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TODAY’S S&P 500 SET-UP – December 10, 2014

As we look at today's setup for the S&P 500, the range is 32 points or 0.82% downside to 2043 and 0.74% upside to 2075.                                                   













  • YIELD CURVE: 1.60 from 1.60
  • VIX closed at 14.89 1 day percent change of 4.79%


MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Dec. 5 (prior -7.3%)
  • 10:30am: DOE Energy Inventories
  • 11:15am: Bank of Canada’s Poloz news conference in Ottawa
  • 1pm: U.S. to sell $21b 10Y bills in reopening
  • 2pm: Monthly Budget Stmt, Nov., est. -$65b (pr -$135.226b)



    • 9am: FDIC Systemic Resolution Advisory Cmte meeting on resolution of systemically important financial companies
    • 9:30am: House Oversight subcommittee on energy policy holds hearing on EPA’s management of Renewable Fuel Standard
    • 10am: Senate Banking Cmte hearing on cybersecurity for financial sector
    • 10am: Senate Agriculture Cmte hears from Commodity Futures Trading Commission Chairman Timothy Massad on derivatives regulation
    • 10am: House Foreign Affairs Cmte hears from Brett McGurk, U.S. representative to global coalition to counter Islamic State
    • 10am: House Transportation and Infrastructure subcommittee on aviation hearing on unmanned aircraft systems
    • 10:15am: House Energy and Commerce’s Health Subcmte hearing on FDA role in regulating genetically modified food ingredients
    • 2:30pm: Senate Judiciary Cmte hearing on President Obama’s orders on immigration



  • Global Airlines to Make Record Profit in 2015, IATA Says
  • JPMorgan Is Seen Needing >$20b for Fed’s New Capital Rules
  • Costco 1Q EPS Beats Estimates on Same-Store Sales Bounce
  • Santander Isn’t Weighing Buyout of U.S. Auto Unit
  • N.Y. Supervised Banks to Face Tougher Cyber Security Tests: FT
  • Honda Stops Sale of Acura Sedan in U.S. in Latest Quality Fault
  • Abercrombie Buyout No Longer Off Limits After CEO Exit
  • Woodside Preferred Bidder for Apache Assets, Australian Says
  • RBS Said to Exit Japan Fixed-Income Trading With 200 Jobs Cut
  • CIBC Said to Mull Offer for LSE’s Russell Asset-Management Unit
  • Hong Kong Protesters Dismantle Tents Before Police Clear Streets
  • Netflix CEO Says Broadcast TV To Last Another 16 Yrs
  • Crude Resumes Slump as Iran Sees $40 If OPEC Solidarity Breaks
  • Kepler Sees Early 2015 as Transition Period for Equities
  • Ferrari Said to Consider Moving Fiscal Residence Outside Italy



    • Ferrellgas Partners (FGP) 7am, ($0.25)
    • Francesca’s (FRAN) 7:30am, $0.17
    • Hovnanian Enterprises (HOV) 9:15am, $0.21 - Preview
    • Laurentian Bank of Canada (LB CN) 8:37am, C$1.41



    • Avanir Pharmaceuticals (AVNR) 4:01pm, ($0.06)
    • Casey’s General Stores (CASY) 4pm, $1.17
    • Men’s Wearhouse (MW) 5:30pm, $0.87
    • Oxford Industries (OXM) 4pm, $0.02
    • Peregrine Pharmaceuticals (PPHM) 4pm, ($0.07)
    • Restoration Hardware (RH) 4:05pm, $0.47
    • Wet Seal (WTSL) 4:05pm, ($0.28)



  • OPEC Says 2015 Demand for Its Crude Will Be Weakest in 12 Years
  • El Nino Conditions Seen Forming by Japan as Pacific Oceans Warms
  • Aluminum Leaving LME Seen by Jefferies Spurring More Volatility
  • Texas Is Now Home to Bargain-Hunting Japanese Oil Buyers: Energy
  • Gale Force Winds Batter Britain as Thousands of Homes Lose Power
  • Glencore Expects Long-Term Thermal Coal Demand Growth at 4.5%/Yr
  • Gold Trades Below Six-Week High as Dollar, Rates Outlook Weighed
  • Further Easing in India’s Gold Curbs to Be Measured: Minister
  • Glencore Sees Nickel Moving Into Substantial Deficits From 2018
  • China’s Copper Smelters Jump After Getting Higher Treatment Fees
  • Andy Hall Turns to Dollar for Commodity Fund Gain After Phibro
  • Soybeans Rise to Highest in Almost Four Weeks Before USDA Report
  • Iron Ore Miners Battling Price Slump Halt Exports From India
  • China’s SRB Copper Buying at 700,000T Overestimated: Glencore
  • Brent Crude Trades Near Five-Year Low With WTI Amid Surplus


























The Hedgeye Macro Team



















Uber Bullish!

This note was originally published at 8am on November 26, 2014 for Hedgeye subscribers.

“If we can get you a car in 5 minutes, we can get you anything in 5 minutes.”

-Travis Kalanick


Travis, how about a massage? Or some turkey day beers and, bonds?


Everyone who has created an anti-consensus company likes how the CEO of Uber, Travis Kalanick, rolls. If this morning’s headlines about T Rowe’s investment are right, it looks like Uber is going to price its final private round at a $35-40B valuation too!


That’s almost as bullish as I am in 2014… on the Long Bond (TLT). In less than 3 minutes, I can get you anything you need to explain the bull case. As growth and inflation expectations slow, globally, bond yields go lower. Ok, maybe that was less than 1 minute.

Uber Bullish! - Fightin  Words 08.29.2014


Back to the Global Macro Grind


In less than 1 minute, I can get you a chart (see Chart of The Day) showing the Rate of Change in US growth versus the 10yr bond yield. Unless you are paid to navel gaze at the “Dow”, this macro relationship is obvious to all but the willfully blind.


