Just Charts: XLP Screens Bullish, Wk 2

Consumer Staples markedly outperformed the broader market last week, falling -0.2% versus the S&P500 at -2.0%. And for a second week, the XLP is bullish on immediate term TRADE and intermediate term TREND durations from a quantitative set-up. This is a material shift as the sector traded bearish TRADE and TREND for the majority of the year-to-date.


Just Charts: XLP Screens Bullish, Wk 2 - chart12


The Hedgeye U.S. Consumption Model is also showing improvement, with 6 of the 12 metrics flashing green.

Just Charts: XLP Screens Bullish, Wk 2 - chart11


Despite an improved outlook for the sector, we continue to believe that the group is facing numerous headwinds, including:

  • U.S. consumption growth is slowing as inflation rises, in-line with the Macro team’s 1Q14 theme of #InflationAccelerating
  • The economies and currencies of the emerging market – once the sector’s greatest growth engine – remain weak with the prospect of higher inflation in 2014 eroding real growth
  • The sector is loaded with a premium valuation (P/E of 19.2x)
  • Less sector Yield Chasing as Fed continues its tapering program
  • The high frequency Bloomberg weekly U.S. Consumer Comfort Index has not seen any real improvement over the past 6 months, but expanded to -27.6 versus -28.5 in the prior week

Just Charts: XLP Screens Bullish, Wk 2 - chart13
Just Charts: XLP Screens Bullish, Wk 2 - chart14


There will be a number of consumer staples companies presenting at CAGE today – March 19th. Click here for the program


Our Best Idea in the sector remains Lorillard (LO). Please email me at if you’d like a copy of the presentation and to listen to the podcast from March 4th.   


Matt Hedrick

Food, Beverage, Tobacco, and Alcohol


Howard Penney

Household Products





Quantitative Setup


In the charts below we look at the largest companies by market cap in the Consumer Staples space from both a quantitative perspective and fundamental aspect where we can offer one.  As you will see over time, sometimes our fundamental view does not align with the quantitative setup (though not often).

BUD – I’ll have another round of bearish BUD beta please! Didn’t take much for this stock to revert squarely back into its Bearish Formation @Hedgeye – TREND resistance = $102.79
Just Charts: XLP Screens Bullish, Wk 2 - chart1

DEO – looks worse than BUD, but both are bearish TREND @Hedgeye with DEO’s TREND resistance firmly intact up at $126.82
Just Charts: XLP Screens Bullish, Wk 2 - chart2

KO – only rallied when the market did, then failed @Hedgeye TREND resistance ($39.58) as the market failed to make new highs
Just Charts: XLP Screens Bullish, Wk 2 - chart3

PEP – looks better than KO primarily because its trading above TREND support of $80.41, albeit barely
Just Charts: XLP Screens Bullish, Wk 2 - chart4

GIS – big correction on a big volume signal late last week; watch TREND support of $49.31 very closely
Just Charts: XLP Screens Bullish, Wk 2 - chart5

MDLZ – still bullish TREND @Hedgeye as long as $33.62 holds
Just Charts: XLP Screens Bullish, Wk 2 - chart6

KMB – still the best looking quantitative setup on this list. We call this a Bullish Formation as it continues to signal a series of higher-lows and higher-highs with TREND support down at $105.95
Just Charts: XLP Screens Bullish, Wk 2 - chart7

PG – having a tough time challenging TREND resistance of $80.56; if it continues to fail there, we’ll remain bearish
Just Charts: XLP Screens Bullish, Wk 2 - chart8

MO – making a serious comeback from the FEB lows; we call this a bearish to bullish TREND reversal @Hedgeye with what was TREND resistance now support at $35.66
Just Charts: XLP Screens Bullish, Wk 2 - chart9

PM – still the dog breath setup of the group; looks nothing like MO as its well below its $83.05 TREND resistance line
Just Charts: XLP Screens Bullish, Wk 2 - chart10

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more