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Bullish, From A Price

Conclusion: Further Deflating the Inflation will make us bullish on growth-oriented equities from a price. We, of course, need to actually see that occur – which ultimately means the Fed must remain on hold long enough for market prices to “clear”. If the Fed is unable to resist the urge to ease, we’ll happily play the long side of the Inflation Trade up to another long-term lower-high in US equities – just as we did from JAN 25th  though mid-MAR.

 

Hedgeye Macro Active Themes: Growth Slowing, Deflating the Inflation, The Last War: Fed Fighting, Bernanke’s Bubbles, Asymmetric Risks and Sovereign Debt Dichotomy.

 

Hedgeye Asset Allocation: ZERO percent exposure to commodities (since APR 5th) and international currencies (since APR 23rd).

 

This we know – on every down tick in crude oil prices, a legion of pundits will tell you to buy [US] stocks because of “declining energy prices”. This we also know – many of these are the same perma bulls who told you buy stocks with crude oil prices +10% higher because: A) “US growth was decoupling from the rest of the earth”; B) “QE_ would propel the rally higher”; or C) “high energy prices were merely a function of accelerating demand” (in spite of global growth data sequentially decelerating since FEB – but who’s counting?).

 

Given such obvious discrepancies, we find it useful to incorporate a consistent and repeatable research process to help navigate the thick haze of Old Wall Storytelling around expectations for growth, inflation and/or policy. Regarding the latter, our quantitative analysis of key market prices suggests that, while some noteworthy participants are already out begging for more QE, the Global Macro universe generally does not view incremental easing out of the Federal Reserve as a near-term event (USD breaking out; Oil and Gold breaking down).

 

Bullish, From A Price - 1

 

Bullish, From A Price - 2

 

Bullish, From A Price - 3

 

Looking to the Fed’s own index of “medium term inflation expectations”, there’s still quite a bit of Deflating the Inflation that must occur in the TIPS market relative to current levels to justify pursuing further easing. The 5yr breakeven inflation rate according to the Fed is 2.76%; this is substantially higher than the 2-2.2% range when the Fed announced QE1, QE2 and Operation Twist. Interestingly, the strike price on the “Bernanke Put” has increased from 750 on the S&P 500 in ’08, to 1050 on the S&P 500 in ’10 and 1150 on the S&P 500 in ’11. Is 1250 the next logical step in this progression? Call us chaos theorists, but that roughly jives with Keith’s 1281 TAIL line of S&P 500 support.

 

Bullish, From A Price - 4

 

As we penned in our MAY 4th research note titled, “Analyzing the Jobs Report Through the Lens of the General Election: April 2012 Edition”, we continue to view the general election debate as supportive of intermediate-term USD strength from a rhetorical perspective as both Bernanke and Obama are forced into an increasingly smaller box for the time being. If events ultimately play out according to our expectations, you’ll hear us get very loud about being bullish on the US/global economy and US/global equities – from a price. In our view, Bernanke packing up his moral hazard and getting completely out of the way will allow both the US economy and US equities to rally to new highs vs. the latter simply bouncing to another long-term lower-high on waning volume.

 

Bullish, From A Price - 5

 

The phrase: “from a price” is paramount. As alluded to previously, you actually need to see a clearing of commodity market prices for Deflating the Inflation to occur and have a positive impact on growth. That roughly equates to more pain across the commodity complex over the intermediate-term in the name of reflating economic growth – an occurrence we saw in both 1H09 and 2H11. Without that pain, the disinflationary tailwind of falling commodity prices will peak here in MAY and decline through year-end (holding prices flat at current levels). For disinflation to continue being incrementally supportive, we need to actually see it show up via continued declines in commodity prices – not just consensus storytelling on the first leg down in crude oil!

 

Bullish, From A Price - 6

 

All told, further Deflating the Inflation will make us bullish on growth-oriented equities from a price. We, of course, need to actually see that occur – which ultimately means the Fed must remain on hold long enough for market prices to “clear”. If the Fed is unable to resist the urge to ease, we’ll happily play the long side of the Inflation Trade up to another long-term lower-high in US equities – just as we did from JAN 25th  though mid-MAR.

