TODAY’S S&P 500 SET-UP – January 29, 2014

As we look at today's setup for the S&P 500, the range is 48 points or 1.20% downside to 1771 and 1.48% upside to 1819.              










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.39 from 2.41
  • VIX closed at 15.8 1 day percent change of -9.30%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Jan. 24 (prior 4.7%)
  • 7:15am: BoE’s Carney speaks in Edinburgh
  • 10:30am: DOE Energy Inventories
  • 2pm: FOMC Rate Decision, Jan. 29, est. 0%-0.25% (pr. 0%-0.25%)


    • President Obama speaks on economy in Md., Penn.
    • 10am: Senate Judiciary Cmte hears from Attorney General Eric Holder at oversight hearing


  • Obama income-gap message frames race for control of U.S. Senate
  • Obama seeks trade deals in speech backing U.S. cos.’ goals
  • FOMC rate decision expected at 2pm
  • JPMorgan said near decision on $2b commodities unit sale
  • Yahoo’s Mayer fails to revive growth 18 months into CEO role
  • Deutsche Bank cuts investment banker pay 23% as loss reported
  • AT&T forecasts profit on low end of estimates as rivalry grows
  • Caesars is said to weigh bid for Revel casino in Atlantic City
  • J&J gets $257m Louisiana Risperdal verdict thrown out
  • Lenovo said to agree to higher than usual break fee with IBM
  • Turkey raises rates to end lira fall as Basci defies Erdogan
  • Ukraine president fails to quell protests after ally quits
  • BP continued suspension from new contracts sought by U.S.
  • Biggest banks seen meeting Basel rules 5 yrs ahead of time
  • Goldman Sachs said to lead American Homes 4 Rent bond deal
  • Canon forecast misses analyst estimates amid camera slump
  • Novartis 4Q net drops on franc, emerging markets
  • Fiat 4Q profit misses est, won’t pay div.
  • Boeing’s testing on new tanker may face delays: Reuters


    • Ametek (AME) 7am, $0.54
    • Biogen Idec (BIIB) 7:15am, $2.27 - Preview
    • Boeing (BA) 7:30am, $1.54 - Preview
    • Canadian Pacific Railway (CP CN) 7:30am, C$1.92 - Preview
    • Capitol Federal Financial (CFFN) 9am, $0.13
    • CGI Group (GIB/A CN) 6:30am, C$0.71 - Preview
    • Dow Chemical (DOW) 7am, $0.43 - Preview
    • EMC (EMC) 6:52am, $0.59
    • Energizer Holdings (ENR) 7:30am, $2.13
    • Gentex (GNTX) 8am, $0.43
    • Hess (HES) 7:30am, $1.07 - Preview
    • Hudson City Bancorp (HCBK) 8am, $0.07
    • JetBlue Airways (JBLU) 7:30am, $0.13
    • Marathon Petroleum (MPC) 7:06am, $1.17 - Preview
    • McCormick & Co (MKC) 6:30am, $1.19
    • MeadWestvaco (MWV) 7:25am, $0.24
    • New York Community Bancorp (NYCB) 8am, $0.26
    • Phillips 66 (PSX) 8am, $1.10 - Preview
    • Praxair (PX) 6:02am, $1.55
    • Rockwell Automation (ROK) 7am, $1.39
    • SEI Investments (SEIC) 8:30am, $0.36
    • Southern (SO) 7:30am, $0.45
    • TCF Financial (TCB) 8am, $0.23
    • Tupperware Brands (TUP) 7am, $1.84
    • Valero Energy (VLO) 7:49am, $1.43 - Preview
    • WellPoint (WLP) 6am, $0.87


    • Amdocs (DOX) 4:01pm, $0.75
    • Cadence Design Systems (CDNS) 4:05pm, $0.23
    • Citrix Systems (CTXS) 4:05pm, $0.98
    • Concur Technologies (CNQR) 4:10pm, $0.13
    • Facebook (FB) 4:05pm, $0.27 - Preview
    • Flextronics Intl (FLEX) 4:01pm, $0.23
    • Fortinet (FTNT) 4:15pm, $0.14
    • Fortune Brands (FBHS) 4:01pm, $0.38
    • Hanesbrands (HBI) 4:01pm, $0.90
    • Idex (IEX) 4:35pm, $0.80
    • Intersil (ISIL) 4:05pm, $0.17
    • InvenSense (INVN) 4:05pm, $0.17
    • Lam Research (LRCX) 4:05pm, $1.03
    • Las Vegas Sands (LVS) 4:22pm, $0.84
    • Murphy Oil (MUR) 5:01pm, $1.18
    • Qiagen (QGEN) 4pm, $0.33
    • Qualcomm (QCOM) 4pm, $1.18 - Preview
    • ServiceNow (NOW) 4:01pm, $(0.02)
    • Symantec (SYMC) 4:01pm, $0.43
    • Tractor Supply (TSCO) 4:01pm, $0.65
    • Vertex Pharmaceuticals (VRTX) 4pm, $(0.56) - Preview


