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Lower-Highs: SP500 Levels, Refreshed

POSITION: Long Energy (XLE)

 

So I’m long inflation (Energy, Gold, etc) and that has a tough time on US Dollar up days. This we know.

 

What we don’t know is what central plan is coming down the pike next. Rather than pay people to sniff around Washington for me, I let the market tell me what the people that know think they know. That’s the best I can do.

 

Across my risk management durations, here are the lines that matter to me most right now (see chart): 

  1. Immediate-term TRADE resistance = 1360
  2. Immediate-term TRADE support = 1345
  3. Immediate-term TRADE support = 1329 

I have 2 different TRADE lines of support because I have been forced to measure a hyper short-term duration in order to solve for how extended the market is (standard deviations of risk) from my intermediate-term TREND zone.

 

In other words, if 1345 snaps, 1329 is in play, fast. If it doesn’t, I still think we keep making lower-highs versus the last Policy to Inflate lower long-term high of 1363 (April 2011). Inflation expectations rising slow growth.

 

Enjoy the chase,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Lower-Highs: SP500 Levels, Refreshed - spx.02.14.12


THE M3: FRANCIS LIU COMMENTS; WYNN SEC REQUEST; TOUR/HOTEL DATA

The Macau Metro Monitor, February 14, 2012

 

 

GALAXY SUGGESTS LETTING IMPORTED WORKERS FILL CROUPIER JOBS Macau News

Galaxy Vice Chairman Francis Lui Yiu Tung said the government should consider relaxing its current restriction that only allows local residents to be employed as croupiers.  “Human resources will be in high demand as there are many big projects, not just for the gaming industry, going on or to be completed in the next couple of years,” Lui said, adding that while Macau’s unemployment rate remained low at just 2.1%.  “Local citizens working as croupiers should be given the chance to be promoted. But when they get promoted, who’s going to fill their positions? I think [the government] should think about letting us hire imported workers as croupiers,” Lui suggested.


Meanwhile, Lui also said his company would focus more on non-gaming attractions in art, culture, conventions and leisure in the second phase of its Cotai project to bet on the “growing” family tourism business.  Although Lui declined to say what type of non-gambling attractions his company is having in mind, he mentioned that shopping and culture are in high demand, whether it is from tourists or locals.
 
Lui also forecast Macau GGR to rise 18-25% in 2012. 

 

WYNN 8K 

On February 8, 2012, following Mr. Okada’s lawsuit, WYNN received a letter from the Salt Lake Regional Office of the U.S. Securities and Exchange Commission requesting that, in connection with an informal inquiry by the SEC, WYNN preserve information relating to the donation to the University of Macau, any donations by the Company to any other educational charitable institutions, including the University of Macau Development Foundation, and the Company’s casino or concession gaming licenses or renewals in Macau.  WYNN intends to fully comply with the SEC’s request.

 

MACAU PACKAGE TOURS AND HOTEL OCCUPANCY RATE FOR DECEMBER 2011 DSEC

Visitors in package tours surged by 51.5% YoY to 794,636 in December 2011.  Visitors from Mainland China (574,427); Taiwan (48,071); and Hong Kong (40,203) soared by 57.7%, 135.8% and 13.8% respectively.  At the end of December 2011, number of available guest rooms of hotels and guest-houses totaled 22,356, up by 2,265 rooms (+11.3%) YoY, with that of 5-star hotels accounting for 63.5% of the total.  The average length of stay increased by 0.05 night to 1.5 nights. 



Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Perfect Market

“Hayek reminded his audience, the perfect market does not exist.”

-Nicholas Wapshott

 

Another day, another major easing by another major central bank. Japan’s decision to inject another 10 Trillion yens of liquidity into the market reflects, well, that they think they’re going to have a liquidity problem!

 

Ostensibly, Keynesians have been cheering on this type of Japanese behavior since 1997. That’s when Bernanke’s bud, Paul Krugman, told Japan to “Print Lots of Money.” Fifteen years later, Japan will have to roll over 242 Trillion Yens in debt (principal + interest) or 24.7% of its current marketable sovereign debt load in 2012.

 

Bubble in Keynesian Economics. Perfect.

 

Back to the Global Macro Grind

 

Keynesians would have you believe that they can centrally plan markets so that we never have hard landings. Hayekians will take the other side of that. Market’s rarely, if ever, price tail risk perfectly. In real-life, Keynesian expectations perpetuate tail risks.

