US Strategy - Slowing of the Beta Trade

On Thursday, the S&P 500 closed at 1,096, up 0.4% on the day.  The S&P 500 has now risen eight of the last nine days; the major index closed yesterday at its best level on the day.


The data points on the MACRO front continue to be positive.  Initial jobless claims fell 10,000 to 514,000 in the week-ended October10th; the lowest level since the beginning of the year. The New York Empire Manufacturing Index surged to 34.6 in October from 18.9 in September, marking the fourth straight monthly increase and the highest reading since May of 2004.  While the Philadelphia Fed Index fell to 11.5 in October from 14.1 in September.  Consensus expectations were for a decline to 12.


Energy commodities were among the best performers in the CRB yesterday.  November crude settled up $2.40 at $ 77.58 a barrel; a one-year high.  Gains were fueled by an unexpected 5.2M barrel draw in gasoline inventories last week, the biggest decline over the past 12-months. 


Consumer Staples (XLP) was the third best performing sector (after the Utilities) as the beta trade seemed to take a bit of a breather.  The XLP also benefited from better-than-expected results out of SWY, which led to a rally in the grocery names. 


The momentum behind the “currency creditability crisis” continued to weigh on the dollar index, which fell for a fourth straight session, finishing down 0.1%.   The risk aversion trade is in full force as the VIX declined for the ninth straight day (5.0%) and is now down 46% year-to-date.  See the Early Look today “Ignorance and Leverage” for more on the creditability crisis.


Yesterday, only three sectors outperformed the S&P 500 and three sectors declined on the day.  The three best performing sectors were Energy (XLE), Consumer Staples (XLP) and Utilities (XLU), while Industrials, Technology (XLK) and Financials (XLF) were the bottom three.    


Today, the set up for the S&P 500 is: TRADE (1,069) and TREND is positive (999).   Day 5 of perfection - the Research Edge quantitative models have 9 of 9 sectors in the S&P 500 positive on TREND and 9 of 9 sectors are positive from the TRADE duration.         


The Research Edge Quant models have 1% upside and 2.5% downside in the S&P 500.  At the time of writing the major market futures in the U.S. were in a tight range following the earrings results of GOOG and IBM.   


The Research Edge MACRO team.



US Strategy - Slowing of the Beta Trade - S P500


US Strategy - Slowing of the Beta Trade - s pperf

US Strategy - Slowing of the Beta Trade - s plevels

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