THE HEDGEYE DAILY OUTLOOK
TODAY’S S&P 500 SET-UP - October 27, 2011
Keith take on the today’s news from Europe – if you gave me the press release (that’s effectively rolling out as more a game of chicken than anything else this morning), I would have probably stayed short the SPY! The headline the media is rolling w/ of 1-1.4T can be any # really because all the Eurocrats are doing is slapping theoretical leverage multiples on the agreed baseline number. No ECB or IMF backstop here – just hopes that they can get the IMF to start to coordinate before they have to make Mario Draghi fold (ECB) to the political will. Mechanically, here’s what happens next for these insolvent banks: 1st they have to tap the public market to raise equity (good luck); then, if that doesn’t work (ie stocks fall), they tap their national government; then EFSF is “last resort.” This will take time and a lot of marked-to-market risk on the front end of this floater (hey Deutsche Bank, want to do a secondary?). Stay tuned
As we look at today’s set up for the S&P 500, the range is 32 points or -1.29% downside to 1226 and 1.93% upside to 1266.
SECTOR AND GLOBAL PERFORMANCE
Yesterday, Keith sold long-term Treasuries (TLT) and booked the gain in the SHORT (SPY).
EQUITY SENTIMENT:
- ADVANCE/DECLINE LINE: +1839 (-3818)
- VOLUME: NYSE 1109.06 (+9.98%)
- VIX: 29.86 -7.32% YTD PERFORMANCE: +68.23%
- SPX PUT/CALL RATIO: 1.63 from 1.94 (-16.23%)
CREDIT/ECONOMIC MARKET LOOK:
TREASURIES: 10yr yield not confirming a TREND breakout for growth either; i'd need to see a close > 2.39% for that
- TED SPREAD: 41.46
- 3-MONTH T-BILL YIELD: 0.02%
- 10-Year: 2.23 from 2.14
- YIELD CURVE: 1.95 from 1.88
MACRO DATA POINTS (Bloomberg Estimates):
- 8:30am: Net export sales
- 8:30am: GDP, est. 2.5%, prior 1.3%
- 8:30am: Personal consumption, est. 1.9%, prior 0.7%
- 8:30am: Jobless claims, est. 401k, prior 403k
- 9:45am: Bloomberg Consumer Comfort, prior (-48.4)
- 10am: Pending home sales, est. 0.3%, prior (-1.2%)
- 10am: Freddie Mac 30-yr mortgage rates
- 10:30am: EIA natural gas storage, est. 87, prior 103
- 11am: Kansas City Fed, est. 8
- 1pm: U.S. to sell $29b 7-yr notes
WHAT TO WATCH:
- EU leaders set 50% write down on Greek debt, boosted rescue fund to EU1t ($1.4t) at crisis summit
- Greek PM Papandreou said the govt. will likely buy shares in some Greek banks as a result of a planned write down of the country’s debt
- JP Morgan discouraged by Fed on potential share buyback: WSJ
- Kodak lenders send board letter on fiduciary duty in asset sale
- Warren Buffett will be featured speaker at Chicago-area fund-raiser to benefit President Obama’s re-election bid
- Texas Gov. Rick Perry plans to bypass some Republican presidential debates
- Obama meets with Czech Republic Prime Minister Petr Necas
COMMODITY/GROWTH EXPECTATION
COMMODITIES: squeezes in oil, copper and gold all look complete - every one of these (were not short any) failing at their TAIL lines.
MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:
- Dreamliner Passengers Enjoy Humid Cabin, ‘Whispering’ Engines
- Olympus Stock Surges as Kikukawa Quits, Woodford Heads to FBI
- Ferrari Fetches $3.6 Million as Lamborghini, Aston Martin Stall
- Sony Buys Ericsson’s Stake in Phone Venture for $1.5 Billion
- Apple Converges With Chipotle as Companies With Low-Risk Returns
- Nintendo Predicts First Annual Loss in 30 Years on Yen, 3DS
- Frank Gehry Looks to Asia for Projects as U.S. Growth Slows
- German Forgers Face Prison for Scam Worth More Than $22 Million
- Nokia Starts Marketing Blitz to Win Customers to Lumia Phone
- Japan’s Retail Sales Fell More Than Expected in September
- Amazon’s Apple War Costs Investors $13 Billion as Net Misses
- Costco Seen Gaining Holiday Sales as Shoppers Skittish: Retail
- Toyota, Ford Cut Production as Thai Floods Disrupt Supplies
- PPR Gains Most in 18 Months After Revenue Exceeds Estimates
- Green Mountain Falls After Tilson Comments on SEC Probe
- Jeronimo Martins Chooses Colombia as Its Second Market Abroad
- PPR ‘Vigilant’ After Quarterly Sales Beat Analyst Estimates
- Groupon IPO Said to Ask Triple Amazon’s Price-to-Sales Ratio
- William Hill 3Q Rev. Up 2%; On Track for FY Expectations
- Woolworths First-Quarter Revenue Rises 4.9% on Grocery Demand
CURRENCIES
EURO – squeeze right up to the most painful point of hedge fund resistance; forced stop losses and covering right here and right now should continue; but if the TAIL (1.40) and TREND m(1.42) lines can’t be eclipsed, this could be a generational short selling opportunity when we look back on it.
EUROPEAN MARKETS
CAC – in terms of the levels that matter – every one of the major squeeze markets has rallied right to TREND line resistance; for the CAC, which I think is the most important one of the basket because of their bank exposures, TREND line resistance = 3411; so watch that and SPY 1266 (TAIL).
ASIAN MARKETS
Japan September retail sales (1.2%) y/y vs cons (0.1%). Bank of Japan maintains interest rates at 0-0.1%.
MIDDLE EAST
The Hedgeye Macro Team
Howard Penney
Managing Director
