prev

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN

 

* The Euribor/OIS tightened 5 bps vs last week and the TED spread fell by 3 basis points to 54.7 bps. 

 

* Bank CDS in the US and Europe tightened significantly. 

 

* The MCDX measure of municipal default risk fell sharply week over week.

 

* The ECB Liquidity Recourse to the Deposit Facility continued to climb.  

 

* Even Steven - Our macro quantitative model indicates that on a short term duration (TRADE), there is slightly more downside risk in the XLF (1.6% downside vs. 1.6% upside).

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 5 of 12 improved / 1 out of 12 worsened / 6 of 12 unchanged

 • Intermediate-term(WoW): Positive / 6 of 12 improved / 2 out of 12 worsened / 4 of 12 unchanged

 • Long-term(WoW): Negative / 0 of 12 improved / 9 out of 12 worsened / 3 of 12 unchanged

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - summary 2

 

1. US Financials CDS Monitor – Swaps tightened for 25 of 27 major domestic financial company reference entities last week.   

Tightened the most WoW: AXP, C, RDN

Widened the most/ tightened the least WoW: MMC, JPM, GNW

Tightened the most MoM: AGO, XL, MBI

Tightened the least MoM: MTG, SLM, GNW

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - CDS  us

 

2. European Financials CDS Monitor – Bank swaps were tighter in Europe last week for 39 of the 40 reference entities. The average tightening was -6.7% and the median tightening was -9.9%.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - CDS  europe

 

3. European Sovereign CDS – European Sovereign Swaps mostly tightened over last week. French sovereign swaps tightened by -6.0% (-14 bps to 221 ) and Portuguese sovereign swaps widened by 1.9% (21 bps to 1119).

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - Sovereign CDS 1  2

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - Sovereign CDS 2

 

4. High Yield (YTM) Monitor – High Yield rates fell 8 bps last week, ending the week at 8.12 versus 8.20 the prior week.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - HY

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 8 points last week, ending at 1605.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - LLI

 

6. TED Spread Monitor – The TED spread fell 2.9 points last week, ending the week at 54.7 this week versus last week’s print of 57.6.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - TED spread

 

7. Journal of Commerce Commodity Price Index – The JOC index rose 3.4 points, ending the week at -17 versus -20 the prior week.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - JOC index

 

8. Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty. The Euribor-OIS spread tightened by 5 bps to 89 bps.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - Euribor OIS

 

9. ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  The ECB pays lower rates than the market, so an increase in this metric demonstrates increased perceived counterparty risk and liquidity hoarding.  

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - ECB liquidity facility

 

10. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 14-V1. Last week spreads tightened, ending the week at 142 bps versus 154 bps the prior week.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - MCDX

 

11. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production. Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion. Last week the index fell 294 points, ending the week at 1053 versus 1347 the prior week.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - Baltic Dry

 

12. 2-10 Spread – We track the 2-10 spread as an indicator of bank margin pressure.  Last week the 2-10 spread tightened to 164 bps, 6 bps tighter than a week ago.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - 2 10  2

 

13. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.6% upside to TRADE resistance and 1.6% downside to TRADE support.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - XLF

 

Margin Debt

We publish NYSE Margin Debt every month when it’s released. 

 

 NYSE Margin debt hit its post-2007 peak in April of this year at $320.7 billion. The chart below shows the S&P 500 overlaid against NYSE margin debt going back to 1997. In this chart both the S&P 500 and margin debt have been inflation adjusted (back to 1990 dollar levels), and we’re showing margin debt levels in standard deviations relative to the mean covering the period 1. While this may sound complicated, the message is really quite simple. First, when margin debt gets to 1.5 standard deviations or greater, as it did this past April, that has historically been a signal of extreme risk in the equity market - the last two times it did this the equity market lost half its value in the ensuing period. We flagged this for the first time back in May of this year. The second point is that margin debt trends tend to exhibit high degrees of autocorrelation. In other words, the last few months’ change in margin debt is the best predictor of the change we’ll see in the next few months. This is important because it means that margin debt, which retraced back to +0.43 standard deviations in September, still has a long way to go. We would need to see it approach -0.5 to -1.0 standard deviations before the trend reversed. There’s plenty of room for short/intermediate term reversals within this broader secular move, as we saw in October and November’s print of +0.78 and +0.55 standard deviations.  But overall, this setup represents a material headwind for the market.  

 

One limitation of this series is that it is reported on a lag.  The chart shows data through November.

