Oil Sentiment: Peak-A-Boo

Takeaway: Hedge funds are piled into and full on long WTI crude oil; we think it's looking quite peaky at these levels.

Over the past several weeks, NYMEX open interest contracts on WTI crude oil have been climbing higher and higher, going from 277,212 on August 21 to 305,623 on September 11. Looking at the chart below, you could argue that technicians and pattern readers would have some slick nickname for this pattern along the lines of “triple peak.” As far as we’re concerned, it looks peak-ish to us, especially with the amount of hedge funds piled in that are long WTI crude.


Energy Analyst Kevin Kaiser thinks we could be topping out here, noting that “oil sentiment (as measured by hedge fund net length in NYMEX) is climbing back up to the level where it’s been a good spot to sell from.” Keep an eye on it.



Oil Sentiment: Peak-A-Boo - kaiser oilsentiment

MACAU: Call It A Comeback

Takeaway: While Vegas growth remains stagnant, Macau is making an impressive comeback that bodes well for the likes of $LVS and $MGM

While Vegas struggles to recover, Macau is picking up the pace with strong numbers being put up over the previous week. Average daily table revenues are up 26% year-over-year, 10% over the prior week, and was 12% higher than August. Big money is coming into play, drawing in HK$868 million per day on average. With these numbers, you can see why we remain bullish on Macau-focused gaming stocks.


Also worth noting are hold trends for the casinos in Macau. For those of you who are unfamiliar with the term, hold  is the measure of the amount of money a casino table game keeps from the total amount of money that is dropped into the cash box. LVS’ share is climbing back towards normal and MGM is having above trend for the month. 



MACAU: Call It A Comeback - macau hold

Post Squeezage: SP500 Levels, Refreshed ...

Takeaway: With the squeezage having run its course, now we can go right back to managing the risk of the market’s multiple ranges, across durations.

POSITIONS: Long Consumer Staples (XLP), Short SPY


It’s not my 1st rodeo being squeezed by a central planner. I highly doubt it will be my last. With the squeezage having run its course, now we can go right back to managing the risk of the market’s multiple ranges, across durations:


  1. Immediate-term TRADE = 1
  2. Intermediate-term TREND support = 1419
  3. Long-term TAIL resistance = 1565


In other words, you can try to threat the needle and buy high, but that didn’t work buying on Friday at 1473 inasmuch as it didn’t work on the way down in 2008. So I think you really have to take a step back here and make a call on what growth and earnings do next.


Our core Global Macro research call, since March, has been Global #GrowthSlowing. What Bernanke did last week only heightens the probability that real (inflation adjusted) global growth slows further.


Unless they ban the reporting of Q3 earnings season (could happen, you never know), I think you have plenty of opportunity to cover shorts and/or buy on red in that 1 range. In the meantime, from here, keep your gross low and net tight.




Keith R. McCullough
Chief Executive Officer


Post Squeezage: SP500 Levels, Refreshed ... - 1

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European Banking Monitor: QE3 has Landed... Now What?

Takeaway: We caution against riding Bernanke and Draghi's coattails. We view fiscal integration and slow growth as risks ahead.

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .


Key Takeaways:


*QE3 has landed, what now? - Banks swaps and sovereign swaps in America, Europe, and Asia all tightened WoW, benefitting from the Fed's QE3 announcement on Thursday. Now what?


We caution that there is risk in simply riding Bernanke and Draghi’s coattails. We stand by the view that European economies have a lengthy runway to get out from under the debt traps that many have created over the last five years. We continue to view the Eurozone experiment as flawed and see headwinds ahead in creating a fiscal union. Finally, rising commodity costs and sticky to rising inflation rates should present further near-term pressures.


Today’s equity markets show that despite all the optimism behind Draghi’s unlimited sovereign bond purchasing program (OMTs) and Bernanke’s to” infinity and beyond” low interest rates over the last two weeks, European equities are selling off as the realities of the challenges and risks ahead for the Eurozone project return to focus.


On OMTs Reporting: The ECB has stated that Aggregate Outright Monetary Transaction holdings and their market values will be published on a weekly basis and the average duration of Outright Monetary Transaction holdings and the breakdown by country will take place on a monthly basis. There is no indication that the OMTs has been initiated.



If you’d like to discuss recent developments in Europe, from the political to financial to social, please let me know and we can set up a call.


Matthew Hedrick

Senior Analyst





European Financials CDS Monitor – French, German, Italian, Spanish, and Greek bank swaps all traded lower last week. Spanish banks were notably improved last week, with some reference entities seeing swaps decline by more than 20%.


European Banking Monitor: QE3 has Landed... Now What? - 33. banks


Euribor-OIS spread – The Euribor-OIS spread tightened by 1 bps to 17 bps. We're not sure how much lower this series can go from here.  The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk.


European Banking Monitor: QE3 has Landed... Now What? - 33. euribor


ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  


European Banking Monitor: QE3 has Landed... Now What? - 33. facility


Takeaway: $BLMN is immediate-term TRADE overbought.

Today, Keith shorted the BLMN love-fest we are seeing from the sell-side at $15 today post IPO initiations of coverage. Management is confident in its ability to achieve its stated goals and the sell-side seems convinced also.  


As we see it, there has clearly not been much progress in fixing this company since it was taken private in 2006.  The primary difference in the company's position, from our purview, is that casual dining now faces a more uncertain outlook dictated by demographic and economic headwinds.  To achieve its goals, the company requires strong sales and management attacking the middle of the P&L.  The macro environment will hamper BLMN's efforts and ultimately, we believe, actual results are likely to come in below where expectations currently sit.  Among the macro issues we see as relevant for BLMN are the following:

  • Accelerating food inflation
  • Soft labor market
  • Rising gas prices
  • Long-term demographic headwing

To conclude, we do not subscribe to the emerging consensus that daypart expansion, enhanced marketing, or other "easy" drivers of earnings growth are ready-to-go, sure-fire winners for BLMN.  As we've said before, Don Corleone would wonder why such generosity is being afforded the investment community.  Why weren't these initiatives undertaken prior to the company coming public? 


We do not believe that a lot has changed since 2007 where BLMN is concerned.  The stock is immediate-term TRADE overbought.





Howard Penney

Managing Director


Rory Green






Takeaway: Raising our Sept GGR growth forecast to 14-21%

Table revenues were very strong this past week in Macau averaging HK$868 million per day.  Average daily table revenues increased 26% YoY, 10% over the prior week, and was 12% higher than August.  We must caution that business typically slows in the last week of September as we approach Golden Week.  This year, however, Sands Cotai Central will open Pacific and the Sheraton rooms which could offset some of the seasonal slowdown. 


We are raising our full month September GGR forecast to HK$23.5-25.0 billion which would represent YoY growth of 14% to 21%.  We continue to be bullish on the Macau stocks.




After a hold impacted start to the month, LVS’s share climbed back towards normal while WYNN moved lower but still way above trend.  SJM and MGM are both having above trend months.  However, it’s still too early in the month to reach any definitive market share conclusions.