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[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
1.87 1.65 1.84
SPX
S&P 500
1,899 1,992 1,986
RUT
Russell 2000
991 1,072 1,066
COMPQ
NASDAQ Composite
4,444 4,727 4,703
NIKK
Nikkei 225 Index
15,607 16,999 16,747
DAX
German DAX Composite
9,030 9,863 9,777
VIX
Volatility Index
16.99 24.13 17.09
USD
U.S. Dollar Index
96.69 98.90 98.22
EURUSD
Euro
1.08 1.12 1.09
USDJPY
Japanese Yen
111.75 114.39 113.44
WTIC
Light Crude Oil Spot Price
28.93 35.66 34.73
NATGAS
Natural Gas Spot Price
1.63 1.90 1.67
GOLD
Gold Spot Price
1,200 1,250 1,240
COPPER
Copper Spot Price
2.05 2.19 2.19
AAPL
Apple Inc.
93 102 101
AMZN
Amazon.com Inc.
527 585 579
MCD
McDonald's Inc.
114 120 118
XLU
Utilities Select Sector SPDR
45.27 47.62 46.31
JPM
J.P. Morgan Chase & Co.
54.06 60.29 59.76
COST
Costco Wholesale Corp.
145 156 153


VIX, Russell and Russia

Client Talking Points

VIX

We really did need sentiment to pivot back to bullish (positioning was bullish until we hit the FEB lows, then they sold the lows – then the squeeze). That said the bullish TREND in equity volatility has a risk range of 15-30, and now we’re at 17 – next big move = up.

RUSSELL 2000

While we’ve been bearish on the Russell 2000 (and S&P 500) since July, we’ve had some massive opportunities to underweight, sell, short, etc. Small Cap (SIZE) as a style factor at obvious lower-highs (from the all-time bubble high of 1295). Now = another one of those opportunities with immediate-term down side to 991 – Costco comps of 0% is not “an economy that appears to be picking up.”

RUSSIA

Forget your friends telling you “Oil has bottomed” or that they’re once again long levered Energy stocks (remember OCT?), the real fun was in being long Russian stocks for the last +14% ramp (in a month!); is this where the next 3-6 months of alpha is going to be? We say this and all Oil & Gas related exposures are happy hunting grounds for bears again.

 

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

Asset Allocation

CASH 64% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 2%
FIXED INCOME 28% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
XLU

Our preferred growth slowing vehicle remains Utilities (XLU) in equites. Hitting on Friday’s revised GDP report (Q/Q SAAR Q4 GDP revised to +1.0% from +0.7%), a deep-dive into the number doesn’t support an incrementally stronger economy:

  • Consumption was revised down marginally but net exports were up with the negative revision to imports outweighing the negative revision to exports. That’s good for the number but lower global trade activity is not a good sign for global growth;
  • Much of the actual change in the revision was due to inventories, which contributed +0.31pts to the headline number
GIS

General Mills (GIS) hit an all-time high last week when it reached $60.18 on Thursday. Although this would not be a great entry point, it is also not a reason to get out if you have a long-term view. Nothing has changed in our fundamental story and we have no reason to lose faith in our thinking to date.

 

Over the course of the past few years, GIS has made strategic acquisitions within the natural & organic / wellness space (we call it the string of pearls approach). Although they are not largely meaningful to top or bottom-line right now, they are changing the way the company thinks about its broader portfolio.

 

We continue to believe GIS is one of the best positioned consumer packaged foods companies due to its strong brands and best-in-class people and organization.

TLT

Our preferred growth slowing vehicle remains (Long-Term Treasuries) TLT in fixed income. A flattening in the yield spread (10YR Treasury Yield – 2YR Treasury Yield) continued last week into double digit basis point territory (currently at 96 basis points). Year-to-date the yield spread has declined 44 basis points while the 10YR Treasury Yield has dropped 47 basis points. As a reminder the yield curve flattens as the economy slows with policy and/or liquidity management driving the short-end higher and defensive positioning and/or discounting of lower future growth/inflation driving the long end lower. 

Three for the Road

TWEET OF THE DAY

Europe has rolled off its cycle peak and not enough investors have contextualized the impact this'll have on the USD

@HedgeyeDDale

QUOTE OF THE DAY

I don’t believe in luck, I believe in preparation.

-Bobby Knight                                                 

STAT OF THE DAY

Airbnb now offers over 1 million rooms or units nationwide.


ICI Fund Flow Survey | More is More

Takeaway: ICI has provided more detail in its weekly survey which will assist investors in pinpointing trends in the asset management sector.