 

TUESDAY MORNING RISK MONITOR: GOOD NEWS CONTINUES TO ROLL IN - Margin Debt

 

Joshua Steiner, CFA

 

Allison Kaptur

 

Robert Belsky

 

Trouble viewing the charts in this email?  Please click the link at the bottom of the note to view in your browser


Just Do It

This note was originally published at 8am on January 12, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“It’s not the dreamers that are remembered, it’s the doers.”

-Tim Tebow

 

This morning one of our top Global Macro leadership sources (ESPN) reports Tim Tebow is now America’s favorite athlete.

 

The poll, calculated monthly, had the Denver Broncos quarterback ranked atop the list for the month of December. In the last 18 years of the ESPN Sports Poll only 11 different athletes (Michael Jordan, Tiger Woods, etc.) have been No. 1.” (ESPN.com)

 

I can already hear the mumbling from the weenie bins  - ‘there goes that knucklehead hockey player talking about winners again’…

 

Yep – and I love it.

 

Back to the Global Macro Grind

 

When it comes to playing at the highest level of Global Macro Risk Management, you really have to do it each and every day. Global Markets wait for no one.

 

We were on a Hedgeye Morning Call in mid-December and our Financials guru, Josh Steiner, said ‘look Keith, people are just exhausted out there.’ On a call in late December, our Gaming Ace, Todd Jordan, said ‘no one is picking up the phones – it’s dead.’

 

And I love that too.

 

If you want to drive absolute returns, consistently, in up and/or down markets, dealing with emotions, losses, and exhaustion is part of this profession. You have to suck up its adversity, absorb it, and turn it into something positive. The alternative to not playing this game confidently is deer-in-headlights.

 

When I watch Europe trade this morning, that’s exactly what I see. I see a lot of people reacting to what was 2011’s playbook. I see journalists claiming authority on what to do with European positions into and out of bond auctions. And I see one mother of a short squeeze in almost everything that was going down in November.

 

This Game of Risk is globally interconnected. You can’t anchor on 1 fear-factor and react. You have to work your tail off to proactively prepare for where the game is going next.

 

“Hard work beats talent when talent doesn’t work hard.”

-poster above Tebow’s bed growing up in Jacksonville, Florida

 

What’s going on in Global Macro markets across our Multi-factor, Multi-duration, model this morning?

 

USA

  1. US Dollar Index remains King (up +11.5% since the end of QE2)
  2. US Equities remain in a Bullish Formation (bullish TRADE, TREND, and TAIL)
  3. SP500’s immediate-term TRADE range moves to 1277-1299 (so buy red closer to 1277, sell green closer to 1299)
  4. US Equity Volatility (VIX) is breaking down into a Bearish Formation (bearish TRADE, TREND, TAIL)
  5. Strong/Stable US Dollar = Lower Volatility (30-day inverse correlation between USD and VIX = -0.77%!)
  6. US Equity Volume Studies are starting to shift to the bullish side (up volume days on up moves)
  7. US Treasuries not yet confirming a breakout in US Growth expectations (10yr under my TREND line of 2.03%)
  8. US Yield Spread (10yr yields minus 2s) = 170 bps wide = 6 basis points wider than where it started 2012
  9. The 3-day range (lead indicator for VIX) in my model is only 44 points wide = very trade-able market vs OCT-NOV
  10. All 9 Sectors in our S&P Sector ETF model are bullish from an immediate-term TRADE perspective
  11. 7 of 9 Sectors in our S&P Sector ETF model are bullish from an intermediate-term TREND perspective
  12. 2 of 9 Sectors in our S&P Sectors ETF model are bearish from a long-term TAIL perspective (Financials and Basic Materials)

REST OF WORLD

  1. Chinese Equities = +3.5% for 2012 YTD and breaking out > immediate-term TRADE line support (Shanghai Composite)
  2. Chinese Consumer Inflation (CPI) falls to a 15-month low this morning at 4.1% = Deflating The Inflation
  3. Hang Seng (Hong Kong) = +3.6% YTD = bullish TREND
  4. Japan’s Nikkei is flashing a very negative divergence at down -0.8% for 2012 YTD = bearish TREND
  5. South Korean unemployment unchanged m/m at 3.1% for DEC and the KOSPI was up +1% overnight = bullish TREND
  6. India down -0.6% last night to 16,077 on the Sensex = bearish TREND
  7. Germany’s DAX is powering forward again this morning to +5.6% YTD = bullish TREND
  8. France’s CAC is up +1% this morning and has moved to bullish on our immediate-term TRADE duration
  9. Italian and Spanish stocks are getting squeezed after lower bond yields (vs last auction)
  10. Russia, Norway, Hungary – all markets that got spanked in 2011 = up and frustrating shorts
  11. Dr Copper breaking out > $3.45/lb TREND line support (this was new as of yesterday) = bearish TAIL up at $3.99/lb
  12. Gold is up +0.7% this morning and is trading in between a rock (TREND resistance = $1682) and TRADE support = $1633

That’s about ½ of what’s already hand-written in my notebook, every day, before 6AM.

