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Less Bullish: SP500 Levels, Refreshed

Takeaway: Overall, testing and holding 1502-1504 is what the bulls should want. Up every week builds exhaustion.

This note was originally published March 04, 2013 at 10:30 in Macro

POSITIONS: 9 LONGS, 7 SHORTS @Hedgeye

 

US stocks up for 8 of the last 9 weeks and failed to overcome the weekly closing high (1519) both into Friday’s close and on this morning’s open. Pretty low stress signal, but I want to respect it for what it is, for now. Overall research fundamentals are actually still improving.

 

Across our core risk management durations, here are the lines that matter to me most:

 

  1. Immediate-term TRADE resistance = 1530 (YTD closing high)
  2. Immediate-term TRADE support = 1504
  3. Intermediate-term TREND support = 1468

 

In other words, you’d rather buy them right than buy them at every price. That’s what we are trying to help you with – timing. I’d rather tighten up my net exposure here and wait and watch for 1504 to hold.

 

Overall, testing and holding 1502-1504 is what the bulls should want. Up every week builds exhaustion.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Less Bullish: SP500 Levels, Refreshed - SPX


European Banking Monitor: Italy’s Woes

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

Key Takeaways:

 

* European Financial CDS - Italian banks are wider on the political uncertainty with increases ranging from +19 to +34 bps. On a MoM basis, Italian banks are up 31 to 52 bps. Spanish banks are not far behind. Interestingly, while sovereign swaps in Germany and France were little changed, German and French bank swaps were notably wider WoW. Swaps widened by a median of 8 bps WoW among EU Financials, while equities were down by 3%. The MoM change in EU Financials is up to +13 bps. 

 

* Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 14 bps. While individual swaps are rising, the sentiment around systemic risk remains low, as evidenced by the very modest uptick in the Euribor-OIS spread.

 

* ECB Liquidity Recourse to the Deposit Facility – Likewise, ECB Liquidity Deposits fell by 13 billion euros last week. 

 -------

 

If you’d like to discuss recent developments in Europe, from the political to financial to social, please let me know and we can set up a call.

 

Matthew Hedrick

Senior Analyst

 

 

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European Financials CDS Monitor – Swaps widened by a median of 8 bps WoW among EU Financials, while equities were down by 3%. The MoM change in EU Financials is up to +13 bps. Italian banks were wider on the political uncertainty with increases ranging from +19 to +34 bps. On a MoM basis, Italian banks are up 31 to 52 bps. Spanish banks are not far behind. Interestingly, while sovereign swaps in Germany and France were little changed, bank swaps among German and French banks were notably wider WoW.

 

European Banking Monitor: Italy’s Woes  - z. banks

 

Euribor-OIS spread – The Euribor-OIS spread widened by 1 bps to 14 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

European Banking Monitor: Italy’s Woes  - z. euribor

 

ECB Liquidity Recourse to the Deposit Facility – Deposits fell by 13 billion euros last week. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

European Banking Monitor: Italy’s Woes  - z. liquidity facility


Less Bullish: SP500 Levels, Refreshed

Takeaway: Overall, testing and holding 1502-1504 is what the bulls should want. Up every week builds exhaustion.

POSITIONS: 9 LONGS, 7 SHORTS @Hedgeye

 

US stocks up for 8 of the last 9 weeks and failed to overcome the weekly closing high (1519) both into Friday’s close and on this morning’s open. Pretty low stress signal, but I want to respect it for what it is, for now. Overall research fundamentals are actually still improving.

 

Across our core risk management durations, here are the lines that matter to me most:

 

  1. Immediate-term TRADE resistance = 1530 (YTD closing high)
  2. Immediate-term TRADE support = 1504
  3. Intermediate-term TREND support = 1468

 

In other words, you’d rather buy them right than buy them at every price. That’s what we are trying to help you with – timing. I’d rather tighten up my net exposure here and wait and watch for 1504 to hold.

 

Overall, testing and holding 1 is what the bulls should want. Up every week builds exhaustion.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Less Bullish: SP500 Levels, Refreshed - SPX


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET?

Takeaway: Neither Italy nor sequestration seem to be having much impact on U.S. Financials. Systemic interbank risk measures remains low for now.