 

Darius Dale

Senior Analyst

 


M: 1Q12 Report Card

Conclusion: Macy’s 2H guidance supports our concern about the stepped-up competitive pressure in the mid-tier later this year. Yeah, we know, Bloomies is high end, and much of Macy’s is not exactly KSS-competitive. But they definitely compete on the fringe. Mgmt went as far as to say that they are seeing definite strength in areas where they compete w JCP. One other interesting dynamic we see is analysts are asking Macy’s management about input costs. We think that’s actually a very relevant question, but probably for a different reason.  The reality is that input costs don’t really matter much anymore. They are known. They are built into the plan – for the vendors, at least. And those prices are tentatively set with retailers. But ultimately, we’re going up against significantly higher AUR’s vs 2H11, and we absolutely NEED to maintain pricing integrity in 2H for margin integrity to hold. People forget that there are two elements to the gross margin equation – and only one of them is cost.

 

While playing the guidance game is not our forte, the reality is that this is the first quarter in 5 where Macy’s did not increase its outlook. With the stock up 23% YTD and short interest as a percent of float testing historical lows of 2.1%, we absolutely need to see positive earnings revisions to move this stock higher. Our thesis regarding stepped up competition in the mid-tier in 2H will need to be dead-wrong in order for that to happen (or JC Penney will need to fall flat on its face and cede share increasingly to M).

 

What Drove the Beat?

The $0.03 beat in 1Q12 was a result of operating expense leverage in light of 2 new store openings in Salt Lake City, UT, and Greendale, WI. The operating expense leverage of 110bps was primarily due to improved profitability in the credit portfolio which is expected to increase $15-$20mm this year. Additionally, M benefitted from reduced D&A though partially offset by increased investment spend in OMNI Channel (My Macy’s, MAGIC selling, etc.) as well as higher pension expense. Inventory growth improved 2 points sequentially in Q1 +6% though the sales to inventory spread remained unchanged -2%. 

 

M: 1Q12 Report Card - M SIGMA

 

Deltas in Forward Looking Commentary?

 

In order to properly measure performance relative to original expectations, we look at management’s 2012 guidance headed into the quarter as well as the key deltas in Q1 results vs. expectations :

 

Store And Sales Growth

  • For planning purposes, we are assuming a comp store increase of approximately 3.5% on a 52-week basis UNCHANGED- continue to expect 3.5% for the remainder of the year and now expect 3.7% for the full year
  • Our total sales, including this extra week, are expected to be up approximately one point over our comp store sales increase UNCHANGED
  • Now, obviously, in Q4, given that extra week, we’re expecting a much bigger gap – in fact, 3.5 points higher total store growth than comp UNCHANGED
  • However, in the first three quarters of the year, total sales growth is expected to be slightly below our comp store growth due to the locations that we closed at the end of 2011 UNCHANGED- revenues +4.3% on +4.4% comp

 New Store Openings

  • We are planning to open two new stores in 2012 – both, in fact, next month – one in Milwaukee and one in Salt Lake City COMPLETE
  • We are also opening five new Bloomingdale’s outlets during 2012, bringing the total number to 12 UNCHANGED

 Gross Margins, Income And Credit

  • We are assuming a flattish gross margin rate for the year, although we could have continued pressure from free shipping, given the sales growth expected in the omnichannel business UNCHANGED- GM was down 30bps in Q1
  • On the SG&A front, we expect to be able to continue to improve our expense rate as a percent of sales UNCHANGED- SG&A leveraged 100bps in Q1
  • We expect our income from the credit portfolio to increase approximately $15mm to $20mm during 2012 UNCHANGED- credit contributed to expense leverage in Q1
  • But we are expecting big variances when we look at the comparison to last year in each quarter UNCHANGED- 3Q expecting unfavorable impact

 

Expenses, Depreciation, Tax Rate And CapEx

  • For the year, we’re expecting retirement expense – pension plus SERP – to increase by approximately $65mm UNCHANGED
  • While depreciation is expected to decline approximately $25mm for the year UNCHANGED
  • For interest expense, we’re assuming approximately $435mm to $440mm for the year UNCHANGED
  • And we’re assuming an effective tax rate of 36.95% for 2012, although it will vary by quarter UNCHANGED
  • And our CapEx budget for 2012 is $850mm INCREASED: now $950mm but will return to $900 level in 2013

 EPS And Costs

  • So, net-net, we are assuming EPS on a diluted basis of $3.25 to $3.30 for 2012 UNCHANGED0 $0.09 below consensus at the high end of range

 

 

Highlights from the Call:

 