 

What do we do with all of it? We hold ourselves accountable to every play we make, time-stamping every position, so that you can trust that the summary of all our hard work has conclusions that we have the convictions to act on.

 

Sometimes (like now in Europe), we have no positions. Sometimes we have many. But all of the time, we want to try to make this Tebow Time at Hedgeye Risk Management.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), EUR/USD, US Dollar Index, Shanghai Composite, and the SP500 are now $1633-1663, $111.89-115.99, $1.26-1.28, $80.64-81.73, 2235-2292, and 1277-1299, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Just Do It - Chart of the Day

 

Just Do It - Virtual Portfolio


THE M3: TABLES FALL; MOCHA CLUBS; COD; S'PORE HOME SALES; TPI

The Macau Metro Monitor, January 17, 2012

 

MACAU NUMBER OF GAMING TABLES AND SLOT MACHINES DSEC

For the quarter ending December 31, 2011, there were 5,302 tables (77 less than the previous quarter) and 16,056 (156 more slots than the previous quarter).

 

MOCHA TO OPEN NEW SLOT PARLOUR Macau Business

Mocha Clubs will open its 10th club in Macau tomorrow.  Located at Hotel Golden Dragon, the all-new venue operates 24 hours and occupies three floors.

BIG CHANGES AT CITY OF DREAMS Macau Business

According to a company source, City of Dreams is working on big changes, starting with a rebranding of the property.  “The rebranding is still very secret but will go ahead this year,” the source said.  Meanwhile, from February 5, City of Dreams’ signature restaurant Horizons will be closed for a two-month complete renovation.  Horizons will have a new entrance and private dining rooms as well as a bar that will introduce guests to fine dining.  City of Dreams is also targeting to open another Chinese restaurant in July to add to the existing ones.

 

SINGAPORE'S PRIVATE HOME SALES DROP TO LOWEST IN TWO YEARS Bloomberg

Singapore’s December private home sales dropped to the lowest in two years after the government imposed new taxes on house purchases.  Private home sales in the island city fell to 632 units in December, the lowest since December 2009, according to data from the Urban Redevelopment Authority. 

 

TOURIST PRICE INDEX FOR THE 4TH QUARTER 2011 DSEC

Macau's Tourist Price Index (TPI) for 4Q 2011 increased by 18.9% YoY to 128.1.  4Q TPI rose by 9.8% QoQ, of which hotel room rate soared substantially during the National Day, the Macao Grand Prix and Christmas holidays, driving up the price index of Accommodation by 30.4%.


CASH HANDOUT LIKELY IN APRIL Macau Daily Times

According to Rádio Macau, Secretary Tam said checks will start to be distributed at the beginning of 2Q 2012.  This year, permanent and non-permanent residents will receive a cash handout of MOP 7,000 and MOP 4,200 respectively. 


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THE HEDGEYE DAILY OUTLOOK

 

TODAY’S S&P 500 SET-UP – January 17, 2012

 

As we look at today’s set up for the S&P 500, the range is 18 points or -0.39% downside to 1284 and 1.00% upside to 1302. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -922 (-1591) 
  • VOLUME: NYSE 827.88 (+7.51%)
  • VIX:  20.91 +2.15% YTD PERFORMANCE: +10.64%
  • SPX PUT/CALL RATIO: 1.82 from 1.55 (+17.54%)

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 54.46
  • 3-MONTH T-BILL YIELD: 0.02%
  • 10-Year: 1.89 from 1.86   
  • YIELD CURVE: 1.67 from 1.64

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Empire Manufacturing, Jan., est. 11 (prior 9.53)
  • 8:30am: NOPA oil stocks, soybean capacity
  • 11am: Export inspections, corn, soybean, wheat
  • 11:30am: U.S. to sell $29b 3-mo., $27b 6-mo. bills
  • 9pm: World Bank releases new growth forecasts

 

WHAT TO WATCH: 

