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[UNLOCKED] Keith's Daily Trading Ranges

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 of which are determined by what's flashing on Keith's screen and by what names 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
1.90 1.70 1.84
SPX
S&P 500
2,060 2,093 2,076
RUT
Russell 2000
1,115 1,155 1,140
COMPQ
NASDAQ Composite
4,781 4,869 4,805
NIKK
Nikkei 225 Index
16,101 17,602 16,666
DAX
German DAX Composite
9,971 10,408 10,321
VIX
Volatility Index
13.69 17.94 15.22
USD
U.S. Dollar Index
93.43 95.11 93.73
EURUSD
Euro
1.12 1.14 1.13
USDJPY
Japanese Yen
107.01 110.59 108.11
WTIC
Light Crude Oil Spot Price
41.24 46.60 45.88
NATGAS
Natural Gas Spot Price
1.88 2.30 2.06
GOLD
Gold Spot Price
1,230 1,277 1,268
COPPER
Copper Spot Price
2.13 2.31 2.23
AAPL
Apple Inc.
93 103 95
AMZN
Amazon.com Inc.
590 680 602
MCD
McDonald's Inc.
125 130 128
XLU
Utilities Select Sector SPDR
46.43 49.90 48.13
GOOGL
Alphabet Inc.
692 740 705
FB
Facebook Inc.
111 120 117


Volume, Gold and Japan

Client Talking Points

VOLUME

Algos/quants lifting little offers on up days; liquidation on the big down days – we still think this is a Liquidity Trap. Total U.S. Equity Volume ramped +22% vs. its 1-month average yesterday (SPX -0.92%, Nasdaq -1.2% on the day).

GOLD

Gold absolutely loves the U.S. GDP #GrowthSlowing call – ramping to +20.2% year-to-date this morning and since not a lot of managers are long it, it’s probably best to focus on whether the SPX is up or down 2%!

JAPAN

Unfortunately, they do have to re-open the Japanese stock market on Monday (closed overnight) with Yen +1% and Nikkei futures -3%; we think this is the epicenter of the #BeliefSystem (in centrally planning equity markets) breaking down.

 

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

Asset Allocation

CASH 62% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 4%
FIXED INCOME 28% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
MCD

McDonald's (MCD) released earnings Friday reporting strong numbers across every important metric. Consider, for example, Q1 EPS $1.23 versus FactSet's consensus estimate of $1.16. Same-store sales in the U.S. were +5.4% vs consensus +4.4%. Revenue in the U.S. was $2.02B vs consensus $1.98B. Company-operating margin was 15.4% vs consensus 14.9% and year-ago 14.3%. We are sticking with our $150 target and believe that $7.00 in EPS for 2017 is not out of the question.

CME

Please note we are removed CME Group from Investing Ideas (long side) on Thursday. "I thought there was going to be more upside to the numbers than there was," Hedgeye CEO Keith McCullough wrote yesterday. "The market reaction looks right on that (companies that beat big go up big – see FB). So I’ll remove it today, as I think the U.S. stock market broadly has a ton of risk pending May-July."

 

Earnings analysis via Financials analyst Jonathan Casteleyn:

 "CME Group had solid earnings results this week with revenue up +11% and earnings up +18% year-over-year. Investors will be hard pressed to find similar growth in the Financials sector with interest rates that continue to compress and very low banking and trading activity. In contrast, the average result for Financial companies in the S&P 500 thus far in earnings season has been top line revenue declines of -3.3% with earnings decay of -14.5%. With 2Q16 trading volumes up +4% year-over-year to start the new quarter, CME will likely put up another solid quarter and out comp the rest of the sector again."

TLT

The market is currently pricing in a rate hike but not until … late 2017. So if you’re looking for reasons to buy the market at all-time highs, don't expect a boost from incremental Fed policy. To be clear, the dovish Fed commentary of late is a direct result of U.S. growth slowing. Friday’s manufacturing PMI continued its downward trend (it peaked in rate of change terms in August 2014). Clearly, the market gets decelerating growth, which is why Utilities (XLU) are leading equity sector divergences YTD (+9.3%) and the U.S. Treasury 10-year yield down 0.35% over that same period. (That translates into TLT +6.5% and ZROZ +10.2% year-to-date.)

