TODAY’S S&P 500 SET-UP – January 5, 2012


Fascinating to watch the Correlation Risk in Global Macro markets start to burn off as consensus keeps focusing on stale indicators - KM


As we look at today’s set up for the S&P 500, the range is 16 points or -0.81% downside to 1267 and 0.45% upside to 1283. 




Bullish is as bullish does – yesterday was a reminder of that as the SP500 rallied from her intraday lows and successfully closed > my long-term TAIL of support (1267) for the 2ndday in a row. Three days in a row and a close above the Oct 29th closing-high of 1285 would confirm this very short-term price move as credible. Volume has not confirmed it yet. Volatility has.


What I liked most about yesterday’s action was that US Dollar UP = Consumer Discretionary UP. This remains my core long-term thesis – without a Strong/Stable Dollar, the purchasing power of the 71% (US Consumption as a % of GDP) gets taxed.


From a TRADE and TREND perspective, 9/9 Sectors are bullish TRADE and 7/9 TREND (with Financials and Basic Materials remaining the 2/9 bearish on intermediate-term TREND – and I think that confirms pending strength in USD too).


I’m long 2/9 Sectors: Consumer Discretionary (XLY) and Utilities (XLU). No SPY or S&P Sector Shorts - KM









  • ADVANCE/DECLINE LINE:  -75 (-1734) 
  • VOLUME: NYSE 759.44 (-11%)
  • VIX:  22.22 -3.27% YTD PERFORMANCE: -5.04%
  • SPX PUT/CALL RATIO: 1.99 from 1.88 (+6%) 


  • TED SPREAD: 57.23
  • 3-MONTH T-BILL YIELD: 0.02%
  • 10-Year: 2.00 from 1.97   
  • YIELD CURVE: 1.75 from 1.70

GLOBAL MACRO DATA POINTS (Bloomberg Estimates):

  • Eurozone Oct industrial orders sa y/y +1.6% vs consensus +3.3% prior +1.6%; Eurozone Oct industrial orders sa m/m +1.8% vs consensus +2.4% prior revised to (7.8%) from (6.4%)
  • Eurozone Nov producer prices index y/y +5.3% vs consensus +5.2% prior +5.5%; Eurozone Nov producer prices index m/m +0.2% vs consensus +0.1% prior +0.1%
  • UK Dec services PMI 54.0 vs consensus 51.5 and prior 52.1
  • France Dec Consumer Confidence Index at 80 vs November reading of 80 – INSEE
  • 7:30am: Challenger Job Cuts (prior -12.8%)
  • 8:15am: ADP Employment, est. 178k (prior 206k)
  • 8:30am: Jobless Claims, Dec. 31, est. 375k (prior 381k)
  • 9:45am: Bloomberg Consumer Comfort, est. -46.0 (prior -47.5)
  • 10:00am: ISM Non-Manufacturing, est. 53 (prior 52)
  • 10:30am, EIA natural gas storage change, Dec. 30
  • 11am: DoE inventories, Dec. 30


  • TechCrunch reports that rumors about Microsoft (MSFT) buying Nokia's smartphone division have been revived
  • Kraft Foods and SodaStream enter strategic co-branding deal
  • US congress looking into quality of credit-ratings companies' views on MF Global (MFGLQ) - WSJ
  • Greek Prime Minister says country could default in March - BBC
  • France sells 10-year bonds at 3.29% yield vs 3.18% on Dec. 1. Sells 30-year bonds at 3.97% yield vs 3.94% Dec. France sold EU7.96b of total debt today with borrowing costs rising.
  • President Obama announces results of Defense Strategic Review in speech at Pentagon
  • SEC holds closed meeting on enforcement matters, 2pm


