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December 29, 2015

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
2.30 2.15 2.24
SPX
S&P 500
2,005 2,085 2,056
RUT
Russell 2000
1,107 1,163 1,148
COMPQ
NASDAQ Composite
4,913 5,099 5,040
NIKK
Nikkei 225 Index
18,504 19,312 18,764
DAX
German DAX Composite
10,174 10,876 10,653
VIX
Volatility Index
14.35 22.74 16.91
DXY
U.S. Dollar Index
97.42 99.35 98.00
EURUSD
Euro
1.07 1.10 1.09
USDJPY
Japanese Yen
120.02 121.69 120.37
WTIC
Light Crude Oil Spot Price
34.83 38.29 36.69
NATGAS
Natural Gas Spot Price
1.69 2.30 2.27
GOLD
Gold Spot Price
1,051 1,081 1,068
COPPER
Copper Spot Price
2.02 2.14 2.08
AAPL
Apple Inc.
104 110 106
AMZN
Amazon.com Inc.
650 680 675
GOOGL
Alphabet Inc.
750 784 782
DIS
Walt Disney Company, Inc.
102 110 105
KMI
Kinder Morgan Inc.
13.83 16.49 15.26
VRX
Valeant Pharmaceuticals Inc.
98.36 120.29 102.14

 

Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, with our intermediate-term (TREND) view and the previous day's closing price for each name.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.

 


The Macro Show Replay | December 29, 2015

 

 


Cartoon of the Day: Look Out Below!

Cartoon of the Day: Look Out Below! - Oil cartoon 12.28.2015

 

"Oil lead the no volume “reflation”/squeeze last week, with WTI up +5.7% week-over-week," Hedgeye CEO Keith McCullough wrote earlier today in a note to subscribers. "It is straight back down -3.5% today after tapping the top-end of our immediate-term $34.97-38.33 risk range (MLPs were +14.4% last wk, but still -32% YTD)."


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‘The Year Nothing Worked’ Says Bloomberg. We Disagree.

Takeaway: Contrary to what some would like you to believe, there were plenty of investable ideas that "worked" out rather well this year.

‘The Year Nothing Worked’ Says Bloomberg. We Disagree. - bloomberg nothing worked

 

It was the year that nothing worked according to Bloomberg.

 

Huh?

 

Our non-consensus team here at Hedgeye begs to differ. We alerted our subscribers to myriad market opportunities on both the long and short side throughout 2015. Here's a sampling of some of our top calls.

 

Energy:

What a difference a year or two can make. One of our firm's top contrarian calls included shorting MLPs like Kinder Morgan (KMI) which Fox Business’ Charlie Gasparino named one of the best calls of the year. Since maverick Hedgeye analyst Kevin Kaiser sounded the alarm back in August 2013, shares of KMI have plunged 60%.

 

‘The Year Nothing Worked’ Says Bloomberg. We Disagree. - Kinder Morgan lump of coal 12.18.2015

 

To be clear, Kaiser was the lone bear on the stock and bore the brunt of exceedingly harsh criticism and personal attacks from Wall Street analysts and supposed market prognosticators only to be vindicated recently when KMI cut its dividend earlier this month. 

 

Macro:

Another big win (which Wall Street missed) came courtesy of our non-consensus Macro team and their repeated warnings on #Deflation and #GrowthSlowing.

 

‘The Year Nothing Worked’ Says Bloomberg. We Disagree. - z Deflation cartoon 08.03.2015

 

For the record, commodities have collectively fallen over 20% this year with broader deflation consistently confounding the Fed's bullish economic narrative. Watch Hedgeye CEO Keith McCullough laying out the thesis in the video below. (Note the #timestamp: 9/18/2014)

Healthcare:

Our Healthcare team led by Tom Tobin issued a number of prescient calls in battleground stocks like long Athenahealth (ATHN) and short AMN Healthcare Services (AHS). Check out Tobin's recent write-up in Investopedia, titled "Why a Perfect Storm Is Brewing in Healthcare" which lays out his #ACATaper theme which will continue to rock healthcare stocks well into 2016.

 

Internet & media:

Sector Head Hesham Shaaban had quite a year. In addition to nailing his short calls on Twitter (TWTR) and Pandora (P), his sole long call in the sector, LinkedIn (LNKD), has ripped ever higher even during a tough year for the broader market.

 

‘The Year Nothing Worked’ Says Bloomberg. We Disagree. - twitter cartoon 04.29.2015

 

Industrials:

It's been a tough year for the sector and analyst Jay Van Sciver called it. His shorts on Caterpillar (CAT) and Wabtec (WAB) are down -25% and -17% respectively year-to-date.  

