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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – February 7, 2013


As we look at today's setup for the S&P 500, the range is 25 points or 1.33% downside to 1492 and 0.32% upside to 1517.          

                                                                                                                     

SECTOR AND GLOBAL PERFORMANCE


BRAZIL – the Bovespa has joined the KOSPI confirming TRADE and TREND duration breakdowns – this, combined with European Indices breaking their immediate-term TRADE lines almost across the board, is new. We respect new.

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

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EQUITY SENTIMENT:


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CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.73 from 1.71
  • VIX  closed at 13.41 1 day percent change of -2.26%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: BoE announces interest rates
  • 7:45am: ECB announces interest rates
  • 8:30am: ECB’s Draghi holds news conference
  • 8:30am: Nonfarm Productivity, 4Q P, est. -1.4% (prior 2.9%)
  • 8:30am: Initial Jobless Claims, Feb. 2 est. 360k (prior 368k)
  • 9:30am: Fed’s Stein speaks on financial stability in St. Louis
  • 9:45am: Bloomberg Consumer Comfort, Feb. 3 (prior -37.5)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: Fed to purchase $1.25b-$1.75b debt in 2036-2042 sector
  • 3pm: Consumer Credit, Dec., est. $14b (prior $16.045b)

GOVERNMENT:

    • NTSB Chairman Deborah Hersman provides update of investigation into Jan. 7 fire that occurred on Japan Airlines Boeing 787 at Logan Intl Airport in Boston, 11am
    • Sen. Bernie Sanders, I-Vt., holds news conference on legislation to stop corporations from sheltering income in Cayman Islands, other tax havens, 10:30am
    • N. Anthony Coles, CEO of Onyx Pharmaceuticals, attends Senate briefing with FDA Commissioner targaret Hamburg, 12pm
    • ITC votes on dumping of frozen, warm-water shrimp from China, Ecuador, India, Indonesia, Malaysia, Thailand, Vietnam
    • FAA, DOT hold mtg on performance standards for collision avoidance systems, 8:30am
    • USPS Board of Governors hold closed mtg, 10am

WHAT TO WATCH

  • Euro strengthens against the dollar before ECB policy decision
  • BOE will likely maintain benchmark interest rate at 0.5%
  • January retail sales likely helped by clearance
  • China injects record $138b into financial system
  • Barclays said to dismiss traders amid 275 job cuts in New York
  • U.S. Airways talks with AMR said to intensify as deadline looms
  • McGraw-Hill defense seen as diversion against U.S. fraud claims
  • Deep-water safety defect threatens global offshore oil drilling
  • Libor accords leave banks facing states with massive claims
  • JPMorgan overtakes Wells Fargo as most valuable bank in U.S.
  • Yahoo links up with Google to put ads on finance, news sites
  • BofA said to shift U.S. Trust bonuses in push for more clients
  • Dell sets Nov. 5 deadline to complete $24.4b LBO deal
  • Teck Resources earnings beat est; sees 2013 coal input of 25mt
  • U.K. manufacturing rises most since July on machinery, chemicals
  • Spain sells EU4.6b bonds vs maximum target EU4.5b

EARNINGS:

    • Cigna (CI) 6am, $1.48
    • Cognizant (CTSH) 6am, $0.91
    • Manulife Financial (MFC CN) 6am, C$0.32 - Preview
    • ON Semiconductor (ONNN) 6am, $0.07
    • Patterson-UTI Energy (PTEN) 6am, $0.29
    • Starwood Hotels (HOT) 6am, $0.65
    • Air Canada (AC/A CN) 6am, C$(0.23)
    • Bunge (BG) 6:30am, $2.32
    • Coca-Cola Enterprises (CCE) 6:30am, $0.44
    • Flowers Foods (FLO) 6:30am, $0.25
    • Hasbro (HAS) 6:30am, $1.16
    • International Flavors (IFF) 6:40am, $0.84
    • Ingredion (INGR) 6:45am, $1.42
    • Teradata (TDC) 6:55am, $0.74
    • Philip Morris (PM) 6:59am, $1.22 - Preview
    • BCE (BCE CN) 7am, C$0.66
    • Fortis (FTS CN) 7am, C$0.50
    • Lazard (LAZ) 7am, $0.33
    • Sally Beauty (SBH) 7am, $0.34
    • Scripps Networks  (SNI) 7am, $0.92
    • Sprint Nextel (S) 7am, $(0.44) - Preview
    • Xylem (XYL) 7am, $0.46
    • Noble Energy (NBL) 7:28am, $1.13
    • FLIR Systems (FLIR) 7:30am, $0.50
    • MSCI (MSCI) 7:30am, $0.53
    • Och-Ziff (OZM) 7:30am, $0.72
    • Monster Worldwide (MWW) 7:30am, $0.07
    • Exelon (EXC) 7:30am, $0.65
    • Graphic Packaging Holding (GPK) 7:30am, $0.08
    • KKR & Co (KKR) 7:55am, $0.21
    • Arrow Electronics (ARW) 8am, $1.08
    • Brookfield Renewable Energy (BEP-U CN) 8am, $0.01
    • Sigma-Aldrich (SIAL) 8am, $0.95
    • Shoppers Drug Mart (SC CN) 8:21am, C$0.84
    • Advance Auto Parts (AAP) 8:30am, $0.75
    • New York Times (NYT) 8:30am, $0.31
    • Medical Properties Trust (MPW) 8:30am, $0.26
    • Great-West Lifeco (GWO CN) 10:49am, $0.53 - Preview
    • NCR (NCR) 4pm, $0.70
    • Coinstar (CSTR) 4:01pm, $0.76
    • Genpact Ltd (G) 4:01pm, $0.24
    • Nuance Communications (NUAN) 4:01pm, $0.36
    • XL Group (XL ) 4:01pm, $(0.36)
    • American Capital Agency (AGNC) 4:01pm, $0.95
    • Regal Entertainment Group (RGC) 4:01pm, $0.20
    • CareFusion (CFN) 4:02pm, $0.52
    • Prospect Capital (PSEC) 4:02pm, $0.42
    • Activision Blizzard (ATVI) 4:05pm, $0.72
    • Republic Services (RSG) 4:05pm, $0.43
    • SunPower (SPWR) 4:05pm, $0.14
    • Riverbed Technology (RVBD) 4:05pm, $0.29
    • DCT Industrial Trust (DCT) 4:10pm, $0.10
    • Apartment Investment & Management Co (AIV) 4:11pm, $0.50
    • LinkedIn (LNKD) 4:15pm, $0.19
    • Microchip Technology (MCHP) 4:15pm, $0.39