  • BB&T, Toronto-Dominion Bank said to be among cos. in talks to buy BankUnited
  • Ista Pharmaceuticals received revised non-binding takeover offer from Valeant, will consider updated proposal
  • Electricite de France withdrew opposition to merger between Exelon, Constellation Energy
  • Georgia Gulf yesterday rejected $1.03b buyout offer from Westlake Chemical as too low
  • Morgan Stanley said to plan to tell employees this week it’s capping, delaying some bonuses: WSJ
  • IRS pursuing documents from CME Group as part of probe into whether some members underreported income earned from leasing their seats
  • Greek PM due to meet tomorrow with group representing private Greek bondholders after 5-day break to discuss forgiving at least half of nation’s debt
  • Seventh victim recovered from Costa Concordia cruise ship; Carnival fell 16% in London yday; also watch RCL
  • Capital One, Citigroup among those reporting monthly credit- card delinquencies, charge-offs
  • Solyndra deadline today for final bids to buy bankrupt co. that got $535m in govt. loan guarantees
  • New York Governor Andrew Cuomo to announce budget at 1pm on spending cuts to erase $2b deficit in yr starting April
  • “Contraband” from Universal opened as weekend’s top film in N.A. theaters 
  • No IPOs scheduled
  • EARNINGS: Citigroup, Wells Fargo, McMoran among those reporting financial results today. Selected companies, with approximate time and Bloomberg est.:
    • TD Ameritrade Holding (AMTD) 7:30 a.m., $0.26
    • M&T Bank (MTB) 7:46 a.m., $1.52
    • Forest Laboratories (FRX) 8 a.m., $1.01
    • First Republic Bank/SF (FRC) 8 a.m., $0.43
    • Citigroup (C) 8 a.m., $0.52
    • Wells Fargo & Co (WFC) 8 a.m., $0.72
    • McMoRan Exploration Co (MMR) 8 a.m., $(0.13)
    • Cree (CREE) 4 p.m., $0.26
    • Fulton Financial (FULT) 4:30 p.m., $0.20
    • American Water Works Co (AWK) 4:30 p.m., $0.33
    • Linear Technology (LLTC) 5 p.m., $0.38
    • Bank of the Ozarks (OZRK) 6 p.m., $0.49
    • Adtran (ADTN) 8 p.m., $0.46

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

COPPER – the breakout above our intermediate-term TREND line of $3.45/lb last week helps bust a huge +3.1% meltup this morning to $3.75/lb; TAIL resistance remains overhead at $3.99, but this move should force capitulation on the short covering side.

  • Consumer Electronics Frenzy Tops $1 Trillion as Tin Rebounds: Commodities
  • Commodities Rise Most in Two Weeks Amid Speculation China May Ease Policy
  • Copper Nears Four-Month High on Chinese Growth, Falling Production At Rio
  • Oil Rises to Three-Day High as Saudi Arabia Is Seen Targeting $100 Crude
  • Gold Climbs to One-Month High on China Easing Outlook, Weakening Dollar
  • Coffee Gains for a Second Day as Colombian Harvest Declines; Sugar Rises
  • Soybeans, Corn Advance as China May Ease Policy After Slowdown in Growth
  • India Increases Tax on Bullion Imports as Government Seeks to Lift Revenu
  • Posco 2011 Profit Declines as Demand for Steel Wanes, Missing Estimates
  • Persian Gulf Debt Risk at Two-Year High on Iran Hormuz Fears: Arab Credit
  • Best Refiner Returns on Naphtha Since May Show China Boom: Energy Markets
  • Sino-Forest Rallies on Outlook for China Asset Recoveries: Canada Credit
  • Morgan Stanley Favors Gold, Copper on Investment Demand, Global Shortage
  • Commodities Rally on Optimism China May Ease Policy

 

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS

 

GERMANY – can you say ZEW? Biggest m/m pop in the German confidence reading ever – and ever is a long-time; DAX +1.7% to +7.2% for 2012 YTD! And finally immediate-term TRADE overbought here. Germany has done a great job, all things considered, keeping unemployment low and fiscal conservatism intact.


THE HEDGEYE DAILY OUTLOOK - 6

 

 

ASIAN MARKETS

 

CHINA – Chinese stocks up +4.2% overnight and we’ll take that on the long side with a smile as Chinese GDP beats bombed out expectations w/ a +8.9% y/y Q4 print and, more importantly, a re-acceleration in Industrial Production in DEC to +12.8% y/y vs +12.4% NOV + a big re-accel in Singapore’s Exports to +9% y/y in DEC vs +1.4% NOV

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 8

 

 

 

The Hedgeye Macro Team

 

 

 



Expert Cues

“Expert intuition strikes us as magical, but it is not.”