 

With that being said, the alpha on our long utilities and Long Bonds (TLT & ZROZ) vs. short Junk Bonds (JNK) position has gone against us in the last two months. Notably, we have no direct exposure to commodities or commodity-related sectors, but being short of JNK amidst a huge rally in commodities has not been a good position. Much of the beaten down resource-leveraged credit has rallied.

Three for the Road

TWEET OF THE DAY

Again, My Thoughts On This Lousy GDP Report  https://app.hedgeye.com/insights/50593-my-thoughts-on-this-lousy-gdp-report… via @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

Always borrow money from a pessimist. He won’t expect it back.

Oscar Wilde

STAT OF THE DAY

According to a YouGov survey conducted in 10 countries across four continents U.S. Democrats and Republicans are about as likely as each other to prefer blue as their favorite color (33% for Democrats and 29% for Republicans). However, 17% of Republicans like red – twice the number of Democrats who do (8%).


CHART OF THE DAY: Fed Forecast = WRONG

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. 

 

"... Why does the Fed have to keep making up new policies? That’s simple. It’s because they keep getting their growth and inflation forecasts wrong. Since the Fed is un-elected and un-accountable, they tend to corroborate a view from the highest office in the land, where Obama was allowed to call people like me “peddlers of economic fiction” in his State of The Union Address."

 

CHART OF THE DAY: Fed Forecast = WRONG - 4 29 cod


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.

Making It Up

“The Fed is simply making it up as it goes along.”

-Jim Rickards

 

In his new book, The New Case For Gold, that’s what my friend Jim Rickards had to say about the US Federal Reserve. If you haven’t seen it yet, Jim and I had a good conversation about US #GrowthSlowing, Gold, etc. on @HedgeyeTV that has close to 100,000 views: https://www.youtube.com/watch?v=70xBQ2lL_pE

 

“Forward guidance is only credible if you actually believe it. Still, considering the fact that the Fed has had 15 different policies since 2008, it is difficult to know what to believe anymore… this is not a disciplined experiment… 15 policies in 7 years? That’s clear evidence of improvisation.” (pg 77)

 

Why does the Fed have to keep making up new policies? That’s simple. It’s because they keep getting their growth and inflation forecasts wrong. Since the Fed is un-elected and un-accountable, they tend to corroborate a view from the highest office in the land, where Obama was allowed to call people like me “peddlers of economic fiction” in his State of The Union Address.  

 

Making It Up - Easy money cartoon 04.28.2016

 

Back to the Global Macro Grind

 

In other real-world news, despite some of the warmest winter weather that the US has ever seen (and ever is still a long time), US GDP slowed to 0.5% for the 1st quarter of 2016. #Peddle that.

 

As my bi-partisan economic #truth seeking partner @Hedgeye, Darius Dale, wrote to our Institutional Subscribers yesterday, our forecast for the 1st half of 2016 represents the slowest pace of US domestic economic growth since the back half of 2012.

 

Having popularized broken sources that completely missed this, it’s no wonder that the Old Wall’s Media (CNBC, Bloomberg, WSJ, etc.) has reverted to some of the most absurd comments I’ve read about US GDP in the last 20 years. Check this one out:

 

“Near zero GDP growth has become somewhat common… and may not be an indicator of pending recession risk as it once was.” -Bloomberg

 

And people in our profession wonder why The American People don’t trust us…

 

Yes, whether people like me or not, we are all in this profession together. I’m not some blogger who has been banned by the industry for insider trading. I’m not hiding behind a pseudonym either. I’m right here, running it right up the middle, every day.

 

Until politicians (elected and un-elected) completely blow up markets again, we still have a chance to start-over by telling one another the truth about the economic, profit, and credit cycle.

 

Since it’s clearly slowing, the Fed is trying to do what the Bernanke/Yellen Feds have always done:

 

Devalue the Dollar (erode the purchasing power of the American people – higher rent, gas prices, etc.) in a last gasp effort to “reflate” the stock market before #Recession replaces ISIS as the most important topic in the US Election.

