CHART OF THE DAY: Scary Market Internal > Total US Equity Market Volume

Editor's Note: This is an excerpt and chart from today's Early Look. It was written by Hedgeye CEO Keith McCullough. Click here to learn more and subscribe. 


...All the while, the market internals have looked scarier at each of those 3 market peaks. Here’s how yesterday’s looked:


  1. PRICE – SPY (SP500) +0.08% yesterday vs. RUT (Russell 2000) -0.52% = bearish divergence
  2. VOLUME – Total US Equity Market Volume (see Chart of The Day) -21% and -24% vs. its 1-mth and 1-yr averages
  3. VOLATILITY – front-month VIX not being able to close below 12 for the 3rd time in the last 3 months

CHART OF THE DAY: Scary Market Internal > Total US Equity Market Volume  - Volume CoDpng


The Macro Show Replay | July 21, 2015



Client Talking Points


Unbelievably low volume at the all-time retest of the SPY highs yesterday (Total U.S. equity market volume -21% and -24% vs. the 1 month and 1 year averages, respectively) and unless it’s different this time, making sales with front month VIX < 12 continues to work. 


Down -0.5% vs. SPX +0.1% yesterday and we think a lot of this can be explained by the S&P 500 having a big net short position (-119,800 non-commercial CFTC contracts) vs. RUT having a relatively too bullish one at -7,533 contracts.


Everything commodity-deflation linked hammered; please stay clear of those “reflation” ideas – long our favorite equity market (Japan +6 days in a row, +3.3% month-over-month vs. Russia and Brazil -7.4% and -3.3% month-over-month, respectively).


**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

The General continues to make tough calls as they work to further streamline their manufacturing footprint as part of Project Century. Last week, announcing the closure of two plants, one in West Chicago, IL and the other in Joplin, MO, eliminating approximately 620 positions in the process. West Chicago produced cereal and dry dinner products for the U.S. Retail organization, while the Joplin facility was acquired as part of the Annie’s acquisition and produced snacks. Because of union negotiations management is expecting these actions to be fully executed by fiscal 2019. We view this as a big positive for the company as they go to a more nimble asset light model, which will save on capex and allow it to be allocated to higher growth product platforms.


According to Gaming, Lodging and Leisure Sector Head Todd Jordan, additional state gaming agencies have reported revenues for the month of June. The good news here is that Penn National Gaming remains on track to beat second quarter estimates this Tuesday July 23rd. In addition, PENN will be hosting an investor day on July 24th. We will be there and communicate any noteworthy color and developments. Bottom line? The company remains one of our favorite names on the long side and boasts the best new unit growth story in domestic gaming.



After an awful retail sales print on Tuesday, the confluence of growth slowing data reared its ugly head Friday with a +0.1% year-over-year headline CPI print for June and a UofMich consumer sentiment reading that declined to 93.3 from 96.1 in May. Note that a +0.1% inflation rate is a heck of a long way from the Fed’s 2% target. These two prints were successful in taking the 10-Year Treasury yield down 10 basis points from Monday’s highs to finish the week at 2.35%. We remain one of the lonely bulls on Treasury bonds (bearish on yields) via TLT, EDV, VNQ.

Three for the Road


VIDEO: Being Long Gold is a Disaster … via @hedgeye



hink of giving not as a duty but as a privilege.

John D. Rockefeller Jr.


A large fire consuming 3,500 acres broke out around I-15 in California on Friday, destroying 20 vehicles and 4 homes.

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July 21, 2015

July 21, 2015 - Screen Shot 2015 07 21 at 6.53.22 AM

WTW: Covering Short

Takeaway: No fundamental change to thesis. WTW just isn't interesting anymore.

We shorted WTW back in January 2014 when the jury was still out on its questionable prospects within a rapidly evolving industry.  That debate is over.  Now it's just a question of whether the company will go bankrupt.  


As a reminder, WTW is dangerously approaching the point where it costs more to acquire its members than the gross margin it earns from them.  If that ever happens, it’s basically game over.  WTW’s 2015 target of $290M in cash can only go so far with an annual debt service of roughly $120M.  For more detail, see the note below.


WTW: Chapter 11?

02/27/15 08:46 AM EST

[click here]



Let us know if you have any questions or would like to discuss in more detail. 


Hesham Shaaban, CFA



Thomas Tobin



EVENT: Internet FOCUS LIST Quarterly Update

Takeaway: Please join us for our call Thursday, July 23rd at 1:00pm EDT. Dialing instructions will be published Thursday morning.

We will be hosting our quarterly INTERNET FOCUS LIST Update Call this Thursday.  We will be reviewing the major themes and incremental developments to our Best Idea Short theses (YELP, P), our Short thesis on TWTR, and our Bearish thesis on BABA (covered).  The emphasis of this call will be to highlight our view over various durations as well as the upcoming catalyst calendar; identifying the major risks and catalysts to each position over the near-to-intermediate term.  In addition, we will preview our new Best Idea Long thesis on LNKD ahead of our upcoming Blackbook.


Please join us for our call Thursday, July 23rd at 1:00pm EDT.  Dialing Instructions will be published Thursday morning.



  • Review of major themes and incremental developments to our thesis on YELP, P, TWTR, and BABA.
  • Highlighting our view over various durations as well as the upcoming catalyst calendar: Risks & Catalysts to each position over the NTM.
  • We will also provide an overview of our new Best Idea Long thesis on LNKD


Hesham Shaaban, CFA


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.