• The call plus


    The Call @ Hedgeye Plus

    Our favorite, high-conviction stock ideas and CEO Keith McCullough’s Macro overlay. Exclusively on Hedgeye TV.


The US stock market’s immediate term reaction to the University of Michigan number is the right one – provided that the SP500 closes below 839 today, this sentiment data point will support my immediate term bear case that we can test SP500 804.

Everything that matters to our macro model happens on the margin. The delta in today’s Michigan survey was, albeit marginally, negative. The math of a 61.2 report versus a 61.9 report on October 16th (see my note from that report attached below) is what it is – however so marginally so…

This negative delta lines up with both Obama’s approval ratings falling and the weekly ABC/Washington Post number deteriorating on a week over week basis. Effectively, these sentiment reading seem to be tracking the stock market – which, alongside the US$, continues to be amongst the most stealth economic leading indicators I have at my disposal.

Both the Michigan sentiment report and Obama’s Rasmussen approval rating bottomed at 55 and 60% respectively in November (see chart from last week’s note measuring the delta of that sentiment bottom). THE QUESTION now is will these sentiment reversals decelerate at a lesser rate and lock in higher lows versus those of November? We are data dependent, so we will let the math tell us, rather than guess…

Historically (1st chart below) all the way back to 1958, Sentiment washouts have occurred under the 60 line in the Michigan Survey. So if we go into the 50 readings again, remember that that drowning feeling you may have is not a unique one – the November reading of 55 marked the SP500 sentiment bottom of 752.

Keith R. McCullough
CEO & Chief Investment Officer