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Daily Market Data Dump: Tuesday

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

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Tuesday - equity markets 6 14

 

Daily Market Data Dump: Tuesday - sector performance 6 14

 

Daily Market Data Dump: Tuesday - volume 6 14

 

Daily Market Data Dump: Tuesday - rates and spreads 6 14

 

Daily Market Data Dump: Tuesday - currencies 6 14


Good Spot

Client Talking Points

VIX

Inasmuch as it was obvious to sell US Equity Beta in the 12-13 VIX range (it’s been working for almost a year now), 21-22 VIX is a buy/cover signal – again, very immediate-term capitulation for chart chasers who got pinned 45 handles higher in SPY.

USD

Dollar Up, Rates Down – that is the #Deflation Risk On – and that’s a big reason for the oversold signal in Global Equities this morning – Reflation sensitive countries (Russia -3%, Australia -2%) and Reflation Risk sector exposures have corrected, hard, from our USD oversold (Energy Overbought) signal last week.

UST 10YR

1.57% 10yr Yield. Yep. All-time low. Rates are oversold ahead of Yellen’s 4th pivot (hawkish to dovish to hawkish to dovish) in 6 months as #EmploymentSlowing becomes obvious...

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/13/16 66% 0% 0% 6% 18% 10%
6/14/16 64% 2% 0% 6% 19% 9%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/13/16 66% 0% 0% 18% 55% 30%
6/14/16 64% 6% 0% 18% 58% 27%
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
TLT

No matter what side of the reflation/deflation trade you’re on, the growth in global demand continues to decelerate on a trending basis. The debate is no longer whether or not growth is slowing. The real debate centers on the policy response and the market reaction to that policy response. While that question presents us with “open the envelope” risk, #GrowthSlowing will continue to be the bull catalyst for U.S. Treasuries whatever the policy response as the slow march to zero yields globally goes on. 

GLD

To sum things up, stay away from the guessing game and stick to what is empirically evident. A stronger USD over the longer term is a probable scenario in our book. We expect the Fed, and all central banks for that matter, will try to combat deflation. That said, global currencies all burning at the same time makes a compelling case for GLD, as gold knows no currency. You can sell it in local currency all over the world. Scary but true.

MCD

There have been rumblings in the news that McDonald's (MCD) 2Q comps have slowed due to the temporary replacement of the 2 for $5 value platform for Monopoly. This has clearly been reflected in the stock as of late, as MCD has underperformed the S&P 500 over the last month.

 

Despite this near term headwind, we still strongly believe in the long-term story for MCD and remain confident that once they get their value platform right nationally, they will be just fine. In the short to intermediate term, as we wait for a solidified value platform, this recent underperformance represents a great buying opportunity. We remain LONG MCD.

Three for the Road

TWEET OF THE DAY

US 10-year Treasury yield 1.58% Lowest since 2012 $TLT remains our #1 non-consensus call #winning @KeithMcCullough pic.twitter.com/fdyXW5Lwt5

@Hedgeye

QUOTE OF THE DAY

"Either you run the day, or the day runs you."

-Jim Rohn

STAT OF THE DAY

Aroldis Chapman holds the record for the fastest pitch ever thrown, 105.1 mph.


JT TAYLOR: Capital Brief

Takeaway: Sanders and Clinton Set to Sit Down, Contrasts in Circumspection; Donald's Donor Deficiency

JT TAYLOR:  Capital Brief - JT   Potomac banner 2

SANDERS CLINTON CONFAB: Hillary Clinton and Bernie Sanders are set to sit down and discuss Sander’s policy wish list, his campaign, and the upcoming convention in July. Sanders has yet to suspend his campaign and up to this point felt that the longer he holds out, the more leverage he has to push Clinton and the Democrats in his direction, but he’s getting perilously closer to overstaying his welcome. Look for Sanders to push his mainstay ideas like wage inequality, free healthcare and free college tuition, and Wall Street reform, while Clinton looks to press for issues she hopes will end up unifying the party - like climate change, immigration, and foreign policy. With Donald Trump threatening to ban ethnic groups and cancel the Paris climate deal, look for Sanders and Clinton to rally and unite the party with their eye on the November prize being more than just the White House.