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)


OIL – huge headwind developing for global consumption #GrowthStabilizing with Brent Oil signaling higher-highs and higher lows on our intermediate-term TREND duration. If you need a reason to start selling some stocks and covering Treasury shorts, that’s it.

  • Brent Crude Rises to Four-Month High, Extends Premium Over WTI
  • U.S. Soy Supply at 48-Year Low as Brazil Ships Held: Commodities
  • World Food Prices Were Stable in January, According to UN Index
  • Zinc Falls for Third Day as Euro-Area Economies Keep Struggling
  • Corn Drops on Speculation USDA May Raise U.S. Stockpile Outlook
  • Platinum Rally Stalls on Speculation Miners May Boost Selling
  • Offshore Drilling Halted by U.S. on Wells With Flawed Bolts
  • Rebar Advances to Nine-Month High as Iron Ore Rallies on Demand
  • Cooking Oil Imports by India Seen Climbing to Record to Beat Tax
  • China Buys Gas at Record as Crude Imports Capped: Energy Markets
  • Copper Seen in ‘Struggle’ to Exceed $8,422: Technical Analysis
  • Olam Second-Quarter Profit Jumps 20% on Grains, Nut Volumes
  • Astra Agro Sells 11,000 Tons of Palm Oil in Auction (Table)
  • Nickel Seen by Deutsche Bank Rebounding After Chinese New Year

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS


EUROPE – what would be really interesting is if we saw the EuroStoxx50 snap its intermediate-term TREND line of 2615 support; its hanging on, barely, this morning – but we need to give this one some time. Waiting/watching for headfakes has been key.

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

 

MIDDLE EAST

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 


THE M3: JUNKET OVERSIGHT; PHILIPPINE CASINOS EXCLUSION FROM LAUNDERING LAW

The Macau Metro Monitor, February 7, 2013

 

 

GOV'T STRENGTHENS OVERSIGHT OF JUNKETS Macau Daily Times

Secretary Tam said that the government is stepping up its inspection on the gaming industry and imposing stricter examination on the backgrounds of the casino junkets in order to “purify” the industry.  “It’s been the government’s established policy to maintain a stable and healthy development of the gaming industry,” Tam said, “should we find any illegal activities in the sector, we won’t turn a blind eye to it, nor take no action against such activities.  The junket system has been operating in Macau for many years, during which we have been optimizing the system with all kinds of adjustments, and reinforcing our supervision of the system. Junket operators need to register with the authority and get a license before they can do business here and we’re planning to exercise stricter examination of their registration. The government is reviewing its current practice in this respect in order to have a closer check on their qualifications, particularly whether or not they have criminal records."

 

CASINOS GET A PASS IN LAUNDERING LAW Inquirer

Philippine casinos were excluded from the amendments passed on stronger money-laundering controls. Senator Teofisto Guingona said casinos and Internet gaming were excluded at the request of the House and of the state regulator Philippine Amusement and Gaming Corp.  “(They) excluded casinos from coverage because (House members) warned it would deter investors. That’s the number one reason. And number two, Pagcor,” Guingona said.

 

The Senate’s passage of the law came five weeks before the opening of Entertainment City, a $4 billion Manila casino complex.


 

 



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Skinning Bears

This note was originally published at 8am on January 24, 2013 for Hedgeye subscribers.

“The skin of the bear must not be distributed until the bear has been killed.”

