TODAY’S S&P 500 SET-UP – December 13, 2011
KM notes from this AM - Our call yesterday for a Short Covering Opportunity only remains relevant from the level we made it at – manage your risk on green today. I’m long SPY and holding my longest net long position of Nov/Dec. I doubt I overstay my welcome. As we look at today’s set up for the S&P 500, the range is 16 points or -0.36% downside to 1232 and 0.93% upside to 1248.
SECTOR AND GLOBAL PERFORMANCE
Yesterday our immediate-term TRADE line of support for the SP500 (1232) holding intraday, KM took the asset allocation to US Equities up to 12% today. We’re also long Healthcare (XLV) and Consumer Discretionary (XLY) as both Sectors (1) remain bullish on both TRADE and TREND durations and (2) are supported by our fundamental Global Macro research view of King Dollar. Strong Dollar = Strong US Consumption.
We’ve stopped hoping that central planners and their Keynesian sources understand this basic point about a country’s currency and her purchasing power. The political economy is not the real-time economy – and hope is not a risk management process. The 2 worst Sectors to be long under our bullish US Dollar theme remain Financials (-19.8% YTD) and Basic Materials (-13.3% YTD).
EQUITY SENTIMENT:
- ADVANCE/DECLINE LINE: -1867 (-4017)
- VOLUME: NYSE 779.79 (-5.06%)
- VIX: 25.67 -2.69% YTD PERFORMANCE: +44.62%
- SPX PUT/CALL RATIO: 1.66 from 1.61 (+3.07%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 53.84
- 3-MONTH T-BILL YIELD: 0.01%
- 10-Year: 2.03 from 2.07
- YIELD CURVE: 1.79 from 1.85
GLOBAL MACRO DATA POINTS (Bloomberg Estimates):
- 7:30am: NFIB Small Business, est. 91.5, (prior 90.2)
- 7:45am/8:55am: ICSC/Redbook weekly retail sales
- 8:30am: Retail Sales, est. 0.6%, (prior 0.5%)
- 10am: IBD/TIPP economic optimism, est. 42.3, (prior 40.6)
- 10am: JOLTS job openings: (prior 3354)
- 10am.: Business inventories: est. 0.8% (prior 0.0%)
- 11:30am: U.S. to sell $35b 4-wk bills, $25b 52-wk bills
- 1pm: U.S. to sell $21b 10-yr notes reopening
- 2:15pm: FOMC Rate decision, est. 0.25%
- France Nov final CPI (EU harmonized) +2.7% y/y vs consensus +2.5%
- UK Nov - CPI +4.8% y/y vs consensus +4.8%, prior +5.0%; RPI +5.2% y/y vs consensus +5.1%, prior +5.4%
- Germany ZEW Survey Current Situation (Dec); actual +26.8%; consensus +30
- Germany ZEW Economic Sentiment (Dec); actual (53.8); consensus (55.3)
WHAT TO WATCH:
- Fed holds policy meeting today amid speculation officials will maintain pledge to keep borrowing costs near record low
- Former MF Global CEO Jon Corzine appears before Congress again; CFO Henri Steenkamp and Bradley Abelow, president and COO, said they didn’t know what happened to as much as $1.2b in missing client funds, in testimony prepared for today’s hearing
- House expected to vote today on package that extends employee payroll tax cut for one year
- Secretary of State Clinton meets with UAE Foreign Minister Abdallah bin Zayed, then holds bilateral meeting with Bosnia and Herzegovina President Zeljko Komsic
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
COMMODITIES – last Thursday we took the my asset allocation to commodities back down to 0% after the ECB press conf as I thought the EUR/USD was going to unwind again – get that USD direction right and you get Commodities right – Oil, Copper, Corn, etc all have broken TAILS and Gold continues to break down this morning (new Gold range = 1 with TREND resistance = 1743)
- Sino-Forest May Default as It Will Miss Earnings Deadline
- Laborer-Turned-Billionaire Tinkler Plans More Coal M&A
- Death of Gold Bull Market Seen by Gartman After Selling Metal
- China’s 150 Million Electric Bikes Bolstering Lead: Commodities
- Gold May Fall a 2nd Day in London as Dollar Strength Cuts Demand
- Oil Trades Near Two-Week Low as Downgrade Risk Weighs on Outlook
- World Fuel Seen Riding Shipping Bankruptcy to 12% Gain: Freight
- Gold Imports by India May Decline as Rupee Plunges to Record
- Rio Allowed to Maintain Ivanhoe Stake, Arbitrator Decides
- Freeport Indonesia Workers Expect Deal to End 3-Month Strike
- China’s Gold Imports From Hong Kong Surge 51% on Haven Demand
- OceanaGold Seeks Acquisitions to Boost Output, Wilkes Says
- Copper Drops for Second Day on European Debt-Crisis Concern
- Vale Pays $1.1 Billion to Increase Fertilizer Unit Stake
- Palm Oil Production in Malaysia Declines to Seven-Month Low
- Wheat Gains as Traders Speculate Farmers May Switch From Corn
- Saudi Oil Minister Says He’s Happy With Current OPEC Output
- Aluminum Surplus May Narrow 12% as Asian Consumption Expands
CURRENCIES
EUROPEAN MARKETS
European Data – first morning in what seems like forever (10 months) where my entire data run on Europe was not a another sequential deterioration – better than toxic is still awful, but German ZEW up for the 1st time in 10mths to -53.8 (vs -55.2) and the UK inflation print stopped going up (+4.8% NOV vs +5.0% OCT). European Stagflation remains.
ASIAN MARKETS
CHINA – certified train wreck in Chinese stocks didn’t stop overnight with the Shanghai Comp down another -1.9% to -19.9% YTD finally moving it to an immediate-term TRADE oversold signal in my model. Chinese Exports to Italy in NOV down -23% y/y!
MIDDLE EAST (HEADLINES FROM BLOOMBERG)
- Tunisia After Revolt Can Alter E-Mails With Big Brother Software
- Egyptians Seek Dollars as Devaluation Concern Grows: Arab Credit
- Security Council Urged to Act as UN Raises Syria Death Toll
- IEA Cuts 2012 Demand for OPEC Oil as Global Consumption Slows
- Iraq Can Lead the Arab World If It Gets Oil Policy Right: View
- Pakistan Sukuk Drought Spurs Demand From Banks: Islamic Finance
- Iran to Hold Military Drill for Closing Hormuz Strait, Fars Says
- Saudi Oil Minister Says He’s Happy With Current OPEC Output
- Iran Sees Oil Prices Falling in 2012 If OPEC Doesn’t Curb Output
- U.A.E.’s New Company Law May Struggle to Prompt IPOs Amid Slump
- Drake & Scull Wins 142 Million Dirhams Contract in Egypt
- Petrofac to Beat Oil Services Profit Target With 20% Growth
- BP Plans to Produce First Natural Gas in Oman by 2016
- Saudi Arabia, Pakistan, Emirates, Selangor: Islamic Bond Alert
- BP to Spend $1b by 2012 on Omani Tight Gas Appraisal, Evans Says
- Emirates, Qatar Banks Interested in Turkey, Hurriyet Reports
- U.S. Violation of Iran Airspace Was Clear, Mehmanparast Says
- Saudi Arabia’s Al-Naimi Says He’s Happy With Current OPEC Output
- Obama Says U.S. Has Asked for Iran to Return Downed Drone
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The Hedgeye Macro Team
Howard Penney
Managing Director