  • JPMorgan Said Near Decision on $2 Billion Commodities Unit Sale
  • WTI Slips From Four-Week High Before Supply Data, Fed Decision
  • Branson’s Butanol Heads to U.S. to Replace Ethanol: Commodities
  • Natural Gas Climbs for Second Day as Frigid Weather Sweeps U.S.
  • Copper Snaps 5-Day Drop as Turkey Raises Rates Before Fed Move
  • Cocoa Falls as ICCO Sticks to Shortage Forecast; Coffee Advances
  • Corn Drops First Time in Seven Days as Crop Prospects Improve
  • Gold Erases Decline in London, Following Gains in New York
  • Oilseed Harvest in India Heading for Three-Year High on Monsoon
  • Rebar Rises for First Time in Three Days on Production Cost Gain
  • Turkey Crisis Puts Jailed Millionaire at Heart of Gold Trail
  • Texas Vies With Saudi Arabian Oil in California Supply: Freight
  • Obama Touts Fracking Rule Opposed by Halliburton, Baker Hughes
  • California Farms Going Thirsty as Drought Burns $5 Billion Hole


























The Hedgeye Macro Team














Come To Me

This note was originally published at 8am on January 15, 2014 for Hedgeye subscribers.

“Come to me, that I may give your flesh to the birds…”



Allegedly, that’s what Goliath said to David, before taking a sling-shot rock to the melon – and dying, epically, in front of his fans circa 1000 BC. It probably felt something like how Captain Top Caller of the US stock market has felt now, for a year. #Boom


I got the quote from reading the 1st fifteen pages of Malcolm Gladwell’s latest pop culture book, David and Goliath. I’m only a third of the way through the book, but it gets pretty underwhelming after that. Malcolm’s bullish momentum has slowed.


“Should I play by the rules or follow my own instincts? Should I persevere or give up? Should I strike back or forgive?” (David and Goliath, pg 5). Irrespective of how the rest of his book goes, Gladwell’s opening questions spoke to me. In the arena that is Wall Street I’m a fighter, not a lover. Failing in front of my growing family and firm is not an option. I need to constantly evolve.


Back to the Global Macro Grind


Are there hard coded rules to risk management? Or should you have none and just trade on your emotions? Should we spend our days striking back at Mr. Macro Market’s real-time signals, or embrace them?


“When he first sees David, his first reaction is to be insulted, when he should be terrified. He seems oblivious of what’s happening around him.” (David and Goliath, pg 13) So, don’t be Goliath (especially if Mr. Macro’s real name is David; he’s everywhere).


I am just Mucker. I don’t tell the market to come to me. The market tells me where to go. And while I can be prickly and moody about it sometimes, I eventually obey.


BREAKING: “SP500 Has Year’s Biggest Gain On Retail Sales, Mergers” –Bloomberg


But, but… yesterday’s headline (the aforementioned one and it are still side by side in the “Most Popular” (most read) of said “SP500 Falls Most Since November Amid Valuation Concern.”


So which one is it? *hint (neither)


Macro markets don’t move that way. That’s because there usually is no single factor model (like “valuation”) that saves you from having to do the real work. That’s what macro is – history, math, and behavioral – and it’s one hell of a grind.


Not to pick on one of the Goliaths of financial market “news”, but US Retail Sales actually slowed, sequentially, to 0.2% in yesterday’s report – and that’s in line with the shift we have been calling for here in the USA as:


1. US Consumption Growth Slows from its Q313 sequential highs

2. US Inflation Expectations Rise from their Q413 sequential lows


Macro is obviously multi-duration and multi-factor, but focusing on the big stuff (Growth and Inflation) matters more than someone’s qualitative view about why someone failed at Brown (Gladwell’s book) or a magic multiple for stocks (Old Wall).


That’s just #history and #math. The more you study both, the more you realize you have to learn. Especially on the Correlation Risk (#math) front, you actually have to re-learn what #history may already be able to contextualize.


