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Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products




Daily Market Data Dump: Wednesday - equity markets 5 25


Daily Market Data Dump: Wednesday - sector performance 5 25


Daily Market Data Dump: Wednesday - volume 5 25


Daily Market Data Dump: Wednesday - rates and spreads 5 25

Investors are Frustrated

Client Talking Points

S&P 500

Will 1 big up day give U.S. stocks their 1st real up week (into month-end) in the last 6 weeks? Maybe we should all buy/cover high again so that we can sell 50 handles lower! Inasmuch as our signal was clear to buy/cover around 2030-2040, it’s crystal clear to start selling again in the 2080-2090 range as Equity Volatility makes yet another higher-low.


Unfortunately, the bond market isn’t buying into the hope that GDP is +2.5% here in Q2 (we’re still below 1%) – at 1.86% this morning the 10YR Yield is signaling at 1.68% is still very much in play ahead of next week’s #EmploymentSlowing report.


Gold down to +15% year-to-date – what a disaster that is! If you haven’t owned it all year, here’s another BUY signal. It’s been a great way to play #GrowthSlowing and we have Durable Goods, GDP, and Labor all being reported in the next week.


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

Asset Allocation

5/24/16 52% 6% 0% 8% 28% 6%
5/25/16 58% 2% 0% 10% 28% 2%

Asset Allocation as a % of Max Preferred Exposure

5/24/16 52% 18% 0% 24% 85% 18%
5/25/16 58% 6% 0% 30% 85% 6%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration

When Janet does have to acknowledge the deterioration in U.S. growth, we expect the policy shift to be dollar bearish on the margin. And, to the contrary, if the Fed RAISES RATES (June) into this slow-down, they’ll be the catalyst for DEFLATION (down yields) again anyway. And there’s nothing Gold (GLD) likes more than a falling dollar and falling interest rates which is why we added it to the long-side of Investing Ideas this week. Remember, this is the same week various Fed members were in public calling for a rate hike with the worst jobless claims print since 2012. #GoodLuck.


McDonald's (MCD) continues to evolve. The company's latest step is testing never frozen burgers at 14 units in the Dallas, TX area. This initiative could give them the ability to compete with better burger concepts such as Shake Shack, In-N-Out and Five Guys.


Meanwhile, there has been chatter about the lack of identity for their value platform in 2Q16. MCD is truly still in the testing phase as to what their national value message will be. We can appreciate the fact that they are testing multiple formats before fully committing.


In the meantime, the tailwind from all-day breakfast will continue to propel growth going forward, until lapping this initiative in 4Q16. We continue to favor MCD as one of the best LONGs in the market right now, due to actual growth and style factors that are friendly in volatile markets.


If you haven’t yet, you got another chance to buy long-term Treasuries at lower highs this week. If you’re already long of Long Bonds (TLT, ZROZ), stick with it. None of the relevant data released this past week suggests that growth could inflect and trend positive:

  • Thursday’s Jobless Claims Report was the worst print, in Y/Y rate of change terms, since 2012, and it was the fourth consecutive week of increasing jobless claims
  • Industrial Production declined -1.1% Y/Y for April, marking the 8th consecutive month of Y/Y contraction: #IndustrialRecession

Tying together a continued deceleration in growth with policy expectations, the most important callout is that our expectation for growth in Q2 is well below consensus and Fed expectations (which have been horribly inaccurate). 

Three for the Road


Why Hedgeye's Howard Penney Is Still Bearish On Shake Shack https://app.hedgeye.com/insights/51167-unlocked-why-hedgeye-s-howard-penney-is-still-short-shake-shack… @KeithMcCullough $SHAK



Life is really simple, but we insist on making it complicated.



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CHART OF THE DAY: How To Risk Manage Our Favorite Macro Positions

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.


"... Since Utilities (XLU) and Long-term Bonds (TLT) already signaled immediate-term TRADE oversold (lower) last week, the only big thing that I like on the long side that is signaling oversold today (i.e. it’s at the low-end of the risk range today) is Gold.


