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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
1.56 1.31 1.53
SPX
S&P 500
2,101 2,177 2,163
RUT
Russell 2000
1,202 1,225 1,202
COMPQ
NASDAQ Composite
4,850 5,090 5,034
NIKK
Nikkei 225 Index
14,919 16,590 16,385
DAX
German DAX Composite
9,269 10,105 10,068
VIX
Volatility Index
12.24 18.32 12.82
USD
U.S. Dollar Index
95.28 96.92 96.10
EURUSD
Euro
1.09 1.12 1.10
USDJPY
Japanese Yen
100.28 106.29 105.44
WTIC
Light Crude Oil Spot Price
43.09 47.04 45.50
NATGAS
Natural Gas Spot Price
2.61 2.95 2.73
GOLD
Gold Spot Price
1,315 1,378 1,335
COPPER
Copper Spot Price
2.08 2.28 2.24
AAPL
Apple Inc.
94.52 98.99 98.79
AMZN
Amazon.com Inc.
720 761 741
NFLX
Netflix Inc.
90.83 99.14 98.02
GOOGL
Alphabet Inc.
691 745 735
JPM
J.P. Morgan Chase & Co.
58.40 64.89 64.12
INFY
Infosys Tech.
17.05 18.46 18.44


July 15, 2016

Want more from Daily Trading Ranges? CLICK HERE to submit up to 4 tickers you'd like to see on the list. 

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.56 1.31 1.53
SPX
S&P 500
2,101 2,177 2,163
RUT
Russell 2000
1,202 1,225 1,202
COMPQ
NASDAQ Composite
4,850 5,090 5,034
NIKK
Nikkei 225 Index
14,919 16,590 16,385
DAX
German DAX Composite
9,269 10,105 10,068
VIX
Volatility Index
12.24 18.32 12.82
USD
U.S. Dollar Index
95.28 96.92 96.10
EURUSD
Euro
1.09 1.12 1.10
USDJPY
Japanese Yen
100.28 106.29 105.44
WTIC
Light Crude Oil Spot Price
43.09 47.04 45.50
NATGAS
Natural Gas Spot Price
2.61 2.95 2.73
GOLD
Gold Spot Price
1,315 1,378 1,335
COPPER
Copper Spot Price
2.08 2.28 2.24
AAPL
Apple Inc.
94.52 98.99 98.79
AMZN
Amazon.com Inc.
720 761 741
NFLX
Netflix Inc.
90.83 99.14 98.02
GOOGL
Alphabet Inc.
691 745 735
JPM
J.P. Morgan Chase & Co.
58.40 64.89 64.12
INFY
Infosys Tech.
17.05 18.46 18.44



Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.


CHART OF THE DAY: China's $704,000,000,000 Debt Binge

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye U.S. Macro analyst Christian Drake. Click here to learn more.

 

"... 4. Chinese Debt: Credit growth and proclivity for malinvestment in China is well publicized but I still think loan growth in 1Q was underappreciated. New loan growth in China was a remarkable $704B in 1Q16. To put that in context, the ARRA Act of 2009 (i.e. Peak Crisis, U.S. Recession Stimulus Package) was just north of $800B. What did that buy them? – another lower cycle low in GDP for 1Q."

 

CHART OF THE DAY: China's $704,000,000,000 Debt Binge - CoD 4


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(HEDG)EYE-CANDY

“Too many of us take great pains with what we ingest through our mouths, and far less with what we partake of through our ears and eyes.” 
-Brandon Sanderson

 

The internet is full of food for investment thought. But it’s mostly low on analytic calories and/or macro-nutrient density – superficially fetching but, from a practical investment application perspective, it’s akin to only eating lettuce or filling up on bread before the main course arrives.  

 

While our morning missive generally strives for tactical and actionable research alpha, I thought I’d try something different this morning and pivot from the normal, prosaic brain candy to some global macro eye candy. 

 

Back to the Global Macro Grind…

 

Think of the chart selection below like a mini macro buffet of enticing analytical morsels to help fill your data mosaic plate.  

 

Let the cerebral satiation commence…

 

1. Consumption Capacity: For most households the trend in wage and salary income defines the capacity for sustainable consumption growth. More holistically, and over shorter and medium terms, spending capacity is more aptly defined by income and credit growth. And outside of high ticket purchases like home & autos, revolving credit (i.e. credit cards) represent the primary means of pulling forward consumption for most households. And credit trends are of increasing import to consumption trends at this point in the cycle.

 

With employment growth slowing, wage inflation and credit growth, collectively, need to rise as fast as payroll growth slows in order to maintain the current pace of HH spending growth. After supporting spending over the last year in the face of decelerating aggregate income growth, revolving credit growth has slowed in each of the last two months.   

