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HEDGEYE Exchange Tracker | Next Stop A 40 VIX

Takeaway: Market anxiety continues to be an opportunity for the exchanges. 1Q16 ADV rose for all 3 trading categories with the VIX +29% W/W.

With the VIX in solid uptrend and having broken to new highs (on higher lows as well), the panic line of 40 is in sight. We focus on equity trading volume this week and the simple linear association of the 50 day moving average of NYSE total stock volume and the volatility index. Higher vol means more investors lining up at the exchange to move exposure around. Separately, the CME Group announced new all time highs in WTI crude oil trading which continues to build up earnings for the first quarter. With energy trading averaging a rate per contract of over $1.20, incremental volume from crude adds solid earnings power considering the blended average CME rate per contract is $0.79 for all products.

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - VIX 40

 

Weekly Activity Wrap Up

1Q16TD average daily volumes (ADVs) rose in all three categories this week as volatility picked up. Cash equity volume for the week came in at 10.1 billion shares traded per day, bringing the 1Q16TD ADV to 9.4 billion, up +36% Y/Y. Futures activity at CME and ICE came in at 28.9 million contracts traded per day this week, bringing the 1Q16TD ADV to 25.0 million, up +25% Y/Y. Additionally, CME is currently at an all-time high in open interest of 116.0 million contracts, which should push volume higher going forward. Options came in with 18.7 million contracts traded per day, bringing the 1Q16TD ADV to 18.7 million, up +20% Y/Y growth. 

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon1

  

U.S. Cash Equity Detail

U.S. cash equities trading came in at 10.1 billion shares per day this week, bringing the 1Q16TD average to 9.4 billion shares per day. That marks +36% Y/Y and +34% Q/Q growth. The market share battle for volume is mixed. The New York Stock Exchange/ICE is taking a 24% share of first-quarter volume, which is consistent with the prior quarter and year-ago quarter, while NASDAQ is taking a 19% share, +65 bps higher Q/Q but -83 bps lower than one year ago.

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon2

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon3

 

U.S. Options Detail

U.S. options activity came in at an 18.7 million ADV this week, bringing the 1Q16TD average to 18.7 million, a +20% Y/Y and +17% Q/Q expansion. In the market share battle amongst venues, NYSE/ICE has been trending downward at a moderate pace, but at an 18% share it is +80 bps higher than the year-ago quarter. Meanwhile, NASDAQ's recent declines bring it -394 bps lower than 1Q15. CBOE's market share is down -149 bps Y/Y but has improved recently; its 27% share of 1Q16TD volume is up +129 bps from 4Q15. BATS and ISE/Deutsche have been taking share from the competing exchanges, with BATS up to a 10% share from 9% a year ago and ISE/Deutsche taking 16%, up from 13% a year ago.

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon4

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon5

 

U.S. Futures Detail

22.3 million futures contracts traded through CME Group this week, bringing the 1Q16TD average to 18.8 million, a +26% Y/Y and +43% Q/Q expansion. Additionally, CME open interest, the most important beacon of forward activity, currently sits at an all-time high of 116.0 million CME contracts pending, good for +27% growth over the 91.3 million pending at the end of 4Q15, an improvement from last week's +22%.

 

Contracts traded through ICE came in at 6.6 million per day this week, bringing the 1Q16TD ADV to 6.2 million, +23% Y/Y and +29% Q/Q growth. ICE open interest this week tallied 69.7 million contracts, a +10% expansion versus the 63.7 million contracts open at the end of 4Q15, an improvement from +7% last week.

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon6

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon8

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon7

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon9 

 

Monthly Historical View

Monthly activity levels give a broader perspective of exchange based trends. As volatility levels, measured by the VIX, MOVE, and FX Vol should rise to normal levels after the drastic compression this cycle, we expect all marketplaces to experience higher activity levels.

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon10

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon11

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon12

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon13

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon14

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon15

 

Sector Revenue Exposure

The exchange sector has broadly diversified its revenue exposure over 10 years as public entities with varying top line sensitivity to the enclosed trading volume data. The table below highlights how trading volumes will flow through the various operating models at NASDAQ, CME Group, ICE, and Virtu:

 

HEDGEYE Exchange Tracker | Next Stop A 40 VIX - XMon19 3

 

 

Please let us know of any questions,

 

Jonathan Casteleyn, CFA, CMT 

  

  

 

 Joshua Steiner, CFA

 

 

 

 


OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST

Takeaway: Please join us for a flash call at 1:30PM ET today to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

Please join us for a flash call at 1:30PM ET today with former US Secretary of Energy Spencer Abraham and former Vice Chairman of the Paris-based International Energy Agency Joe McMonigle to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

 

OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST - HE M opec fc

 

KEY DISCUSSION POINTS:

  • A Tweet from the Wall Street Journal's OPEC reporter that "OPEC is ready to cooperate on a cut" sent oil futures higher and moved the entire market for two hours going into the close.
  • The WSJ tweet quoted a television interview given by the UAE energy minister but turned out to be false alarm as his comments resembled previous statements about cooperation if everyone cuts.
  • With oil heading lower, you should expect similar comments and headlines but it's nothing more than a mirage.
  • Investors should ignore the noise because it's too early for a cut. The Saudi's think their market share policy is winning.
  • A cut now would be counter-productive - like sending a lifeline to US producers.