Gold’s immediate-term risk range is now $1215-1260. So I’d buy some at $1215 and sell some at $1260."


CHART OF THE DAY: How To Risk Manage Our Favorite Macro Positions - 05.25.16 EL Chart

Brier Bear

“The distance between what you forecast and what actually happened.”

-Phil Tetlock


Not to be confused with Tim Horton’s Brier Cup (or what Canadian Curling fanatics call The Brier), your Brier Score is a probability weighted measure of how good you are at forecasting.


As Phil Tetlock explained in the must-read #behavioral economics book I’ve been citing for the last month, Superforecasting, “Brier scores are like golf scores: lower is better. Perfection is 0.” (pg 64)


No one is perfect. But that doesn’t mean we shouldn’t strive for excellence. We’ve been within 20-30 basis points of forecasting US GDP perfectly for the last 5 quarters. If we’re right on Q2, being positioned for lower-for-longer is going to make for better performance again.


Brier Bear - growth cartoon 05.24.2016


Back to the Global Macro Grind


But, but… bond yields rose (for a week), gold is getting “hammered” (to +15% YTD), and… if the SP500 can hold it’s short-squeeze day of +1.4% (yesterday), US stocks are going to be up for the 1st week in the last 6…


Doesn’t that mean GDP is going to be 2.5% and the Fed can raise rates in June?


C’mon. Let’s keep it real here. Inasmuch as the SP500 signaled immediate-term TRADE oversold (after 4 straight down weeks) in the 2030-2040 range last week, it will signal immediate-term TRADE overbought in the 2080-2090 range this week.


Oh, and it’s month-end.


That’s when everyone @CNBC who is in the business of marketing “but the market isn’t down” (meanwhile most fund managers they interview are) gets to try to tell you another story about how #TheCycle wasn’t really happening, afterall.


Yes, getting the rate of change in GROWTH And INFLATION right is a major component of having a low Brier Score. But risk managing the range (i.e. trading) of immediate-term oversold vs. overbought is a critical component to scoring well too.


From a Hedgeye #Process perspective, what I mean by that is this:


  1. Start with your best Bayesian bet on where the intermediate-term TREND is going (our research view)
  2. Contextualize that TREND within the long-term TAIL duration (i.e. #TheCycle)
  3. And then just risk manage the immediate-term TRADE range of oversold/overbought signals


I know. This isn’t perfect. But after 17 years of trial and error (making legions of mistakes), this process of marrying my multi-duration cycle research with quantitative risk management signals (multi-duration, multi-factor) is the best I can do.


What do you do? If you’re reading this, I certainly appreciate you having an open mind to what it is that I do.


What I don’t do is chase high and freak-out (sell) low. While it seems like forever ago (in inbox question terms), it was only last week that I wrote to you about 9-10 buy/cover signals, taking Real-Time Alerts to 9 LONGS and 3 SHORTS.


In the spirit of the chapter in Superforecasting that today’s quote about Brier Scores comes from (called Keeping Score), on May 18th, I also took our “Cash” position down to its lowest level of 2016 at 49%.


That’s when bond yields tapped the top-end of my risk range (and stocks sold off to the low-end of the immediate-term TRADE range) though. This morning European, Japanese, and US Equities are trading at the top-end of the range:


  1. SP500 immediate-term risk range = 2037-2084
  2. Nikkei immediate-term risk range = 16,331-16,890
  3. German DAX immediate-term risk range = 92


So I’ll raise my “Cash” position back up to 58% now (selling some US Equity and USD exposure).


Since Utilities (XLU) and Long-term Bonds (TLT) already signaled immediate-term TRADE oversold (lower) last week, the only big thing that I like on the long side that is signaling oversold today (i.e. it’s at the low-end of the risk range today) is Gold.


Gold’s immediate-term risk range is now $1. So I’d buy some at $1215 and sell some at $1260.


Selling and/or buying “some” in something doesn’t mean I don’t have “conviction.” It means I have a process to measure the distance between what I’m forecasting and what is actually happening.


