The Economic Data calendar for the week of the 12th of December through the 16th is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.
Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.
POSITION: Long Consumer Discretionary (XLY), Long Healthcare (XLV)
I covered my short position in SPY this morning and bought Consumer Discretionary (XLY), taking my asset allocation in the Hedgeye Asset Allocation Model to US Equities up from 3% (on yesterday’s open) to 9%.
With the EUR/USD oversold on a catalyst (EU Summit) we were calling for, everything has a time and price. As the US Dollar strengthens, US Consumer Confidence continues to strengthen (Michigan Consumer Confidence reading was up to 67.7 in DEC vs 64.1 in NOV). Like it did in our US Consumption models in 2009, Deflating the Inflation has its perks.
I know the Keynesians want exports. I just want them to go away. This is not an export economy. It’s a Consumption economy. And whoever figures out that political message first will start to get the political economy right too.
Across all 3 durations in our risk management model, I stand by the note I wrote on Wednesday:
It’s a multi-factor, multi-duration view. It’s what we do. And it should continue to help you think about doing what seems logical in this environment of Big Government Intervention and Volatility – buy low and sell high.
Keith R. McCullough
Chief Executive Officer
THE HEDGEYE BREAKFAST MONITOR
Comments from CEO Keith McCullough
Consensus expectations for a European solution were what failed this week – this will take time.
With US Stocks down for both November and December, Santa is going to have to have one heck of a rally in the next 2 weeks for us to be wrong. I am hearing that central planners are considering moving the date on Christmas however.
SP500 support 1231; TAIL resistance 1270. Manage your risk around that range.
YUM: Yum! Brands was upgraded from Market Perform to Outperform at Bernstein.
WEN: Wendy’s tweet related to the annual promotion the company does to raise money for the Dave Thomas Foundation for Adoption was the most retweeted tweet in 2011.
This note was originally published at 8am on December 06, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“During the great plague of London, in 1665, the people listened with avidity to the predictions of quacks and fanatics.”
That’s one of my favorite quotes from one of my favorite economic history books – “Extraordinary Popular Delusions and the Madness of Crowds.” It serves as a healthy reminder that the psychology of the market can remain unhealthy, until it snaps.
Oh snap. After the US stock market puts on an +8.5% (99 point) move in less than a week, how dare the hockey head at Hedgeye Risk Management say sell!
How dare I say sell in February or April 2011 at SP500 1340 or 1363? How dare I not align my 2011 GDP estimates with Keynesian Quacks? How dare I do any globally interconnected work and say sell into year-end?
Oh, the almighty “year-end rally.” This is the stuff of savants. All it requires is the most elephantine intellects created on earth to summarily conclude that it has to happen – with other people’s money!
I was on the road in NYC seeing clients yesterday and that was a question I got in every meeting – why can’t we have a year-end rally?
My answer: why not?
After being down from April to September, US stocks rallied to a lower-high in October. After being down over -7% in a straight line for 4 weeks in November, stocks rallied to another lower-high on the last day of the month. After starting off down for December, heck, it made another lower-high yesterday too. Hallelujah, Yes We Can rally, baby!
Hopefully that’s as fanatic as I have sounded all year. I needed to get that off my chest.
Back to the Global Macro Grind…
Rather than get sucked into the speculation that European central planners are going to be able to suspend economic gravity this Friday, here’s what the rest of the world’s interconnected market is telling us this morning:
But, but, can’t we rally into year-end?
Let me look at the casino futures and give you an answer for the next 3 hours of trading…
But to where? And, more importantly, then what? The typical Perma-Bull market operator has fed off of this thing that The People of the United States of America have a say in called inflows – as in the amount of money Americans are willing to invest in their 301k.
In addition to A) Shortening Economic Cycles and B) Amplifying Market Volatilities, the other major unintended consequence of Big Government Intervention in markets has been the loss of trust The People have in free-markets.
Call me a quack, fanatic, or Mucker this morning and I’ll be totally cool with all 3 as long as that puts me in preservation of capital mode as the Street gets paid to suspend disbelief that a 1-week Keynesian Santa rally is real.
My immediate-term support and resistance ranges for Gold (broken TREND line support this morning), Brent Oil (broke TAIL line support this morning) and the SP500 are now $1720-1743, $109.06-110.42, and 1234-1260, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.