TODAY’S S&P 500 SET-UP – February 11, 2014

As we look at today's setup for the S&P 500, the range is 80 points or 3.66% downside to 1734 and 0.79% upside to 1814.                                                










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.37 from 2.36
  • VIX  closed at 15.26 1 day percent change of -0.20%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:30am: NFIB Sm. Biz Optimism, Jan., est. 93.5 (prior 93.9)
  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 9am: Fed’s Plosser speaks in Del.
  • 10am: JOLTs Job Openings, Dec. (prior 4.001m)
  • 10am: Wholesale Inventories m/m, Dec., est. 0.5% (pr 0.5%)
  • 10am: Fed’s Yellen testifies to House Fin. Services Cmte
  • 4:30pm: API weekly oil inventories
  • 8pm: Fed’s Lacker speaks at Stanford University
  • 8pm: Fed’s Fisher speaks in Dallas


    • 9am: Obama and Hollande hold state arrival ceremony, 9am; State dinner begins 8:30pm
    • 10:15am House Ways and Means Committee marks up H.R. 3865 which would delay IRS rules on 501(c)(4) organizations
    • 10:30am Senate Budget Cmte hears from CBO Director Douglas Elmendorf on economic outlook through 2024
    • House Republicans plan Feb. 12 vote to boost debt limit until March 2015, restore cost-of-living raises for military retirees


  • Fed’s Yellen testifies to House Financial Services Cmte
  • KKR to close two funds targeting individual investors
  • Obamacare delayed until 2016 for businesses w/ <100 workers
  • Ackman sells General Growth shrs to exit holding in mall owner
  • Barclays to cut up to 12,000 jobs as 4Q profit falls
  • L’Oreal to pay $8.2b to buy back 8% of its stock from Nestle
  • Blankfein says EMs in better position than during 1998 crisis
  • SEC majority wants to review exchanges’ oversight status
  • GM’s China sales rise 12% to record in January on Buick demand
  • General Motors to invest 1.5b Zloty in Polish plant: Dziennik
  • Porsche to exceed 200,000 in deliveries in 2015 on Macan
  • Wall St. vets may be removed from arbitration panels: Reuters
  • North Carolina agency may delay own deal with Duke Energy: AP
  • Virgin America said to pick Barclays, Deutsche for IPO: FT
  • Glencore Xstrata’s 4Q copper output increases 32%
  • China auditors plan to file appeal of 6-month U.S. ban


    • CAE (CAE CN) 8:22am, C$0.18
    • CVS Caremark (CVS) 7am, $1.11 - Preview
    • Dean Foods Co (DF) 7:01am, $0.18
    • Entergy (ETR) 7am, $0.83
    • HCP (HCP) 8am, $0.56
    • Health Net/CA (HNT) 8:15am, $0.29
    • Henry Schein (HSIC) 7am, $1.40
    • Huntsman (HUN) 6am, $0.37
    • Ingersoll-Rand PLC (IR) 7am, $0.61
    • IntercontinentalExchange Group (ICE) 7:30am, $1.95
    • LPL Financial Holdings (LPLA) 6:05am, $0.59
    • Marsh & McLennan Cos (MMC) 7am, $0.56
    • Mosaic (MOS) 7am, $0.43
    • National Retail Properties (NNN) 8:30am, $0.28
    • Omnicom Group (OMC) 7am, $1.14 -
    • PG&E (PCG) 9:02am, $0.42
    • Regeneron Pharmaceuticals (REGN) 6:30am, $2.09 - Preview
    • Reynolds American (RAI) 6:58am, $0.80 - Preview
    • Sprint (S) 7am, ($0.36)
    • Zoetis (ZTS) 7am, $0.34


    • Arch Capital Group (ACGL) 4:01pm, $0.96
    • Brookfield Residential Properties (BRP CN) 4:09am, C$0.84
    • CNO Financial Group (CNO) 4:03pm, $0.29
    • Conversant (CNVR) 4:02pm, $0.57
    • Covanta Holding (CVA) 4:01pm, $0.22
    • DaVita HealthCare Partners (DVA) 4:01pm, $0.98
    • Energen (EGN) 4:30pm, $0.82
    • FireEye (FEYE) 4:05pm, ($0.37)
    • Fossil Group (FOSL) 4:01pm, $2.43
    • Packaging of America (PKG) 5pm, $0.89
    • PHH (PHH) 4:03pm, $0.08
    • Sangamo Biosciences (SGMO) 4pm, ($0.11)
    • Seattle Genetics (SGEN) 4:05pm, ($0.24) - Preview
    • Service International (SCI) 4:05pm, $0.24
    • Trimble Navigation (TRMB) 4:05pm, $0.37
    • TripAdvisor (TRIP) 4pm, $0.21
    • Western Union Co (WU) 4:01pm, $0.32
    • Willis Group Holdings PLC (WSH) 4:41pm, $0.49


