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    MARKET EDGES

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Client Talking Points

EURO

The risk range for the Euro is 1.23 to 1.25. The market is pricing in a potent dose of ECB President Mario Draghi drugs, but what if he doesn’t deliver? European (EuroStoxx 600) equities are overbought. France's unemployment rate accelerates to 10.4% - in case you didn’t know Draghi's drugs aren’t doing anything for the real economy.

YEN

The risk range for the Yen is 117.03 to 119.99, we signaled a buy for FXY (Yen) in Real-time Alerts yesterday. In the immediate term Japanese (Nikkei) equities are overbought and the Yen is oversold, the market is pricing in an ultra-smooth election bid for Abe.

OIL

If the Euro and the Yen bounce you could easily see the price of oil bounce. Watch for the counter-trend move here USD Down = Yen (and/or Euro) UP = Nikkei Down = Oil Up = High Short International Energy Stocks Up. The risk range for WTI Oil is 63.76 to 71.72.

Asset Allocation

CASH 63% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
EDV

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). U.S. real GDP growth is unlikely to come in anywhere in the area code of consensus projections of 3-plus percent. And it is becoming clear to us that market participants are interpreting the Fed’s dovish shift as signaling cause for concern with respect to the growth outlook. We remain on other side of Consensus Macro positions (bearish on Oil, bullish on Treasuries, bearish on SPX) and still have high conviction in our biggest macro call of 2014 - that U.S. growth would slow and bond yields fall in kind.

TLT

We continue to think long-term interest rates are headed in the direction of both reported growth and growth expectations – i.e. lower. In light of that, we encourage you to remain long of the long bond. The performance divergence between Treasuries, stocks and commodities should continue to widen over the next two to three months. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove. We certainly hope you had the Long Bond (TLT) on versus the Russell 2000 (short side) as the performance divergence in being long #GrowthSlowing hit its widest for 2014 YTD (ex-reinvesting interest).

XLP

The U.S. is in Quad #4 on our GIP (Growth/Inflation/Policy) model, which suggests that both economic growth and reported inflation are slowing domestically. As far as the eye can see in a falling interest rate environment, we think you should increase your exposure to slow-growth, yield-chasing trade and remain long of defensive assets like long-term treasuries and Consumer Staples (XLP) – which work decidedly better than Utilities in Quad #4. Consumer Staples is as good as any place to hide as the world clamors for low-beta-big-cap-liquidity.

Three for the Road

TWEET OF THE DAY

Seems like Western Canadian oil sands and LNG projects are the first ones feeling the heat with lower prices. COS cuts its div. nearly 50%

@Hedgeye_Comdty

QUOTE OF THE DAY

Winners make commitments, losers make promises.

-Anonymous

STAT OF THE DAY

Purchase demand rose +2.5% week-over-week and the year-over-year rate of decline improved to -4.9% from -11% prior as the index held above the 170-level for the 3rd straight week – the longest streak at that level since June.