Daily Trading Ranges, Refreshed [Unlocked]

This is a complimentary look at Hedgeye's proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers every weekday morning by CEO Keith McCullough. It was originally published December 18, 2014 at 07:40. Click here to learn more and subscribe.

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Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration

Takeaway: This week we take a look at energy state jobless claims trends and their relative exposure to the collapse in crude.

Oil has been in the news recently in case you haven't noticed. It will be important to watch state level initial jobless claims going forward. Why? Energy-heavy states are at risk of higher job loss due to the collapse in crude oil prices.


With that in mind, we're going to start posting occasional updates on how these states are faring from a labor market standpoint.


Our Energy Sector Head, Kevin Kaiser, sent a note out internally a while back flagging an article that showed state level labor market concentrations tethered to energy. The key chart from that note is shown below. The big energy states in the US (in alphabetical order) are Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia and Wyoming. For those interested in the article, it can be found here.


Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration - States with Energy Concentration


A lot of people don't realize that the Labor Dept publishes initial jobless claims data on a weekly basis, but on a one-week lag. Here's a look at the trend in these energy-heavy states based on the most recent week of data. There's some good news and some potentially bad news. The good news is that if you look at the rate of change in week-over-week NSA initial claims in these energy heavy states, it averages 1.88%. That compares with the national average of 1.90%. This is good. It suggests that, for now, energy states are not diverging from the national trends. The potentially bad news, however, is that if you look at the chart above, you'll notice that some of these energy states are more exposed to Oil & Gas Operations (Alaska, as an example). Alaska actually saw the highest w/w change in claims of the energy states. That said, the other state that saw claims rise faster than the national average was West Virginia, which has a comparatively small oil-based labor market relative to a large coal-mining labor market. It's also worth repeating that one week of data isn't enough to draw any firm conclusions. As we move forward, we'll build out this dataset to see if more concrete conclusions can be drawn, but for now we thought we'd start with an opening salvo at what is one of the big potential black swans for an otherwise strong domestic labor market.  


Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration - energy bar chart


The Data

Prior to revision, initial jobless claims fell 5k to 289k from 294k WoW, as the prior week's number was revised up by 1k to 295k.


The headline (unrevised) number shows claims were lower by 6k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -0.75k

WoW to 298.75k.


The 4-week rolling average of NSA claims, another way of evaluating the data, was -12.9% lower YoY, which is a sequential improvement versus the previous week's YoY change of -8.1%


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Yield Spreads

The 2-10 spread fell -7 basis points WoW to 153 bps. 4Q14TD, the 2-10 spread is averaging 178 bps, which is lower by -21 bps relative to 3Q14.


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Joshua Steiner, CFA


Jonathan Casteleyn, CFA, CMT



Takeaway: Today we rehash the #Quad4 vs. #Quad1 debate as it relates to how you should be positioned within the domestic equity market.


Long Ideas/Overweight Recommendations

  1. Consumer Staples Select Sector SPDR Fund (XLP)
  2. Health Care Select Sector SPDR Fund (XLV)
  3. iShares National AMT-Free Muni Bond ETF (MUB)
  4. iShares 20+ Year Treasury Bond ETF (TLT)
  5. Vanguard Extended Duration Treasury ETF (EDV)

Short Ideas/Underweight Recommendations

  1. SPDR S&P Regional Banking ETF (KRE)
  2. iShares Russell 2000 ETF (IWM)
  3. iShares MSCI European Monetary Union ETF (EZU)
  4. iShares MSCI France ETF (EWQ)
  5. SPDR S&P Oil & Gas Exploration & Production ETF (XOP)



Renewing the #Quad4 vs. #Quad1 Debate: What has become a daily part of our internal asset allocation discussions is a likely fundamental transition into #Quad1 in the U.S. for the upcoming quarter. While we remain firmly entrenched in #Quad4 from both a positioning and reported data perspective, we think it’s helpful to review such discussions in our external publications as well.


Based on the base effects in the GDP data, a trip to #Quad1 is highly likely occurrence in 1Q15. That forecast is augmented by the demonstrable tax cut being levied upon the median consumer as a result of falling rent, food, utilities and gas prices.








A confirmed transition into #Quad1 in the U.S. would make us fundamentally bullish on the associated sectors and style factors – namely consumer dictionary (XLY), financials (XLF) and small caps (IWM).




THE HEDGEYE MACRO PLAYBOOK - Financials GIP Model Backtest




In light of that, we have been patiently waiting for this fundamental outlook to start to get priced into the U.S. equity market; specifically, we are looking for sustained outperformance of #Quad1 sectors and style factors relative to our preferred #Quad4 sectors and style factors (i.e. healthcare, consumer staples, utilities and REITs).


Thus far, such outperformance has yet to occur – at least not on a trending basis.  On a MoM basis, the IWM is just now starting to outperform the XLV; it’s generally been outperforming the XLP, but still demonstrably underperforming the XLU and VNQ. Moreover, neither the XLY or XLF are confirming a move into #Quad1 just yet.








