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TRADE OF THE DAY: ADM

Today we bought Archer Daniels Midland Company (ADM) at $28.33 a share at 10:15 AM EDT in our Real-Time Alerts. We bought on red when our immediate-term TRADE oversold signal after an #OldWall downgrade. Hedgeye Consumer Staples Sector Head Rob Campagnino says manage the risk of the range into the EPS event (up and down). Still one of our top long ideas.

 

TRADE OF THE DAY: ADM - image001


M/JCP: Loud and Getting Louder

Takeaway: We've been vocal on our Macy's short call. The one you're hearing us get louder on is long JCP. No action yet. We're waiting on price.

Keith added M to our #real-time alerts on the short side into the close. That’s the trade you saw, because the stock call matched up with the research call.

 

The corresponding trade you have not yet seen is to long JCP. As we’ve hit on repeatedly over the past several weeks, we think that the improving sales trajectory in 2013 and incremental improvement in store layout and dot.com business will drive the stock higher this year – even if JCP needs to buy the better top line. That might not be the best ROIC decision, but we think that this stock will trade on revenue, not ROIC.

 

We’re not going to make many friends today in saying that given that nearly a third of the float is short. But we’d rather be right than make friends.

 

To be clear, if the stock call matched up to the fundamental call at the current price, Keith would have added it to our real-time alerts. He has not. Translation = he likes it lower. But if you are less price sensitive and want a contrarian idea that we think will gain momentum on the upside in 2013, this is absolutely one to consider. 

 

 

 


Treasuries Take Hold

This morning, the yield on the 10-year Treasury Note hit 2.0%, a level not seen since April of 2012. Despite moving back down to 1.95% shortly after, the 10-year continues to hold above our TAIL risk line of support at 1.84%. We could soon see the 10-year yield flirting with 2.4% over the next three months, particularly if our call on US unemployment stabilizing continues to take hold. #GrowthStabilizing is good for stocks, bad for bonds. Friday's jobs report should play a role in determining if a yield above 2.0% is here for good.

 

Treasuries Take Hold - JAN28


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Still Bullish: SP500 Levels, Refreshed

Takeaway: We anticipate that downside will be reasonably contained as the market pulls back from immediate-term TRADE overbought.

The Bloomberg quote of the day form this AM read:

 

“I’ve failed over and over again in my life and that is why I succeed”

-Michael Jordan

 

While not at all comparing ourselves to MJ, his six titles and his decade-plus of unparalleled dominance in the modern era of basketball, we do share a similar experience in that our failures also tend to sow the seeds for eventual success(es).

 

Long-term clients of our Macro research product know that we haven’t traditionally been the bulls’ huckleberry at the top-end of market melt-ups in previous years as various Polices to Inflate have appropriately led us to discounting eventual slowdowns in economic and/or earnings growth. This time, however, we too are cheering on those gains with the backdrop of not much incremental in the way of such policies.

 

As we outlined in our note from Friday titled, “1565?: SP500 Levels, Refreshed”, we think the balance of risks underpinning the US equity market from both a fundamental research and quantitative risk management perspective remains demonstrably in favor of further upside.

 

More importantly, we think there are a number of investors who may not have fully participated in the melt-up; they and “the flows” will likely be buying the dips at/around our immediate-term TRADE and, if necessary, our intermediate-term TREND lines of support:

 

  • Immediate-term TRADE Overbought = 1509
  • Immediate-term TRADE support = 1486
  • Intermediate-term TREND support = 1434

 

If you’re still bearish on this market or do not necessarily believe it has further upside, that’s totally fine; to each his/her own. We just don’t think it's prudent to short this puppy at least until you see a quantitative breakdown through the aforementioned level(s) of support that is also confirmed by a deterioration in the fundamental backdrop.

 

Right now, however, that scenario is about as probable as sustained flows into fixed income funds throughout 2013 (i.e. “not very”).

 

Darius Dale

Senior Analyst

 

Still Bullish: SP500 Levels, Refreshed - SPX


MACAU: Smoke On The Water

The partial smoking ban that went into place this month has yet to have a material impact on Macau casinos. Average Daily Table Revenue (ADTR) was HK$775 million this past week, in-line with the prior week and well below the first two weeks of the month. The pre-Chinese New Year timing is also a factor in the decline in ADTR. 

 

We expected the smoking ban to play a significant role in revenue but it has yet to do so. Since January 1st, 9000 people have been fined for smoking in public areas. The partial smoking ban allows casinos to have smoking areas in up to 50% of the gaming floor area. The rules do not set up a minimum ratio for the number of slots and tables to be included in smoking and non-smoking area. 

 

MACAU: Smoke On The Water - macau1 normal


MACAU: NEW WEEK - SIMILAR PACE

Daily table revenues averaged HK$775 million this past week, in-line with the prior week and well below the first two weeks of the month.  The pre-Chinese New Year timing is clearly a factor.  Our full month projection remains at +7-11%, probably a bit lower than consensus.  So far, it doesn’t look like the smoking ban has had much impact, much to our surprise.

 

MACAU: NEW WEEK - SIMILAR PACE - macau1

 

MPEL continues to have a strong month in terms of market share while LVS and MGM remain below recent trend.  

 

MACAU: NEW WEEK - SIMILAR PACE - a2


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