TODAY’S S&P 500 SET-UP – July 12, 2012

As we look at today’s set up for the S&P 500, the range is 21 points or -0.63% downside to 1333 and 0.94% upside to 1354. 











    • Up versus the prior day’s trading of -955
  • VOLUME: on 07/11 NYSE 767.99
    • Increase versus prior day’s trading of 5.55%
  • VIX:  as of 07/11 was at 17.95
    • Decrease versus most recent day’s trading of -4.11%
    • Year-to-date decrease of -23.29%
  • SPX PUT/CALL RATIO: as of 07/11 closed at 1.10
    • Down from the day prior at 1.69 


10YR – fresh new #GrowthSlowing lows for the 10yr yield at 1.49% this morning and that’s really bad for the Financials, as the Yield Spread (10s/2s) also hits new lows at +123bps wide; not clear if Dimon’s fireside chat w/ the sell side’s finest tomorrow will change the economic gravity of the matter – the Yield Spread has never not gone back to flat in a big cycle (see 60yr chart from our deck yesterday). 

  • TED SPREAD: as of this morning 36
  • 3-MONTH T-BILL YIELD: as of this morning 0.09%
  • 10-Year: as of this morning 1.48%
    • Decrease from prior day’s trading at 1.52%
  • YIELD CURVE: as of this morning 1.23
    • Down from prior day’s trading at 1.26 

MACRO DATA POINTS (Bloomberg Estimates): 

  • 8:30am: Import Price Index M/m, June, est. -1.8% (prior -1%)
  • 8:30am: Initial Jobless Claims, July 7, est. 370k (prior 374k)
  • 9:45am: Bloomberg Consumer Comfort, July 8 (prior -37.5)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas change
  • 11am: Fed to sell $7b-$8b coupon securities in 7/15/2013 to 1/31/2014 range
  • 1pm: U.S. to sell $13b 30-yr bonds (reopening)
  • 2pm: Monthly Budget Stmt, June, est. $60b (prior $43.1b)
  • 2pm: NAHB midyear forecast
  • 3:40pm: Fed’s Williams speaks in Portland, Ore. 


    • House, Senate in session
    • Senate Energy meets to review progress on eliminating environmental hazards at abandoned National Petroleum Reserve oil wells in Alaska, 9:30am
    • House Energy panel holds hearing on proposed legislation to limit government programs backing alternative energy, 9:15am
    • House Science panel holds hearing on spurring economic growth through NASA-derived technologies, 10am
    • Dept. of Labor to announce settlement with BP regarding 2005 explosion at Texas City refinery, 11am


  • Yahoo! holds annual meeting today
  • Yahoo! expected to name Levinsohn CEO: LA Times
  • Blackstone teams up with investors for ING Asia insurance bid
  • Supervalu sinks on strategic review, dividend suspension
  • Peregrine customers’ claims priced at 25 cents on dollar
  • ECB says overnight deposits fall to lowest in 7 mos.
  • Maple, TMX Group obtain recognition orders from BCSC, ASC
  • Dentsu buys Aegis in $4.9b deal to create global media, marketing network
  • Peugeot shuts France plant, cuts extra 8,000 jobs; GM owns 7% of Peugeot
  • JPMorgan is No. 1 stock picker in buy-side survey
  • CFTC poised to adopt client-fund safeguards after MF Global
  • DirecTV, Viacom talks continue as channels stay dark 


    • Cogeco Cable (CCA CN) 6am, C$1.06
    • Cogeco (CGO CN) 6am, C$0.99
    • Corus Entertainment (CJR/B CN) 7am, C$0.49
    • Fastenal (FAST) 7am, $0.37
    • Astral Media (ACM/A CN) 7:55am, C$1.01
    • Progressive (PGR) 8:30am, $0.27
    • Commerce Bancshares (CBSH) 9am, $0.72
    • Novagold (NG CN) 9:15am, $(0.06)
    • Resources Connection (RECN) 4pm, $0.72
    • Bank of the Ozarks (OZRK) 6pm, $0.52 