All told, we’re not in a hurry to adopt an offensive #Quad1 asset allocation recommendation just yet. With global macro volatility making higher-lows for the first time since early 2011 and with both emerging markets and the broad U.S. high-yield debt complex essentially blowing up, we think there are enough warning signs out there to warrant remaining defensively postured in the domestic equity market.






If that view changes, trust me – you’ll be the first to know!


***CLICK HERE to download the full TACRM presentation.***



#Quad4 (introduced 10/2/14): Our models are forecasting a continued slowing in the pace of domestic economic growth, as well as a further deceleration in inflation here in Q4. The confluence of these two events is likely to perpetuate a rise in volatility across asset classes as broad-based expectations for a robust economic recovery and tighter monetary policy are met with bearish data that is counter to the consensus narrative.


Early Look: Money Man (12/15)


#EuropeSlowing (introduced 10/2/14): Is ECB President Mario Draghi Europe's savior? Despite his ability to wield a QE fire hose, our view is that inflation via currency debasement does not produce sustainable economic growth. We believe select member states will struggle to implement appropriate structural reforms and fiscal management to induce real growth.


Moscow, We Have a Problem (12/16)


#Bubbles (introduced 10/2/14): The current economic cycle is cresting and the confluence of policy-induced yield-chasing and late-cycle speculation is inflating spread risk across asset classes. The clock is ticking on the value proposition of the latest policy to inflate as the prices many investors are paying for financial assets is significantly higher than the value they are receiving in return.


#Bubbles: “Hedge Fund Hotel” Edition (Part II) (12/8)


Best of luck out there,




Darius Dale

Associate: Macro Team


About the Hedgeye Macro Playbook

The Hedgeye Macro Playbook aspires to present investors with the robust quantitative signals, well-researched investment themes and actionable ETF recommendations required to dynamically allocate assets and front-run regime changes across global financial markets. The securities highlighted above represent our top ten investment recommendations based on our active macro themes, which themselves stem from our proprietary four-quadrant Growth/Inflation/Policy (GIP) framework. The securities are ranked according to our calculus of the immediate-term risk/reward of going long or short at the prior closing price, which itself is based on our proprietary analysis of price, volume and volatility trends. Effectively, it is a dynamic ranking of the order in which we’d buy or sell the securities today – keeping in mind that we have equal conviction in each security from an intermediate-term absolute return perspective.

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LEISURE LETTER (12/18/2014)



  • Dec 20: Trump Taj Mahal Closing

Today's Headline Story

Regulators meeting bankers in January – According to the SCMP, the note sent out by the Monetary Authority on December 16 tells Macau banks that the January meeting will explain the "live monitoring system" that will allow the Ministry of Public Security to to view transfers using the China UnionPay card, and that the note also asks the banks for a list of information on "high-risk businesses" using the China UnionPay system, such as stores selling jewelry and wine.


A senior gaming insider tells the SCMP that the crackdown appears to be the real deal, and "it's not just the VIP junket operators who bring in the high-rollers who are nervous." 


Article HERE

Takeaway: China government may be supportive of Macau but GGR growth is clearly not a concern.


PENN/CZR/GENTING – The Gaming Facility Location Board chose sites in Sullivan, Schenectady and Seneca counties and decided not to recommend a fourth license amid an increasingly saturated gambling market where consumers have more options closer to home. The NY winners:

  • Montreign Resort Casino will be built in the Catskills town of Thompson. The $630 million project will include 2,150 slots, 61 table games, a 391-room hotel, indoor waterpark, golf course and entertainment village including restaurants and retail shops.
  • Its developer, Empire Resorts, operates through a subsidiary, the nearby Monticello Casino & Raceway. Montreign The Rivers Casino & Resort at Mohawk Harbor in the city of Schenectady will be part of a larger redevelopment effort at a formerly blighted riverfront site. The $300 million project will include a hotel, a high-end steakhouse, 66 gambling tables and more than 1,100 slot machines.
  • Lago Resort & Casino, a $425 million project in the Finger Lakes town of Tyre in Seneca County, will include 2,000 slot machines. It was the largest contender in the Finger Lakes-Southern Tier region.

Article HERE

Takeaway:  This was a major disappointment for the big operators, particularly Genting who was a front runner. Selecting 3 casino sites instead of 4 is the right move given the saturated gaming environment.


GENS – Genting Singapore today repurchased 12.2 million shares (38% of today's trading volume) for S$13 million. Cumulative shares repurchased year-to-date = 143,561,000 or 1.2% of the outstanding shares.  Following today's share repurchase, the total shares outstanding = 12,104,575,298.   

Article HERE


PENN– Hollywood Casino Toledo has won approval for an outdoor smoking deck with 34 slot machines. Similar areas have been approved in Horseshoe Cincinnati and Hollywood Columbus.

