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This Time Is?

This note was originally published at 8am on March 27, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“Mr. Dalio admits to being wrong roughly a third of the time…”

-The Economist, March 2012

 

At least there’s someone out there who doesn’t proclaim to nail it on every Global Macro market move. Bridgewater’s Ray Dalio is, incidentally, one of the only major hedge fund managers to not blow up in a down tape going back to the 2007 turn.

 

There are, of course, different definitions of being right and wrong in markets. All you need to do is change the duration of your prospective holding and/or risk management period, and you are all set.

 

While the Fed Chairman’s Policy to Debauch The Dollar and Inflate provided for a fascinating time to watch another no volume rally in US stocks yesterday, my process also reminded me that it was a time to sell.

 

Back to the Global Macro Grind

 

I came into the day with 14 LONG positions in the Hedgeye Portfolio and ended the day with 10. I came into the day with 13 SHORT positions and ended the day with 14. #TimeStamped - that’s just what I did. It doesn’t mean that all 27 of my LONG/SHORT positions were right or wrong. I’m simply showing you what I do in real-time. Most people won’t.

 

Per the same article in The Economist, Dalio also “attributes a big part of his success to managing the risk of bad calls.” That’s something that Steve Cohen says too. If you’ve successfully managed risk with live ammo across all of the big bull and bear moves since 2007, you’ll recall that being perma-anything has not worked.

 

Maybe this time it’s different. Maybe it’s not.

 

Bearish Factors in my notebook this morning:

  1. SP500 = immediate-term TRADE overbought at 1417
  2. SP500 immediate-term downside versus upside (3 weeks or less) = 10:1
  3. Financials (XLF) and Tech (XLK) are 3.7 and 3.9 standard deviations overbought on my TREND duration
  4. US Equity Volatility (VIX) at 14 anything = the most obvious clean cut sell signal since Q1 2008
  5. US Equity Volumes are the most bearish I have ever seen (yesterday’s volume = -17% vs my TREND avg!)
  6. US Dollar Down -0.62% yesterday on Ben Bernanke’s Policy To Inflate will only slow growth faster
  7. US Treasury Bond Yields (10yr) stopped going up at 2.31% and 2.47% TRADE and TAIL resistance, respectively
  8. China Slowing had the Shanghai Composite down -0.2% overnight and the Hang Seng remains bearish TRADE
  9. India’s stock market had a no volume bounce to a lower-high and remains bearish TRADE (Growth Slowing)
  10. Spain’s stock market (-3.5% YTD) remains in a Bearish Formation as Spanish bond yields won’t go down
  11. Greek stocks stopped going up on FEB 13thand are down -8% since
  12. Oil prices remain in a Bullish Formation with immediate-term upside on Brent Oil at $126.92/barrel
  13. Copper remains below its long-term TAIL of 4.03% resistance (and all-time bubble high)
  14. US Housing (New and Pending Home sales) numbers are suggesting a potential Triple Dip
  15. Japanese Yen continues to signal we are crossing the Rubicon of the mother of all Sovereign Debt Crises

Bullish Factors in my notebook this morning:

  1. SP500 remains in a Bullish Formation provided that 1402 holds (intermediate-term TREND support = 1312)
  2. S&P Equity Sector Model has 8 of 9 Sector ETFs bullish TRADE and TREND (Energy is the only bear – XLE)
  3. SP500 is up +12.6% YTD, perpetuating the performance chase into month and quarter end (Friday)
  4. SP500 is finally developing less bearish Correlation Risk to the US Dollar (30-day correlation = +0.27%)
  5. Japanese stocks, closed up +2.4% overnight (like European stocks did in Q1 of 2011, they love FX devaluation)
  6. South Korea’s KOSPI is holding onto its Bullish Formation with critical TRADE support of 2,012 intact
  7. Germany’s DAX remains on fire at +20.2% YTD (Bullish Formation)
  8. Russia’s Trading System Index loves the fuel of the almighty Petro-Dollar (down dollar, up oil) = RTSI +24.5% YTD
  9. Brazil’s Bovespa remains bullish intermediate-term TREND (we sold our long position yesterday at overbought)
  10. Canada’s TSX remains in a Bullish Formation (we sold that too yesterday at immediate-term TRADE overbought)
  11. Gold prices didn’t snap long-term TAIL support of $1652/oz yet
  12. US Treasury Yields on the short-end of the curve are moving into a Bullish Formation with TAIL support = 0.35% (2yr)
  13. US Treasury Curve Yield Spread (10s minus 2s) is +3bps wider day-over-day at +192bps wide
  14. Euro is back above intermediate-term TREND support of $1.32 vs USD (bullish for European purchasing power)
  15. President Obama’s probabilities of re-election just hit a fresh new high in our Election Indicator of 62.3%

In other words, if you open your process to what’s going on in the entire world, there’s a lot going on out there.

