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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – November 21, 2012


As we look at today's setup for the S&P 500, the range is 33 points or 1.72% downside to 1364 and 0.66% upside to 1397.     

                                                                                                                                                                          

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1a

 

THE HEDGEYE DAILY OUTLOOK - SP

 

THE HEDGEYE DAILY OUTLOOK - 3A

 

THE HEDGEYE DAILY OUTLOOK - 4A

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - sentiment


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.41 from 1.41

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Nov. 16 (prior 12.6%)
  • 8:30am: Initial Jobless Claims, Nov. 17 est. 410k (prior 439k)
  • 8:58am: Markit US PMI Preliminary, Nov., est. 51.0 (prior 51.3)
  • 9:45am: Bloomberg Consumer Comfort, Nov. 18 (prior -33.1)
  • 9:55am: U. of Michigan Confidence, Nov. final, est. 84.5 (prior 84.9)
  • 10am: Leading Indicators, Oct. est. 0.1% (prior 0.6%)
  • 10:30am: DOE inventories
  • 11am: Fed to sell $7b-$8b notes due 11/30/15-1/31/16
  • 11am: U.S. to announce plans to sell 2Y, 5Y, 7Y notes
  • 11:30am: U.S. Treasury to sell $13b 10Y TIPS in reopening
  • Noon: EIA natural gas storage change
  • 3pm: Baker Hughes rig count

WHAT TO WATCH

  • EU finance ministers fail on Greece debt-reduction package
  • FBI said to be looking into HP’s claims over Autonomy accounting
  • Martoma fund used dark pool to keep inside trade quiet, SEC says
  • Hostess aims to shut down permanently after mediation fails
  • Box office releases include “Life of Pi,” “Rise of Guardians”
  • Deutsche Bank’s Jain sees “significant” bank consolidation
  • BoE says unlikely it would cut bank rate in foreseeable future; voted 8-1 to halt bond purchases
  • News Corp., CBS said in talks on Simon & Schuster, WSJ says
  • Japan’s exports reach 3-yr low; Oct. exports down 6.5% Y/y
  • Hillary Clinton seeks to salvage proposed cease-fire in Gaza

 EARNINGS:

    • Donaldson (DCI) 7am, $0.34
    • Deere (DE) 7am, $1.88

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)


COPPER – the Doctor remains ill; no new news, but important to contextualize within the perimeter of the storytelling that is “China has bottomed”; China stopped making new lows last night, but Copper leads metals lower again after failing at my TRADE line of $3.53/lb resistance.

  • Crude Oil Rises on Gaza Conflict Amid Declining U.S. Stockpiles
  • Drought No Obstacle to Record Income for U.S. Farms: Commodities
  • Silver Trade Drops 30% on China Bourse as Industry Use Falls
  • Rubber Imports by India Seen at Record as Demand Tops Production
  • Copper Slides for a Second Day Amid Revived Debt-Crisis Concern
  • Gold Swings Between Gains and Drops on Dollar, Physical Demand
  • Soybeans Drop as Rains in Parts of Brazil Improve Crop Prospects
  • Sugar Drops in London on Signs of Ample Supplies; Cocoa Declines
  • Gas-Oil Price Link in Focus as Exporters Meet in Malabo
  • Natural Gas in New York Falls From Highest in More Than a Year
  • Palm Oil Drops as Falling Malaysian Exports Spur Demand Concern
  • China Grabs Share in Latin America Wind With Cheap Loans: Energy
  • Ivorian Cocoa Grinding Seen Costlier Than Europe’s on Tax Plan
  • China’s Iran Crude Imports Rise to Highest Since Sanctions

THE HEDGEYE DAILY OUTLOOK - 5A

 

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6A

 

 

EUROPEAN MARKETS


DAX – the good news is that the 2-day squeeze in European Equities recaptured the 7116 intermediate-term TREND line for the DAX; the bad news is that the DAX continues to make lower-highs and is broken on an immediate-term TRADE basis (7231 resistance); this is where being Duration Agnostic matters.


THE HEDGEYE DAILY OUTLOOK - 7A

 

 

ASIAN MARKETS


JAPAN – island economy, hostage to high cost oil imports in local FX, smothered by Keynesian economic policy enters the death spiral of what didn’t work 15 yrs ago (Krugman: “Print Lots of Money”); OCT Exports -6.5% y/y is a train wreck (3yr lows) and the Yen hits a 7mth low; this remains the most un-talked about risk in Global Macro today.