From a #behavioral perspective, how many market mavens have tied everything together for you in a baby blue Tiffany box? Our team is constantly searching for clues, correlations, and causalities on human behavior. Like markets, they evolve too.


What do you think matters more to macro markets, A) confidence or B) valuation. I’ll go with A).


Without confidence in:


1. Growth Accelerating (sustainably)

2. Inflation being under control (as opposed to what the government tells you it is)

3. The strength and credibility of a government’s balance sheet, income statement, and currency


You will not have sustainably strong equity market multiple.


That’s why the greatest threat to the US stock market is a reversal of what gave the market its first taste of multiple expansion in half a decade – a #Strengthening US Dollar, #GrowthAccelerating, #DeflatingTheInflation, and #Rates Rising.


Instead of reading the Bloomberg headlines, here’s what actually happened in the last 2 trading days:


1. SP500’s Biggest Down Day since NOV 7, 2013 = Dollar Down, Rates Down, Stocks Down

2. SP500’s Biggest Up Day of 2014 = Dollar Up, Rates Up, Stocks Up


So come to me #StrongDollar, or I will re-allocate capital to countries who don’t play by the rules of the Federal Reserve and a tired Western Keynesian academia. If this time is different, and I fail to evolve my positioning – may my flesh be fed to the birds.


Our immediate-term Macro Risk Ranges are now as follows (all 12 Macro ranges are in our Daily Trading Range product):


UST 10yr Yield 2.79-2.94%

SPX 1820-1848

DAX 9461-9624

Nikkei 15656-15997

VIX 11.84-13.42

USD 80.49-81.24


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Come To Me - Chart of the Day


Come To Me - Virtual Portfolio


In preparation for LVS FQ4 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.




  • We are targeting the late 2015 opening of our latest Integrated Resort



  • We're obviously happy with our win per unit at the margin driver there is the mass table business



  • We're still running 60%-plus margins in the premium mass segment.
  • As you know we're at $4.5 million a day. Our goal is to get to $5 million a day. 
  • So we're buying more rooms from the hotel and that may have an adverse effect, a point or two on the margins.



  • Raised our recurring dividend for the 2014 calendar year to $2 per share, an increase of 42.9% compared to the $1.40 recurring dividend we will have paid this year.
  • With $1.65 billion remaining under the term's stock repurchase authorization and in the future we expect to repurchase at least $75 million of stock per month.


  • For the first time we're getting strong results out of the premium mass segment.

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[video] McCullough: My Risk Signals on $AAPL

Holy Ugly, Batman!

Takeaway: If this is the best Adidas can come up with (while it loses market share and sponsorships to Nike and Under Armour) then they're in trouble.

Adidas - Rick Owens & Adidas partner on innovative women’s footwear 

  • "For Spring/Summer 2014, designer Rick Owens and Adidas collaborate to create an innovative women’s footwear silhouette which debuted at the Rick Owens Spring/Summer 2014 Women’s collection presentation during Paris Fashion Week."
  • "Subtle yet instantly iconic, the trainers display only the slightest hint of branding: a barely perceptible three-stripe perforation along the side."

Holy Ugly, Batman! - shoe2


Takeaway from Hedgeye Retail Analyst Brian McGough: We are the first to admit that when we think shoes are ugly, it probably means that they are going to be commercially relevant.  But get a load of these beauties which retail for $700. They are anything but 'subtle yet instantly iconic.'


This a small scale partnership between designer Rick Owens and Adidas and probably only made the headlines because they were featured in a Paris Fashion Week show. But if this is the best that Adidas can come up with, while it loses market share and sponsorships to Under Armour and Nike, then they are in for more trouble.

Join the Hedgeye Revolution.


Takeaway: Short the slots.

“Slot machines are a dying business,” says veteran Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan.


“They were insanely profitable for decades, but they’re dinosaurs now. Nobody plays them except for baby boomers.”


Jordan’s been pounding his investment thesis hard since October. He says this development poses an enormous problem for regional gamers and slot companies and has been advising subscribers to short vulnerable stocks in the space.


What’s happened since then?


Since he released his black book advising shorting International Game Technology (IGT) in the fall, shares of IGT have dropped 20%.


Meanwhile, Penn National Gaming (PENN) and Pinnacle Entertainment (PNK) have both plummeted around 20% since Jordan went on record on January 3rd then again on HedgeyeTV on January 9 advising subscribers to short the stocks.


Join the Hedgeye Revolution.

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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.