 

Participating Dialing Instructions

  • Toll Free:
  • Toll:
  • UK: 0-
  • Confirmation Number: 13630766
  • Materials: CLICK HERE

 

BIOS:

 

Spencer Abraham

Secretary Spencer Abraham serves as Senior Energy Analyst and is Chairman and CEO of The Abraham Group, an international strategic consulting firm focused on the energy sector and based in Washington, DC.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy. Secretary Abraham served as the tenth Secretary of Energy in United States history from 2001-2005 under President Bush. 

 

Prior to being named a Cabinet Member, Spencer served as an effective and highly productive U.S. Senator from Michigan for six years.

 

In addition, he is a frequent commentator on FOX News, CNN and Bloomberg TV as well as a periodic contributor of op-ed articles to the Financial Times, The Wall Street Journal, The Washington Post, The Weekly Standard and other publications.

Secretary Abraham holds a law degree from Harvard University, where he co-founded the Federalist Society, and is a native of East Lansing, Michigan.

 

 

Joseph McMonigle

Joseph McMonigle serves as a Senior Energy Analyst and is president and co-founder of The Abraham Group LLC.


Mr. McMonigle is the former Vice Chairman of the Paris-based International Energy Agency. He also served concurrently as U.S. Representative to the IEA (2003-2005).

 

In addition, Mr. McMonigle served as Chief of Staff at the U.S. Department of Energy and also as the American co-chair of the U.S.-China Energy Cooperation Working Group. He is also an attorney and member of the Energy Bar Association as well as the Pennsylvania and District of Columbia bars.

 


OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST

Takeaway: Please join us for a flash call at 1:30PM ET today to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

Please join us for a flash call at 1:30PM ET today with former US Secretary of Energy Spencer Abraham and former Vice Chairman of the Paris-based International Energy Agency Joe McMonigle to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

 

OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST - HE M opec fc

 

KEY DISCUSSION POINTS:

  • A Tweet from the Wall Street Journal's OPEC reporter that "OPEC is ready to cooperate on a cut" sent oil futures higher and moved the entire market for two hours going into the close.
  • The WSJ tweet quoted a television interview given by the UAE energy minister but turned out to be false alarm as his comments resembled previous statements about cooperation if everyone cuts.
  • With oil heading lower, you should expect similar comments and headlines but it's nothing more than a mirage.
  • Investors should ignore the noise because it's too early for a cut. The Saudi's think their market share policy is winning.
  • A cut now would be counter-productive - like sending a lifeline to US producers.

 

Participating Dialing Instructions

  • Toll Free:
  • Toll:
  • UK: 0-
  • Confirmation Number: 13630766
  • Materials: CLICK HERE

 

BIOS:

 

Spencer Abraham

Secretary Spencer Abraham serves as Senior Energy Analyst and is Chairman and CEO of The Abraham Group, an international strategic consulting firm focused on the energy sector and based in Washington, DC.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy. Secretary Abraham served as the tenth Secretary of Energy in United States history from 2001-2005 under President Bush. 

 

Prior to being named a Cabinet Member, Spencer served as an effective and highly productive U.S. Senator from Michigan for six years.

 

In addition, he is a frequent commentator on FOX News, CNN and Bloomberg TV as well as a periodic contributor of op-ed articles to the Financial Times, The Wall Street Journal, The Washington Post, The Weekly Standard and other publications.

Secretary Abraham holds a law degree from Harvard University, where he co-founded the Federalist Society, and is a native of East Lansing, Michigan.

 

 

Joseph McMonigle

Joseph McMonigle serves as a Senior Energy Analyst and is president and co-founder of The Abraham Group LLC.


Mr. McMonigle is the former Vice Chairman of the Paris-based International Energy Agency. He also served concurrently as U.S. Representative to the IEA (2003-2005).

 

In addition, Mr. McMonigle served as Chief of Staff at the U.S. Department of Energy and also as the American co-chair of the U.S.-China Energy Cooperation Working Group. He is also an attorney and member of the Energy Bar Association as well as the Pennsylvania and District of Columbia bars.

 


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INSTANT INSIGHT | McCullough On Short-Term Bounces, Oil & European Equities

Takeaway: Here's what you need to know about today's bounce in global stock markets.

INSTANT INSIGHT | McCullough On Short-Term Bounces, Oil & European Equities  - bounce cartoon 01.12.2016

 

"And the bounce… off fresh YTD closing lows, across Global Equity markets – that’s what bear markets do," Hedgeye CEO Keith McCullough wrote in a note to subscribers this morning.