 

THE HEDGEYE DAILY OUTLOOK - 8A

 

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9A

 

 

The Hedgeye Macro Team

 

 

 


Value Trap Trades

 

Hedgeye CEO Keith McCullough appeared on CNBC's Fast Money this evening to discuss everything from Bernanke's view of the Fiscal Cliff to market performance to the Autonomy scandal at Hewlett-Packard (HP). 

 

One topic the Fast Money traders discussed were  stocks that were value traps. Keith honed in on Caterpillar (CAT), noting that valuation is NOT a catalyst and that investors need to realize that earnings are slowing.

 

Watch the above video for Keith's appearance on CNBC.

 


CHART DU JOUR: MACAU EBITDA SHARE

While much of the EBITDA share movements is due to hold fluctuation, we believe LVS will continue to gain revenue and EBITDA share

 

  • LVS maintained its industry leading position thanks to a strong performance from the Venetian.  3Q EBITDA share improved 2.8% QoQ to 27.9%.
  • Due to stellar results at Galaxy Macau, Galaxy has surged into 2nd place, a significant rise over the last year.  Galaxy Macau’s EBITDA rose 12% QoQ.
  • MGM continues to hold the rear.  3Q EBITDA was negatively impact by low hold on direct play and rolling chip play.

 

CHART DU JOUR: MACAU EBITDA SHARE - macauebitda


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.

Following Bernanke's Lead

Since the Federal Reserve first initiated quantitative easing back in November of 2008, the US stock market has shot upward in tandem with each subsequent announcement. However, the law of diminishing returns seems to kick in with each new round of easing as the gains following an announcement quickly become short-lived. Keep in mind that the S&P 500 is down -6% since the September 14 high (aka the Bernanke Top).

 

Following the Keynesian route of printing money over and over again is clearly unsustainable. Moreover, GDP growth is no longer keeping pace with the equity market as growth and earnings continue to slow. A fix is needed and one thing remains certain: another round of easing is not the solution. Some traders may be set on thanking the Fed for quick pops in the market, but over time, all good things come to an end.

 

Following Bernanke's Lead - fedgdp


Solid Growth In Macau

Macau average daily table revenue (ADTR) grew 17% year-over-year last week, in line with our expectations and a solid week nonetheless. For the month, we’re predicting year-over-year growth of gross gaming revenue (GGR) of around 5-10%, well above October’s 4% growth. We think that December will improve to the point where it exceeds November; the only reservations we have at the moment are smoking restrictions that may go into effect in early-to-mid January. 

 

Solid Growth In Macau - image016


SMALLER LESS SMALL

Takeaway: No need to panic now but the small players need to be watched

The little slot guys trying to play with the big boys

 

We've been waiting years for this but could the small guys finally be making their move?  Ok, we're not ready to call the end of the big boy dominance of the slot market.  Outside the top 5, the small guys will still only comprise 7% of North American ship share (excluding Canadian replacements).  However, that's more than double what it was in 2008.  The product is much better coming out of MGAM, Aruze, et al.  So while there is no need to begin cutting estimates on IGT, BYI, WMS, Aristocrat, and Konami, this is a trend that needs to be monitored.  We continue to believe that IGT, at least over the near and intermediate term, is the least likely to bear a material (to them) share impact from the new competition because of their product depth.

  • In 2008, we estimate that the top 5 suppliers had North American ship share of 97%
  • In 2012, we estimate that the top 5 suppliers will only have 87% ship share in North America
    • 6% of the decline is due to Spielo’s large share of the currently ongoing replacement cycle in Canada
    • However, even without the Canadian replacement cycle, we estimate that the top 5 share would still decline to 93%
  • Some of the small players that are slowly but surely gaining traction in the for-sale market include:
    • MGAM
      • 2009:  entered the market with 132 units
      • 2012:  on track to ship over 2,000 units to NA
      • Continuing to get licensed in many state jurisdictions, including Nevada in 2013, which should almost guarantee MGAM above market growth
    • Aruze
      • We estimate that Aruze had approximately 300 units “sold” in 2010 and are currently on track to sell about 750 units this year.
      • They are still predominantly focused on participation / leases
    • Spielo - They are a player in VLT/VGT markets and are beginning to develop better content for Class III.  Through Wells-Gardner, they have already secured over 1,800 IL VGT contracts.
    • Ainsworth
      • In 2010, Ainsworth sold approximately 475 machines into NA. 
      • In 2012, they are on track to sell around 1,700 units

 

SMALLER LESS SMALL - spielo


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