prev

Short Selling Opportunity: SP500 Levels, Refreshed

POSITIONS: Long Utilities (XLU), Short SPY, Short XLI, Short XLY

 

Much like my call last Tuesday “Short Covering Opportunity”, this one is explicit. There should be no mincing of words associated with my positioning. Ahead of tomorrow’s option expiration and inflationary CPI report, I’d love the opportunity to short 1401.

 

Across my core risk management durations, here are the lines that matter most: 

  1. Immediate-term TRADE overbought = 1401
  2. Immediate-term TRADE support = 1372
  3. Intermediate-term TREND support = 1290 

In other words, I’m looking at 3 points of upside versus almost 30 on the downside (wicked asymmetry). And since few agreed that there were 30 points of upside from last Tuesday’s 1345 line (there was 55), I say game on.

 

As (hopefully) many learned during the tops of Q1 2008, 2010, and 2011 – tops are processes, not points.

 

Manage this immediate-term range of risk accordingly,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Short Selling Opportunity: SP500 Levels, Refreshed - SPX


THE HBM: SBUX, RUTH, PFCB, BWLD

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Consumer

 

Initial jobless claims for the week ended March 10th came in at 351k versus 357k consensus and a revised 365k for the week prior (initially 362k).

 

THE HBM: SBUX, RUTH, PFCB, BWLD - initial claims

 

 

Commentary from CEO Keith McCullough

 

The good news is Greece is out of the Bloomberg Most Read (Today = #1 Goldman, #2 China, #3 Apple):

  1. ASIA – post the USA meltup in everything Apple and celebrations in Financials to a made-up test, Asia has basically been down for the last 2 days (Equities), with China and India leading the decline. Bulls were begging for India to cut rates last night and they didn’t (inflation), so the Sensex dropped -1.6% on that and snapped TRADE line support of 18,023, again. China’s FDI print was down -0.9% y/y – not good.
  2. SPAIN – acts like le chien de Sarkozy; the IBEX continues to flash a major negative divergence vs Global Equities as of late (Spain -1.4% YTD w/ Germany +20%!); when your stock, currency (Euro), and bond markets are all falling at the same time – not good.
  3. TREASURIES – here’s your hat-trick of ‘not goods’; if you are long anything in Fixed Income, that is (who would be?) – Treasury Bonds are getting blasted – 2yr yield have moved +44% to the upside in 2 weeks. It’s a good thing there is zero asymmetric risk w/ the Bernank’s zero bound policy.

People chasing performance can convince themselves this rally in Japanese, American, or Venezuelan stocks is all about Growth – or they can be realistic and just call it a chase. They chased into March end of 2008, 2010, and 2011 – that didn’t turn out so well by August.

 

KM

 

 

SUBSECTOR PERFORMANCE

 

THE HBM: SBUX, RUTH, PFCB, BWLD - subsectors

 

 

QUICK SERVICE

 

SBUX: Deutsche Bank increased its price target on Starbucks from $59 to $61 on possible catalyst for sales from the company’s light roast launch.

 

 

CASUAL DINING

 

RUTH: Ruth’s Chris has kicked off its “Sizzle, Swizzle and Swirl Happy Hour” premium bar menu at select locations, featuring food and drink items for $7, according to nrn.com.

 

PFCB: P.F. Chang’s was raised to Hold from Sell at Argus Research.

 

BWLD: Buffalo Wild Wings CEO Sally Smith appeared on CNBC’s show, Fast Money, last night and was not asked about wing prices once.  March Madness is good for business, though.

 

THE HBM: SBUX, RUTH, PFCB, BWLD - egg sets vs wing prices black

 

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

RRGB: Red Robin Gourmet Burgers gained 2% on accelerating volume.

 

THE HBM: SBUX, RUTH, PFCB, BWLD - stocks

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – March 15, 2012


As we look at today’s set up for the S&P 500, the range is 32 points or -1.81% downside to 1369 and 0.48% upside to 1401. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -1436 (-3249) 
  • VOLUME: NYSE 853.21 (-5.94%)
  • VIX:  15.31 3.45% YTD PERFORMANCE: -34.57%
  • SPX PUT/CALL RATIO: 1.01 from 1.42 (-28.87%)

CREDIT/ECONOMIC MARKET LOOK:


TREASURIES – here’s your hat-trick of ‘not goods’; if you are long anything in Fixed Income, that is (who would be?) – Treasury Bonds are getting blasted – 2yr yield have moved +44% to the upside in 2 weeks. It’s a good thing there is zero asymmetric risk with the Bernank’s zero bound policy. 

