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Lower-Highs: S&P 500 Levels, Refreshed

This note was originally published November 26, 2012 at 11:33 in Macro

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: S&P 500 Levels, Refreshed - SPX


Employment Growth To Slow?

The Chicago Fed National Activity Index is an index of 85 economic indicators that are aggregated into an index meant to project the overall level of US economic growth.  The Chicago Fed updated the National Activity Index this morning, coming in at -0.56, versus 0.00 last month. The Chicago Fed interpretation of the rolling 3 month index readings is below...

  1. A reading of 0.0 signals economy expanding at historical growth rate
  2. A reading of +0.7 signals a period of sustained increasing inflation
  3. Below -0.70 following a period of economic expansion signals the beginning of a recession
  4. Above -0.70 following a period of economic contraction signals the end of a recession

 

Employment Growth To Slow?  - Chicago Fed Explanation Slide normal

 

Our Healthcare team has isolated certain components of the Chicago Fed National Activity Index to build an employment forecasting model, which calls for employment growth to slow to 4Q12 and decelerate further in 1Q13.  If employment growth decelerates over the next 2 quarters as our model projects, we should expect an increased level of caution from management teams as they release and update 2013 outlooks.

 

Employment Growth To Slow?  - Employment Forecast 1Q13 Chicago Fed 11 26 12 normal


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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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