Revenues: +4.3%

  • Sales continued to be strong at Macy's and Bloomingdales both in-store and online (online +34%)
  • Sales performance broad based
  • Men's, center core (watches jewelry handbags cosmetics shoes etc.) and home strong
  • Feminine apparel stronger in Feb and March than in April but feeling better particularly in classic
  • Saw strength in impulse apparel (women's age 22-30)
  • Junior business continued to be weak
  • Private brands continued to perform well (charter club, bar 3 strongest, new ideology brand launched recently doing well)
  • Geographic: southern markets continue to outperform (FL, TX, Hawaii)
  • Strength in other markets demonstrate the power of My Macys and more localized assortments
  • AUR +8% with units down 4%

Gross Margin: 38.8%, down (-30bps)

  • Merchandise margin flat in the first quarter
  • Rounded the impact of free shipping but growth of Omni channel continue to put pressure on GM

 

Inventory Improvements:

  • Inventory +6% (increase in in-transit merchandise, inventory +3% net payables)
  • More opportunity to satisfy demand with inventory from other stores and DTC as well as online demand from in store
  • Now have over 80 stores equipped to drop ship and expect over 290 store fulfillment locations by Holiday
  • Drop shipping Should enable more productive inventory and store square footage

Operating expenses: +1%; 110bps of leverage

  • Credit was the biggest factor favorably impacting expenses
  • Expect credit profitability to increase by $15-$20mm for the full year (1Q consistent with higher end of annual guidance)
  • Benefitted from lower D&A
  • Offsetting: higher expense related to Omni channel investments, higher pension expense

EBIT +80bps YoY

 

Cash Flow $265mm vs. $67mm LY

5 primary drivers:

  • Higher net income
  • Last year, pension contribution of 225mm in quarter
  • Tax payments and reductions in deferred taxes last year (246mm unfavorable last year)
  • Inventory net of payables was $118mm favorable vs. last year
  • Reduction in prepaid expenses due to Lord and Taylor proceeds that had been put in escrow were used to purchase 2 key parcels of flagship in Union Square Can Francisco.

 

Outlook:

Second Quarter:

  • Sales growth to be consistent with +3.5% with May higher and June/July lower
  • GM expected to be flattish
  • SG&A expected to increase more in 2Q relative to last year than it did in the first Q primarily because credit profitability is only expected to be up slightly
  • In 3Q, credit profitability is expected to be lower than last year by 40-50mm but still expect 15-20mm increase in full year credit profitability

Full Year:

  • Guidance is unchanged at +3.5% comp for the remainder of the year or 3.7% for the full year
  • EPS also remains at $3.25-$3.30
  • Capex now expected to be $950mm although next year it will return to $900 level as previously discussed
  • Plan to continue to focus on OMNI Channel and better tailor assortment to localized needs.
  • Enhanced MAGIC Selling expected to continue to differentiate Macy's from competitors

 

 

Q&A

 

JCP:

  • Have seen an uptick in business in markets where they compete against JCP
  • Marketing strategy has been unchanged since the announcement of JCP's new strategy
  • There are strategies in place to maintain the customers coming over from JCP

Renovation at Herald Square:

  • Will have an impact on the comp
  • Will have some effect on the total but not material

Product costs:

  • Are expecting to see some relief in 2H
  • Don’t expect an impact until later in 3Q

Buybacks

  • 1.1bn remaining in the authorization
  • Have not quantified exact amount but idea is to use excess cash to buy back stock

Inventory:

  • Net of payables up 3% so below 2Q sales expectations
  • Will take longer to figure out optimal place by cetegory for inventory levels
  • Expect to see this in 2013 and beyond
  • With more categories online that can be fulfilled from store better able to satisfy demand
  • Big chunks of inventory available in store but not yet online
  • Will be testing putting inventory up online that will be 100% fulfilled from in-store
  • Site to store to door rolling out by category- accelerating rollout because it has been so successful

3Q Guidance:

  • Not giving guidance but quarter but 40-50mm credit profit compare will put a lot of pressure on earnings

SG&A

  • Committing to reaching 14-15% EBITDA rate
  • Current game plan in place to reach 14%; getting to 15% will require new thinking
  • While investing in growth, doing so while keeping in mind bottom line improvement

Merchandise Margin:

  • Think there is huge opportunity to improve inventory productivity that will help gross margin
  • Plan to pull inventory from locations where they would be sold for less to preserve margins
  • Expect gross margin to be flattish for the year
  • Did not increase promotions in the quarter
  • Clearing the cold weather goods when the weather was hot

