TODAY’S S&P 500 SET-UP – December 14, 2011


Sold SPY yesterday at 1249 resistance and got hedged, fast. That’s the only way to play the game that’s in front of you right now.  As we look at today’s set up for the S&P 500, the range is 18 points or -0.96% downside to 1214 and 0.51% upside to 1232. 




KM started yesterday long SPY with a plan to sell it on a failure at 1249 (so I did).  In one of the uglier intraday reversals of the year, the SP500 ended up snapping my immediate-term TRADE line of support (1232) on the close. Now the Index (SPY) is back to bearish TAIL; bearish TRADE.  In conjunction with the SPY TRADE break of 1232, 5 of 9 sectors are bearish on my TRADE duration and 2 of them are bearish TRADE and TREND (Financials and Basic Materials which are the 2 Sectors we’ve flagged for the biggest drawdown risk to US Dollar up).  For the YTD, you can drive a truck through the Sector returns see below; but that truck rides a 4 lane highway that drives through 2 very big Macro calls in 2011 – 1H11 Growth Slowing and 2H11 King Dollar.  As the US Dollar continues to strengthen, I expect Strong Dollar = Deflate The Inflation = Strong Consumption = Long Healthcare + Consumer




THE HEDGEYE DAILY OUTLOOK - daily sector performance


THE HEDGEYE DAILY OUTLOOK - global performance



  • ADVANCE/DECLINE LINE:  -1377 (-490) 
  • VOLUME: NYSE 926.53 (+19.12%)
  • VIX:  25.41 -1.01% YTD PERFORMANCE: +43.15%
  • SPX PUT/CALL RATIO: 1.57 from 1.66 (-5.46%)



  • TED SPREAD: 54.12
  • 3-MONTH T-BILL YIELD: 0.01%
  • 10-Year: 1.96 from 2.03   
  • YIELD CURVE: 1.72 from 1.79


GLOBAL MACRO DATA POINTS (Bloomberg Estimates):

  • 7:00am: MBA Mortgage Applications, week of Dec. 9
  • 8:30am: Import Price Index, M/m, Nov., est. 1.0% (prior 0.6%)
  • 8:30am: Fed’s Lockhart speaks about Atlanta
  • 10:30am: DoE inventories
  • 1:00pm: U.S. to sell $13b 30-yr bonds (reopening)
  • UK Oct ILO unemployment rate +8.3% vs consensus +8.4%, prior +8.3%
  • UK Nov claimant count (unemployment change) +3.0k vs consensus 14.9k



  • Oil declined amid speculation that OPEC will set an output ceiling near current production levels
  • Groupon ratings initiated at several firms including Deutsche Bank (hold) Goldman (buy), Wells Fargo (outperform)
  • China will impose anti-dumping, anti-subsidy duties on some U.S. vehicles
  • Data on sales of previously owned homes from 2007 to Oct. 2011 will be revised lower as a result of double counting: Reuters
  • Bullish sentiment decreases to 45.3% from 47.4% in the latest US Investor's Intelligence poll; Bearish sentiment increases to 30.5% from 29.5%; Those expecting a market correction increases to 24.2% from 23.1%




CORRELATION CRASH – remains my Hedgeye Macro Theme #2 for Q411 as its born out of Theme #1. Gold is doing what it did when my correlation risk model blew out in Q4 of 2008. This morning’s immediate-term TRADE correlation (inverse) b/t USD and Gold = -0.84% and commodities like Corn are looking like the Euro.

  • China Easing Case Grows on ‘Grim’ Outlook, Money Supply: Economy
  • Buffett’s Surging Silo Sales Boosting Cargill Costs: Commodities
  • Corzine Knew MF Made Loan From Customer Accounts, Duffy Says
  • Crude Drops From One-Week High in New York Before OPEC Meeting
  • Cheapest Foreign Coal in Three Years Lures China: Energy Markets
  • Sino-Forest Bonds Indicate No Recovery Expected: Canada Credit
  • Gold May Rebound From 7-Week Low as Europe Concern Spurs Demand
  • Sino-Forest Woes Spur Nine Dragons to Tap Shanghai: China Credit
  • Mozambique Ports Grow With Rio Tinto Appetite for Coal: Freight
  • Risk Rising of Deeper China Slowdown, Conference Board Says
  • Humala Pleases Peru Investors With Moves to Save Mine Projects
  • Copper Slumps to Two-Week Low as Fed Refrains From New Stimulus
  • Nippon Steel Gets Clearance for Take Over of Sumitomo Metal
  • Oil Surges on Speculation of Supply Disruption in Middle East
  • Iron Ore Trading System May Stir Swap Demand, Straits Says
  • Rio Tinto Doesn’t Plan Ivanhoe Bid After Arbitration Ruling
  • Gold Extends Losses as Fed Refrains From More Stimulus Measures
  • Death of Gold Bull Market Seen by Gartman as He Sells Metal


THE HEDGEYE DAILY OUTLOOK - daily commodity view




KING DOLLAR – remains our Hedgeye Macro Theme #1 for Q411 and I’m sticking to it. Get the EUR/USD right and you’ll get most other things that are extremely correlated right. All of Asia and Latin America in rate cutting mode; Europeans getting bazooka’d.



THE HEDGEYE DAILY OUTLOOK - daily currency view




THE HEDGEYE DAILY OUTLOOK - euro performance




CHINA – apparently not getting the Santa Claus rally memo from the US centric perma bulls; Chinese stocks down for the 5th consecutive day, down another -0.89% to fresh 3yr lows, and back in crash mode (down -20.7% YTD) as China’s Money Supply (M2) gets reported at the lowest level since May of 2001! (12.7%)



THE HEDGEYE DAILY OUTLOOK - asia performance




  • Hakkasan to Open in Four U.S. Cities as Restaurant Goes Global
  • Assad’s Detachment From Syria Killings Reveals Life in Cocoon
  • Saudi Arabia Names New Economic Team Amid Drive for Growth
  • OPEC in Talks to Complete 30 Million-Barrel Output Agreement
  • Mozambique Ports Grow With Rio Tinto Appetite for Coal: Freight
  • Saudi’s Naimi Sees ‘Great Agreement’ on Output Within OPEC
  • Six Themes for Oil & Gas Equities in 2012: Citigroup
  • Taqa Spread Over Corporates Widens on Debt Buyback: Arab Credit
  • Kuwait’s Burgan Bank Buys Eurobank Tekfen, Haberturk Says
  • Strait of Hormuz Not Closed, Iran Foreign Ministry Says
  • Hormuz Strait Closure Not on Iran’s Agenda, Al Alam Reports
  • Iraqi Oil Pipeline Near Basra Burns After Explosions, AP Says
  • Qatargas Says Planned Maintenance at LNG Trains 5,6,7 Completed
  • Sabic Working to Turn Crude Into Petrochems Without Refinery
  • Iraq to Open First Oil Sea Terminal, Plans Bids on March 7
  • Syrian Central Bank Fixes Pound Rate Against Other Currencies
  • U.A.E. New Company Law May Struggle to Prompt IPOs Amid Drop
  • Saudi Shares Rally on Speculation Loss Overdone, Reshuffle



The Hedgeye Macro Team

Howard Penney

Managing Director

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