  • Gold 22% Rally to Record Seen by Sprott Amid Debt: Commodities
  • Refineries Doubling Shutdowns Signals Oil Slide: Energy Markets
  • Oil Falls on Signs Faltering Economy Is Eroding Fuel Consumption
  • Cocoa Declines After Drop in European Cocoa Grind; Sugar Gains
  • Goldman Lifts Grain-Price Forecasts as Drought Withers Fields
  • Gold Retreats as Fed’s Minutes Lack Additional Stimulus Signal
  • South African Platinum Output Falls for 11th Month on Prices
  • Aid Welcomed by Drought-Stricken States as Losses Seen Worsening
  • China Crushers Buy More Local Soybeans as Cost of Imports Jumps
  • Cooking-Oil Imports by India Fall as Rupee Drop Deter Buyers
  • Palm Oil Drops for a Third Day on Concern Slowdown Curbs Demand
  • Sandfire Proves Cheapest Copper Target on First Profit: Real M&A
  • Russia’s Stavropol Region Is Seen Reaping 40% to 45% Less Grain
  • IEA Sees Global Oil Demand Growth Pickup in 2013 on Economy
  • Copper Seen Falling Amid Further Signs of Worldwide Slowdown
  • Corn Advances After USDA Cuts Outlook on U.S., World Harvests 










ITALY – Mario wasn’t kidding; it’s time to get out – the MIB Index -1.1% leads losers this morning and moves right back into crash mode (> 20% peak/trough decline YTD); Italy looks more suspect here than Spain – we went through why its size concerns us on our Q3 Macro Themes Call yesterday – email us if you missed the call and want the replay/slides.






KOSPI – continues to be one of our most stealth leading indicators for Global Growth (particularly for Industrials and Tech), and apparently the South Koreans agree w/ us – they cut rates for the 1st time in 3yrs last night – and, contrary to popular #BailoutBull beliefs, that was not good for Asian stocks; KOSPI down hard on that -2.3% (Bearish Formation).










The Hedgeye Macro Team

What's Your Edge?

“You are on your own and you must take ownership of your own destiny.”

-Hugh Hendry


No, that wasn’t the new marketing pitch from President Obama. That’s from one of Scotland’s finest – the one and only Hugh Hendry. He runs Eclectica Asset Management.


Eclectica isn’t a word that spell-checks on this word processor – that’s why you just have to love the name. This guy couldn’t give 2 deflated Canadian copper cents about what other people think about him and/or his Global Macro process.


For me, this has always meant being detached from the sell-side community. It is not a question of respect, it is just that I prefer not to engage in their perpetual dialogue of determining where the “flow” is. I cannot be reached by telephone… not one buddy, not one phone call, not one instant message. I am not seeking that kind of “edge”…” (Manager Commentary, April 2012)


Back to the Global Macro Grind


What’s our edge? Math.


Every single Global Macro thought, theme, and position we consider putting our name on is driven by what the market tells us. We don’t tell the market what to think. We aren’t that “smart.” The market tells us.


When I started in the hedge fund business in 1998, “smart” meant something that’s a lot different than what it means today. Smart is as performance does. It doesn’t mean coming up with a “value” idea, pitching it to all your favorite “smart” friends (after you bought it), getting them to buy it, and then promoting it on TV.


Modern Global Macro Risk Management (i.e. post 2007) uses computers. I hear a lot of whining about this – “it’s the machines”… I mean get real already. If it’s the machines, hire more super smart people to build better machines to front run the other machines.




Yep, I just wrote that. And I can because A) I don’t run a prop desk B) I don’t run a bank and C) I don’t run a broker-dealer. Front-running the machines is simply having a repeatable math-based decision making process that keeps you 1, 2, and hallelujah if it’s 3 steps ahead of the smartest guys/gals in the room.


In other words, understand what the other machines will act on, and act ahead of their most probable behaviors. If someone legitimately believes that the 50-day Moving Monkey is a risk management process, great. Let them – and more importantly, don’t interrupt them while they get whipped around by it.


Been there, done that.


I saw (I don’t hear, I use Twitter) more “flow” yesterday about the 50-day moving average being “intact” (it’s at 1335) than just about anything that was flowing into yesterday’s market close.