Women's Apparel:

  • Feel very good about regular priced selling of the new goods

Millennial Customer Initiatives:

  • Spending a lot of time rethinking how product is selected for stores
  • Launched Bar 3 last year as a way to use private label market to help (bar 3 geared toward older customer)
  • Reviewing marketing to be sure reach out is working; digital, social media, etc.
  • Juniors doing less well due in part to market overall, M needed to reload the strategy and restart overall- feel it will be much better a year from now

Omni Channel

  • Will continue to improve and add new components to MAGIC selling

Brazil Brazil Brazil Campaign

  • Very early to tell but product from Brazil doing very well in store
  • Doing some tailoring by market mostly in terms of size of the Brazil campaign
  • Sticking to overall marketing program

Bloomingdales:

  • Continues to be very strong, no major callout there

Home Business:

  • Big ticket has been unbelievably strong- think the trend will continue

Amazon

  • As much a competitor as JCP, KSS, etc.
  • In most of the businesses, the in store experience is still very important to the consumer
  • Expect it to be very challenging for an internet pure play to compete
  • In fashion business, having stores is still a competitive advantage

Potential for short term borrowing:

  • Not something that would be done this year given cash position but have started to test the opportunity

 


BBBY: Shorting

 

Keith just shorted BBBY on the heels of an acquisition that we don’t like one bit. See our comments below.

 

BBBY: Shorting - BBBY levels

 

As we stated in our post "BBBY: Congratulations on Diworsification" earlier today:


This one is ominous. After three years of benefitting from a competitor’s demise, BBBY’s organic growth rate is slowing
due to secular and cyclical forces. So what does it do? Buys something 3x larger than any other deal it’s done. Good luck.


Congratulations BBBY, you just made it a notch higher on our short list. Seriously…Cost Plus? What’s next, Big Lots? Shopping rule number 1… Just because you could get something cheap it does not mean you should buy it. With your $515mm purchase of CPWM, you get an extra $1bn in revenue, including $400mm in consumables (something you do almost none of today). This is a different animal altogether. Translation = you have a healthy, 16% EBIT margin business today, and you just bought something that struggles to keep up even the hope of getting to a 5% margin.


Asset turns higher at CPWM (therefore offsetting low margins to keep returns high – a la Costco and Sam’s). Yes. But we’re talking 2.65x asset turns vs 1.67 for BBBY. COST runs at 3.50, and BJ runs at 4.85. 

As for timing, BBBY is running against some obvious secular challenges with internet competition, and is also facing tough compares as it relates to where it is in its cycle. Driven by mid-to-high single digit comps upon lsd square footage growth over the past 3-years, operating profit grew 46%, 31%, and 22% in 2009, 2010, and 2011, respectively. Many people forget that this is the precise period after which Linens and Things went bankrupt. Since then, EBIT growth has eroded sequentially, Amazon has come on hard, and the company has taken evasive maneuvers to streamline its operations – including relocating its headquarters by 50 miles (causing a potential talent retention problem).


The bottom line here is that this business needs to be fixed. And fixed in a pretty meaningful way. BBBY has done acquisitions in the past, and has ‘fixed’ them to an extent. But lets keep the numbers in context. Each of its prior three acquisitions accounted for less than 30 stores – or 7% of BBBY’s existing size – at the time of acquisition. Cost Plus equals 22%. This is a major statement by the company that it has to move further outside its (extremely profitable) core to continue to deliver the growth that it’s multiple deserves.


We don’t like it one bit.


BBBY: Shorting - bbby stores


Fast Facts About Cost Plus:


Cost plus is a specialty retailer of casual home furnishings and entertaining products in US. They currently operate 258 stores in 30 states under the names “World Market”, “Cost Plus World Market” and “World Market Stores”. The company’s strategy is to differentiate itself by boasting a largely unique, ever-changing selection (many of which are imported) at value prices in an exciting shopping environment. A large portion of products are proprietary or private label. The “World Market” brand is typically not available in department stores or other specialty retailers. One of the primary differences between BBBY & CPWM is that 40% of CPWM sales are in consumables with the remaining 60% in home furnishings. Additionally, within home furnishings, CPWM offers ready to assemble living room/dining room pieces
as well as sofas, chairs, as well as outdoor furniture.