 

CONTRASTS IN CIRCUMSPECTION: In times of turmoil, true leaders emerge and have stood to both console and rally our nation. The tragic massacre in Orlando comes as the first big test of the 2016 general election. Trump is using the situation to double down on his sentiment towards Muslims, immigration and went on to tweet an I-told-you-so statement, calling for President Obama to resign. In contrast, Clinton canceled her first dual campaign appearance with Obama, delivering more somber remarks and outlining her goals to combat terrorism. Candidates will ultimately differentiate and further distance themselves from their opponent in their response to situations of this magnitude - expect this to prevail throughout the election.

  

THAT’S A WRAP: Today is the official close of the 2016 primary season with the Democrat’s last stop in DC. Although the primary is inconsequential from a delegate standpoint, it may mark the graceful exit of Bernie Sanders from the race.  Let’s see how that little meeting with Clinton goes...

 

DONALD'S DONOR DEFICIENCY: The Trump camp may have lost more sorely-needed donors after high profile patrons made no bones about shutting their wallets at Mitt Romney’s annual conference.  Donors were vocal in their concern with Trump’s lack of discipline and his demagoguery. The summit, which brings together Romney’s extensive network of wealthy contributors, further serves as a reminder of the hurdles Trump faces in corralling the monied crowd. If he’s unable to mend the wounds, look for these dollars to go elsewhere – we hear Gary Johnson is looking for help.  

 

PROMESA FLOATED IN THE SENATE: Help for the debt-stricken island appears to be just weeks away after a strong House vote (297-127) bolstered the prospect of the legislation in the Senate. That is - unless, there is objection from one Senator; enter Bernie Sanders. Sanders has openly opposed the legislation and introduced his own bill so Capitol Hill awaits his approach. To add to the growing pressure in Congress, the Supreme Court yesterday rejected Puerto Rico’s ability to allow public utilities to restructure their $20 billion in debt, striking down a 2014 Puerto Rico Law, furthering the debt crisis on the island.

 

BREXIT COUNTDOWN: Uncertainty continues to rise with nine days left before the United Kingdom’s “Brexit” referendum. Over the weekend, two polls put the Leave camp ahead, while a UK betting firm has implied the probability of a vote to Remain has now fallen to 68.5% from almost 80% a week earlier. We spoke with Alexander Nicoll, a consulting member of the UK-based International Institute for Strategic Studies, on the events leading up to the UK vote and what the outcome of the vote spells for the UK and EU. You can listen to the replay here.

 

HUNTED: THE F-35 PROGRAM AT FARNBOROUGH (LMT, UTX, NOC, BAE, BA): On Friday, June 17th at 11:00 EDT, our Senior Defense Policy Advisor LtGen Emo Gardner will host a call for investors regarding the first ever appearance of the F-35 at the world’s most important aerospace show, the Farnborough International Airshow, July 11-17.

 

ELECTION PREVIEW WITH SCOTT REED: Please join us for a call next Tuesday, June 21st at 11:00 AM EDT, with Scott Reed, one of Washington’s top political strategists, as he shares his insight on the presidential election, the upcoming Democratic and Republican conventions, and Senate and House races this fall. You can find the dial-in information here.

 

DON KOHN REPLAY: In case you missed it, we spoke with Former Fed Vice Chairman Don Kohn ahead of the FOMC meeting today and tomorrow. You can listen to the replay here.

 


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 80.35%
  • SHORT SIGNALS 78.44%

CHART OF THE DAY: Checking-In On Equity Volatility

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.

 

"... Oh, and how about that thing called equity volatility?

 

Front month US Equity VIX just went from 13 to 21-22, in a week. Since both the April and June US stock market “rallies” to lower-all-time-bubble highs came on decelerating volume, should this move surprise anyone other than people who chase charts?

 

Or were people chasing moving monkey averages aware of the causal factor called #TheCycle all along?"

 

CHART OF THE DAY: Checking-In On Equity Volatility - 06.14.16 EL Chart


What's Yellen's Update?

“I update constantly.”

-Tim Minto

 

In Superforecasting by Phil Tetlock, they call him Captain Minto for good reason. In the 3rd season of the IARPA forecasting tournament, Tim Minto (a 45 year old Canadian Software Engineer) won with a ridiculous Brier Score of 0.15. How did he do it? Bayes Theorem.