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


UST 10yr Yield 1.68-1.89% (bearish)

SPX 2037-2084 (bearish)
RUT 1090-1140 (bearish)

NASDAQ 4 (bearish)

Nikkei 160 (bearish)

DAX 92 (bearish)

VIX 13.86-17.58 (bullish)
USD 94.11-95.95 (bullish)
EUR/USD 1.11-1.13 (bearish)
YEN 108.45-110.79 (bullish)
Oil (WTI) 46.98-49.89 (bullish)

Nat Gas 1.95-2.17 (bearish)

Gold 1 (bullish)
Copper 2.02-2.10 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Brier Bear - 05.25.16 EL Chart

The Macro Show with Keith McCullough Replay | May 25, 2016

CLICK HERE to access the associated slides.

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

JT Taylor: Capital Brief (formerly Morning Bullets)

Takeaway: Trump Hitting Hard, Clinton Hits the Casinos; Dem Trouble in VIrginia

JT Taylor: Capital Brief (formerly Morning Bullets) - JT   Potomac banner 2


TRUMP HITS HARD: Time to play hard ball. We knew it was coming, we just didn’t know when. Donald Trump doesn’t care about the issue or the context - he’s going ugly, early.  Although the presidential primaries are cooling, they’re still not over as neither candidate is their party’s official nominee yet and they’re already crossing the line – to the extent that one even existed this cycle. Trump seems to keep the surprises coming and one of his allies summed it up perfectly: “What Trump is going to do only Trump knows. Trump is not scripted, he’s not programmed and he’s not handled, but he can read, and he does know the Clintons.” A storm is brewing.


ET TU SUSANA?  Hillary Clinton isn’t the only one he’s going after. Trump attacked fellow Republican and NM Gov Susana Martinez and her record in the state claiming he’d do a better job as Governor after she snubbed his rally in Albuquerque last night. We’ll scratch her from the Veep shortlist.


CLINTON HITS THE CASINOS: “How does anybody lose money running a casino?” Well, people do lose money at casinos, but that’s not what she was referring to as Hillary Clinton follows suit by going after Trump’s past and this time, we’re talking business. Clinton poked fun at the presumptive Republican nominee for his four businesses’ bankruptcies, including his famously failed Atlantic City casinos. Additionally, Clinton shined a light on Trump Mortgages, their role in the housing recession, and Trump’s nerve in rooting for the economy to fail.


DEMOCRAT WOES IN VA: VA Democratic Gov Terry McAuliffe was named the subject of an ongoing investigation by the FBI and prosecutors from DoJ’s public integrity unit. McAuliffe, a longtime friend and confidant of the Clintons, is likely to cause problems for both the Democratic Party and their frontrunner as well - you can bet Trump will go after him as the investigation involves a Chinese billionaire, who has not only donated to McAuliffe’s campaign, but to the Clinton Foundation as well. VA is a toss-up state and, with an eventful summer ahead for McAuliffe, it doesn’t look as if he’ll be much help for the cause down the road.


CALI KNOWS HOW TO PARTY: Californians are registering to vote faster than ever before. More than twice as many voters have registered this year than in the same four-month period in 2012. The growing voter groups identify themselves as Hispanics and Millennials. Both are left-of-center groups, with one favoring Sanders and the other favoring Clinton. CA is too blue for Republicans to be competitive in the fall, but look for a more engaged electorate to impact the Democratic race there in less than two weeks.


LET’S PLAY FAIR:  Bernie Sanders will get more slots on the platform-writing committee for the upcoming Democratic Convention in Philadelphia. Under a new agreement, Sanders will now occupy a third of the fifteen seats on the committee, while Clinton will name six, and DNC Chairwoman Debbie Wasserman Schultz will name four. Sanders and his staff have complained for months that the Democratic Party was tilted in Clinton’s favor and Democratic officials have responded saying that they will give the senator an “unprecedented” say over the official policies of the Democratic Party.  Sanders was quick to act, appointing two controversial figures: James Zogby, a pro-Palestinian activist who serves as president of the Arab-American Institute; and Cornel West, liberal author and racial justice activist who is one of President Obama’s highest-profile African American critics.


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