To most of our “rate of change” fans,  the year-over-year rate of change in growth and inflation are pretty basic concepts. To Consensus Macro (and the financial media that dotes on it), not so much…


Yesterday’s Consensus Media headlines on US GDP were classic. Sadly, Bloomberg (who we pay a lot of money to for rate of change data), continued down the all-time-CNBC-ratings-lows-perma-SPY-bull-spin-path by writing:


BREAKING: “SP500 Little Changed Near Record On GDP, Consumer Confidence”


In other real-world news yesterday, “Consumer Confidence” actually tanked (falling to 88.7 in NOV from 94.5 in OCT), and the rate of change in year-over-year US GDP growth slowed (again) to 2.4% in Q3 versus 2.6% in Q2.


#PermaBull says pardon?


Yes. Evolve your process, just a little, and stop staring at a next to useless GDP quarter-over-quarter SAAR (sequentially/seasonally adjusted) report and look at it how you look at the companies you invest in (i.e. on a year-over-year basis).


This isn’t rocket science. I can get you these numbers (and a whole lot more of them) in less than 3 minutes!


Again, to review why US bond yields continue to crash (10yr yield -26% YTD to 2.25% this morning):


  1. After topping at +3.1% year-over-year growth in Q4 of 2013, Q314 US GDP growth slowed to +2.4% and…
  2. While the +1.9% year-over-year growth report for Q1 was much uglier than the +3-4% “expected”…
  3. You can look forward to a Q4 GDP growth print in 2014 that is closer to +1.9% than Q3’s 2.4% was


Put another way, we still have US GDP growth (year-over-year dammit!) tracking to +2.2% for 2014 – and, magically, that’s exactly where the 10yr US Treasury Yield is trading this morning.


#Tah-dah! Get growth’s rate of change right – and you get bond yields right.


My inbox is fun. I often get forwarded other people’s macro work and, most of the time, I can’t particularly understand what it means. Mostly, I think that’s because I only care about rates of change. And most of that work doesn’t.


It’s not personal. It’s simply my perspective. And it’s this anti-consensus process and perspective that had us as bearish on the Long Bond in 2013 (when the rate of change in US growth was #accelerating) as we are Uber Bullish now.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.22%-2.33%

SPX 2020-2074

RUT 1154-1190

VIX 12.16-15.62

Yen 117.20-119.16

WTI Oil 73.03-77.04

Copper 2.94-3.01


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Uber Bullish! - 11.26.14 EL Chart

YUM: Hiccup Aids the Bull Case

YUM continues to be on our Best Ideas list as a long.

YUM released updated FY14 guidance after the close today, estimating mid-single digit full-year EPS growth, below the 9% growth the street is currently projecting.  Perhaps the more disappointing guide, however, was FY15 EPS growth of at least 10%, well below the 17% the street is currently projecting.  Specific operating unit commentary was limited, although management noted an anticipated benefit from sales leverage as sales rebound in China.


This release doesn’t change much, in our view, and in fact strengthens our long thesis with what is yet another example of China dragging down the overall business.  We continue to believe there is a strong likelihood management either 1) induces significant change from within or 2) is influenced by a group of influential shareholders to make significant changes. 


All told, tomorrow’s anticipated sell-off could present a nice buying opportunity for investors, particularly when considering expectations are being reset to reasonable and, we’d argue, easily achievable levels.  YUM is a powerful, global brand that has many levers at its disposal in order to immediately drive shareholder value. 


We look forward to learning more at the company’s investor meeting on Thursday.


Howard Penney

Managing Director


Fred Masotta


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S&P 500: Levels Refreshed

Ed. note: This content was originally published for Hedgeye subscribers on December 09, 2014 at 11:38AM.



If nothing else, watching 2014 macro markets (not just SPY!) and all of the storytelling embedded within their weekly moves is a crash course in #behavioral economics.


That said, with both growth and inflation expectations slowing (that’s why our Best Macro Idea remains long the Long Bond), the question remains as to when they attack the SP500’s intermediate-term TREND line (like they did in October).


My answer? Not yet.


The main reason for that answer isn’t some divine survey – it’s my #process. And, across all 3 of its core risk management durations, here are the levels that matter to me most:


  1. Immediate-term TRADE resistance = 2065
  2. Immediate-term TRADE support = 2040
  3. Intermediate-term TREND support = 1998


S&P 500: Levels Refreshed - 12 09 14 SP 500 Levels Refreshed


In other words, as they test and try that 2040 line, I expect volatility to get immediate-term TRADE overbought. If that line holds (on a closing basis) probability rises that SPY bounces. If that line breaks, probability rises that SPY retests 1998 TREND support.


As I outlined in my Early Look this morning, “Bayesian Answers”, that’s my probability-weighing #process and I’m sticking to it. I only know what the market tells me – beyond that I read every #history that I can find, just to remind me what very little I know.


Sell green, buy red.


Cartoon of the Day: Fallen...

Cartoon of the Day: Fallen... - Oil cartoon 12.09.2014

The epic crash in oil continues with crude down over -40% since June.

Hedgeye Holiday Cocktail Event (Tonight)

'Tis the Season…We hope you can join us at Cellar Bar (40 W. 40th Street – in the Bryant Park Hotel) on Tuesday December 9th from 5-9pm for some holiday cheer!


Please RSVP to this email if you can join.


We look forward to seeing you!


- Hesham


Hedgeye Holiday Cocktail Event (Tonight) - z. Hedgeye  Holiday Invite

Hedgeye Holiday Cocktail Event (Tonight) - z. Cellar Bar Map

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