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“Nothing entirely disappears in history.”
But the US stock market’s volume in the last 5 trading days almost has…
#History, as eloquently defined by T.J. Stiles in The First Tycoon – The Epic Life of Cornelius Vanderbilt, is “threads of tattered old fabric – especially social fabric – ever woven into new tapestries.” (pg 79)
Especially on the Old Wall, what’s stale to you and I eventually becomes the new. More commonly called consensus, it’s the art of front-running storytelling that makes us money. No pattern of predictable market behavior entirely disappears; especially with the benefit of looking in the rear-view mirror.
Back to the Global Macro Grind…
So let me tell you a story this morning about Vanishing Volume. As with any good story, you need a good headline. After I effectively failed my first creative writing course in New Haven, a nice young professor taught me alliteration. Two v’s. Yep, so easy a Mucker can do it.
What’s not easy for the financial media to tell you are original content stories that require a basic level of algebra and a contextual overlay (you know, something like, say, a time series… so that you can see something meaningful, like the rate of change).
Usually, it’s easier to show these historical matters in pictures. So, instead of reading my rant, you can just skip to Christian Drake’s Chart of The Day and get the point. What we’re showing you here is the lack of buying conviction (i.e. total US equity market volume, across all exchanges):
Fair enough. Since it feels like half of America took the day off again yesterday, you can accuse me of cherry picking that one nasty day of no-volume. So I’ll broaden my horizons to the last 5-days. UP day volume was -14% versus the average.
Now, if you only use a Moving-Monkey (more commonly called a simple 50 or 200 day moving average), you don’t care about risk factors like this. Single-factor (price only) models are point and click. My 6yr old can do it on Yahoo Finance. No underneath the hood analysis of volume or volatility required.
In my process (studying fractal patterns, returns, draw-downs, etc. of US stocks), using a multi-factor model is critical. And to be clear, it’s not that I have anything against monkeys… I used to use those things too (newsflash: they don’t work).
What’s the alternative? As a basic predictive signal, what works?
And really bad if you go all multi-duration and cross-asset-class (more factors) in your analysis!
So let’s go there.
I can keep going deeper and delve into the depths (more alliteration – see, I can do this without Janet – Yes I Can!) of the non-linear ecosystem that is the Global Macro Market – but I will not… because every good line of storytelling needs to simplify the complex.
What will be extra complex is seeing how Goldman and Credit Suisse explain their “buy Facebook (FB)” call from yesterday if my WhatsApp! man Zuck doesn’t deliver the 14x revenue bacon tomorrow. As for the buy Apple (AAPL) ahead of the quarter thing, that’s not how I roll.
I’m a macro man, so my main focus into and out of earnings events will be how the bubbles (Biotech and Social Media) trade after making lower-highs on lower-volumes. Biotech (IBB) was +2.3% yesterday but remains below @Hedgeye TREND resistance.
Oh, and Housing stocks (ITB) made fresh 2014 lows yesterday (-5.3% YTD), but let’s not story-tell about vanishing housing demand (while rates are falling) until tomorrow…
Our immediate-term Global Macro Risk Ranges are now (12 Big Macro ranges in our Daily Trading Range product):
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
TODAY’S S&P 500 SET-UP – April 22, 2014
As we look at today's setup for the S&P 500, the range is 53 points or 2.02% downside to 1834 and 0.81% upside to 1887.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH:
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
In preparation for IGT's F2Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.
FQ2 CONSENSUS ESTIMATES
The table below lists our current investment ideas as well as a list of potential ideas we are in the process of evaluating (watch list). We intend to update this table regularly and will provide detail on any material changes.
Consumer Staples mildly underperformed the broader market last week, rising 1.5% versus the S&P500 at 1.7%. XLP is up 1.5% year-to-date vs the SPX at 0.9%; the coming week is marked by a number of earnings releases.
Earnings Calls (in EST):
Monday (4/21): KMB (10am)
Wednesday (4/23): PG (8:30am); RAI (9am); TUP (10am); DPS (11am)
Thursday (4/24): HSY (8:30am); MO (9am); MJN (9:30am); CCE (10am); LO (1pm)
Friday (4/25): CL (11am)
For a seventh straight week, 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.
The Hedgeye U.S. Consumption Model shows a worsening outlook over recent weeks, with only 3 of the 12 metrics flashing green.
Despite the bullish quantitative set-up for the sector, we continue to believe that the group is facing numerous headwinds, including:
Top 5 Week-over-Week Divergent Performances:
Positive Divergence: SAFM 6.1%; POST 5.7%; MNST 5.5%; NUS 4.9%; KO 4.7%
Negative Divergence: HLF -7.9%; AVP -2.9%; CCE -1.7%; SAM -1.2%; PM -0.4%
Last Week’s Research Notes
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 – the King of chasing low-beta-slow-growth-yield is back! Confirmed now for almost a month, BUD is back above its TREND line of $105.48
DEO – is not the King of Beers – still bearish TREND @Hedgeye with $129.34 resistance
KO – big move on a big price/volume breakout last week; KO back above its $39.59 TREND line
PEP – bullish TREND support of $83.14 confirmed last week on a big price/volume move out of earnings
GIS – still bullish TREND with $50.21 TREND support
MDLZ – hanging onto TREND support of $34.45 – needs to start confirming some higher-highs soon though
KMB – still the best looking stock on this list YTD – low volatility ramp to higher-lows and higher-highs w/ TREND support down at $107.23
PG – got slow-growth-dividend-yield chasing in that portfolio? The machines are clamoring for those style-factors now; what was TREND resistance of $80.31 is now support
MO – raging low-beta bull roaring now! TREND support = $35.68
PM – slow-growth-yield-chasing even gets assigned to what’s been a dog – bullish TREND now if $82.13 support holds
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.