 

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

The weekly ICI survey has just become more robust with the Investment Company Institute now providing additional categories within domestic equities, world equities, and taxable bonds in its weekly fund flow information which canvasses 98% of all publlically traded mutual funds. Please let us know if you would like a copy of the underlying information. For example, a fairly general aggregation of international equity flows has now been broken out into Developed versus Emerging Market survey results which are very different in trajectory and magnitude.

 

ICI Fund Flow Survey | More is More - new intro 

 

In the 5-day period ending February 24th, domestic equity funds had their second week of positive inflows in the last 22 weeks; investors contributed a net +$2.1 billion to the asset class with Large Cap (new category) driving the contribution. In fixed income funds, investors resumed withdrawals from the taxable bond category with investment grade outflows (new category) being offset by new risk taking in high yield (new breakout) which had a solid inflow. Meanwhile, tax-free munis continue to be the story for 2016 thus far taking in another +$1.0 billion in contributions (their 21st week of consecutive inflows). Money funds took in a large +$15 billion contribution last week, which is likely due to tax refund receipts and on going risk aversion.


ICI Fund Flow Survey | More is More -  5 ICI1

 

In the most recent 5-day period ending February 24th, total equity mutual funds put up net inflows of +$4.4 billion, outpacing the year-to-date weekly average outflow of -$346 million and the 2015 average outflow of -$1.6 billion.

 

Fixed income mutual funds put up net outflows of -$100 million, outpacing the year-to-date weekly average outflow of -$777 million and the 2015 average outflow of -$475 million.

 

Equity ETFs had net redemptions of -$5.0 billion, trailing the year-to-date weekly average outflow of -$4.5 billion and the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$2.3 billion, trailing the year-to-date weekly average inflow of +$2.4 billion but outpacing the 2015 average inflow of +$1.0 billion.

 

Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.



Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the weekly average for 2015 and the weekly year-to-date average for 2016:

 

ICI Fund Flow Survey | More is More -  3 ICI2

 

ICI Fund Flow Survey | More is More -  5 ICI3

 

ICI Fund Flow Survey | More is More -  4 ICI4

 

ICI Fund Flow Survey | More is More - ICI5

 

ICI Fund Flow Survey | More is More - ICI6



Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.

 

ICI Fund Flow Survey | More is More - ICI12

 

ICI Fund Flow Survey | More is More - ICI13

 

ICI Fund Flow Survey | More is More - ICI14

 

ICI Fund Flow Survey | More is More - ICI15

 

ICI Fund Flow Survey | More is More - ICI16



Most Recent 12 Week Flow within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI), the weekly average for 2015, and the weekly year-to-date average for 2016. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

ICI Fund Flow Survey | More is More - ICI7

 

ICI Fund Flow Survey | More is More - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, investors flocked to gold last week, contributing +$1.9 billion or +7% to the GLD ETF.

 

ICI Fund Flow Survey | More is More - ICI9



Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.

 

ICI Fund Flow Survey | More is More - ICI17

 

ICI Fund Flow Survey | More is More - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$775 million spread for the week (+$1.5 billion of total equity inflow net of the +$2.2 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$438 million (more positive money flow to equities) with a 52-week high of +$20.5 billion (more positive money flow to equities) and a 52-week low of -$19.0 billion (negative numbers imply more positive money flow to bonds for the week.)

  

ICI Fund Flow Survey | More is More - ICI10

 


Exposures:
The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:

 

ICI Fund Flow Survey | More is More - ICI11 



Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA







the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

The Macro Show Replay | March 3, 2016

CLICK HERE to access the associated slides.

 

 


CHART OF THE DAY: Is There A Pick Up In U.S. Real Consumer Spending? No

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... 'A pick up in US real consumer spending' – as you can see in the Chart of The Day, everyone and their brother/sister who does macro math should know by now that Real Consumption Growth was great at last year’s cycle peak of 3.32%; in rate of change terms the top is in; saying it’s “picking up” vs. the cycle peak is an obfuscation of the bigger picture."

 

CHART OF THE DAY: Is There A Pick Up In U.S. Real Consumer Spending? No - 03.03.16 chart


Establishment Economists

“Archaic humans did not initiate any revolutions.”

-Yuval Noah Harari

 

And archaic economists certainly didn’t initiate an ability to call economic slow-downs, market crashes, or recessions in the last 20 years. As you know, the Federal Reserve hasn’t proactively predicted ANY recessions over that time span, and Old Wall consensus macro missed calling 3 US economic cycle peaks in a row (2000, 2007, and 2015).

