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TAIL Time: SP500 Levels, Refreshed

Takeaway: This is the first time where we’re going to legitimately test our 1364 TAIL line of support. If that line snaps, buckle up.

POSITIONS: Long Utilities (XLU), Short Industrials (XLI)

 

Today is TAIL time. This is the first time where we’re going to legitimately test our 1364 TAIL line of support. If that line snaps, buckle up. Because there’s no real intermediate-term support from there to 1258.

 

Across our core risk management durations, here are the lines that matter to me most:

 

  1. Intermediate-term TREND resistance = 1419
  2. Immediate-term TRADE resistance  = 1391
  3. Immediate-term TRADE support = 1351

 

In other words, my model is already signaling that a breakdown through 1364 is probable. Meanwhile, my immediate-term Risk Range is flagging lower-highs and lower-lows for the first day since May (1).

 

KM

 

Keith R. McCullough
Chief Executive Officer

 

TAIL Time: SP500 Levels, Refreshed - SPX


Housing: Post-Sandy Surprise

Mortgage activity is bouncing back in the aftermath of Hurricane Sandy. Last week mortgage applications to buy homes rose +11% to an index level of 190. This compares with a decline of 5% in the previous week, reflecting the dislocation caused by Hurricane Sandy. Taken together, however, the two-week change was +5.45%, a fairly strong showing. 

 

Housing: Post-Sandy Surprise - MBA Apps  Shark normal

 

Refinance applications rose 13% following a decline of 5% in the previous week, snapping a 5-week streak of declines in the refi market. Housing continues to build momentum and prices are rising adequately as sentiment shifts; people prefer to own a home over renting. Thanks to the Federal Reserve, interest rates will remain low for a long period of time, helping to encourage lending.

 

Housing: Post-Sandy Surprise - Shark normal

 

Of course, the fiscal cliff looms on the horizon and should the automatic tax hikes go into effect along with spending reductions, that will hurt the market and slow the progress we’ve made since the 2008 crisis.

 

Housing: Post-Sandy Surprise - YoY normal


Playing The Debt Ceiling

The US Treasury is fast approaching its borrowing limit of $16.394 trillion; we expect the Treasury to hit that number within 35 calendar days or by December 17, 2012. While we're growing increasingly optimistic generally about the Financials post the Fiscal Cliff/Debt Ceiling, we think investors should have realistic expectations about what is likely to happen over the immediate/intermediate term. Based on the how things went in the last go-around, we would be positioned defensively in the short-term, and be looking to take advantage of the weakness once resolution if forthcoming.

 

Playing The Debt Ceiling - debtceiling1

 

Playing The Debt Ceiling - debtceiling2

 


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Singapore Continues Bleeding

Things just aren’t getting better in Singapore as Q3 shows a decline in gaming metrics and gross gaming revenues hitting their lowest levels since Q2 2010. Q3 hold in Singapore was 2.27%, the lowest quarterly hold rate ever and way below Singapore’s historical hold rate of 2.99%. Hold in 3Q 2011 was 2.90%.

 

Singapore Continues Bleeding - singaporeGGR


Buying The Flush

Client Talking Points

Check Your Levels

Trading the market with a process means you’re equipped with one of the best weapons out there. If you stay within your range and levels and use your process to execute trades, chances are you’ll do well out there or at the very least, you won’t lose money. Our support in the S&P 500 is 1364 and we told you to buy the bounce off of  that level. Sure enough, the market can’t break through that level and heads upward. This is by no means a bullish call. When the S&P 500 is oversold and you’re nearing support, you watch and wait. If support holds, you buy that bad boy and ride it toward your next level of resistance.

Asset Allocation

CASH 61% US EQUITIES 6%
INTL EQUITIES 0% COMMODITIES 6%
FIXED INCOME 15% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
TCB

After a long downward slide, TCB has finally turned the corner. The margin has stabilized after the balance sheet restructuring. Loans are growing thanks to the equipment finance business. Non-interest income is more likely to go up than down going forward, a reversal from the past 18 months. Credit quality has a tailwind from a distressed housing recovery in TCB’s core markets: Minneapolis, Detroit and Chicago. On top of this, the CEO, Bill Cooper, is one of the oldest regional bank CEOs, which raises the probability that the bank will be sold. Expectations are bombed out at this point, so we think it’s time to move from bearish to bullish on TCB.

IGT

There is improving visibility on 20%+ EPS growth with P/E of only 11x with better content leading to market share gains. New orders from Canada and IL should be a catalyst. Additionally, many people in the investment community are out in Las Vegas at the annual slot show (G2E) and should hear upbeat presentations by management.

HCA

While political and reimbursement risk will remain near-term concerns, on the fundamental side we continue to expect accelerating outpatient growth alongside further strength in pricing as acuity improves thru 1Q13. Flu trends may provide an incremental benefit on the quarter and our expectation for a birth recovery should support patient surgery growth over the intermediate term. Supply costs should remain a source of topline & earnings upside going forward.

Three for the Road

TWEET OF THE DAY

“The Petraeus news cycle started as ‘tawdry affair,’ crossed into ‘freakout about national security’ and is now back to ‘tawdry affair.’” -@moorehn

QUOTE OF THE DAY

“The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.” -Bertrand Russell

STAT OF THE DAY

OCT ADVANCE RETAIL SALES: -0.3% V -0.2%E; RETAIL SALES LESS AUTOS: 0.0% V 0.2%E


THE M3: CHUI COMMENTS ON SMOKING; VIP; TOUR/HOTEL DATA

The Macau Metro Monitor, November 14, 2012

 

 

CASINOS HAVE ENOUGH TIME TO IMPLEMENT BAN ON SMOKING Macau Business

Macau CEO Chui says he is confident gaming operators will be able to establish smoking areas before the forthcoming ban on smoking in casinos comes into effect on January 1.  Chui also admitted the private property market is “overheated” and prices are “high”. But he downplayed the situation, saying market fluctuations must be seen as something normal.  Chui also said preparation works for the new border checkpoint between Macau and the mainland continue and are “on schedule”. 

 

MOST OF THE VIP GAMBLERS ARE MAINLAND OFFICIALS Macau Daily News

Macau's media cited statistics from casinos that Mainland government officials accounted for a quarter of the high‐end players in Macau, while executives from state-owned enterprises accounted for almost a quarter.

 

PACKAGE TOURS AND HOTEL OCCUPANCY RATE FOR SEPTEMBER 2012 DSEC

Macau visitor arrivals in package tours increased by 21.9% YoY to 749,496 in September 2012.  Visitors from Mainland China (538,178) increased by 23.7%, with 222,914 coming from Guangdong Province.  There were 100 hotels and guesthouses operating in September 2012, providing 26,083 rooms, an increase of 3,704 (+16.6%) YoY, of which guest rooms of the 5-star hotels accounted for 63.9% of the total.  The average length of stay decreased by 0.18 night to 1.3 nights.

 


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