Home Furnishings: Furniture, rugs, pillows, bath linens, lighting, window coverings, frames, and baskets. Furniture products include ready-to-assemble living and dining room pieces; sofas, chairs; unique handcrafted case goods and occasional pieces; as well as outdoor furniture made from a variety of materials.


Consumables: Gourmet foods and beverages, including wine, microbrewed and imported beer, coffee, tea, and mineral water. The wine assortment offers a number of moderately priced premium wines. Foods generally have a shelf life of 6 months or longer.


Stores (generally 15,700 square feet) are designed to evoke a “marketplace” feeling. The company feels its stores are a
destination store with a specific purchase in mind (largely similar to BBBY).


Online sales currently represent ~3% of sales (www.worldmarket.com).


Sourcing:

The Company purchases its merchandise from approximately 2,000 suppliers; the largest of which represented approximately 3% of total purchases in the fiscal year ended January 28, 2012. A significant portion of Cost Plus World Market’s products are manufactured abroad in over 50 countries in Europe, North and South America, Asia, Africa and
Australia.


P&L:

Net sales were $964mm in 2011 at an 32% GM and 3.3% operating margin. 



 


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China Looks Healthy: CAF Trade Update

Conclusion: We continue view China as the safest place to be on the international equity front over the intermediate term, as Deflating the Inflation gives Chinese policymakers increased scope to support economic growth.

 

Virtual Portfolio Position: Long Chinese equities (CAF).

 

Earlier this morning, Keith added to our long position in Chinese equities which is now a little over -2% against our $22.11 cost basis (though largely a function of the MAR 29 one-time dividend of $2.04, which revalued the CAF to a close of $19.54 on the day). Looking at China irrespectively of our risk managed position, the Shanghai Composite Index is actually the world’s best performing major equity market in USD-terms since MAR 14 (+1.1%).

 

Evidently, the Chinese, who consume commodities such as food, energy and industrial metals to support the 81% of their GDP that is Fixed Investment and Private Consumption, enjoy Deflating of the Inflation – which was the key takeaway from our 2Q Themes: Last War: Fed Fighting, Bernanke’s Bubbles and Asymmetric Risks.

 

Per our MAY 7 research note titled, “A Refreshed Look Upon Our Best Ideas Across Asia & Latin America”:

 

“While admittedly boring, we continue view China as the safest place to be in the EM space over the intermediate term. Contrary to consensus storytelling about supply and demand for raw materials, we view incremental Deflating of the Inflation as supportive of the Chinese economy, as it will allow the PBOC, State Council and China Securities Regulatory Commission to continue to implement “fine tuning”, which are pro-growth (i.e. pro-liquidity; pro-investment) measures designed to buoy, but not dramatically stimulate, Chinese economic growth – which our models point to a critical inflection point here in 2Q12.”

 

Recent Chinese growth data has been supportive of our fundamental thesis (i.e. five-consecutive sequential gains in both Manufacturing and Services PMI readings through APR; growth in raw materials demand inflected positively in MAR), but not so much so that we’d recommend buying everything commodities and global equities on an Old Wall-style “China is back” narrative (Import growth slowed in MAR to a 29-month low of +5.4% YoY; APR data due out in the next 24-36 hours). Even if that were overwhelmingly the case, we wouldn’t dare make such an intellectually lazy call anyway.

 

Through the end of this week, we’ll receive China’s APR inflation data (10th) and then its APR economic growth data (11th). Our quantitative risk  management levels, which are included in the chart below, are signaling to us that this batch of data is likely to be viewed positively – which, according to our thesis, suggests continued, but not dramatic improvement in the Chinese economy.

 

Darius Dale

Senior Analyst

 

China Looks Healthy: CAF Trade Update - 1


BBBY: Congratulations on Diworsification

This note was originally published May 09, 2012 at 10:31 in Retail

This one is ominous. After three years of benefitting from a competitor’s demise, BBBY’s organic growth rate is slowing due to secular and cyclical forces. So what does it do? Buys something 3x larger than any other deal it’s done. Good luck.

 

Congratulations BBBY, you just made it a notch higher on our short list. Seriously…Cost Plus? What’s next, Big Lots? Shopping rule number 1… Just because you could get something cheap it does not mean you should buy it. With your $515mm purchase of CPWM, you get an extra $1bn in revenue, including $400mm in consumables (something you do almost none of today). This is a different animal altogether. Translation = you have a healthy, 16% EBIT margin business today, and you just bought something that struggles to keep up even the hope of getting to a 5% margin.