 

(HEDG)EYE-CANDY - CoD 1

 

2. Global Trade = Past Peak?: After 30 years of ongoing improvement world trade now appears to be past peak. According to World Trade Organization data, World Trade of Goods peaked into 2014 and has since been in steady decline. The trend in export of Services looks similar as does total trade as a % of world GDP (i.e. it’s not just a function of falling energy prices). Remember, the globe as a whole is a closed system and the primary mechanism of action of last ditch currency war policy is to drive relative improvements in global export share. A flat to modestly larger share of a smaller pie is not the policy path to sustained prosperity.

 

(HEDG)EYE-CANDY - CoD 2

 

3. Household Formation | All the Wrong Places?: Despite employment and income growth among 25-34 year olds inflecting 3 years ago and subsequently growing at a premium to the broader average, household formation for the group has yet to really pick up. According to the CPS monthly micro data, the welcomed pickup in household formation observed over the last 6 quarters has largely been a result of household formation in older age cohorts. Headship rates for young adults, the share of 1st-time buyers in the existing market and the prevalence of basement dwelling (% of 18-34 year olds living with parents) have all remained near their post-crisis peak through 2015. Ball under water or false hope?

 

(HEDG)EYE-CANDY - CoD 3

 

4. Chinese Debt: Credit growth and proclivity for malinvestment in China is well publicized but I still think loan growth in 1Q was underappreciated. New loan growth in China was a remarkable $704B in 1Q16. To put that in context, the ARRA Act of 2009 (i.e. Peak Crisis, U.S. Recession Stimulus Package) was just north of $800B. What did that buy them? – another lower cycle low in GDP for 1Q. 

 

To put the protracted Chinese debt binge in further context, cumulative private sector credit growth for the U.S. and Eurozone from 2000-2008 was ~$25T combined. Private sector credit growth in China from 2000-Present is ~$24.9T – essentially as much as the US and EU combined during the peak leverage/bubble expansion. Recall also that the 1Q16 increase – which saw loan growth increase $380B in January alone -occurred at the peak of global deflationary angst and probably put a floor under the cratering in commodities and the downward spiraling of the commodity correlation trade in equities. Relatedly, Chinese non-performing loans rose to 1,392 billion Yuan as of March 31, 2016, which is up +41.7% year over year.

 

(HEDG)EYE-CANDY - CoD 4

 

5. Luxury Spending: Estimates on the impact of the wealthy on consumer spending vary but all put the share of consumer outlays by the top quintile at greater than 40%. Spending on luxury goods – a proxy for the state of high end consumerism – is growing at its slowest pace since 2010 in 2016 YTD. In fact, the -2.7% YoY decline in spending recorded in May was the 1st month of negative growth since 2011. 

 

(HEDG)EYE-CANDY - CoD 5

 

6. Housing | Foreign Demand: Strong Dollar, Weak Global Growth & New Regulation are pressuring foreign demand for residential real estate. According to the latest data from the NAR, total sales to non-resident foreigners declined -11% YoY in the latest year while total dollar volume fell -18.5%. This matters as international buyers have represented ~4% of total transaction volume and ~8% of dollar volume over the last few years and, in select geographies (Miami for example), represent upwards of one quarter and one third of sales and dollar volumes, respectively.

 

Relatedly, beginning this year the Treasury Department & the FBI will track high end real estate transactions in Miami and Manhattan in an attempt to crackdown on money laundering in the ultra high-end real estate markets. Nationally, nearly 50% of foreign buyers purchasing properties over $5mn are doing so through shell company LLCs.

 

(HEDG)EYE-CANDY - CoD 6

 

7. Fund Flows | Bear Tracks: The running year-to-date tally for stock ETFs is now a -$27 billion while the exodus from active equity mutual funds has maintained record pace at -$88 billion thus far in 2016. On the other side of these outflows, of course, is corporate buyback activity. Companies bought back a record $166B in stock in 1Q16 according to Factset and that trend looks to have continued in 2Q. How does record repo activity at all-time highs in equities, 7-years into an expansion register on your long-term shareholder value creation radar?

 

(HEDG)EYE-CANDY - CoD 7

 

8. Record Weakness | Industrial Production & Capital Goods: Industrial Production growth has been negative for 12 consecutive months and New Capital Goods Orders have had an epic run of negative growth in 16 of the last 17 months. In each instance the current losing streak represents the worst non-recessionary data essentially ever. To now, Industrial Production has also carried the distinction of sending zero false positive signals with respect to recession signaling over the last 7+ decades.    

 

(HEDG)EYE-CANDY - CoD 8

 

9. Anchored | 10Y Yields: The simple fact is that you don’t have $13T in negative yielding sovereign debt because everything is awesome and global escape velocity is imminent.  Yield differentials – particularly with Japan and Europe – have acted as an anchor on domestic bond yields. At present, the 10Y U.S. treasury yield spread to German and Japanese yields remains as wide as its been in the peri-recession and post-crisis period. Assuming static yields OUS, a return to average post-crisis spread would put the U.S. 10Y under 1%. 

