TODAY’S S&P 500 SET-UP - November 1, 2011
As we look at today’s set up for the S&P 500, the range is 53 points or -3.14% downside to 1214 and 1.09% upside to 1267.
SECTOR AND GLOBAL PERFORMANCE
From a TRADE and TREND perspective, today’s selloff didn’t do much to the Sector Studies. The only Sector to break its intermediate-term TREND line today was the one that’s most negatively correlated to a rising US Dollar – Basic Materials (XLB).
That’s the good news. The bad news is that 4 of 9 Sectors failed to succeed in recovering their long-term TAIL lines of support – Financials (down -15.4% YTD), Basic Materials (down -10.3% YTD), Industrials (down -4.3% YTD) and Energy (up +2.1% YTD). Again, these Sectors all have 1 thing in common – they do not like a rising US Dollar like most Americans do. The SP500’s long-term TAIL (1267) broke again today too.
The Hedgeye asset allocation has moved from 0% US Equities this summer to 9% currently and embraces the Bullish Formation (bullish on all 3 risk mgt durations – TRADE/TREND/TAIL) in Consumer Discretionary (XLY) which, in terms of upside from here, looks more attractive to me than Utilities (XLU). We like both, but XLY better; especially if Strong Dollar Deflates The Inflation (= bullish for US Consumption and economic growth in 2012).
EQUITY SENTIMENT:
- ADVANCE/DECLINE LINE: -1908 (-1851)
- VOLUME: NYSE 1143.02 (+13.27%)
- VIX: 29.96 +22.14% YTD PERFORMANCE: +68.79%
- SPX PUT/CALL RATIO: 3.02 from 1.54 (+95.59%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 42.94
- 3-MONTH T-BILL YIELD: 0.01%
- 10-Year: 2.17 from 2.34
- YIELD CURVE: 1.92 from 2.06
MACRO DATA POINTS (Bloomberg Estimates):
- 7:45am/8:55am: ICSC/Redbook weekly sales
- 10am: Construction spending, est. 0.3%, prior 1.4%
- 10am: ISM, est. 52.0, prior 51.6
- 11:30am: U.S. to sell $35b 4-wk bills
- 4:30pm: API inventories
WHAT TO WATCH:
- Greek’s PM Papandreou called referendum and parliamentary confidence vote, raising the prospect of derailing European bailout effort and pushing Greece into default.
- Higher output from Honda and Toyota, combined with growing demand for full-size trucks by Ford, GM probably accelerated the SAAR to 13.2m vehicles.
- Mario Draghi to succeed Jean-Claude Trichet as ECB President today
- Congressional supercommittee meets on “Overview of Previous Debt Proposals,” 1pm
- Senate is scheduled to resume consideration of amendments on spending bills
COMMODITY/GROWTH EXPECTATION
MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:
- China Mobile Skirts Apple to Add 5 Million IPhone Users: Tech
- Gisele, Gwyneth, Demi Pose for Testino; Kapoor’s Scary Tunnel
- Record Coal Premium Turning Into Bargain as Deals Sour: Real M&A
- Esprit Drops as Europe Sales Slide on Weaker Demand
- IPhone China Rival Focuses on Software for Half-Price Device
- Sony Revamps TV Business After Seven Straight Annual Losses
- Toshiba, Nippon Yusen Call for More Government Action on Yen
- Mideast Dining Means Darden-Led U.S. Chains Follow Money: Retail
- Amazon Boosts Cloud Computing Sales, Seizing on U.S. Budget Cuts
- Indonesia’s October Consumer Prices: Summary (Table)
- Colonel Sanders Devouring Little Sheep Means 69% Gain: Real M&A
- United Breweries Falls in Mumbai After Quarterly Net Drops 11%
- Thailand Oct. Consumer Prices Rise 4.19% From Yr Ago; Est. +4.5%
- Drinking My Way Through 1,000 Belgian Craft Beers: John Mariani
- Louis Vuitton Store, Offices in London Sold for $28 Million
- *INDONESIA'S OCT. CONSUMER PRICES FALL 0.12% FROM MONTH AGO
- Panasonic Forecasts Biggest Loss in Decade on Strong Yen, TV
- Esprit First-Quarter Sales Rise 0.6% as European Demand Slows
CURRENCIES
EUROPEAN MARKETS
ASIAN MARKETS
Chinese authorities rhetorically signaled that it will be neither a source of “dumb money” for the EFSF, nor will it be pressured into easing too soon.
2007-08 Similarities Watch: Hong Kong Money Supply (M3) turned negative on a YoY basis in Sep like it die in 2Q08
Australia cuts key rate to 4.5% in first reduction since 2009.
MIDDLE EAST
The Hedgeye Macro Team
Howard Penney
Managing Director