Todd Jordan (GLL):
Rob Campagnino (Consumer Staples):
Brian McGough (Retail):
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.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH
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.
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 Macro Team
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.
Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.
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:
On both, there are a few chinks in the bull’s growth horns this morning.
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,
Keith R. McCullough
Chief Executive Officer
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.
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