 

Every investor has their own unique investment time horizon and appetite for draw-down risk. You can make your call on what to do next. That’s is the beauty of this game. It’s always changing and offering you another chance to do the same.

 

Yesterday is over. Risk is managed proactively for tomorrow. Inasmuch as selling low in 2009 was, buying high can be a “bad call” too. So just keep that in mind at VIX 14 if you think buying in Q1 of 2012 is going to be different this time.

 

My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, Japanese Yen (vs USD), and the SP500 are now $1652-1704, $124.45-126.92, $78.83-79.38, $82.41-84.12, and 1402-1417, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

This Time Is? - Chart of the Day

 

This Time Is? - Virtual Portfolio


LVS: TRADE UPDATE

Keith shorted LVS in the Hedgeye Virtual Portfolio at $60.43.  According to his model, the TRADE range is between $58.22 and $60.69. TREND support is at $52.54 .

 

 

In anticipation of the Sands Cotai Central (SCC) opening tomorrow and better than expected Macau market growth, LVS has ripped higher by 33% since the start of the year.  While SCC will help LVS regain share, its existing properties face potentially greater cannibalization than currently anticipated by the Street.  When MPEL and Galaxy both opened their new properties, shares zoomed higher ahead of their openings, only to sell off post opening.  LVS could be a similar case.

 

Current Street expectations of 20%+ growth for the rest of the year may be a little rosy as a lot of the Q1 growth was driven by easy hold comparisons.  Comparisons are much more difficult for the rest of the year and while Mass has looked good, VIP volume growth has been essentially non-existent since June of last year.

 

LVS: TRADE UPDATE - LVS


Liz Claiborne Takeover Seen With Allure of Kate Spade: Real M&A


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THE M3: SCC; EASTER/CHING MING VISITATION

The Macau Metro Monitor, April 10, 2012

 

 

SANDS COTAI CENTRAL TO OPEN TOMORROW Macau Business

Once complete, Cotai Central will house two themed casinos called Himalaya and Pacifica.  Himalaya opens in phase one and has about 600 slots, 216 gaming tables and four live electronic gaming tables connected to 200 terminals for players.  Another 150 VIP tables can be found at the Paiza, Cotai Central’s dedicated area for VIP premium and junket players. The Paiza will host 11 fixed junkets.


Sands will get 200 new tables from the government for the first phase.  That will use up all the available tables under the cap of 5,500 imposed until next year. The property’s other tables will be sourced from Sands’ established casinos.

 

It could be far more difficult finding tables for Pacifica when it opens in 3Q 2012. “Our understanding is that we have another 200 new tables that we were essentially promised [by the government],” says David Sisk, Sands China's executive vice president.  Cotai Central’s first phase features more than 600 five-star rooms and suites under the Conrad hotel brand and another 1,200 four-star rooms from Holiday Inn.  The opening will add another 28 shops, meeting space and food and beverage options to Cotai.

RECORD VISITOR NUMBER BRINGS EXTRA BUSINESS Macau Daily Times

The Easter and Ching Ming festivals brought extra numbers of tourists to Macau and additional business for retail shops, restaurants and hotels.  According to the authority’s statistics, the daily number of visitors coming in and out of the city ranged between 330,000 and 370,000 during the holiday, making a total of more than 1.4 million holidaymakers, most of them through Hong Kong, or the Barrier Gate in the northern end that connects to Zhuhai. 

 


President Obama's Chance of Winning Reelection Declines to 61% -- Hedgeye Election Indicator

President Obama's Chance of Winning Reelection Declines to 61% -- Hedgeye Election Indicator  - Screen Shot 2012 04 10 at 7.28.13 AM 

 

 

If the US Presidential election were held today, President Obama would have a 61% chance to win reelection, according to the Hedgeye Election Indicator (HEI). That's down a full percentage point from last week, when the HEI calculated the President's chances of winning reelection at 62%. It's also the second consecutive week that the HEI has shown that the President's odds of reelection have declined. The decline in the last two weeks stands in contrast to the first quarter of the year when the HEI climbed in January from a 50% likelihood that Obama would win reelection to a record high of 62.3% in late March.

 

 

President Obama's Chance of Winning Reelection Declines to 61% -- Hedgeye Election Indicator  - HEI

 

 

Hedgeye developed the HEI to understand the relationship between key market and economic data and the US Presidential Election. After rigorous back testing, Hedgeye has determined that there are a short list of real time market-based indicators, that move ahead of President Obama’s position in conventional polls or other measures of sentiment. One of those indicators, the timing of the overall performance of the US stock market, played a key role in moving the HEI lower this week. Based on our analysis, market prices will adjust in real-time ahead of economic conditions, which will ultimately shape voters’ perception of the Obama Presidency, the Republican candidates and influence the probability of an Obama reelection.   

 

Hedgeye releases the HEI every Tuesday at 7 a.m. ET, all the way until election day Tuesday November 6.



Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.61%
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