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Lower-Highs: SP500 Levels, Refreshed

POSITIONS: Long Bonds (TLT and FLAT), Short Industrials (XLI)

 

I sold our long Utilities (XLU) position this morning because it was up. When something is up, but fails to re-capture TREND support, I sell it. That discipline holds for the US stock market post last week’s no-volume bounce to lower-highs too.

 

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 = 1406
  3. Immediate-term TRADE support = 1379

In other words, as we make lower-highs, the probability of the YTD highs for US stocks for 2012 being in (September 14th) are rising.

 

As a result, with the TREND bearish, you’ll likely get paid to risk manage the range between 1364 (TAIL support) and 1419 (TREND resistance) proactively. In the meantime, the bond bull driven by #GrowthSlowing rages on.

 

KM

 

Keith R. McCullough
Chief Executive Officer

 

Lower-Highs: SP500 Levels, Refreshed - SPX


CHART DU JOUR: THE END OF THE MASS HOLD TAILWIND?

Takeaway: This could be a big negative for Macau stocks

Mass revenue growth has outpaced volume growth.  With Mass hold % plateauing, revenue growth is likely to slow.

 

  • Over the past four years, mass revenue growth has significantly outpaced volume growth as mass hold rates climbed higher and higher
  • While the higher hold is likely sustainable – due to rationalization and productivity – we’re concerned that investors may not be aware of how much hold has played a role in the 3+ year surge in Macau Mass growth
  • Mass volume growth has lagged revenue growth by an average of over 10%.  Going forward, Mass revenue growth is likely to track volume growth which means slowing growth trends.

 

CHART DU JOUR:  THE END OF THE MASS HOLD TAILWIND? - MAF


Watching The Eurozone

It’s important to keep an eye on yields for government bonds throughout the Eurozone; it provides insight into the confidence investors have for each country. 10-year bond yields are lower on a week-over-week basis as Greece continues to be bailed out. Remember: European Central Bank President Mario Draghi will do “whatever it takes” to save the EU. The lower the yield, the lower the risk.

 

Watching The Eurozone - 10yearEURO


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MACAU: STEADY AS SHE GOES

Macau average daily table revenue (ADTR) remained unchanged from last week at HK$775 million.  For the full month, we are projecting YoY growth in GGR of 5-9%, above October’s 4% growth.  December growth should be even better than November’s.  We believe hold was normal this week and that mass traffic continues to be strong.

 

MACAU: STEADY AS SHE GOES - macau234

 

Relative to market share trend, Galaxy continues to be the laggard in November while LVS is pushing towards 20% again, above its trailing 3-month share of 18.8%.

 

MACAU: STEADY AS SHE GOES - macau345


Natgas On The Move

There’s been a lot of talk about how natural gas is poised to make moves in 2013. Looking at the amount of natgas rigs out there, we see that rig count increased by 11 on a week-over-week basis according to data from BHI. That’s the biggest week-over-week increase since September 2011. 4 rigs were added in the PA Marcellus and 3 gas rigs were added in Louisiana. Energy Sector Head Kevin Kaiser notes that the best way to play the resurgence in natgas drilling is to go long pressure pumpers like C&J Energy Services (CJES).

 

Natgas On The Move - natgasrig


Move It

Client Talking Points

Strong Markets

There’s a strong correlation between the S&P 500 and the US Dollar vis-a-vis the 90-day inverse correlation (-0.90). That means if you can get the dollar right, you can get a lot of other things right. Take the inverse correlation into account and a down week for the dollar makes sense as stocks, junk bonds, and commodities moved higher last week. Want a stronger equity market with volume to boot? We’re going to need stronger growth in America first. Grow GDP and quit pussyfooting around in Congress and we might just make this happen.

Consider Treasuries

Last week’s selloff in Treasuries brought the yield on the 10-year up to 1.68%, up 11 basis points on a week-over-week basis. That came close to our immediate-term TRADE line of resistance at 1.69% but we couldn’t break on through to the other side. As the 10-year drops back to 1.66% this morning, we find ourselves in a bearish formation so in turn, we raised our fixed-income asset allocation up to 27%. You have to go with what’s right, not with what’s wrong. 

Asset Allocation

CASH 46% US EQUITIES 9%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 27% INTL CURRENCIES 18%

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

“You know it's Monday morning when a @NYSEEuronext trader is still whistling the @NBCSportsfootball anthem #NYGiants” -@carlquintanilla

QUOTE OF THE DAY

“It is impossible to defeat an ignorant man in argument.” -William G. McAdoo

STAT OF THE DAY

UBS fined $47.5 million in insider trading case as #OldWall keeps with tradition.


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.65%
  • SHORT SIGNALS 78.63%
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