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Client Talking Points

OIL

Both the commodity (WTI) and the stocks (Energy indexes) are signaling immediate-term TRADE overbought this morning post a bad U.S. jobs report and the USD signaling immediate-term oversold. The CRB Index was up +1.9% vs. SPX -0.4% yesterday – apparently the new bull market narrative for consumer stocks (only sector UP year-to-date) is rising gas prices?

ROTATION

It wasn’t just CRB/Oil/Gold vs SPX rotation of chart chasers forced to chase “reflation”, it was what consensus is overweight (Healthcare stocks) vs. underweight in Long Only land (Energy stocks). At one point, intraday, the XOP (Oil & Gas ETF) was +6% and Biotech (IBB) was DOWN -6% (Healthcare, XLV -4%)! #crashy

OVERBOUGHTS

This is where using our risk range model matters most – when bearish TRENDs have counter-TREND rips to the top-end of our immediate-term range. On that score, alongside Oil, XOP, XLE, of the equity majors we’re registering overbought signals in: Nikkei, Hang Seng, KOSPI, DAX, CAC, and FTSE. If you’re still bearish Global Equities, this is where you sell (again).

 

**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

 

Asset Allocation

CASH 67% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 7%
FIXED INCOME 26% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
GIS

Our Consumer Staples team remains positive on General Mills coming out of the 2Q15 earnings call. We have been LONG GIS for the last six months and continue to have a favorable view of the company due to the following reasons:

  • Sequential improvement in cereal
  • Growth in Natural & Organic categories
  • Snacking
  • Cost cutting initiatives
  • M&A activity
PENN

Many of the regional gaming states will release September revenues next week and as we’ve written about, they should look a lot better than August. Overall same store revenue declined 5% in August (we had predicted –2%) but most of the decline was due to the calendar and a difficult comparison. For September we are projecting an increase of 2% YoY

 

Our Missouri tracker is forecasting September gaming revenues to be up 3.6% YoY. This is a 6% sequential improvement from August's YoY change of -2.5%. Meanwhile, Pennsylvania slot revenues were up 4% in September. Our thesis for a sequential rebound in September remains intact. We like PENN on the long side from these levels.

TLT

It was an important couple of weeks for those who were still wrestling with our lower-for-longer views. The brevity of the macro moves post-report Friday proves just how non-consensus that call remains in a year where the S&P 500 is down -8%. The scary thing with regard to Janet’s credibility is that bad news is now being priced in as bad news. Moreover, we believe this late-cycle weakness is likely to remain ongoing.  

Three for the Road

TWEET OF THE DAY

Now $YUM's CEO & board must DE-RISK the China business by implementing a plan to evolve the business model in a meaningful way..  #asap

@HedgeyeHWP

 

QUOTE OF THE DAY

Erroneous assumptions can be disastrous.

Peter Drucker

STAT OF THE DAY

The average number of coffee drinks consumed is 2.1 per day in the U.S. People in their twenties consume 1.8coffee drinks per day, those in their thirties consume 2.0, those in their forties consume 2.2, those is their fifties consume 2.4 and those in their sixties consumer 2.4 (Zagat).