*note: Bloomberg supports Obama and the Clintons

 

So, no worries, as long as Oil/Gas prices keep ramping (into month-end portfolio performance reporting), the SP500 isn’t going to go down much more than it did yesterday (-0.92%). The “Ex-Energy” Nasdaq will (-1.20%)!

 

Obviously Dollar Devaluation trades are getting some people paid (not The People). But, with the SP500 barely “up” for the YTD, the low-beta alpha is being made in being long those big liquid Macro positions that thrive during US #GrowthSlowing periods:

 

  1. Long-term Treasury Bonds (TLT) = +7.1% YTD
  2. Utilities (XLU) = +11.2% YTD
  3. Gold (GLD) = +20.1% YTD

 

That’s right. The peddlers of “the US economy is great” narrative don’t talk about Mr. Macro Market nailing GDP slowing from 3% to 1.4% to 0.5% in Gold +20.1% YTD terms, do they? Maybe that’s why our Gold video is going to hit 100,000 views.

 

While I may be accused of being “terrible” (for 2 months) for not changing my mind on the SP500 and loading up on MLPs when the TRENDING US economic data didn’t change, I’ve had much worse things happen to me in my career.

 

And when it’s all said and done, I’ll go to my grave resting peacefully, knowing that I helped build a firm that is independent of Washington and Wall St. conflicts of interest – a firm that didn’t have to make things up in order to get paid.

 

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND research views in brackets) are now:

 

UST 10yr Yield 1.70-1.90% (bearish)

SPX 2060-2093 (bearish)
RUT 1115-1155 (bearish)

NASDAQ 4 (bearish)

Nikkei 16101-17602 (bearish)

DAX 98 (bearish)

VIX 13.69-17.94 (bullish)
USD 93.43-95.11 (bullish)
EUR/USD 1.12-1.14 (neutral)
YEN 107.01-110.59 (bullish)
Oil (WTI) 41.24-46.60 (bearish)

Nat Gas 1.88-2.30 (bearish)

Gold 1230--1277 (bullish)
Copper 2.13-2.31 (bearish)

AAPL 93-103 (bearish)

MCD 125-130 (bullish)

XLU 46.43-49.90 (bullish)

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Making It Up - 4 29 cod


The Macro Show with Hedgeye CEO Keith McCullough Replay | April 29, 2016

CLICK HERE to access the associated slides.

An audio-only replay of today's show is available here.


My Thoughts On This Lousy GDP Report

Takeaway: We're the only firm to have called the slow-down from its 2015 cycle peak.

This morning's bad 0.5% US GDP report didn't surprise us. It didn't surprise the Long End of The Curve (Long Bond) either. We're the only firm to have called the slow-down from its 2015 cycle peak.

My Thoughts On This Lousy GDP Report  - GDP cartoon 10.29.2015

 

Macro markets have been discounting GDP #GrowthSlowing for months now. That's why the Fed has pivoted back to dovish, devaluing the Dollar, in a last gasp hope to "reflate" asset prices. 

 

In the next 3 months, we think the probability is at its highest point that US GDP goes negative sequentially (Hedgeye Predictive Tracking Algo is currently forecasting +0.3% QoQ SAAR for Q2). While many are trying to make the argument (Bloomberg, CNBC, etc.) that GDP "doesn't matter" like it used to ... we've never traveled with that conflict of interest crowd, and we won't this time either. (See Shame On You Mark Zandi for more on this).

 

Instead, we'll remind you that there is an epic amount of credit cycle risk associated with the profit cycle going to negative on a year-over-year basis. And tell you to short both Junk and High Yield (again).

 

As my colleague Darius Dale wrote in a note to institutional subscribers today,

 

Assuming Q1 isn’t revised in any material way, our forecast for 1H16E represents the slowest pace of domestic economic growth on a multi-quarter basis since 2H12. Any downside surprises from there will surely translate to renewed recession fears.

 

Stay long The Long Bond, Utilities, Gold, MCD, etc.


Early Look

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