  • TED SPREAD: 39.24
  • 3-MONTH T-BILL YIELD: 0.08%
  • 10-Year: 2.29 from 2.27
  • YIELD CURVE: 1.82 from 1.74 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Empire Manufacturing, Mar., est. 17.5 (prior 19.53)
  • 8:30am: PPI (M/m), Feb., est. 0.5% (prior 0.1%)
  • 8:30am: Jobless Claims, week Mar. 10, est. 357k (prior 362k)
  • 9am: TIC Flows, Jan., est. $40.0b (prior $87.1b)
  • 9:45am: Bloomberg Consumer Comfort, week of Mar. 11, est. -36.0 (prior -36.7)
  • 10am: Philadelphia Fed., Mar., est. 12 from 10.2
  • 10am: Freddie Mac mortgage rates
  • Treasury Secretary Tim Geithner speaks to Economic Club of New York, Noon 

 GOVERNMENT:

  • President Obama travels to an Prince George’s County Community College to talk about energy
  • FERC meets to discuss Exelon-Constellation merger, PJM plan for capacity pricing, 10am
  • House in recess, Senate in session:
    • Senate Appropriations subcommittee hears from Transportation Secretary on agency’s budget, 9am
    • Senate Appropriations subcommittee hears from FBI director on agency’s budget, 10am
    • Senate Environment subcommittee hears from Nuclear Regulatory Commission chairman on lessons from Fukushima, 10am
    • Senate Finance Committee hears from Deere & Co. Chairman on establishing normal trade relations with Russia, 10am
    • Supreme Court not in session 

WHAT TO WATCH:

  • Cisco Systems said to be in advanced talks to acquire NDS Group for $5b: Calcalist
  • Yahoo! investor Third Point plans to file preliminary proxy statement “within the week” to seek shareholder votes on proposed slate of four new directors
  • LSI Corp. filed complaint with ITC against Funai Electric, MediaTek and Realtek Semiconductor over technology used in audiovisual devices
  • Credit-card cos. report monthly net charge-offs, delinquencies
  • Schlumberger said to seek buyers for unit that distributes oilfield supplies, business that may fetch as much as $800m
  • Google will present changes to search engine over next few months that could affect millions of websites: WSJ
  • Morgan Stanley preparing to invest millions in Mexican energy cos. as country opens up industry to private capital
  • Foreclosure filings in the U.S. fell 8% in Feb., smallest y/y decrease since Oct. 2010: RealtyTrac
  • House Republicans pushing for new round of budget cuts this year, congressional aides say, raising possibility of govt. shutdown shortly before Nov. election
  • Tropical cyclone Lua forecast to strengthen on Australia’s northwest coast as Chevron evacuates workers from gas projects, iron ore ships steam out to sea 

 EARNINGS:

    • Quebecor (QBR/B CN) 6 a.m., C$0.91
    • Hanwa Solar (HSOL) 6 a.m., $(0.30)
    • Aurizon Mines (ARZ CN) 6 a.m., C$0.13
    • Gabriel Resources (GBU CN) 7 a.m., $(0.01)
    • Scholastic (SCHL) 7 a.m., $(0.70)
    • Winnebago (WGO) 7 a.m., $0.04
    • Cato (CATO) 7 a.m., $0.34
    • AMC Networks (AMCX) 8 a.m., $0.60
    • Ross Stores (ROST) 8:30 a.m., $0.85
    • Athabasca Oil Sands (ATH CN) Pre-mkt, C$(0.03)
    • Crescent Point Energy (CPG CN) 9 a.m., C$0.12
    • Dole (DOLE) 4:05 p.m., $(0.12) 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Cocoa Rally Fading as African Rains Erase Shortage: Commodities
  • Soybeans Near Six-Month High as Brazil Crop May Miss Estimates
  • Oil Trades Near One-Week Low on Supply; Goldman Sees $130 Brent
  • Copper Swings Between Gains, Losses on Chinese, U.S. Economies
  • Gold Rebounds in New York as Low Interest Rates May Spur Demand
  • Cocoa Falls to One-Week Low as Rains Boost Crops; Sugar Advances
  • Global Food Prices Seen Declining as Demand Growth Slows
  • Rubber Shortage Widening to Bolster Prices, Producers Say
  • Oil Exports Ease Crude Sting for U.S. Economy: Chart of the Day
  • Obama’s Keystone Denial Imperils Refiners’ $25 Billion Oil Bet
  • Oil at $126 Boosts BP Ability to Pay More for Gulf Spill: Energy
  • Checking German Power May Trim Poland Price Gap: Energy Markets
  • Orange-Juice Price Seen Unaffected by End to U.S. Brazil Duties
  • Iron Ore Seen Rallying as China Lending Policy May Boost Demand
  • Fortescue Raises $2 Billion From Junk Bonds After Doubling Sale
  • Impala’s Hand Forced as Zimbabwe Starts Nationalization 

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS


SPAIN – acts like le chien de Sarkozy; the IBEX continues to flash a major negative divergence vs Global Equities as of late (Spain -1.4% YTD w/ Germany +20%!); when your stock, currency (Euro), and bond markets are all falling at the same time – not good.

