• run with the bulls

    get your first month

    of hedgeye free


Chasing The Market


Hedgeye CEO Keith McCullough appeared on The Kudlow Report on CNBC tonight. Politics, economics and the stock market were the talk of the night.


Corporate profits are a huge concern, especially for the bulls. Growth is slowing and earnings are under pressure and it’s tough to determine exactly what “cheap” stocks really are. This situation has been driven by Ben Bernanke’s central planning policies. Now with the falling dollar and extension of QE3, we’re dealt with rising costs (food, fuel, etc.) and no real economic gains.


We’re up 16% year-to-date for the stock market and while people might be inclined to chase gains in the market, we know that’s not proper risk management. We’re surprised Mitt Romney hasn’t come out saying he’ll strengthen the US dollar and will get rid of Ben Bernanke to counter Obama’s rhetoric heading into November.


Watch Keith’s full take on the market, inflation expectations and economic growth in the clip we’ve posted.



Takeaway: Looking up

  • Even beyond seasonality, average daily table revenues improving
  • September comparisons get easier in the back half which should boost the month’s YoY growth into the high teens
  • The typical seasonal slowdown pre-Golden Week could be offset by the opening of SCC’s Pacifico casino and Sheraton hotel rooms



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

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.

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

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

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.