  • Alcoa Earnings Estimates Plunge After Aluminum Drop: Commodities
  • Oil Trades Near 8-Week High as Iran Threat Counters Europe Debt
  • Gold May Advance on Demand From Asia as Gartman Turns Bullish
  • China Seen Boosting Oil Imports on Capacity Gain: Energy Markets
  • U.K. Warns Iran Over ‘Illegal’ Threat to Close Strait of Hormuz
  • U.S. Container Trade Rebounding at Fastest Pace Since May
  • Schweppes Losing Australia Summer Sales in Fizz Shortage: Retail
  • Rio Declares Force Majeure on Two Canada Aluminum Smelters
  • Base Metals to Rally in 2012, Credit Suisse’s Deverell Says
  • Mosaic CEO Says Phosphate Has Bottomed Ahead of Spring Planting
  • Cattle Top Gold as Safest Commodity Return by Volatility Measure
  • Copper Advances After Biggest Drop in Three Weeks Spurs Buying
  • Soybeans May Climb to Near $13 on Fibonacci: Technical Analysis
  • Stocks Erase Early Drop as 10-Year Treasury Yield Touches 2%
  • Five Rare Earths Crucial for Clean Energy Seen in Short Supply
  • Harita Said to Plan Singapore IPO of Nickel Mining Division
  • Commodities Had Net Outflows of $11.4 Billion, Citigroup Says
  • EU Moves Closer to Iran Oil Ban as Greece Lifts Objections
  • Cotton Harvest in India Seen Missing Estimate on Lower Yield





EUR/USD – is the Euro getting blasted to a 15 month low because of Unicredit or b/c a Romney win in NH is a big time stabilizer for the USD? Or both? Markets don’t move on a 1-factor model – I think this Presidential debate is going to be USD bullish inasmuch as insolvent European banks blowing up is bearish.






DAX – can I get a live quote/recap of a European Bond Auction? Cmon. That mattered 12 months ago when few were focused on it – now, every time European equities have a downtick my tweet-stream lights up w/ the same known knowns. What isn’t obvious yet is how strong German stocks and bonds act on these down moves. DAX holding 5 range of support is bullish. Period.






ASIA – Growth Slowing at a slower rates as a Deflating The Inflation is starting to slow the pace of declines on Asian Equity market down days; India’s Services PMI 54.2 for DEC (vs 53.2 NOV) was a positive surprise and Thailand reporting lower sequential inflation for DEC at 3.5% vs 4.2% in NOV was more of what we are seeing across Asia.




  • Oil Trades Near 8-Week High as Iran Threat Counters Europe Debt
  • Iran Central Bank Moves to Rescue Rial as Allies Tighten Net
  • U.K. Warns Iran Over ‘Illegal’ Threat to Close Strait of Hormuz
  • Dana Board Considered Updates on Project Financing, Mol Stake
  • Hard-line U.S. Policy Tips Iran Toward Belligerence: Vali Nasr
  • Dana Gas $1 Billion Sukuk Yield Rises to Record on Debt Risk
  • Land Bill Boosts Indonesia Debt Rating Outlook: Islamic Finance
  • JX Energy in Talks With Saudi Arabia to Replace Iran’s Crude
  • BAE to Get $780 Million Cash Boost From Saudi Order, UBS Says
  • Monti Says Any Iran Sanctions Must Allow Repayment of Eni Debt
  • Iran to Reduce Record Oil Premiums for Asia After Saudi Decrease
  • EU Moves Closer to Iran Oil Ban as Greece Lifts Objections
  • Al Futtaim HC Securities to Shut U.A.E. Brokerage Operations
  • Oil Price Would Skyrocket if Iran Closed the Strait of Hormuz
  • Iran Oil Ban by EU May Send Brent Crude to $125, SocGen Says
  • RTS Futures Rise as Oil Gains on Iran Dispute: Russia Overnight
  • Oil Falls in New York as Europe Crisis Counters Iran Concern
  • Gold Rises to Two-Week High as European, Iranian Tensions Mount



The Hedgeye Macro Team

Howard Penney

Managing Director


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