 

THE HEDGEYE DAILY OUTLOOK - 6

 

 

ASIAN MARKETS


ASIA – post the USA meltup in everything Apple and celebrations in Financials to a made-up test, Asia has basically been down for the last 2 days (Equities), with China and India leading the decline. Bulls were begging for India to cut rates last night and they didn’t (inflation), so the Sensex dropped -1.6% on that and snapped TRADE line support of 18,023, again. China’s FDI print was down -0.9% y/y – not good.

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 8

 

 

 

The Hedgeye Macro Team

 


get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

Don't Hate The Debate

This note was originally published at 8am on March 01, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“You have to choose not to spiral into hate.”

-Izzeldin Abuelaish

 

On red yesterday I took up my positions in US Equities and Commodities to 12%, respectively, buying Utilities and Gold in the Hedgeye Asset Allocation Model. I also sold my entire US Dollar position (9%) on green. Don’t hate me for moving fast. Sometimes that’s just what I do.

 

‘Trading, Fast and Slow’ might be a good title for a new book (or maybe just a high-frequency tweet). It uses 3 words that some people in our business love to hate. Trading? Oh no, “I’m not a trader, I am an investor.” Ok. Do you invest fast or slow? Do you manage risk? Yes, we know – you actually have to trade to answer both of those questions.

 

While plenty of people from The Old Wall are just punching the over-compensation clock at this point, I think we have entered the thralls of creative destruction. These are the most exciting times of my 13-year career. There is so much to Re-think, Re-work, and Re-build.

 

We have an entire industry that needs to be debated. Every process. Every premise. Every minute of every day offers you an opportunity to not only get in the game, but be the change we all want to see in this profession.

 

If that sounds a little speechy, it’s because it is. As Ray Dalio at Bridgewater likes to say, this business is all about figuring out the truth. In the final pages of Izzeldin Abuelaish’s ‘I Shall Not Hate’, he comments on the same principles of risk management in the Middle East:

 

“I’m not talking about the light of religious faith here, but light as a symbol of truth. The light that allows you to see, clear away from the fog – to find wisdom. To find the light of the truth you have to talk to, listen to, and respect each other.” (page 196)

 

The partisan politics, economics, and investing styles that have failed us over the last 5yrs are broken. Don’t Hate The Debate. Embrace change and progress. We can always do better. We always have.

 

Back to the Global Macro Grind

 

One of the most heated debates I have with clients remains centered on the interconnectedness of the world’s reserve currency to market prices that are primarily denominated in that currency (US Dollars).

 

Since most of Western academia has not taught us to re-think markets this way, their dogma is now our dilemma. That’s why we need to slap on the accountability pants and hash this one out, fast. It’s time for the professors to be held accountable to the debate.

 

If you don’t think Fed Policy drives the US Dollar and Inflation/Deflation Expectations of assets priced in Dollars, try that theory at home with your own money. If the Fed were to even whisper about a rate hike, Oil and Gold would get hammered.

 

That’s why managing risk around big up/down moves in the USD is critical to getting Big Beta right. With the US Dollar Index up +0.8% on the day yesterday (one of its biggest up days of 2012), here’s what happened underneath the Globally Interconnected Market hood:

  1. Silver = down -6.9%
  2. Gold = down -5.5%
  3. Basic Materials (XLB) = down -1.9%

It’s a good thing the Dollar isn’t correlated to Apple.

 

Notwithstanding that the Chairman of the Federal Reserve didn’t mention the words (and hasn’t since 2006) CORRELATION RISK in his entire semi-annual testimony yesterday, we’re still not in the business of taking his word for it on what is or is not happening out there.

 

I know this is a touchy subject – particularly to the legions of Nobel Prize winners who get paid to be willfully blind to it. But this is America, not Russia. We, The People, have a fiduciary responsibility to hold central planners accountable.

 

Transparency, Accountability, and Trust?

  1. Transparency: Bernanke to Ron Paul yesterday on defining inflation - “I’ll talk to you about that offline”
  2. Accountability: Bernanke’s prepared remarks on his mandate for PRICE STABILITY -“as we expected, inflation was transitory”
  3. Trust: Bernanke on his forecasts – “my projections are considerably lower than last year”

Alrighty then.

  1. So there is no inflation because Bernanke chooses to define it with what’s just universally considered not true
  2. And as long as commodity markets oscillate between bubble and crash mode, price inflation/deflation is “transitory” and stable?
  3. And if you’re willing to take his word for it on forecasts that he’s had dead wrong, we can soft land this puppy perfectly

I really don’t hate the man. I Don’t Hate The Debate either. As an immigrant to what I genuinely felt was the last bastion of free-market of capitalism in the world, I just find being held hostage to an un-elected central planner who is obfuscating the truth un-American.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), Utilities (XLU), US Dollar Index, and the SP500 are now $1697-1735, $122.21-126.02, $34.74-35.68, $78.09-79.06, and 1363-1372, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Don't Hate The Debate - Chart of the Day

 

Don't Hate The Debate - Virtual Portfolio




real-time alerts

real edge in real-time

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.

next