THE HEDGEYE DAILY OUTLOOK

THE HEDGEYE DAILY OUTLOOK

 

TODAY’S S&P 500 SET-UP - October 20, 2011

 

Exotic TAILS notwithstanding (18 tigers and 8 bears on the loose in Ohio yesterday), we know this market’s long-term TAIL is broken (1266) – so, all we have to do now is continue to manage risk around the immediate (TRADE) to intermediate-term (TREND) range.  As we look at today’s set up for the S&P 500, the range is 20 points or -0.73% downside to 1201 and 0.92% upside to 1221

 

SECTOR AND GLOBAL PERFORMANCE

 

From an immediate-term TRADE perspective, today’s selloff doesn’t change the fact that all 9 sectors (and the SP500 itself) remain bullish. This is healthy until it isn’t. A close below 1201 tomorrow would change this setup. Holding above it would be bullish.

 

Another improving TREND (intermediate-term) is that 4 of 9 Sectors are now bullish on that duration: Consumer Discretionary (XLY), Utilities (XLK), Tech (XLK), and Consumer Staples (XLP). We like those Sectors in that order. Consumer Discretionary will be the most direct beneficiary of a Strong Dollar as it will continue to “Deflate The Inflation.”

 

THE HEDGEYE DAILY OUTLOOK - hrmsv

 

THE HEDGEYE DAILY OUTLOOK - bpgm1

 

THE HEDGEYE DAILY OUTLOOK - hrmsp

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -1354 (-3428) 
  • VOLUME: NYSE 964.04 (-11.17%)
  • VIX:  34.44 +9.13% YTD PERFORMANCE: +94.03%
  • SPX PUT/CALL RATIO: 1.78 from 1.64 (+8.80%)

 

CREDIT/ECONOMIC MARKET LOOK:

 

  • TED SPREAD: 39.13
  • 3-MONTH T-BILL YIELD: 0.03%
  • 10-Year: 2.18 from 2.19    
  • YIELD CURVE: 1.90 from 1.91

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30 a.m.: Jobless claims, est. 400k, prior 404k
  • 9:45 a.m.: Bloomberg Consumer Comfort, prior (-50.8)
  • 10 a.m.: Leading indicators, est. 0.2%, prior (-17.5)
  • 10 a.m.: Existing home sales, est. 4.91m, down 2.5%
  • 10 a.m.: Freddie Mac mortgage rates
  • 10:15 a.m.: Fed’s Bullard speaks in St. Louis
  • 10:30 a.m.: EIA Natural Gas storage
  • Noon: Fed’s Lockhart moderates panel on economy in Atlanta
  • 12:50 p.m.: Fed’s Pianalto speaks in Toledo, Ohio
  • 1 p.m.: U.S. to sell $7b 30-yr TIPS (reopen)
  • 2 p.m.: Treasury’s Brainard testifies to U.S. Senate committee
  • 6 p.m.: Fed’s Tarullo speaks at Columbia in NYC
  • 7:45 p.m.: Fed’s Kocherlakota speaks on economic education in Minneapolis

WHAT TO WATCH:

  • Yahoo! isn’t necessarily up for sale, co-founder Jerry Yang said; Alibaba CEO reiterates he’s interested in buying the company
  • Groupon said to be in talks to sell shares in IPO valuing co. at ~$12b
  • Sales of existing U.S. homes probably declined 2.5% to 4.91m annual rate in Sept., economists’ forecast ahead of today’s report
  • SEC said to be trying to determine if SAC Capital used insider information to profit from J&J’s 2009 takeover of Cougar Biotechnology, WSJ says

COMMODITY/GROWTH EXPECTATION                                             

 

COMMODITIES – we’ve called for the Correlation Crash to continue and that’s plainly obvious now with Gold chasing Copper (albeit with a lower beta); both remain broken; Copper down -2.9% this morning is immediate-term TRADE oversold, but has moved back into the down -30% since July zone; not good – neither is Gold’s TREND resistance ($1685) fortifying itself

 

THE HEDGEYE DAILY OUTLOOK - dcommv

 

MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:

  • Pamela Anderson Champions Palladium as Gold Prices Soar: Retail
  • Iron’s Worst Rout in 15 Months May Deepen as China Slows
  • Silver Bear Market Seen Ending on Europe Crisis: Commodities
  • China Love of U.S. Cherries Fuels Cool-Cargo Boom: Freight
  • Gold Falls to Two-Week Low as Gains in the Dollar Curb Demand
  • EU Targets Commodities, High-Frequency Trading in Market Law
  • Coal Gridlock Heralds Two-Year High Asia Premium: Energy Markets
  • Zambia Investors Say Copper Boom to Extend as Sata No Castro
  • Copper Drops for a Fourth Day on European Debt-Crisis Concern
  • Chinese Aluminum Supply Jump 30% in 3 Weeks, Signaling Slump
  • Oil Drops a Second Day on Europe Outlook; Brent Premium Widens
  • Rio Tinto Makes $567 Million Offer for Hathor to Trump Cameco
  • Gold Prices May Extend Losses on Bear Flag: Technical Analysis
  • EU Seeks Curbs on Commodity Derivatives, High-Frequency Trading
  • Freeport Says Grasberg Mine Operating at Two-Thirds Capacity
  • Agnico Plunges After Halting Canadian Gold Mine on Flooding
  • Commodities trading suffers as French banks curb credit
  • Thailand, Indonesia ‘Closely Monitoring’ Rubber Decline
  • Oil Rebounds on Speculation EU Agreement Will Help Fight Crisis

 

CURRENCIES                                                        

 

THE HEDGEYE DAILY OUTLOOK - dcurrv

 

EUROPEAN MARKETS

 

RUSSIA – consistently flashing negative divergences vs the focus European markets (DAX, CAC, Greece, etc) this week; this tells me that A) I’m right on the USD TREND and B) right on Oil remaining a bearish TAIL/TREND; Petrodollars drive the RTSI and its crashing – down -34% since May.

 

THE HEDGEYE DAILY OUTLOOK - bpem1

 

ASIAN MARKETS

 

ASIA – the Hang Seng was down -1.8% again last night (China down -1.9% testing new lows) and the move was consequential as the only remaining line of support (18215) was snapped again on the downside.  As the world focuses on 1 thing (Europe) you tend to get paid to focus on everything else that doesn’t cease to exist – Asian Growth Slowing is a big one.

 

THE HEDGEYE DAILY OUTLOOK - bpam1

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - me

 

The Hedgeye Macro Team

Howard Penney

Managing Director


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