  • Natural Gas Rebounds From Three-Week Low on U.S. Winter Storm
  • Gold Advances to Highest Price Since November as Dollar Weakens
  • Rhodium Bust Ending as Car Sales Fuel Mine Deficit: Commodities
  • Sugar Traders Split as Brazil Dryness Weighed Against Surpluses
  • Aluminum Trades Near a One-Week High Before Yellen Testimony
  • Rebar Touches 17-Month Low as Inventory Gains After Holiday
  • Soybeans Extend Losses After USDA Raises Global Supply Outlook
  • China Eyes Poultry Consolidation as Bird Flu Cuts Consumption
  • Wheat Crop Seen Third-Biggest by Australia on Western Supply
  • California Wildfires Erupt Early in Risk to Homes and Vineyards
  • Transnet Fights BHP to Win Coal Port Access for Black Miners
  • Strong Chinese Steel Demand May Fail to Absorb Iron Ore Glut
  • Chinese Coal Firms’ Debt Concerns Sink Shares: Chart of the Day
  • WTI Trades Near Six-Week High as U.S. Fuel Supplies Seen Falling


























The Hedgeye Macro Team














February 11, 2014

February 11, 2014 - Slide1 


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February 11, 2014 - Slide11
February 11, 2014 - Slide12



Chinese New Year (CNY) is off to a great start for the Macau casinos following a softer than expected January (hold issues in Jan?).  Daily table revenues averaged $1.464 billion, up 78% over comparable period last year.  The more appropriate comp is 3rd week of February last year when table revs averaged HK$1.107 billion – so peak CNY is up about 32%.  We should see one more week of fairly strong revenues related to the CNY celebration before the seasonal slowdown.  All in, we continue to project February YoY growth of around 20%, which could prove conservative.


For market shares, LVS is crushing it this month with MTD market share well ahead of trend as is Galaxy.  Those market share gains are coming at the expense of SJM, MGM, and MPEL.  While variances from normal hold are no doubt causing most of the share volatility this early in the month, we expect LVS primarily and Wynn secondarily, to be volume share gainers, with LVS showing the longer tail.  Indeed, the anecdotal feedback from the ground suggests terrific volumes at the LVS Cotai properties.





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.

Silent Apprehension

This note was originally published at 8am on January 28, 2014 for Hedgeye subscribers.

“Wall St. was a street of vanished hopes, or curiously silent apprehension, and a sort of paralyzed hypnosis.”

-New York Times


Imagine that was the header for @NYT on the eve of America’s central economic planner in chief’s State of The Union. Newsflash: it’s not. That was the front page of the New York Times on the day after the 1929 US stock market crash.


John Coates cites the aforementioned headline in chapter 1 (The Biology of a Market Bubble) of The Hour Between Dog and Wolf and goes on to remind us that “research on body-brain feedback, even within physiology and neuroscience, is relatively new.” (pg 28).


So how are you feeling this morning? While you know that hope is not a risk management process, apprehension and paralysis are all part of the game. While it’s hard to sell`em on green and buy`em on red, fading your emotional state is often the precise action to take.


Back to the Global Macro Grind


I don’t know about you, but in the heat of the decision making moment I fade how I feel about markets a lot. Through 15 years of trial and error, I’ve learned to increasingly rely on multi-factor, multi-duration, risk management signals amidst the research noise.


Since I don’t have a dog (or wolf) in the fight in marketing a perma bullish or bearish position, I use the TRADE versus the TREND in order to tone down my testosterone. Yep, I’m a dude – keeping that under control matters!


To review our process lingo:

  1. TRADE is 3 weeks or less in duration
  2. TREND is 3 months or more in duration

The reason why I use “more” or “less” is because time in my model (days) varies inversely with volatility. In other words, if front-month volatility ramps +50% in a week, the number of days in my TRADE model falls, fast – and, if implied volatility (looking out on the curve) doesn’t confirm that immediate-term information surprise, I keep an above average amount of duration (time) in the TREND model.


That may or may not make sense to you. So to put it more simply:

  1. When both front-month and implied volatility are signaling lower-highs and lower-lows, a monkey can buy stocks
  2. When both front-month and implied volatility move from bearish to bullish TRADE and TREND, monkeys get killed

Momentum monkeys, I mean.


I know, I know. Every time I call someone a monkey, I trigger an emotional response. But, please, don’t be offended. I am a monkey too – I’m just one that tends to learn from the cage door being slammed on my fingers.


Volatility, of course, is the #1 risk factor that every major fund manager who has fallen from grace has messed up. Even the world’s best messed this up in bonds last June. Many more have already messed this up in Japanese and Emerging Market Equities YTD.


This is basically why I completely disagree with the concept of being an active “long-term investor” who doesn’t use an implied volatility risk management overlay. While it would be nice to wake up to sun and bananas at the zoo every day, reality is that every once in a while a storm rips the cages open and the tigers, who have been putting up with monkey-bull chirping for a year, are hungry.