 

Here's more analysis from McCullough:

 

"Does Draghi need to burn the Euro for European Equities to stop crashing? Yes. Down Euro -0.4% vs. USD this morning finally stopped the DAX at a -30% crash (since 2015’s high) – Italy’s crash (MIB Index) was -34%! This stops Gold from going higher this am too (Up Dollar) – my FX volatility signal is surreal (Euro risk range 1.07-1.14)"

 

 

Speaking of bounces... 

 

"What will a +4.5% bounce in oil prices off new cycle lows do? Keep Oil Volatility (OVX) astonishingly bullish – and that is bearish for the TREND call on everything Energy which remains bearish – risk range on OVX is, get this, 62-79! (immediate-term risk range for WTI = 25.98-29.99) – bear markets don’t end in big media sponsored bounces."

 

 

Heads up!


[UNLOCKED] Keith's Daily Trading Ranges

Editor's Note: We've made some new enhancements to Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers weekday mornings by CEO Keith McCullough. Click here to view a brief video of McCullough explaining how to use it most effectively.

 

Subscribers now receive risk ranges for 20 tickers each day -  the last five are determined by what's flashing on Keith's radar screen and what tickers subscribers are asking about. Click here to subscribe.

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.81 1.58 1.63
SPX
S&P 500
1,809 1,882 1,829
RUT
Russell 2000
935 990 953
COMPQ
NASDAQ Composite
4,141 4,399 4,266
NIKK
Nikkei 225 Index
14,662 16,901 15,713
DAX
German DAX Composite
8,517 9,241 8,752
VIX
Volatility Index
23.97 29.50 28.14
USD
U.S. Dollar Index
94.62 97.99 95.62
EURUSD
Euro
1.07 1.14 1.12
USDJPY
Japanese Yen
111.07 116.96 112.38
WTIC
Light Crude Oil Spot Price
25.98 29.99 27.30
NATGAS
Natural Gas Spot Price
1.91 2.23 1.99
GOLD
Gold Spot Price
1,170 1,245 1,247
COPPER
Copper Spot Price
1.98 2.09 2.01
AAPL
Apple Inc.
91 96 93
AMZN
Amazon.com Inc.
443 525 503
GOOGL
Alphabet Inc.
671 727 706
MCD
McDonald's Inc.
112 119 116
XLU
Utilities Select Sector SPDR
45.30 47.11 45.70
JPM
JP Morgan Chase & Co.
53.01 56.79 53.07


RH | Expect Another 8k

Takeaway: If the company was going to miss, it’d have announced it along with this 8k around management changes.

The announcement that COO Ken Dunaj is leaving RH bugs us, but only because of the ammo it gives the Street around the ‘Don’t Like Management’ argument against the stock. It’s not that Ken is/was on his own a major force behind driving growth and profitability. But this release tells the investment community several things – even if we don’t believe most of them.

  1. First off, this ‘resignation’ actually happened on Tuesday. If you were wondering what took the stock from $52 to $47, now you know. Someone got the memo early.
  2. This will probably introduce a ‘revolving door’ component to investor’s concerns about management. As for the issues around Gary being eccentric – those we can handle, and can easily refute. But the facts are stacking up about management leaving in a way that people will universally question RH’s ability to retain talent. They’ll look at the following…
    • Carlos Alberini, Co-CEO who left to become CEO of Lucky in Dec 2013 (yes, people will revive ‘the Carlos argument’)
    • Doug Diemoz, Chief Development Officer, left RH last summer after 15 months in order to be CEO of Crate & Barrel (not a big deal, RH has not missed a beat).
    • Richard Harvey, head of Kitchens & Tablewear, who quietly left late 2015 after being hired to meaningfully grow the Kitchens business. (RH shifted gears and saw several opportunities to pursue ahead of kitchens. He left on his own accord).
    • Dunaj, COO (leads the organization that moves product – not store openings, to be clear)
  3. In every instance, there was a change in strategy or direction that makes sense out of the headcount changes, which makes sense to us. When a story is as transformational as this, nobody’s job is status quo indefinitely.  But still, people who want stability in management on top of a dynamic growth story won’t like this.
  4. Ironically, this is not the 8K we were expecting to see. We were looking to see a Business Update press release, and the market was too. An interesting thought is that if business was in trouble, it would likely have had to have been disclosed along with this management change. In that regard, relative to expectations, the fact that we got the singular release about Dunaj is probably more bullish than anything else – again, relative to the stock’s performance over the past three days.
  5. Top management has been in planning meetings for much of the past two weeks. In that regard, the timing of a change like this makes sense. It also makes sense to us that we’ll see an update by the end of Feb, which will bless the quarter, and include a business outlook that is far better than a $47 stock suggests.

In the meantime, RH is trading at 12x current year numbers and a long term earnings growth rate of 40% (both of which no one believes). In other words, it’s trading in-line with KSS, and 25% BELOW zero square footage growth retailers with peak margins (like FL, GPS).

 

Here is a link to our latest RH Black Book:  RH In A Recession Black Book Click Here


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