 

As Hayek reminded us, “economic decisions in real life are made by individuals based on partial knowledge of current conditions coupled with their best guess of what may happen. Each individual comes to a different judgment about what those conditions might be. Some get the decision right, some wrong.” (Keynes Hayek, page 180)

 

Dynamic, non-linear, and interconnected – words that you’ll never hear from a US central planner – but these are the Global Macro Risk Management days of our lives. There is no such thing as the Perfect Market, no less the perfect consensus pricing of globally-interconnected risk. Anyone who tells you otherwise is in the business of selling you a fairy tale about certainty.

 

So what happened on the “news” this morning?

  1. No one cared about the Moodys “news” because it’s a year old
  2. Japanese Yen snapped its intermediate-term TREND line of 0.013 (YEN/USD)
  3. Copper snapped an immediate-term TRADE line of $3.88/lb support

Notice Greece isn’t the new Global Macro news this morning. Neither is Apple. If you didn’t know that the legacy news cycle operates on a lag relative to Hayek’s “moving picture”, now you know…

 

Dow 15,000?

 

Other than tacking another crumpled Barron’s cover to the cork-board behind my desk, I have no idea what to tell you about The Old Wall and its propensity to delve into these deeply intellectual debates about big round numbers.

 

What I can tell you is what my baseline 3 factor model (Price, Volume, Volatility) is saying about the SP500 at 1351:

  1. Price: all closes below 1363 are lower long-term highs versus the flailing one people chased in April of 2011
  2. Volume: just flat-out nasty volume signals (ie no volume) are being registered, daily now, at these lower highs
  3. Volatility: the VIX is making a series of higher long-term lows and building immediate-term TRADE support at 18.31

That’s an immediate-term view of the SP500. I have no idea where the SP500 or the Dow is going to close in 3 years, never mind when it’s going to pin the tail on the 15,000 donkeys. Each and every day, we reserve the free-market right to change our minds about probabilities, scenarios, and risks. As the Inflation and Growth data changes, we do.

 

What’s up next for the data?

  1. Inflation Expectations continue to rise, sequentially, so look for that in the US import price report today – then the PPI and CPI reports on Thursday and Friday.
  2. Growth Expectations continue to slow, sequentially, so look for that to be reconciled by the Global Macro data, daily.

Not everyone has a process to absorb Global Macro economic data so, to a degree, it shouldn’t be a surprise that people gravitate toward the “news” that’s being pumped into them. Our timing on the rate of change in both Growth and Inflation can often be early. Perfectly timing markets with 100% accuracy also implies some orange jump suit risk that we’re not willing to take on.

 

In addition to 10 Trillion reasons why the Japanese are implicitly acknowledging the severe Deficit/GDP issues associated with running a -2.3% year-over-year GDP number in Q4, here are some other Global Growth Slowing signals of the last 48 hours:

  1. Chinese Equities failed at intermediate-term TREND resistance (2372 Shanghai Comp) again, closing down -0.3% overnight
  2. French Equities failed at long-term TAIL resistance (3565 CAC) again, and are down for the 4thtrading day of the last 7
  3. US 10-year Treasury Yields failed at intermediate-term TREND resistance (2.03%), again this morning (1.97% last)

And, don’t worry, I get it – I’m highlighting the negative signals – but I also get that these are very big ones. Without Japan, China, Europe, and the US confirming whatever Apple and Greece did in the last 24 hours, I get paid to ask the question – again – how perfect has consensus been in the last 4 years in missing the most perfectly interconnected market signals?

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), EUR/USD, and the SP500 are now $1, $115.79-120.03, $1.30-1.33, and 1, respectively.

 

Best of luck out there today and Happy Valentine’s day to my beautiful wife Laura,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Perfect Market - Chart of the Day

 

Perfect Market - Virtual Portfolio


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – February 14, 2012

 

As we look at today’s set up for the S&P 500, the range is 20 points or -0.72% downside to 1342 and 0.76% upside to 1362. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 1607 (3211) 
  • VOLUME: NYSE 682.65 (-9.06%)
  • VIX:  19.04 -8.42% YTD PERFORMANCE: -18.63%
  • SPX PUT/CALL RATIO: 2.38 from 1.40 (70.00%)

CREDIT/ECONOMIC MARKET LOOK:

 

TREASURIES – the 10yr continues to trade between the rock (TRADE support = 1.96%) and the harder place (TREND resistance = 2.03%); still signaling a US Growth Slowdown in FEB (sequentially) as the Yield Spread (10/2s) compresses by 5bps day/day here…

  • TED SPREAD: 40.60
  • 3-MONTH T-BILL YIELD: 0.09%
  • 10-Year: 1.98 from 1.97
  • YIELD CURVE: 1.70 from 1.69

