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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – November 27, 2012


As we look at today's setup for the S&P 500, the range is 39 points or 1.87% downside to 1380 and 0.90% upside to 1419.      

                                                                                                                                                                         

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.39 from 1.40

MACRO DATA POINTS (Bloomberg Estimates):

  • 6:30am: Fed’s Lockhart speaks in Berlin
  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 8:30am: Bernanke speaks, College Fed Challenge, Washington
  • 8:30am: Durable Goods Orders, Oct. est. -0.7% (prior 9.8%)
  • 9am: S&P/CS 20 City M/m SA, Sept. est. 0.4% (prior 0.49%)
  • 10am: Richmond Fed Manufact. Index, Nov., est. -9 (prior -7)
  • 10am: Consumer Confidence, Nov. est. 73.0 (prior 72.2)
  • 10am: House Price Index M/m, Sept. est. 0.4% (prior 0.7%)
  • 11am: Fed to purchase $1.5b-$2b notes due 2/15/23-2/15/31
  • 11:30am: U.S. to sell $40b 4-week bills
  • 1pm: U.S. to sell $35b 2-year notes
  • 1pm: House Price Purchase Index Q/q, 3Q, est. 1.4%
  • 4:30pm: API inventories
  • 5pm: Fed’s Potter speaks at NYU Stern School
  • 6pm: Fed’s Evans speaks in Toronto

GOVERNMENT:

    • House, Senate in session
    • Army Private First Class Bradley Manning, accused of releasing classified documents to WikiLeaks website, faces preliminary hearings in Fort Meade, Md.
    • IEA Executive Director Maria Van Der Hoeven holds briefing on 2012 World Energy Outlook, 4pm

WHAT TO WATCH

  • European finance ministers eased the terms on emergency aid for Greece
  • Federal Reserve Bank of Dallas President Richard Fisher said he advocates limits on U.S. quantitative easing
  • Lehman Brothers agreed to sell its Archstone unit to Equity Residential and AvalonBay for $6.5bn, scrapping plans for IPO
  • Durable goods orders probably fell 0.7% in Oct.
  • Las Vegas Sands CEO Adelson to earn $1.2b from special div.
  • HP sued over losses from alleged fraud at Autonomy before buyout
  • Apple, LG Electronics face trial over Alcatel-Lucent patents
  • Fiscal cliff in U.S. raises risk of global recession, OECD says
  • U.K. GDP rose 1% in 3Q, matching median forecast
  • JPMorgan’s Jamie Dimon would be best to lead Treasury Dept. in financial crisis, Buffett says
  • Bombardier wins record $7.8b order from U.K.’s VistaJet
  • Italy borrowing costs fall at zero coupon 2014 auction
  • Rajat Gupta bid to remain free while appealing verdict opposed by U.S.

EARNINGS:

    • Ralcorp Holdings (RAH) 7am, $0.87
    • ADT (ADT) Pre-mkt, $0.43
    • Alimentation Couche Tard (ATD/B CN) 11am, $0.94
    • Analog Devices (ADI) 4pm, $0.57
    • Green Mountain Coffee Roasters (GMCR) 4pm, $0.48
    • PVH (PVH) 4:02pm, $2.29
    • Guidewire Software (GWRE) 4:05pm, $0.01
    • Copart (CPRT) After-mkt, $0.36

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Oil Trades Near One-Week Low as Supply Counters Europe Optimism
  • Speculators Raise Wagers First Time in Seven Weeks: Commodities
  • Soybeans Advance to Two-Week High on South American Crop Concern
  • Copper Reaches Three-Week High as Greece Gets Eased Rescue Terms
  • Financing Deals May Keep Aluminum Premiums Elevated: Outlook
  • Gold Swings Between Gains and Declines as Greek Deal Reached
  • China Poised to Delay Corn Imports Until Price Drops, Group Says
  • Wheat Exports From India to Surge as Drought Cuts Global Harvest
  • Cocoa Swings Between Gains and Losses; Sugar, Coffee Climb
  • Rebar Falls for Second Day After Iron Ore Drops to One-Month Low
  • LNG Rising Most Since Fukushima Spurring 21% Golar Gain: Freight
  • Thailand to Surpass India as Top Rice Shipper on Stockpile Sales
  • Rebound in Shipping Fundamentals Unlikely Until 2H13: Outlook
  • Aluminum 2013 Demand Growth May Reach Mid-Single Digits: Outlook

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


EURO – shorting the Euro on the Greek “news” is the most obvious move to make here in FX; looking at re-shorting the Yen as well; long USD and long the long Bond (TLT) as bond yields couldn’t care less about Greece.

 

THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS


GREECE – up, up, then down; if you believe anything Greece, Spain, or Italy says, that’s an entirely different discussion; in the meantime, market’s don’t lie; politicians do – Greek stocks (Athex Index) -1% on the day now; down -7% and -48% from their OCT2012 and NOV2011 lower-highs, respectively.


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


CHINA – a new day in Chinese stocks brought fresh YTD lows; down -1.3% on the Greek “news” to 1991 on the Shanghai Comp, now only 90bps away from being back in crash mode (-19.1% from the #GrowthSlowing top in March).

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 


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

 

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


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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


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