Article HERE


GTECH – offers to buyback its €750M of Subordinated Interest-Deferrable Capital Securities.  GTECH also declared a €0.75 interim dividend payable January 2015.


CCL – announced the new President of its Carnival Cruise Lines brand will be CLIA’s current CEO, Christine Duffy.  Duffy’s appointment takes effect Feb. 1. She succeeds Gerry Cahill, who retired in November. 

Article HERE


NCLH – Norwegian Escape, due to cruise the Caribbean year-round from Miami in November 2015, will feature two Planks, that let guests walk eight feet out over the edge of the ship. The expanded sports complex will have five zipline-style Sky Rails, including one that will loop out over the side of the 4,200-passenger ship. In addition to a full-sized basketball court, Escape will have a bocce ball court, a mini-golf course themed to the Teenage Mutant Ninja Turtle characters, an expanded Aqua Park and a new tandem slide in the Aqua Park called Aqua Racer.  In addition, Norwegian is also adding the line’s first dedicated nursery for children ages 2 and under. In expanding its “Guppies” program to children ages 6 months to three years, Norwegian will offer an active area for play time and age-appropriate activities and a separate space for napping. 

Article HERE


LV visitation record– According to LVCVA, Las Vegas visitation has passed 40 million for the first time. And, with two weeks left in the year, visitation could reach 41 million. The previous record was 39.727 million visitors in 2012. More air service from Canada and Mexico was credited with part of the growth. Also, the National Finals Rodeo broke attendance records at 177,656 over its 10 days.

Article HERE

Takeaway: Visitation has grown in every month this year. Meanwhile, gaming revenues, YTD, have been flat.


2015 Notable LV openings – See details in the link below.

Article HERE


2015 Mainland holidays– The central government has announced that next year’s Lunar New Year holidays in the mainland will be from February 18 to 24.

Mainlanders will also be given four periods of three days off in a row, beginning respectively on January 1, April 5, May 1 and June 20. The seven days of National Day holidays will begin on October 1.

Article HERE


Custom border – new custom clearance policy between Macau and the city of Zhuhai come into effect today. The opening time for Macau customs and Gongbei will be extended an extra two hours each, people with effective identifications will be able to enter and leave from 6am to 1am in the next day.


Macau's Lotus border and Zhuhai's Hengqin border will open 24 hours for clearance of visitors as well as passenger cars. The Chief Executive of Macau Chui Sai On visited Wednesday the borders before the new measures were put in force.

Article HERE

Takeaway: As expected. A slight positive.


Golden Nugget Lake Charles Staking Its Claim – Golden Nugget Lake Charles is the manifestation of owner Tilman Fertitta's risky maneuver to obtain Louisiana's last casino license. Fertitta refers to his new location as one of the nation's most appealing markets, but he's next door to an established, successful competitor with identical amenity offerings.

Article HERE


Cuba – The White House's move toward normalizing relations with Cuba has fueled interest among American cruise passengers hoping to visit, although the agreement doesn't allow U.S.-based cruise ships to call. Lifting the ban on mass tourism would require congressional approval.  

Takeaway:  No doubt Cuba would benefit the cruise lines but that would take some time.


Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.  

Call Details For Today's Athletic Black Book - 1PM EST

Takeaway: Call Details For Today's Athletic Black Book - 1PM EST

Below is the conference call information for our Athletic Black Book Call Today at 1:00PM EST.


We look forward to having you join us for the call.


Call Details

Toll Free Number:

Toll Number:

Password: 13597073

Materials: CLICK HERE


The Bull Case Is Now “Decoupling”

Client Talking Points


Oil bounces (again) and this one seems to be inspiring the many (Janet trades oil futures now - says the crash was just “transitory”). The immediate-term risk range for WTI, however, continues to signal lower-lows and lower-highs = 52.89-59.91, so if you weren’t short Russia, Energy, etc., here’s another chance.


Putin is 1 of 5 central planners in the Top 5 Bloomberg Economic Stories this morning (the others include Yellen, Draghi, Abe, and a Swiss Guy who cut to negative rates). You know this is going to end well because Putin said Russia’s economy will “recover in 2017”… Russian stocks +5.3% on that to -47.7% year-to-date – UAE +13%, Saudi +8% (totally normal market moves).


The Swiss central bank telling savers they get to pay them (negative rates) is the latest catalyst to drive European Equities to lower-highs, but this doesn’t seem to be stimulating Greece (-2.2% to -26.6% year-to-date). #TwilightZone

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

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.


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).


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


JAPAN: Weimar Nikkei correlation trade firmly intact, +2.3% overnight post Yen resuming being burnt to a crisp



Beware of the person who can't be bothered by details.

- William Feather


68% of 56 economists surveyed by Bloomberg late last week said the Federal Open Market Committee will drop its pledge to keep interest rates near zero for a “considerable time” and instead adopt a word such as “patient” to describe its approach to policy. Only 23% said the committee will keep “considerable time.”

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