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:30 am: NFIB Small Business Optimism, Jan., est. 95.0 (prior 93.8)
  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 8:30am: Import price index, Jan.; Y/y est. up 7.2% (prior gain 8.5%), M/m est. up 0.3% (prior drop 0.1%)
  • 8:30am: Advance retail sales, Jan., est. up 0.8% (prior up 0.1%)
  • 8:45am: Fed’s Plosser speaks on economy in Newark, Del.
  • 10am: Geithner testifies before Senate Finance Committee
  • 10am: Business Inventories, Dec., est up 0.4% (prior up 0.3%)
  • 11am: Fed to purchase $4.25-$5b notes
  • 11:30am: U.S. to sell $20b 64-day cash management bills
  • 1pm: U.S. to sell $40b 4-week bills
  • 4:30pm: API weekly inventories
  • 5:40pm: Fed’s Lockhart speaks on economic outlook in Sarasota, Fla.

GOVERNMENT:

  • House, Senate in session:
    • Senate Budget committee hearing on proposed FY2013 budget
    • Senate Finance committee hearing on proposed FY2013 budget
    • GE holds conference on “American Competitiveness: What Works” (through 2/16)

WHAT TO WATCH:  

  • Moody’s cut debt ratings of Italy, Spain, Portugal, said may strip France, U.K. of top Aaa ratings
  • Senate Finance, Budget committees to have budget hearings today on Obama’s proposed $3.8t budget plan
  • Deadline today for 13-F filings with the SEC for 4Q
  • Santorum draws even with Romney in poll showing they trail Obama
  • Boeing signs record order from Lion Air for 230 planes worth $22.4b
  • Fed to issue decision “soon” on Capital One, ING Direct deal
  • U.S. Volcker rule faces harsh critics as effective date nears
  • Bank of Japan added $128b to asset-purchase program, set 1% inflation target
  • Google wins U.S. antitrust approval to buy Motorola Mobility

 EARNINGS

  • Michael Kors (KORS), premkt, $0.06
  • Host Hotels & Resorts (HST) 6 a.m., $0.30
  • ACI Worldwide (ACIW) 6:45 a.m., $0.72
  • United Therapeutics (UTHR) 7 a.m., $0.82
  • Marsh & McLennan (MMC) 7 a.m., $0.45
  • Omnicom (OMC) 7 a.m., $0.95
  • Fossil (FOSL) 7 a.m., $0.97
  • Watson Pharmaceuticals (WPI) 7 a.m., $1.76
  • Avon (AVP), 7 a.m., $0.53
  • Generac Holdings (GNRC) 7 a.m., $0.63
  • RioCan REIT (REI-U CN) 7:30 a.m., C$0.35
  • Hospira (HSP) 7:32 a.m., $0.47
  • Goodyear Tire & Rubber (GT) 8 a.m., $0.21
  • HCP (HCP), 8 a.m., $0.68
  • BorgWarner (BWA) 8 a.m., $1.17
  • TransCanada (TRP) 8:11 a.m., C$0.55
  • Valspar (VAL) 8:40 a.m., $0.48
  • Textainer Group Holdings (TGH) 8:45 a.m., $0.99
  • Zynga (ZNGA), post-mkt, $0.03
  • Quest Software (QSFT) 4 p.m., $0.51
  • FMC Technologies (FTI) 4 p.m., $0.50
  • Hittite Microwave (HITT) 4 p.m., $0.53
  • Bob Evans (BOBE) 4:01 p.m., $0.60
  • American Capital (ACAS) 4:01 p.m. $0.20
  • Hatteras Financial (HTS) 4:01 p.m., $0.90
  • Chemed (CHE) 4:01 p.m., $1.48
  • American Campus Communities (ACC) 4:01 p.m., $0.49
  • Weight Watchers International (WTW) 4:01 p.m. $0.86
  • Taleo (TLEO) 4:02 p.m., $0.23
  • TastGroup Properties (EGP) 4:02 p.m., $0.78
  • MetLife (MET) 4:03 p.m., $1.24
  • Arch Capital Group (ACGL) 4:05 p.m., $0.62
  • Masimo (MASI), 4:05 p.m., $0.23
  • Sapient (SAPE), 4:05 p.m., $0.16
  • Tanger Factory Outlet Centers (SKT) 4:05 p.m., $0.41
  • j2 Global Inv. (JCOM) 4:15 p.m., $0.62
  • Home Capital Group (HCG CN) 5:01 p.m., C$1.49
  • Natural Resource Partners (NRP) 5:05 p.m., $0.48
  • Valmont Industries (VMI) 5:30 p.m., $1.67
  • Curtiss-Wright (CW) 5:35 p.m., $0.84
  • Brookfield Office Properties (BOX-U CN) 5:45 p.m., C$0.35

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

COPPER – the Doctor took a good look at his long-term TAIL of resistance ($3.98/lb) and not only backed off but is now breaking down through 3.87/lb immediate-term TRADE support. Watching that global growth signal closely as Hong Kong’s Finance Secretary warned of potentially seeing a down y/y Q112 GDP growth print.

