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    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

On Friday Healthcare broke the TRADE line, while Financials and the Industrials are $0.04 away.

Last Friday, the S&P 500 closed at 1,079, down 1.2%.  We had another correction day on Friday, but on very light volume.  There were no major changes to the portfolio on Friday.       

On the MACRO front, housing-related stocks were weaker on Friday as the group failed to take advantage of a 9.4% month-to-month jump in September existing home sales to an annualized pace of 5.5 million; the highest since July of 2007. Consensus expectations were for a 4.9% increase.  In addition, the median home price fell at the slowest pace in a year, while months' supply fell to 7.8 in September from 9.3 in August.

On Friday, four sectors outperformed the S&P 500 and every sector was down on the day.   The three best performing sectors were Technology (XLK), Consumer Discretionary (XLY) and Consumer Staples (XLP), while Energy (XLE), Industrials (XLI) and Materials (XLB) were the bottom three. 

Technology was the best performing sector on Friday, on the back of strong numbers out of MSFT.  On the downside was another selloff in the semiconductor stocks with the SOX down over 3%.  BRCM was one of the worst performers in the group on conservative December quarter guidance.  Financials continue to underperform, as the bank sector (highlighted by continued disappointment out of the regionals) finished lower for the fourth time last week.

Consumer Discretionary was the second best performing sector on Friday.  The breadth of the rally was not particularly impressive, as the bulk of the outperformance was driven by a blowout quarter from AMZN.  Media and housing related names were the biggest underperformers in the index.

Fed President Plosser (non-voter - hawk) is pushing the Fed to soften the guidance language in future policy statements, which provided some support for the dollar on Friday.  The UUP dollar index finished up 0.5% on the day.  The VIX was up 7.6% on Friday and 3.9% on the week. 

Today, the set up for the S&P 500 is: TRADE (1,072) and TREND is positive (1,011).   The Research Edge quantitative models have 9 of 9 sectors in the S&P 500 positive on TREND and 8 of 9 sectors are positive from the TRADE duration.  Yesterday, the Financials moved back to positive on both durations.           

The Research Edge Quant models have 2% upside and 1% downside in the S&P 500.  At the time of writing the major market futures are poised to open to the up side. 

The Research Edge MACRO Team.

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