-Sir Winston Churchill

 

That’s what Churchill said after the Allies invaded Italy at Salerno in late 1943. If you’ve ever thought about trying to skin a bear yourself, locals from my neck of the woods would suggest you make sure it’s dead first too.

 

Risk management lessons in markets and in life tend to rhyme – if you practice common sense, that is. Some people get all religious about this stuff. Others practice some “technical” form of voodoo. I’m more into Churchillian-style strategic thinking myself.

 

During WWII, Churchill’s strategy was “to assign a larger importance to opportunism and improvisation, seeking rather to live and conquer in accordance with the unfolding event than to aspire to dominate often by fundamental decisions.” (The Last Lion, page 708)

 

Back to the Global Macro Grind

 

If your risk management strategy is to A) Embrace Uncertainty and B) react to changing probabilities based on time and price, you’ll be satisfied doing a whole lot of nothing sometimes. Waiting and watching is a risk managed choice.

 

That’s what we did heading into Apple’s (AAPL) earnings event. Since we didn’t have any fundamental “edge” on the quarter, and our risk management signal (Bearish Formation, TAIL RISK $561) said to stay away, any other decision would have been a gamble.

 

That doesn’t mean today’s reactions to AAPL (down -8%) or Netflix (up +30%) don’t present opportunities. And that’s the point. The great goals in my life have been scored when preparation meets opportunity. Patience is a virtue.

 

With the SP500 up for 6 consecutive days (up +4.8% YTD and +10.4% from its mid-November 2012 fiscal cliff freak-out closing low), plenty a stock market bear’s bum has been skinned – but has The Bear been killed?

 

If your answer to that is yes, you and I (and the T Bay locals) need to have a little chat about wild animals.

 

To review, there are 2 core components to what we do:

  1. Quantitative Risk Management (Signals, Factoring, etc.)
  2. Fundamental Research

On both, there are a few chinks in the bull’s growth horns this morning.

 

Quant Signals:

  1. KOSPI (-3.3% correction now from its YTD high) broke TRADE line support of 1985
  2. CHINA (Shanghai Comp), down -0.8% overnight, broke its immediate-term TRADE line of 2308
  3. JAPAN (Yen vs USD) failed to overcome 87.71 resistance again and is trading down hard, -1.2%
  4. Implied volatility in both the Yen and Japanese Equities is rising, fast
  5. Overbought signals across European Equities are being confirmed by lower immediate-term highs
  6. CRB Commodities Index failed at its long-term TAIL risk line of 306 (should snap 300 again today)
  7. Gold failed fast at intermediate-term TREND resistance of $1692
  8. Oil remains sticky, testing a TAIL duration breakout in both Brent and WTIC
  9. Copper, immediate-term TRADE overbought at $3.72/lb is making a series of lower long-term highs
  10. SPX overbought at 1496 and VIX oversold at 12.16 are what they are until they aren’t

Fundamental Research:

  1. Spain’s unemployment hits a higher-high at 26.02% (#PoliticalClass gets paid before The People)
  2. Japanese Exports fall another -5.8% y/y in DEC, despite setting their currency on fire!
  3. France printed a nasty Manufacturing PMI report for JAN, 42.9 (vs 44.9 in DEC)

Of course there are bullish Fundamental Research data points in this morning’s macro grind as well (imagine there wasn’t?). Chinese PMI of 51.9 in JAN was a little better than 51.5 in DEC; Germany’s Manufacturing PMI for JAN came in at 49.8 vs 46 last month, and the US economic data that’s pending (jobless claims today; New Home Sales tomorrow) continues to be bullish.

 

There’s always bulls and bears somewhere. Our daily service isn’t to be either – it’s to be objective and opportunistic when risk/reward changes (in any market or security) on the margin.

 

On the margin, was the Russell2000 making a lower-high yesterday a signal or was it noise? How about the US stock market’s breadth (advancers 46% vs decliners 50%) being negative on an up SP500 day? Why was there no volume (down 9% vs my TREND avg)? Channeling my inner-Churchill, inquiring risk management minds should never, ever, ever, give up asking questions.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, USD/YEN, UST 10yr Yield, AAPL, and the SP500 are now $1662-1692, $110.23-112.27, $3.65-3.71 $79.79-80.14 (USD bullish, Yen bearish), 80.71-90.41, 1.81-1.87%, $464-506 (Apple = immediate-term TRADE oversold in the post), and 1479-1496, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Skinning Bears - Chart of the Day

 

Skinning Bears - Virtual Portfolio


TRADE OF THE DAY: DAL

Today we shorted Delta Air Lines (DAL) at $14.38 a share at 3:18 PM EDT in our Real-Time Alerts. Airline bulls are all looking for the same catalyst that A) may not happen (US Air deal) and B) won't change Hedgeye Industrials Sector Head Van Sciver's Industry call that this time it's not different. Shorting Delta at immediate-term TRADE overbought with oil down.

 

TRADE OF THE DAY: DAL - TOTD


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