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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – August 28, 2014


As we look at today's setup for the S&P 500, the range is 28 points or 0.76% downside to 1985 and 0.64% upside to 2013.                                                           

                                                                    

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.83 from 1.85
  • VIX closed at 11.78 1 day percent change of 1.29%

 

MACRO DATA POINTS (Bloomberg Estimates) 

  • 8:30am: GDP Annualized, 2Q revised, est. 3.9% (prior 4%)
  • 8:30am: Initial Jobless Claims, Aug. 23, est. 300k (pr 298k)
  • 9:45am: Bloomberg Consumer Comfort, Aug. 24 (prior 36.6)
  • 10am: Pending Home Sales m/m, July, est. 0.5% (prior -1.1%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: Kansas City Fed Mfg Activity, Aug., est. 7 (prior 9)
  • 11am: U.S. to announce plans for auction of 3M/6M bills

 

GOVERNMENT:

    • Senate, House out on August recess
    • Federal Deposit Insurance Corp releases quarterly report on bank earnings
    • 12pm House Dem. Leader Nancy Pelosi press conf. call on women’s agenda, including equal pay legislation

         

WHAT TO WATCH:

  • Russian hackers said to attack 5 banks seeking customer data
  • U.S. sees Russia directing rebel counteroffensive in Ukraine
  • Lagarde to explain her role in French legal case to IMF board
  • Boeing, Airbus vying for $2b order from India’s Air One
  • Goldman cedes NYSE post as speed traders seize stock floor
  • Telefonica lifts GVT bid to $9.8b to rival Telecom Italia
  • Dollar General reports earns; Family Dollar deal a focus
  • Paramount said to plan $2.5b IPO in biggest REIT offering
  • Google extends local advertisements on smartphones to desktops
  • Ford begins production of first Mustang to be sold worldwide
  • Glaxo’s Ebola vaccine set to begin tests in humans next week
  • Sands sues brother of trader in Chinese probe over casino debt
  • Wal-Mart’s Massmart profit plunges on weaker S. Africa spend
  • CSR rejects Microchip approach; says is considering options
  • Spain growth picks up as consumer prices drop most since 2009
  • TripAdvisor to begin trading on Nasdaq today under TRIP
  • Tel Aviv switch to Mon.-Fri. trading backed by TASE brokers

 

AM EARNS:

    • Abercrombie & Fitch (ANF) 7:30am, $0.11 - Preview
    • CIBC (CM CN) 6am, C$2.21 - Preview
    • Coty (COTY) 6:30am, $0.05
    • Dollar General (DG) 7am, $0.83 - Preview
    • Genesco (GCO) 7:28am, $0.55
    • Hanwha SolarOne (HSOL) 6am, no est.
    • Laurentian Bank of Canada (LB CN) 8:33am, C$1.40 - Preview
    • Pall (PLL) 7am, $1.06
    • Signet Jewelers (SIG) 7am, $0.98
    • Toronto-Dominion Bank (TD CN) 6:30am, C$1.09 - Preview

 

PM EARNS:

    • Avago Technologies (AVGO) 4:05pm, $1.05
    • OmniVision Technologies (OVTI) 4:18pm, $0.53
    • Pacific Sunwear (PSUN) 4pm, $(0.03)
    • Splunk (SPLK) 4:02pm, $(0.02)
    • Veeva Systems (VEEV) 4:02pm, $0.07

               

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • WTI Declines as Crude Stockpiles Expand at Cushing; Brent Steady
  • Gold-Price Indicator Fades as ETPs Lose $71 Billion: Commodities
  • Commodity Income at Top 10 Banks Seen Climbing 21% in First Half
  • New Ship Rules Come Amid Worst Barge Spills Since 2008: Freight
  • Aluminum Advances for Fourth Day as LME Stockpiles Decline
  • Sugar Rises in New York on Brazil Supply Outlook; Coffee Falls
  • China Commodity Buyer Changhua Says Banks Resume Credit Line
  • Congo Copper Shipments Halt as Botswana Bars Entry to Stem Ebola
  • Rubber in Tokyo Falls on Yen as Thai Price Slumps to 5-Year Low
  • Palm Oil Climbs From Five-Year Low on Chinese Demand Outlook
  • Cotton Seen Dropping to Lowest Since ’09 by Gap’s Indian Partner
  • Drier Sept.-Nov. Seen for Parts of Southeast Australia: Bureau
  • Glencore Says Company is Preferred Proponent for Bauxite Project
  • Modi’s Faster Green Permits Seen Fueling Growth: Corporate India

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


August 28, 2014

August 28, 2014 - Slide1

 

BULLISH TRENDS

August 28, 2014 - Slide2

August 28, 2014 - Slide3

August 28, 2014 - Slide4

August 28, 2014 - Slide5

August 28, 2014 - Slide6

August 28, 2014 - Slide7

 

BEARISH TRENDS

August 28, 2014 - Slide8

August 28, 2014 - Slide9

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August 28, 2014 - Slide11
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August 28, 2014 - Slide13


Cartoon of the Day: All Time SPY-Highs

Cartoon of the Day: All Time SPY-Highs - Waiting bear 08.27.2014

 

Keith McCullough wrote in today's Morning Newsletter, "While the stock, bond, and commodity market bubbles have all had different narratives, one thing is not different – prices go up, then down, a lot."

