US Strategy - Earnings Season Looms

On Friday, the S&P 500 closed at 1,071, up 0.6% on the day.  Day five of the S&P 500’s rally as the momentum behind the recovery trade continued all week; volume was shockingly low. 

 

Last week the S&P rose 4.5% as the MACRO calendar provided some positive momentum.  The bullish tone stemmed from the ISM numbers on Monday and continued through Wednesday and Alcoa's relatively upbeat release into Thursday's better than expected jobless claims and retail reports.  The catalysts in the coming week will be comprised of major earnings reports, which include: top banks JPMorgan, Goldman Sachs, Citigroup, and Bank of America, report this week along with Google, Southwest Airlines, Intel, IBM, General Electric, and Johnson & Johnson.

 

Friday’s portfolio activity included shorting the XHB – the Homebuilders ETF.  We were the bulls on a Q2 housing turn last December.  Now Keith and I are getting cautious on housing in 1H 2010.  As rates head higher, access to capital tightening is not good for the early cycle home builders.  Additionally, without help from Washington the housing market is not healthy enough to stand on its own two feet and the $8,000 tax credit is expected to expire at the end of November.

 

The dollar index was up 0.7% on the heels of Ben Bernanke's comments after recovering from a 14-month low hit Thursday.  The VIX declined for the fifth straight day and is now down 14% over the past week. 

As of Friday, four of the nine sectors outperformed the S&P 500, with every sector positive except Consumer Discretionary and Energy.  The three best performing sectors were Healthcare (XLV), Financials (XLF) and Technology (XLK), while Energy (XLE), Materials (XLB) and Consumer Discretionary (XLY) were the bottom three.  We are currently long the XLV, which we would expect to be buoyed this morning by the announcement from Onyx Pharmaceuticals that they are acquiring privately held Proteolix for $810MM.

 

Today, the set up for the S&P 500 is: TRADE (1,051) and TREND is positive (991).   Day 1 of perfection - the Research Edge quantitative models have 9 of 9 sectors in the S&P500 positive on TREND and 9 of 9 sectors are positive from the TRADE duration.         


Howard Penney
Managing Director

 

US Strategy - Earnings Season Looms - S P500

 

US Strategy - Earnings Season Looms - s pperf

 

US Strategy - Earnings Season Looms - s plevels

 


Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more