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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).

THE HEDGEYE DAILY OUTLOOK - levels 1025

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

EQUITY SENTIMENT:

  • 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.

COMMODITY/GROWTH EXPECTATION                                             

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.

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

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

CURRENCIES                                                        

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

EUROPEAN MARKETS

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.

THE HEDGEYE DAILY OUTLOOK - euro performance

 

ASIAN MARKETS

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 DAILY OUTLOOK - asia performance

 

MIDDLE EAST

THE HEDGEYE DAILY OUTLOOK - mideast performacne

The Hedgeye Macro Team

Howard Penney

Managing Director