 

Yes, you can become Trump style you-ge! on Wall Street by selling people who are in the business of being long reasons to be bullish. You just need to keep changing the reasons. It’s actually a good business. So is selling porn. As Harari reminds us in Sapiens, “the ability to create an imagined reality out of words enabled large numbers of strangers to cooperate.” (pg 32)

 

After doing an entire day of meetings with Institutional Investors in New York City yesterday, I realized that the same group of people who dismissed our Industrial #Recession call as “being a small part of the economy” are now hanging their entire bull case on industrials, PMIs, etc. “bottoming.” In other news, Costco (consumption side of the economy) comped 0% in February.

 

Establishment Economists - 4  growth cartoon 03.02.2016

 

Back to the Global Macro Grind

 

“Phew” wrote Nancy Lazar, “the US economy appears to be picking back up.” Thank goodness for that, eh? Let’s pass that note around to all the bottom-up “value” stock pickers who have been getting crushed for the last 3-6 months. They’ll feel relieved.

 

Was it the new cycle low in US Consumer Confidence of 92.2, a 17-month low in growth in signed contracts for Pending Home Sales, the Markit Services PMI going sub-50 for the 1st time since 2009, or the Russell 2000 crashing in February that revealed that the 70% of the economy that really matters isn’t slowing from its cycle peak?

 

Just to knock down the pins on our views vs. the same economist who was looking for what “felt” like 4% US GDP growth in 2015, here are my Top 3 rebuttals to her very huge and excellent perma bull research note yesterday:

 

  1. “A pick up in US real consumer spending” – as you can see in the Chart of The Day, everyone and their brother/sister who does macro math should know by now that Real Consumption Growth was great at last year’s cycle peak of 3.32%; in rate of change terms the top is in; saying it’s “picking up” vs. the cycle peak is an obfuscation of the bigger picture
  2. “A rebound in construction spending” – as you all know (see our bullish research on US Housing for all of 2015), Autos & Housing aren’t “rebounding” – they’re slowing from their 2015 rate of change cycle peaks. For details see YTD returns for fund managers who are levered long GM, Ford, and Housing stocks (or the recent Pending Home Sales report of -1.4% y/y)
  3. “The lagged impact of lower oil prices” – that one is my favorite. Remember that one? Ed & Nancy (different firms now - they broke up) would write that every other week at the all-time #bubble high for US stocks in July of 2015 – “low gas prices” are going to create rainbows and puppy dogs for as far as the eye can see. Isn’t the new bull case “rising gas prices” btw?

 

Nancy also likes what all #LateCycle labor economists (like Janet Yellen) like to see, which is “solid employment growth” – which, by the way, you always see at the END of a US economic cycle.

 

Tomorrow, that’s actually the catalyst for the real bulls on Wall Street (the Long Bond and Utilities Bulls) – yet another rate of change slow-down in US Non-Farm Payrolls (NFP) from its FEB 2015 Labor Cycle PEAK of +2.34% growth.

 

To give Nancy some credit, she did mention that the “foreign backdrop remains a headwind… pulling down Global PMI to 49.8, the lowest level since early 2013.” The problem with that truth is that her partner Francois Trahan has been calling for PMIs to “bottom” globally since US and Japanese Equities peaked in July!

 

It’s not “mean” to call out Establishment Economists and hold them to account for their research views. God knows, The People can’t afford the Old Wall missing it again. I’d be more than happy to debate any economist in an open forum, anywhere, any time. If we want to evolve as a profession – if we really “want America to be great again” – we really need to have these debates!

 

Since the best macro exposures you could have been long for the last 2-3 weeks (during the slow-volume squeeze after hedge funds shorted the YTD lows) are precisely the ones that ruined most portfolio returns for the last 6-8 months, I have no doubt that people who are in the business of being bullish are going to be looking for “the economy to be picking up”…

 

Reality is they aren’t highlighting the most important things at this stage of The Cycle (the profit cycle and the credit cycle). Instead, they’re cherry picking one-off data points that are actually still slowing in trending (year-over-year) rate of change terms.

 

With S&P Earnings down -8.2% year-over-year (that’s a non-GAAP number, the real # is down double-digits on a percentage basis), High Yield Spreads > historical mean, and Long-term Bond Yields hovering around all-time lows (1.86% UST 10yr is -41bps YTD), the most forward looking and accurate economist I know (Mr. Market) still sides with my team - not Nancy, Ed, and Francois.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.65-1.87%

SPX 1
RUT

VIX 16.99-24.13
EUR/USD 1.08-1.12
Oil (WTI) 28.93-35.66

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Establishment Economists - 03.03.16 chart


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.57%
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