-Daniel Kahneman

 

This weekend I finally started reading Daniel Kahneman’s “Thinking, Fast and Slow” and was pleasantly surprised to see him cite one of my favorite American thinkers, Herbert Simon (read “Models of My Life”), in the Introduction:

 

“The situation has provided a cue; this cue has given the expert access to information stored in memory, and the information provides the answer. Intuition is nothing more and nothing less than recognition.” (Thinking, Fast and Slow, page 11)

 

Pattern recognition is the fulcrum principle of Chaos Theory. While neither Kahneman nor Simon have drawn that parallel to Global Macro Risk Management, if they did what we do every day I think they probably would have.

 

Back to the Global Macro Grind

 

While consensus has spent 2012 caught in the vacuum of 2011’s news (European Crisis and Growth Slowing), we’ve been letting this globally interconnected marketplace of colliding factors give us cues on Growth Slowing’s Bottom (Q1 Hedgeye Macro Theme):

  1. Strong US Dollar = Stronger US Consumption, Confidence, and Employment
  2. Deflating The Inflation = Growth Slowing at a slower rate in Asia (China in particular)
  3. German Fiscal Conservatism = Bullish German Stocks on both our TRADE and TREND durations

There should be no surprises about what’s happening in US, Chinese, or German stocks this morning. Our leading indicators have been giving us Crystal Clear Cues for the last 3 weeks. That’s why we have our largest asset allocation to US Equities in over a year. That’s why we’re long Chinese and Hong Kong Equity exposures. That’s why we’ll open this morning with no European shorts.

 

In the order that these Expert Cues appear in my notebook this morning:

 

1.   CHINA – closing up +4.2% overnight, the Shanghai Composite had its best move since October of 2009. Growth Slowing in China is a 2-year stale story that we have signaled in real-time. Looking at the higher-frequency economic data that was reported closest to now (the December data, not the quarterly), China appears to be seeing Growth Slow at a Slower Rate. Chinese Industrial Production for DEC accelerated to +12.8% y/y (vs +12.4% in NOV). Meanwhile, Singapore’s Export Growth for DEC jumped to +9% y/y (vs +1.4% in NOV). You’ll recall we use Singapore as a leading indicator for Eastern demand.

 

2.   GERMANY – trading up another +1.7% to an impressive +7.2% for 2012 YTD, the German DAX is proving that this morning’s concurrent indicator of confidence (the German ZEW reading) was better than bad for good reason. It was actually the biggest 1-month pop in the ZEW reading ever – and ever is a long time. Germany is proving that fiscal conservatism can support strong domestic employment (6.8% vs USA’s 8.6%). Not pandering to the political winds of the Keynesian bailout beggars should also be commended.

 

3.   USA – holding above both my long-term TAIL line (1267 support) and the closing high of October 29th, 2011 (1285), the SP500 is proving that Strong Dollar = Strong Consumption works where it matters in the American economy – on 71% of US GDP Growth. Neither we (nor the US Treasury Bond Market) are suggesting US Growth is great, but the US Currency and Equity markets aren’t signaling a US recession either. Provided that the US Dollar remains strong (Romney winning in South Carolina this week will continue to help), we think US Growth’s Bottom could very well be happening in Q411 through Q112.

 

With Expert Cues in hand, we derive our summary positioning in the Hedgeye Asset Allocation Model

  1. Cash 58% = down from 70% at the end of 2011
  2. US Equities = 18% (Consumer Discretionary, Consumer Staples, Utilities – XLY, XLP, and XLU)
  3. Int’l Currency = 15% (US Dollar – UUP)
  4. Int’l Equities = 9% (China and Hong Kong – CAF and EWH)
  5. Fixed Income = 0%
  6. Commodities = 0%

That’s a very different mix in my asset allocation than what I was carrying from April-November of 2011. I’ve moved from a big allocation to Growth Slowing at an accelerating rate (Long Fixed Income) to long Growth Slowing’s Bottom (Long Equities).

 

What hasn’t changed is my position in the US Dollar and Commodities. I still think that Strong Dollar = Deflates The Inflation, so look for me to potentially short some Commodities today.

 

Having a repeatable risk management process isn’t magical. Neither is it perfect. It’s just what we do.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), EUR/USD, US Dollar Index, Shanghai Comp, German DAX, and the SP500 are now $1, $110.20-114.33, $1.25-1.28, $80.72-81.97, 2, 6151-6329, and 1, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Expert Cues - Chart of the Day

 

Expert Cues - Virtual Portfolio


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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.

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