Key Takeaways:

 

* European Financial CDS - Italian banks are wider on the political uncertainty with increases ranging from +19 to +34 bps. On a MoM basis, Italian banks are up 31 to 52 bps. Spanish banks are not far behind. Interestingly, while sovereign swaps in Germany and France were little changed, German and French bank swaps were notably wider WoW. Swaps widened by a median of 8 bps WoW among EU Financials, while equities were down by 3%. The MoM change in EU Financials is up to +13 bps. 

 

* Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 14 bps. While individual swaps are rising, the sentiment around systemic risk remains low, as evidenced by the very modest uptick in the Euribor-OIS spread.

 

* ECB Liquidity Recourse to the Deposit Facility – Likewise, ECB Liquity Deposits fell by 13 billion euros last week. 

 

* U.S. Financial CDS -  Mortgage insurers MGIC and Radian continued to tighten, improving 319 and 135 bps, respectively WoW, signaling that sentiment around the ongoing housing recovery is intact. The global U.S. banks were modestly wider WoW on rising concerns around Italy. 

 

* 2-10 Spread – Last week the 2-10 spread tightened to 164 bps, 12 bps tighter than a week ago. 

 

Financial Risk Monitor Summary

 • Short-term(WoW): Negative / 3 of 12 improved / 6 out of 12 worsened / 4 of 12 unchanged

 • Intermediate-term(WoW): Positive / 6 of 12 improved / 3 out of 12 worsened / 4 of 12 unchanged

 • Long-term(WoW): Positive / 9 of 12 improved / 1 out of 12 worsened / 3 of 12 unchanged

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 15 rm

 

1. U.S. Financial CDS -  Mortgage insurers MGIC and Radian continued to tighten, improving 319 and 135 bps, respectively WoW, signaling that sentiment around the ongoing housing recovery is intact. The global U.S. banks were modestly wider WoW on rising concerns around Italy. 


Tightened the most WoW: MTG, RDN, AGO

Widened the most WoW: MBI, MS, JPM

Tightened the most WoW: RDN, MTG, MET

Widened the most MoM: AON, MMC, BAC

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 1 rm

 

2. European Financial CDS - Swaps widened by a median of 8 bps WoW among EU Financials, while equities were down by 3%. The MoM change in EU Financials is up to +13 bps. Italian banks were wider on the political uncertainty with increases ranging from +19 to +34 bps. On a MoM basis, Italian banks are up 31 to 52 bps. Spanish banks are not far behind. Interestingly, while sovereign swaps in Germany and France were little changed, bank swaps among German and French banks were notably wider WoW.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 2 rm

 

3. Asian Financial CDS - India widened while China tightened. Japan was mixed. 

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 17 rm

 

4. Sovereign CDS – Italian sovereign swaps widened sharply last week on Italian political uncertainty. Italy's swaps widened 36 bps WoW to 286 bps. Spain and Portugal were narrowly wider by 11 bps on sympathy. The rest of the world, however, moved little, with the U.S., Germany, France, Ireland and Japan all flat or narrowly tighter.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 18 rm

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 3 rm

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 4 rm

 

5. High Yield (YTM) Monitor – High Yield rates fell 10.5 bps last week, ending the week at 5.98% versus 6.08% the prior week.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 5 rm

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 0.6 points last week, ending at 1771.9.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 6 rm

 

7. TED Spread Monitor – The TED spread rose 1.6 basis points last week, ending the week at 18 bps versus last week’s print of 16.4 bps.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 7 rm

 

8. Journal of Commerce Commodity Price Index – The JOC index fell 0.8 points, ending the week at 9.08 versus 9.9 the prior week.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 8 rm

 

9. Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 14 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 9 rm

 

10. ECB Liquidity Recourse to the Deposit Facility – Deposits fell by 13 billion euros last week. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 10 rm

 

11. Markit MCDX Index Monitor – Last week spreads widened by 1 bp, ending the week at 93 bps versus 92 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1. 

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 11 rm

 

12. Chinese Steel – Steel prices in China fell 2.0% last week, or 76 yuan/ton, to 3790 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 12 rm

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 164 bps, 12 bps tighter than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 13 rm

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.9% upside to TRADE resistance and 1.5% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: ARE ITALY'S WOES HITTING U.S. FINANCIALS YET? - 14 rm

 

Joshua Steiner, CFA



THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – March 4, 2013


As we look at today's setup for the S&P 500, the range is 32 points or 1.07% downside to 1502 and 1.04% upside to 1534.            

