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Takeaway: If oil (and food) continues to deflate, consumers get a real-time tax cut. That’s bullish, for consumers.

This note was originally published December 04, 2012 at 11:00 in Macro


POSITIONS: Long Consumer Discretionary (XLY), Short Industrials (XLI) and Utilities (XLU)

I have no idea what the next government catalyst is going to be, but those who begged for more government have no business whining about it.

The only thing I know is that if oil (and food) continues to deflate, consumers get a real-time tax cut. That’s bullish, for consumers. Period.

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 support = 1404
  3. Long-term TAIL support = 1366

In other words, if 1404 holds, a re-test of 1419 on the upside is probable. A close above 1419 would be explicitly bullish. On the downside, if 1404 doesn’t hold, it’s a long way to 1366. But that long-term TAIL support is good to have underneath.

Keep moving out there,

KM

Keith R. McCullough
Chief Executive Officer

Buy Consumer: SP500 Levels, Refreshed - SPX