
WHAT TO WATCH:
- Citigroup closing proprietary-trading unit that incurred losses in 3Q as regulators prepare to restrict banks from making bets with shareholder cash.
- France’s Aaa rating under pressure as debt crisis has led to “deterioration” of govt. finances, Moody’s said last night
- Bank of America said to move derivatives from its Merrill Lynch unit to subsidiary flush with insured deposits; move said to divide FDIC, Fed
- President Obama continues on day two of bus tour through North Carolina, Virginia to promote $447b jobs proposal
- Republican candidates, minus former Utah Governor Jon Huntsman, debate in Nevada tonight, 8 p.m.
COMMODITIES: like Hang Seng and Europe all fail at TREND levels; Oil and Gold failing at $89.12 and $1686 is explicitly bearish for both
MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:
- Tallow Replaces Crude Oil as Biofuels Head to War: Commodities
- Energy Bonds Offer Haven From Europe on Oil Bet: Credit Markets
- Gold Declines With Equities on Europe Crisis, China Concerns
- Gas Beating Oil in Shipping as Users Expand Stockpiles: Freight
- Crude Oil Supply Climbs a Second Week in Survey: Energy Markets
- Commodity Speculators May Face New Limits After CFTC Vote Today
- China Copper Output Drops From Record as Economy Slows
- Copper Declines as China Grows at Slowest Pace in Two Years
- Wal-Mart Asia Chief Takes Over China Stores Amid Pork Probe
- Australian Wheat Reserves May Near Record on Rail Shortage
- Shell Oil Purchase Sparks OGX Outperformance: Brazil Credit
- China’s Corn Imports May Jump to 20 Million Tons, Olam Says
- China’s September Steel Output Falls to Lowest in 7 Months
- Shipping Jumps as Iron-Ore Rout Spurs Demand: Chart of the Day
- Soybeans, Corn Drop as China Grows at Slowest Pace in Two Years
- Gold Falls From Three-Week High on Dollar’s Rally; Silver Drops
- Oil Drops for a Second Day on China Growth, U.S. Supply Forecast
- Freeport’s Grasberg Output at 50% of Capacity, Saleh Says
EUROPE: could be worse; basically DAX and CAC both failed at their TREND levels 24hrs ago and are correcting to TRADE line support
CHINA: GDP has been slowing for 3 quarters so this isn't new, but Chinese stocks drop another -2.3%, Hang Seng down -4.3%, India -2%
ASIA: plain ugly move in the Hang Seng on the heals of the China data w/ HK snapping what was a very brief stint > TRADE support
The Hedgeye Macro Team