TODAY’S S&P 500 SET-UP – December 21, 2011


Another debt laden central plan, another short covering rally – Joy to the Levered World.


As we look at today’s set up for the S&P 500, the range is 24 points or -1.15% downside to 1193 and 0.78% upside to 1251. 




So my TREND line of 1207 support holds and zoom! Everything that was a down December of -3.3% to-date (24hrs ago) is fixed. Just like that – presto.  Perfectly manageable, provided that you can change your entire positioning in 1 hour of trading.  


The new range for the S&P 500 (1 - TAIL) and my call remains that you’ll push the low end of that range on Dollar up moves and the high-end on Dollar down.  With the immediate-term TRADE correlation (inverse) between SP500 and USD = -0.88 and for EuroStoxx vs USD its -0.97.


We are long Consumer Discretionary (XLY) as I think the USD down day today is more of a counter-TREND move than the bigger picture one that continues to develop.  Strong Dollar = Strong Consumption (new YTD highs today in our big cap Consumer favorites – WMT and SBUX), and a much more sustainable economic and risk mgt environment than what you’re attempting to deal with as central planners attempt to “smooth” the price/volatility cycle.




THE HEDGEYE DAILY OUTLOOK - daily sector view


THE HEDGEYE DAILY OUTLOOK - global performance




SENTIMENT – the best thing about not running money is I get much better feedback on how people are really positioned. While its fashionable to say “everyone is bearish”, as of DEC the data no longer supports that qualitative claim (VIX anywhere in the area code of 21-23 is a very complacent signal and the II Bullish/Bearish Survey Spread just popped right back up to a 3mth high (to the Bull side) of +1800bps wide (last registered Dec 7th, before we swooned, again)


  • ADVANCE/DECLINE LINE:  2135 (+4057) 
  • VOLUME: NYSE 947.03 (+22.25%)
  • VIX:  23.22 -6.82% YTD PERFORMANCE: +30.82%
  • SPX PUT/CALL RATIO: 1.25 from 1.60 (-22.10%)



  • TED SPREAD: 57.12
  • 3-MONTH T-BILL YIELD: 0.01%
  • 10-Year: 1.94 from 1.82   
  • YIELD CURVE: 1.68 from 1.58


GLOBAL MACRO DATA POINTS (Bloomberg Estimates):

  • US MBA Mortgage purchase applications index (4.9%) in 16-Dec week; total market index (2.6%) compares to (8.2%) and +4.1%, respectively, in the prior week; refi index (1.6%) vs. +9.3%
  • 10am: Existing home sales, Nov., est. up 2.2% to 5.05m
  • 10:30am: DoE inventories
  • 1pm: U.S. to sell $29b 7-yr notes


  • Bank of America said close to settling a Justice Dept. probe into whether its Countrywide unit violated fair-lending practices
  • Fed’s plan to boost supervision for U.S. banks stopped short of setting minimum liquidity levels, delayed decisions on risk-based capital and leverage until intl. regulators weigh in
  • House, Senate remain deadlocked on extending unemployment benefits
  • Bullish sentiment increases to 48.4% from 45.3% in the latest US Investor's Intelligence poll
  • Sinopec's buying spree has wide-ranging effects - WSJ
  • Switzerland and the United States are " reasonably close" to foster a tax agreement in order to end tax evasion using Swiss accounts – Swissinfo
  • Hackers in China got access to all of US Chamber of Commerce's information – WSJ




  • Nordic Shipping Banks Beat UniCredit Amid Overcapacity: Freight
  • Record Coal Deals Whittle Targets as Prices Climb: Commodities
  • Gold Extends Climb on Global Recovery Speculation, Weaker Dollar
  • Oil Climbs a Third Day on U.S. Economy, Shrinking Crude Supplies
  • Emerging Stocks to Drop on Commodities Risk: Technical Analysis
  • Hedge-Fund Refuge Sought by Traders Amid Bank Cuts: Commodities
  • Copper Climbs on Chinese Pledge to Support Exports, Trade Data
  • Container-Shipping May Rise in 2012 After Alliances, Platou Says
  • Corn, Wheat Decline on Forecast of Rains Easing Stress on Crops
  • Temasek Buys Mosaic Shares to Become Largest Shareholder
  • New Gold May Top 1 Million Ounces in Six Years, Oliphant Says
  • Oil Climbs a Third Day on U.S. Economy, Shrinking Crude Supplies
  • China Refined Copper Imports Rise to 29-Month High on Prices
  • Palm Oil Gains on Concern Supplies May Drop as Production Slows
  • Metal Thieves Thought to Have Taken London Sculpture, FT Says
  • Gold Gains as Euro Advances on IMF Pledge, German Confidence
  • India May Allow More Sugar Exports After Mills Fill Quota

THE HEDGEYE DAILY OUTLOOK - daily commodity view




THE HEDGEYE DAILY OUTLOOK - daily currency view




LTRO – genius. brilliant. Right, right – for another short-term TRADE squeeze but piling another 498B Euros (monster #) in LTRO leverage onto this sick puppy is like lathering up tricky Dick Fuld a month before the blowup. This has both the DAX and CAC getting squeezed right back above TRADE lines of support (5809 and 3062, respectively) and I would not be short European Equities or the Euro here. EUR/USD mini breakout line = 1.31; waiting on 1.33 to re-short.


THE HEDGEYE DAILY OUTLOOK - euro performance




CHINA – apparently the Chinese didn’t get the Institutional AM short covering memo (short red; chase green) – China looked more like Oracle’s guidance last night, losing another -1.2%, still in freefall at -22% YTD (Shanghai Comp). Remember, adding more leverage to the system structurally impairs Global Growth.


THE HEDGEYE DAILY OUTLOOK - asia performance



  • Goldman Sachs Sukuk Row May Dent Industry Lure: Islamic Finance
  • U.S. Joins EU Pressing to Cut Iran Oil Sales Over Nuclear Effort
  • Troops Are Gone but Iraq War Is Not ‘Over’: Meghan L. O’Sullivan
  • Aldar Won’t Delist Shares From Abu Dhabi, Deputy CEO Says
  • Almarai Acquires Argentina’s Fondomonte for $83 Million
  • Aldar of U.A.E. Drops to Record Amid Delisting Bets; Yield Falls
  • US Military 'Ready to Engage in a Conflict With Iran'
  • Lebanon Deposit, Loan Growth Slow on Syria Unrest: Arab Credit
  • BPCL Said to Plan Paying Iran for Crude Via Rivals’ Accounts
  • Qatari Group to Acquire 90% of Dexia BIL in $950 Million Deal
  • Dexia break-up quickens with Qatari deal
  • Oil Climbs Second Day on Gain in Housing Starts, Iran Concern
  • Genel in Talks With Longford Over Iraq Oilfield Stake Purchase
  • Record Oil-to-Natural Gas Ratio Reshapes Chemicals: 2012 Outlook
  • Drydocks World Sees $2.2 Billion Debt Restructuring in March
  • Hayward’s Genel in Talks to Buy Further Stake in Iraq Field: Sky
  • Etihad Signs $1 Billion Technology Deal With Sabre Airline
  • National Marine Dredging to Buy Emarat Europe Fast Building



The Hedgeye Macro Team

Howard Penney

Managing Director

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