 

Asset turns higher at CPWM (therefore offsetting low margins to keep returns high – a la Costco and Sam’s). Yes. But we’re talking 2.65x asset turns vs 1.67 for BBBY. COST runs at 3.50, and BJ runs at 4.85.

 

As for timing, BBBY is running against some obvious secular challenges with internet competition, and is also facing tough compares as it relates to where it is in its cycle. Driven by mid-to-high single digit comps upon lsd square footage growth over the past 3-years, operating profit grew 46%, 31%, and 22% in 2009, 2010, and 2011, respectively. Many people forget that this is the precise period after which Linens and Things went bankrupt. Since then, EBIT growth has eroded sequentially, Amazon has come on hard, and the company has taken evasive maneuvers to streamline its operations – including relocating its headquarters by 50 miles (causing a potential talent retention problem).

 

The bottom line here is that this business needs to be fixed. And fixed in a pretty meaningful way. BBBY has done acquisitions in the past, and has ‘fixed’ them to an extent. But lets keep the numbers in context. Each of its prior three acquisitions accounted for less than 30 stores – or 7% of BBBY’s existing size – at the time of acquisition. Cost Plus equals 22%. This is a major statement by the company that it has to move further outside its (extremely profitable) core to continue to deliver the growth that it’s multiple deserves.

 

We don’t like it one bit.

 

BBBY: Congratulations on Diworsification - bbby stores

 

Fast Facts About Cost Plus:

Cost plus is a specialty retailer of casual home furnishings and entertaining products in US. They currently operate 258 stores in 30 states under the names “World Market”, “Cost Plus World Market” and “World Market Stores”. The company’s strategy is to differentiate itself by boasting a largely unique, ever-changing selection (many of which are imported) at value prices in an exciting shopping environment. A large portion of products are proprietary or private label. The “World Market” brand is typically not available in department stores or other specialty retailers. One of the primary differences between BBBY & CPWM is that 40% of CPWM sales are in consumables with the remaining 60% in home furnishings. Additionally, within home furnishings, CPWM offers ready to assemble living room/dining room pieces as well as sofas, chairs, as well as outdoor furniture.

 

Home Furnishings: Furniture, rugs, pillows, bath linens, lighting, window coverings, frames, and baskets. Furniture products include ready-to-assemble living and dining room pieces; sofas, chairs; unique handcrafted case goods and occasional pieces; as well as outdoor furniture made from a variety of materials.

 

Consumables: Gourmet foods and beverages, including wine, microbrewed and imported beer, coffee, tea, and mineral water. The wine assortment offers a number of moderately priced premium wines. Foods generally have a shelf life of 6 months or longer.

 

Stores (generally 15,700 square feet) are designed to evoke a “marketplace” feeling. The company feels its stores are a destination store with a specific purchase in mind (largely similar to BBBY).

 

Online sales currently represent ~3% of sales (www.worldmarket.com).

 

Sourcing:

The Company purchases its merchandise from approximately 2,000 suppliers; the largest of which represented approximately 3% of total purchases in the fiscal year ended January 28, 2012. A significant portion of Cost Plus World Market’s products are manufactured abroad in over 50 countries in Europe, North and South America, Asia, Africa and Australia.

 

P&L:

Net sales were $964mm in 2011 at an 32% GM and 3.3% operating margin. 

 

BBBY: Congratulations on Diworsification - cost plus outside

 

BBBY: Congratulations on Diworsification - cost plus main floor 

 

BBBY: Congratulations on Diworsification - cost plus 3


Gnarly: SP500 Levels, Refreshed

POSITIONS: Long Healthcare (XLV), Short Industrials (XLI)

 

Growth Slowing and Deflating The Inflation, at the same time – gnarly.

 

I don’t think people want to hear me opining about this anymore. We made the research call in March, when it should have been made. Now it’s all about the risk management levels: 

  1. Intermediate-term TREND resistance = 1366
  2. Immediate-term TRADE support = 1344
  3. Long-term TAIL support = 1281 

In other words, we’ll probably keep bouncing to lower-highs on no-volume and mean reverting towards 1281 on the downside until the fundamental Growth Slowing slows at a slower rate and/or we see a close > 1366.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Gnarly: SP500 Levels, Refreshed - SPX


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