THE HEDGEYE DAILY OUTLOOK
TODAY’S S&P 500 SET-UP - October 25, 2011
What a difference a few days of Fed heads whispering about policies to inflate makes. As we look at today’s set up for the S&P 500, the range is 35 points or -2.81% downside to 1219 and 0.00% upside to 1254.
SECTOR AND GLOBAL PERFORMANCE
Yesterday, Keith shorted the SPY today for the first time in October. He did that because it was immediate-term TRADE overbought and still broken from a long-term TAIL perspective (1266 is TAIL resistance). "If 1219 holds, I have no problem covering the short position and getting longer again."
TRADE: all 9 sectors are now bullish from an immediate-term TRADE perspective. That’s not new as of today – it was new last week. The only thing that was new today was that Healthcare (XLV) joined 4 other Sectors in the Bullish TRADE and TREND camp (XLY, XLU, XLK, and XLP).
TREND: for the YTD, the Top 3 Sectors are 3 that we like on the long side: Utilities (+10.8%), Consumer Discretionary (+6.7%) and Healthcare (+6.7%). On a pullback I’d be buying all 3 of those Sectors and continuing with the Short Financials and Cyclicals (XLF, XLB, and XLI).
- ADVANCE/DECLINE LINE: 1991 (-248)
- VOLUME: NYSE 927.32 (-22.09%)
- VIX: 29.26 -6.58% YTD PERFORMANCE: +64.85%
- SPX PUT/CALL RATIO: 2.24 from 2.12 (+5.63%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 41.52
- 3-MONTH T-BILL YIELD: 0.02%
- 10-Year: 2.25 from 2.23
- YIELD CURVE: 1.95 from 1.93
MACRO DATA POINTS (Bloomberg Estimates):
- 7:45 a.m./8:55 a.m.: ICSC/Redbook Retail sales
- 9 a.m.: S&P/Case-Shiller 20 City MoM% est. 0.1% from 0.05%; YoY est. (-3.5%)
- 10 a.m.: Consumer Confidence, est. 46.0, prior 45.4
- 10 a.m.: House Price Index, M/m, est. 0.2%, prior 0.8%
- 10 a.m.: Richmond Fed, est. 0, prior -6
- 11:30 a.m.: U.S. to sell 4-week bills
- 1 p.m.: U.S. to sell $35b 2-year notes
- 4:30 p.m.: API inventory
WHAT TO WATCH:
- Banks are pushing back against European leaders on the size of losses they are ready to accept on Greek bonds.
- Apple TV project is being led by Jeff Robbin, the software engineer who built iTunes, according to 3 people with knowledge of the project
- President Obama in S.F., appears on Tonight Show with Jay Leno
- Rick Perry announces plan to reform tax code
- House Speak Boehner speaks on U.S.-Russia relationship, 1:30 p.m.
INFLATION – does a 24 hour +6.1% move in the price of oil matter heading into Halloween and Thanksgiving weekend? Don’t ask Dudley – this is the most singular factor in my model that slowed US GDP growth in Q111, so watch this and the policy rhetoric that backs it very closely. I don’t think it holds as the US Dollar has a ton of support at its TREND line of 75.37. But in the land of the Fiat Fools, anything can happen.
MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:
- Inflation Peaking in U.S. With Most Prices Tumbling: Commodities
- BP Profit Drops Less Than Expected as Dudley Boosts Asset Sales
- Uranium Deals Prove Most Lucrative on Nuclear Demand: Real M&A
- Thai Floodwaters Rise Near Bangkok, Testing City’s Defenses
- Bangkok River Swells to Record as Floods Reach Thai Capital
- Oil Rises to 12-Week High as Demand Signals Spur Bull Market
- Ivanhoe Mines Calls Lure Traders Speculating on Buyout: Options
- Car Carriers Profit on Record Demand as Shipping Falls: Freight
- Gold Advances for a Third Day as Europe’s Debt Woes Spur Demand
- Copper May Rise on Indications Demand Remains Steady in Asia
- Oil Supplies Climb From 20-Month Low in Survey: Energy Markets
- BlackRock Says Gold Takeovers May Gain on Price Outlook
- Caterpillar Earnings Top Estimates as Economy Recovers
- AngloGold Says Gold Can ‘Easily’ Rise to $2,200 an Ounce
- Nestle Investigates Report It Shortchanges Farmers in China
- Australia Says Mining Tax Laws to Match Deal With Industry
- Copper Gains as Much as 1.4% to $7,742.25 a Ton, Reversing Fall
- Copper Extends Biggest Two-Day Gain Since January 2009
- Caterpillar’s Earnings Signal Exports to Boost U.S. Expansion
- Corn Gains for Second Day as Demand Rises After Price Decline
EUROPE – still no resolution on the 2 things that matter – timing and sizing of the bazooka – and time is running out. Every European equity market has failed at TREND line resistance again this morning. On a positive note, Greece isn’t down another -5% this morning. Euro resistance huge 1.39-1.40 and while there were plenty of hedge funds short Euros, the last 21 days has had to shake plenty of people out.
CHINA – after getting smoked last week (-4.7%), posts its 2nd day “off the lows”, leading gainers in Asia alongside Thailand, closing +1.7%, but unable to capture 2424 TRADE line resistance. Hong Kong posted its worst export # in 2 years (down -3% y/y for SEP, nasty).
The Hedgeye Macro Team