 

‘The Year Nothing Worked’ Says Bloomberg. We Disagree. - z cat cartoon

 

Restaurants:  

Hedgeye Managing Director Howard Penney penned a piece for Fortune back in October "Why McDonald’s stock will never trade below $100 again." What a call. Since then MCD is up 13.5% versus the S&P's 0.6% gain. His research on shorting Shake Shack (SHAK) and Chipotle (CMG) have also worked out rather nicely.

 

‘The Year Nothing Worked’ Says Bloomberg. We Disagree. - z chipotle cartoon

 

Gaming, lodging and leisure:

After calling the year-to-date bottom in Macau casino stocks Hedgeye Gaming, Lodging and Leisure head Todd Jordan appropriately advised clients to sit on the sidelines before the stocks ultimately tumbled 10% in November. Meanwhile, the long call on Boyd Gaming (BYD) has been a consistent winner for our team.   

 

For more see on the outlook for Gaming stocks, click the video below.

Financials:

Sector co-heads Jonathan Casteleyn and Josh Steiner nailed the short thesis on Encore Capital Group (ECPG), which is down 33% this year.  

 

Retail:

All year long, Retail Sector Head Brian McGough has been appropriately suspect about the outlook for the sector, even amidst all the Black Friday chest-thumping. Short calls on Tiffany (TIF) have worked out well. The stock is down 30% year-to-date. In the video below, McGough talks about the two stocks he does like in retail.

 

Contrary to Bloomberg's reporting, there were plenty of investable ideas that "worked" this year, just not on the books that Wall Street was talking up. 

 

* * *  

 

Editor's Note: To learn more about how you can access our institutional research please email sales@hedgeye.com.


FINANCIALS SENTIMENT SCOREBOARD - JPMorgan (JPM) AND FEDERATED INVESTORS (FII)

Takeaway: We are flagging JPMorgan (JPM - Score: 95) (short) and Federated Investors (FII - Score: 18) (long) on sentiment and short interest.

This morning we are publishing our updated Hedgeye Financials Sentiment Scoreboard in conjunction with the release of the latest short interest data last night. Our Scoreboard now evaluates over 300 companies across the Financials complex.

 

The Scoreboard combines buyside and sell-side sentiment measures. It standardizes those measures to an index of 0-100, where 100 is the best possible sentiment ranking and 0 is the worst. Our analysis shows that a contrarian strategy can be employed successfully by taking the other side of stocks with extreme readings in sentiment, either bullish or bearish. Once sentiment reaches these extreme levels, it becomes a very asymmetric setup wherein expectations become too high or too low.  

 

We’ve quantified the tipping points for high and low sentiment. Specifically, we've found that scores of 20 or lower have a positive, average expected return while scores of 90 or greater are more likely to underperform.

 

Specifically, our backtest of 10,400 observations over a 10-year period found that stocks with scores of 0-10 went on to produce an average absolute return of +23.9% over the following 12-month period. Scores of 10-20 produced an average absolute return of +11.9%. At the other end of the spectrum, stocks with sentiment scores of 90-100 produced average negative absolute returns of -10.3% over the following 12-months.

 

The first table below breaks the 300 companies into a few major categories and ranks all the components on a relative basis. The second table breaks the group into smaller subsectors and again gives them relative rankings within those subsectors. 

 

FINANCIALS SENTIMENT SCOREBOARD - JPMorgan (JPM) AND FEDERATED INVESTORS (FII) - SI1

 

FINANCIALS SENTIMENT SCOREBOARD - JPMorgan (JPM) AND FEDERATED INVESTORS (FII) - SI2

 

FINANCIALS SENTIMENT SCOREBOARD - JPMorgan (JPM) AND FEDERATED INVESTORS (FII) - SI3

 

The following is an excerpt from our 90 page black book entitled “Betting Against the Herd: Generating Alpha From Sentiment Extremes Across Financials.”

 

Let us know if you would like to receive a copy of our black book, which explains this system and its applications.

 

BUYS / LONGS: Financials with extremely low sentiment readings of 20 and below on our index (0-100) show strong average outperformance in absolute and relative terms across 3, 6 and 12 month subsequent durations.  Stocks with sentiment ratings of 20 or lower rise an average of +15.1% over the next 12 months in absolute terms.   

 

SELLS / SHORTS: Financials with extremely high sentiment readings of 90 and above on our proprietary sentiment index (0-100) demonstrate a marked tendency to underperform in absolute and relative terms across 3, 6 and 12 month subsequent durations.  Stocks with sentiment ratings of 90 or greater fall in value an average of -10.3% over the next 12 months in absolute terms. 

 

 

FINANCIALS SENTIMENT SCOREBOARD - JPMorgan (JPM) AND FEDERATED INVESTORS (FII) - Absolute 12 mo

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT


The U.S. Economic Outlook In 2016? Not Good

 

In this brief excerpt from The Macro Show, Hedgeye CEO Keith McCullough and Senior Macro analyst Darius Dale discuss U.S. third quarter GDP and why our non-consensus 2016 growth outlook is looking grim.

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

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