What, precisely, does that mean to people? Do they actually run other people’s money using a 1-factor simple moving average that my 4-year old son could replicate with his iPad and bang out conclusions on any ticker I give him?


That’s the biggest risk to our profession. The simple reality is that, since 2007, a lot of people have not changed what it is that they do. That’s sad and exciting. Sad because sad is as sad does; exciting because it provides for creative destruction – the guts of what we do.


What’s our edge?


Like I said, it’s math. And what I mean by that is that I am constantly re-modeling a baseline 3-factor model with dynamic price, volume, and volatility data across 3 core durations (TRADE, TREND, and TAIL).


Currently, looking at the SP500 for example, here’s what I see:

  1. Intermediate-term TREND resistance overhead (that’s bearish) at 1365
  2. Immediate-term TRADE support below last price (that’s bullish) at 1333
  3. An intermediate-term risk management range of 1

We’re Duration Agnostic. So you tell me what the duration of your risk is, and we’ll tell you what the risk of the range within your duration is. This gives us a very simplified edge that is our own. Our edge is making decisions at the highest probability points within our defined duration and range. It doesn’t mean we are always right; it means we don’t swing at outside pitches.


Our edge is by no means easy to derive. I have a team of 27 analysts constantly pumping me with quantitative inputs that I can add and/or subtract from our models. Constantly re-modeling; constantly changing – that is what I do. And I’m very humbled by the idea that I can attempt to explain our edge to you each and every day. Being held accountable to our process can only make us better.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, and the SP500 are now $1, $98.24-103.01, $82.61-83.96, $1.21-1.24, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


What's Your Edge? - Chart of the Day


What's Your Edge? - Virtual Portfolio

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.


Earlier today, the Hedgeye Macro Team, led by CEO, Keith McCullough, and DOR, Daryl Jones, hosted our 3Q12 Macro Themes Call. 


Topics included:  

  • Growth Slowing's Slope - Our fundamental view is that growth will come in lower than expectations across a collection of major economies - including the U.S. We refute the notion of the U.S. decoupling and will present the main indicators that signal a higher probability of equities crashing from here. 
  • The Cliff - We analyze the assumptions embedded in consensus/CBO forecasts regarding the "fiscal cliff" and offer our view on how heightening uncertainty regarding this event should impact global financial markets. Further, we discuss the question: will slower domestic growth pull forward the debt ceiling debate and introduce uncertainty on a fiscal cliff resolution? 
  • Obama vs Romney - As elections approach we evaluate the policy impact on the broader economy based on the victor. Could the U.S. look more like Europe if Obama wins? And what asset classes stand to outperform based on the next president?  

To access the presentation materials, please click on the following link: "Q3 MACRO THEMES AND PRESENTATION".


To access the replay podcast, please copy/paste the following link into the URL of your browser: NOTE: You must be logged into for complete access. Email if you require a refreshed password.



Hedgeye Risk Management is a leading independent provider of real-time investment research. Focused exclusively on generating and delivering actionable investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts - united around a vision of independent, uncompromised real-time investment research as a service.


Please contact if you have any questions.




The Hedgeye Macro Team

HedgeyeRetail Visual: Athletic FW & Apparel - Solid Start to July

Athletic Footwear and Apparel sales accelerated into the first week of July. The month started off strong, on top of tough compares last year. Starting next week, both apparel and footwear yy comparisons become significantly more favorable. Underlying fundamentals would need to seriously erode in order to show disappointing headline results for the duration of the summer. 


HedgeyeRetail Visual: Athletic FW & Apparel - Solid Start to July - Footwear and apparel 1 yr


HedgeyeRetail Visual: Athletic FW & Apparel - Solid Start to July - FW app 2 yr


Philippines opportunity underappreciated by investors


  • Details are scarce but we think MPEL will invest between US$300-580 million and procure a management fee
  • The phase one construction cost may be around US$700 million with any additional hotel towers/amenities likely funded almost exclusively by MPEL
  • As can be seen from the chart, MPEL generates positive shareholder value if the project generates EBITDA north of $125 million.  Resorts World Manila – the only existing integrated casino resort in the Philippines – generates annualized EBITDA over US$300 million.



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