Back to the actual levels, to keep this simple, let’s just focus on the inverse relationship between the SP500 and VIX:

  1. TRADE – SPX 1837 momentum support broke as 13.81 VIX resistance became immediate-term support
  2. TREND – SPX 1779 support was tested intraday yesterday (and held), but VIX 14.91 TREND is firmly intact

And here Mucker the monkey was covering oversold shorts (and buying one long, LVS) into the close as 1779 SPX held (which would be called a high-probability gamble - dealer shows a 6 in #BlackJack)… and the minute I saw Apple (AAPL) guide down, I thought it was going to be a gamble I’d pay for today (and deserve it).


But, the US Equity Futures are up 8-10 handles and I’ll play lucky on the open today instead. I won’t, however, confuse that with the next leg up in this market ripping to fresh all-time highs. Provided that 1837 SPX TRADE resistance and 14.91 VIX TREND support remain intact, I’ll be a seller again this morning on green (like we were in #RealTimeAlerts on the open yesterday).


I know that playing the game across durations isn’t for everyone. But this is what I do. And I like it. I can assure you that the longest of “long-term” investments you can ever make is starting your own company with all of your own money. And for me at least, that investment requires absorbing 24/7 risk management, apprehension, and pain – if you want the long-term to last longer, that is.


Our immediate-term Global Macro Risk Ranges are now (12 Big Macro Ranges are in our Daily Trading Range product):


SPX 1758-1822

VIX 14.91-20.41

USD 80.18-80.79

Pound 1.64-1.66 (bullish)

NatGas 4.58-5.15

Gold 1240-1272


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Silent Apprehension - Chart of the Day


Silent Apprehension - Virtual Portfolio


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




  • Since we rolled this out to 100% of our traffic in early June, we've driven more clicks per meta session and better downstream partner conversion, and although pricing remains choppy, we've seen a modest uptick in meta revenue per session. We continue to work on improving onsite and partner conversion, running multiple tests every week, and we expect more gains in this area.
  • We'll have lapped the transition completely by the end of Q2 next year, and so the whole transition piece will be behind us and it will be continued growth based on our hotel shopper numbers, and the rest of our ongoing conversion improvements that we work on every week.
  • For partners, coverage is strong and bidding frequency is up.


  • According to Skift, Tripadvisor halted its TV campaign in the US market in January.
  • We are seeing some positive signs from this campaign, but it is too early to gauge the overall effectiveness.
  • We spent a couple of million in Q2, maybe a couple of million more at the end of September Q3 when we launched the campaign. And by the time Q4 finishes, we'll probably have spent close to $30 million or so.
  • We wanted to go heavy in order to be able to detect a lift that we felt comfortable that we could correlate with the specific TV spend. And we've been in market a lot in October and that will continue in November as well. And I'll report back in early Q1 with a more definitive, hey look, this is what we've learned from everything we were doing in TV.
  • Argentina is a relatively small market for us, so we thought we would be able to see it a stronger signal for the TV spend. France and Spain, key European markets for us. Picked two as opposed to going broad based and the U.S. is home market where we have the most traffic, hey, will we be able to see the results that we're looking for.


  • Sort of 2014 and if you look at how TripAdvisor historically delivers projects, it's perhaps we're known as faster than some other companies. I think earlier part of 2014 than later part of 2014 because it is kind of the next best thing we feel we can do on the mobile front. We have a lot of installs. We're still pre-installed on Samsung S4. We've got new native apps, Android and iPhone, that just rolled out, nice engagement we're seeing on both of those, but we're missing that booking functionality, so that's the clear next phase for our mobile strategy.


  • So meta over and done with (mid-2014), mobile less of a headwind. In international, will remain a bit of a headwind. Hopefully, we can acknowledge that as an ongoing headwind, but make it up elsewhere in the company as we improve our overall monetization of the site.


  • Our brand strength and our conversion numbers in the U.K. is outstanding, arguably sort of best in the world, and Brits like to travel a lot, so that's good for us; Australia is a pretty strong market for us; Japan has some structural weaknesses in terms of the commission rates that the local players are able to collect on hotels. And so, when the local OTA isn't making as much money on the bookings, they can't pay us as much, but we continue to grow in all of our markets. Europe, the Northern European markets are better than the Southern European markets. I don't think that has anything to do with TripAdvisor per se. I just think that's the macroeconomic climate for all travel providers.


  • We view it as a tremendous market. We still continue to invest in China, and so we still have a couple of points-of-sale that are growing in China. We like the investment, we're well positioned for the future, we're not commenting on the overall timeframe when that turns profitable, but it positions us well down the road with that growing market or worse comes to worse, we could curtail our investments and take those dollars and put them elsewhere.

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