 

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Shorting France (EWQ)

Investment Recommendations:  short France (EWQ),  EUR/USD (FXE) and Eurozone equities (EZU);   Long GBP/USD (FXB)

 

This morning Keith added a short signal in France (via the etf EWQ) to our Real-Time Alerts.  We’ve been waiting for an entry point on European equities, with major indices broken TREND for nearly two months in our model. We were afforded the opportunity today with ~ 50bp bounce in the EWQ as the CAC remains broken TREND and fundamentals support economic weakness ahead.

Shorting France (EWQ) - vv. cac

 

As Keith notes in the Real-Time Alert update:

 

“I make a lot of mistakes. One of them that I didn't make was re-shorting European Equities too early on the no-volume bounce. One big mistake I think the European Equity bulls are about to make is thesis drift. I don't know one PM who got long Europe because they thought European growth would slow and that the market would need another QE.  Time to sell the most socialist of European economies, France.”

 

While we are closely following the Draghi Card, namely the pull-forward expectations of QE that he sent to the market in his Jackson Hole commentary (for more see Draghi Trumps Yellen’s Dovishness – Sticking with the Playbook), our call is simply that we do not see growth accelerating in Europe, and right here and now are not getting long equities simply on the prospect of QE.  Instead we’re getting short a weak horse in the region, France. 

 

Here’s our near term set-up on the region:

  • Process:  our TREND lines across major European indices remain broken = we’ll maintain a bearish bias on the equities
  • Friday’s CPI Print:  we expect Eurozone CPI (released at 5am EST this Friday) to tick down 10bps to 0.3% -- expect heightened investor expectations that Draghi needs more “powder” to revert falling inflation, however we do not see Friday’s print as the catalyst to issue QE at the September 4th ECB meeting
  • September 4th ECB Meeting:  we expect updated ECB staff projections to show downward revisions to growth and inflation. Draghi will “push” the growth and inflation prospects from TLTROs and QE-lite (ABS buying) programs in his commentary (although we are not buying it), and will leave QE in his back pocket

Weak Growth And Weakening. Last week’s Eurozone Q2 GDP print confirmed massive slowing for the region to 0.0% Q/Q (vs 0.2% prior) and 0.7% Y/Y (vs 0.9% prior) – and while both France and Germany slowed, our call is that France will underperform its main peer in the quarters ahead. Here’s the Q2 divergence:

 

France  0.0% Q/Q (0.1% est.) vs. 0.0% prior

France  0.1% Y/Y (0.3% est.) vs. 0.7% prior (0.8% revised)

 

Germany  -0.2% Q/Q (-0.1% est.) vs. 0.8% prior

Germany  1.3% Y/Y (1.4% est.) vs. 2.2% prior

 

Supportive of today’s call is also survey data out that showed France Business Confidence declining in the August figure, its 4th straight month of declines; PMI Services and Manufacturing data that has shown France squarely underperforming the region since 2012 (largely below the 50 line indicating contraction); record-high jobless numbers; a 16-year low in housing starts; weak industrial production; low inflation (+0.5% Y/Y); and government bond yields falling steadily (down -1.2% Y/Y).

Shorting France (EWQ) - vv. businss conf france

Shorting France (EWQ) - vv pmis

Shorting France (EWQ) - vv. yields

 

Politically Weak.  Just two weeks ago France’s government cut its GDP forecast in half (again) to 0.5% (from 1.0%) for 2014 and it will likely miss its FY deficit target of 4%.  News this week of President Hollande reshuffling his government (after Economy Minister Arnaud Montebourg stepped down on Monday), is confirming evidence to us that the policies of Hollande’s government are not on track to return growth to the economy over the medium term. That Hollande himself is wildly unpopular, with a paltry approval rating of 17%, furthers the outlook that the government’s pledge that the “recovery is there” is grossly disingenuous. 

 

Matthew Hedrick
Associate

 


Stay Far Away From Burger King, BK Looking to Tim Hortons to Bail Them Out Via 'Enrichment Scheme'

Takeaway: 5 words from Hedgeye's Howard Penney: Stay away from Burger King.

Hedgeye managing director and restaurants analyst Howard Penney was interviewed by BNN earlier today and explained why he believes owning Burger King is a big mistake for investors. Penney says 'Burger King is looking to Tim Hortons to bail them out of a bad situation.

 

Stay Far Away From Burger King, BK Looking to Tim Hortons to Bail Them Out Via 'Enrichment Scheme' - hp3

Click here to watch the full interview.

 

 


Investing Ideas - Levels

Takeaway: Here are Hedgeye CEO Keith McCullough's refreshed levels for our high-conviction investing ideas.

Investing Ideas - Levels - LEVELS

Trade :: Trend :: Tail Process - These are three durations over which we analyze investment ideas and themes. Hedgeye has created a process as a way of characterizing our investment ideas and their risk profiles, to fit the investing strategies and preferences of our subscribers.

  • "Trade" is a duration of 3 weeks or less
  • "Trend" is a duration of 3 months or more
  • "Tail" is a duration of 3 years or less

Anything longer than 3 years is unpredictable.

 


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