 

Do you have a Bayesian forecasting process? Or do you go with the Old Wall “feel” thing? “In simple terms, the theorem says that your new belief should depend on two things – your prior belief (and all of the knowledge that has informed it) multiplied by the diagnostic value of the new information.” (Superforecasting, pg 170)

 

Before the US Treasury 10yr Yield hit 1.57% this morning, our belief was that classic #LateCycle economic factors (like #EmploymentSlowing) would drive the long end of the curve to all-time lows. The “new information” on labor slowing wasn’t new. It was in Janet Yellen’s favorite labor market indicator (Change in Labor Conditions Index). She should have listened to it.

 

What's Yellen's Update? - Jobs.rate hike cartoon 11.04.2015

 

Back to the Global Macro Grind

 

Q: What’s Yellen’s update going to be this week? A: Dovish.

 

Yep. After going from hawkish (DEC) to dovish (MAR) to hawkish (MAY)… she’s going back to dovish.

 

While I won’t give her credit for being correct in her prior beliefs on either GDP growth or the employment cycle, she gets a sticker from Hedgeye for updating on the latest NFP (non-farm payroll) and JOLTS labor information.

 

What if she stays hawkish?

 

Oh boy, if you think blaming Brexit this time (or China last time she had to pivot dovish) carries some volatility, wait until you see what she makes her reflation trade look like on a Dollar Up, Rates Up (into a slow-down) move.

 

But neither I, nor my colleague Don Kohn (former Vice Chair of the Federal Reserve under Bernanke), thinks she’ll do that.

 

Back to the latest “market conditions” and US economic updates:

 

  1. US Retail Sales for the month of May will be released today (we’ll update our predictive tracking algo for US GDP intraday)
  2. Major Global Equity markets continue to crash as growth expectations and long-term sovereign bond yields do

 

Yep. The Fed might care more about “levels” than they do rate of change, but that doesn’t mean that rate of change doesn’t matter more than their linear-optimal-utilization model “levels” do.

 

What happens when the “level” implies a rate of change crash in prices?

 

  1. Japanese Stocks (Nikkei) dropped another -1% overnight, taking its crash from the 2015 cycle peak to -24.3%
  2. Chinese Stocks (Shanghai Comp) remain in crash mode, down -45% year-over-year in rate of change terms
  3. German Stocks (DAX) are down -1.4% this morning, taking its crash to -23% from the 2015 cycle peak

 

“Reflation” country (equity) indices like Australia and Russia are down -2% and -3%, respectively, this morning as Dollar Up, Rates Down asks the risk management question of the month: #Reflation or #Deflation, from here?

 

And how, by the way, do you reflate asset prices when NIRP (negative rate policy) is being read as a banking #Recession?

 

Not that holding the equity bulls to consistent account matters anymore (the bull case changes every 6 weeks), but whoever is looking for “earnings to rebound in Q2” has to go both non-GAAP and “Ex-Financials” to get there with yields crashing and curves flattening.

 

Oh, and how about that thing called equity volatility?

 

Front month US Equity VIX just went from 13 to 21-22, in a week. Since both the April and June US stock market “rallies” to lower-all-time-bubble highs came on decelerating volume, should this move surprise anyone other than people who chase charts?

 

Or were people chasing moving monkey averages aware of the causal factor called #TheCycle all along?

 

So many questions. Such a messed up consensus. Don’t forget that up until late last week, in CFTC futures & options net positioning terms, Wall Street was net LONG SP500 and net SHORT the 10YR Treasury!

 

With our long-term cycle call firmly intact, our immediate-term TRADE signal actually says the 10yr is immediate-term oversold at 1.55% inasmuch as the beloved barometer (SP500) is at 2067.

 

I guess that signals that Yellen’s update would be another buy/cover signal (for stocks) on the “news.” It’s perverse, but it’s reality. The new bull case needs the Fed, not real economic and/or earnings growth.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.55-1.70%

SPX 2067-2104
RUT 1140-1170

Nikkei 155

DAX 9

VIX 15.88-22.77

USD 93.11-96.01
Oil (WTI) 47.62-51.39

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

What's Yellen's Update? - 06.14.16 EL Chart


The Macro Show with Christian Drake Replay | June 14, 2016

CLICK HERE to access the associated slides.

 

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


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