                                                                                                                   

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: 1.62 from 1.61
  • VIX  closed at 15.36 1 day percent change of -0.97%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8am: Fed’s Yellen speaks in Washington
  • 9:45am: ISM New York, Feb. (prior 56.7)
  • 11am: Fed to buy $1.25b-$1.75b notes in 2036-2043 sector
  • 11:30am: U.S. to sell $35b 3-mo. bills, $30b 6-mo. bills
  • 11:45am: Former Fed Chairman Volcker speaks in Washington
  • 1:15pm: Fed’s Powell speaks in Washington
  • U.S. Rates Weekly Agenda

GOVERNMENT:

    • This week, agencies implement automatic budget cuts, House may take up continuing resolution to keep govt funded
    • IAEA board convenes in Vienna to discuss Iran
    • Institute of International Bankers conference; speakers include Under Sec. of Treasury Mary J. Miller, Fed Gov. Jerome Powell, Comptroller of the Currency Thomas Curry, CFTC Chairman Gary Gensler, FDIC Chairman Martin Gruenberg
    • Washington Week Ahead 

WHAT TO WATCH

  • Obama calls lawmakers to seek ways to recast budget cuts
  • Euro leaders demand austerity; Italy moves closer to vote
  • Las Vegas Sands says it probably violated FCPA
  • Buffett plans acceleration of Berkshire capital spending
  • Buffett plans to boost stake in IBM; says yr was subpar
  • Transocean board seeks $2.24/shr div; Icahn wanted >$4
  • Kuroda pledges bolder action as BoJ governor
  • Samsung to seek further review as Apple damages cut ~45%
  • Genting to buy unfinished Las Vegas Echelon resort from Boyd
  • China monetary tightening pressure eases as rebound slows
  • ‘Giant Slayer’ is wknd’s top film w/ $28m in NA sales
  • U.S. Weekly Agendas: Finance, Industrials, Energy, Health, Consumer, Tech, Media/Ent, Real Estate, Transports
  • North American M&A Agenda
  • Canada Weekly Agendas: Energy, Mining
  • U.S. Jobs, ECB Rate Meeting, Kenya Votes: Wk Ahead March 4-9

EARNINGS:

    • Yingli Green Energy (YGE) Pre-mkt, $(0.57)
    • Tech Data (TECD) 6am, $1.76
    • Arena Pharmaceuticals (ARNA) 7am, $(0.05)
    • Stratasys Ltd (SSYS) 7am, $0.38
    • Vermilion Energy (VET CN) 7am, C$0.53
    • Shuffle Entertainment (SHFL) 4pm, $0.12
    • Cninsure (CISG) 4pm, NA
    • Ascena Retail Group (ASNA) 4:02pm, $0.23
    • Santarus (SNTS) 4:05pm, $0.01
    • ABM Industries (ABM) 5pm, $0.22

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • WTI Oil Futures Decline for Third Day to Trade Near $90 a Barrel
  • Investors Least Bullish in Four Years Pulling Funds: Commodities
  • Gold Swings as Investors Weigh Economic Stimulus Against Dollar
  • Cocoa Falls to 10-Month Low on Ivory Coast Rainfall; Sugar Rises
  • Palm Oil Climbs as Worst Losing Streak Since 2006 Spurs Demand
  • Indonesian Palm Reserves Seen Declining by Bangun on Demand
  • Lead and Zinc Decline as China Property Curbs Could Damp Demand
  • Vietnam 2013 Rice Exports Reach 744,408 Tons as of Feb. 28: VFA
  • Angola to Start Cargo Rail Line From Luanda Port This Month
  • Keystone Report Spurs Opponents to Vow Stiffer Fight on Pipeline
  • Marathon Said to Join Oil CEO Search as Bid War Looms: Energy
  • U.S. Soybean Reserve Seen Lower in Survey; Grain Supply May Rise
  • Joblessness Down as Bernanke View of Cyclical U.S. Weakness Wins
  • Rubber Drops to Two-Month Low as China to Cool Property Prices

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 


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