  • Zinc Glut Rising to Two-Decade High Threatens Rally: Commodities
  • Copper Swings Between Gains, Losses on Confidence, Rating Cuts
  • Corn Declines as U.S. Acres May Increase to Highest Since 1944
  • Oil Rises to Three-Week High as Iran Threat Counters Europe Debt
  • Cocoa Falls as Rains May Help West African Crops; Sugar Drops
  • Iron Ore May Advance Amid Seasonal Demand Increase, UBS Says
  • Gold May Decline as Stronger Dollar Cuts Demand After Downgrades
  • Wheat Exports From Australia Seen at Record as Output Gains
  • BP Boosts Cash Before Trial Threatening Image: Corporate Finance
  • Soybeans May Advance on Fibonacci, ADM Says: Technical Analysis
  • BHP, Rio Approve $4.5 Billion Escondida Copper Mine Expansion
  • Oil Supplies Expand to Five-Month High in Survey: Energy Markets
  • China Shale Delay to Boost LNG Imports in Boon for Exxon: Energy
  • Container Rates Rebounding 29% as Cargo to U.S. Expands: Freight
  • U.S. Farmers to Plant Most Corn Acres Since 1944, USDA Says
  • BP Must Face Investors’ Fraud Claims Spurred by Gulf Oil Spill
  • Sino-Forest Truth May Never Be Known as Ardell Defends Founder

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 6

 

 

ASIAN MARKETS

 

JAPAN – evidently the Bank of Japan agrees with us in that they could have liquidity issues come the ides of March (massive sovereign debt spike). Surprisingly, the BOJ announced another 10 TRILLION Yens (lots of Yens) in easing last night; this lifted stocks and debauched the Yen. We’re finally seeing the 1.30 TREND line of YEN/USD snap. Stay tuned…

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 8

 

 

 

The Hedgeye Macro Team

 

 


THE HBM: DPZ, MCD, CMG, DRI, TXRH

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Comments from CEO Keith McCullough

 

US stocks continue to hang in at their YTD highs on really bad volume and skew signals:

  1. JAPAN – evidently the Bank of Japan agrees with us in that they could have liquidity issues come the ides of March (massive sov debt spike). Surprisingly, the BOJ announced another 10 TRILLION Yens (lots of Yens) in easing last night; this lifted stocks and debauched the Yen. We’re finally seeing the 1.30 TREND line of YEN/USD snap. Stay tuned…
  2. COPPER – the Doctor took a good look at his long-term TAIL of resistance ($3.98/lb) and not only backed off but is now breaking down through 3.87/lb immediate-term TRADE support. Watching that global growth signal closely as Hong Kong’s Finance Secretary warned of potentially seeing a down y/y Q111 GDP growth print.
  3. TREASURIES – the 10yr continues to trade between the rock (TRADE support = 1.96%) and the harder place (TREND resistance = 2.03%); still signaling a US Growth Slowdown in FEB (sequentially) as the Yield Spread (10/2s) compresses by 5bps day/day here…

 

Moodys, thanks for coming out.

 

KM

 

 

SUBSECTOR PERFORMANCE

 

THE HBM: DPZ, MCD, CMG, DRI, TXRH - stocks

 

 

QUICK SERVICE

 

DPZ: Domino’s Pizza was rated New Hold at Miller Tabek, price target $36.

 

MCD: McDonald’s said on Monday that it will work with its U.S. pork suppliers to phase out the use of gestation crates, the cramped stalls that millions of mother sows are confined to while they raise piglets, according to Reuters.

 

CMG: Chipotle’s first national TV ad, aired during the Grammy’s, overshadowed even Coldplay’s performance according to adage.com. 

 

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

PNRA: Panera Bread underperformed yesterday.  Earnings last Tuesday disappointed on the top line.

 

 

CASUAL DINING


DRI: Darden Restaurants is rated New Equalweight at Stephens.

 

TXRH: SAC Capital reported a passive stake in Texas Roadhouse equal to 5.4%.

 

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

Volume was low overall in the casual dining space yesterday.

 

<chart3>

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


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