 

(HEDG)EYE-CANDY - CoD 9

 

10. The “APP Economy”: People have a tendency to look at hiring in the “Information” Sector as their proxy for tech employment trends.  This is misleading, however, as employment in Computer System Design – which includes the jobs people typically view as the “app economy” including those related to programming, cloud computing, etc.  - is classified under the Professional and Business Services sector.

 

App economy employment growth decelerated for a 12th consecutive month in June while recording the slowest pace of MoM growth since 2010. The payroll slowdown accords with the conspicuous slowing in tech funding trends. VC funding in Silicon Valley has rolled over the last couple quarters with total deals declining -18% YoY and Total Dollar funding down -19.5% YoY in 1Q16.   

 

(HEDG)EYE-CANDY - CoD 10

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.31-1.56%

SPX 2101-2177 

VIX 12.24-18.32 
USD 95.28-96.92 

Gold 1 

 

Best of luck out there today. Have a great weekend,

 

Christian B. Drake

U.S. Macro analyst


It was the “perfect” week for the SPY chart

Client Talking Points

Pound

One way to keep US Equity Beta Up = Dollar Down (on the week); but how does that continue (from here)? With GBP/USD signaling immediate-term TRADE overbought at $1.34 and US economic growth (Q2 GDP) not tracking to recession (our Q2 predictive tracking algo currently has 1.5-1.8% y/y)?

Europe

The other side of the FX (and relative economic slowing) TREND looks like Euro Down (vs. Dollar Up) to us; EUR/USD top-end of the risk range = $1.12, and as European #GrowthSlowing continues, we're looking for a re-test of $1.05; French stocks down -0.8% have the CAC40 out of “crash” mode at -17% from last year’s high, but still bearish TREND @Hedgeye.

Oil

The other former Perma Bull narrative on US Stocks was Oil $60-70… and while you pretty much have to change that Equity Beta Chasing narrative quarterly at this point, it’s still important to remind you that Oil is signaling bearish TREND now ($47.54 resistance WTI) inasmuch as USD is signaling bullish TREND @Hedgeye.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
7/14/16 56% 0% 0% 12% 25% 7%
7/15/16 51% 0% 0% 13% 30% 6%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
7/14/16 56% 0% 0% 36% 76% 21%
7/15/16 51% 0% 0% 39% 91% 18%
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

Last week, we introduced our Q3 Macro Themes: #ProfitCycle, #ConsumerCredit, #EuropeImploding. The gist of themes #1 and #2 emphasize that the economic cycle continues to roll over as evidenced by declining corporate profitability and the pending deceleration in consumer credit growth which is more of a “when” rather than an “if” scenario. 

 

Consumer credit growth has a direct effect on consumption. Employment and consumption peaked on a Y/Y rate of change basis in Q1 2015 right after corporate profits peaked in the second half of 2014.

GLD

We want to be long of continued growth decelerating and inflation picking up from a GIP modeling perspective into the back half of 2016. TIPS are a great way to play both of these views along with our GLD (reflation) and TLT (growth slowing) positions.

TIP

See update on TLT/GLD.

Three for the Road

TWEET OF THE DAY

OIL: reiterating Long Gold (instead of Oil) as WTI continues to fail @Hedgeye TREND pic.twitter.com/rQ8GiwEHiZ

@KeithMcCullough

QUOTE OF THE DAY

"If you aren't going all the way, why go at all?"

-Joe Namath

STAT OF THE DAY

Joe Namath threw 173 TD's and 215 interceptions for the NYJ.


CMG | 2Q16 QUARTERLY DASHBOARD

Chipotle (CMG) is on the HEDGEYE Restaurants Best Ideas list as a SHORT.

 

SUMMARY

We still think there is significant downside to CMG.  The challenge to our short call remains timing.  The biggest challenge remains finding the right balance of being aggressive on the SHORT versus the slope of the line in the recovery in sales trends.  Aggressive capital allocation toward new units will be the ultimate downfall of the stock.  Timing matters.    

CMG | 2Q16 QUARTERLY DASHBOARD - CHART 1

 

STOCK PERFORMANCE

CMG continues to underperform the S&P 500 across all but the one-month duration!  

  • 1-Month – +7.1% vs. S&P 500 +4.5%
  • 3-Month – (10.9%) vs. S&P 500 +3.9%
  • YTD – (12.9%) vs. S&P 500 +5.9%
  • 12-Month – (36.8%) vs. S&P 500 +2.7%

 

BEAT/MISS RATIO

  • Revenues – 1 for 6 (missed the last 2 quarters)
  • Same-Store Sales – 2 for 6 (big miss last quarter)
  • EPS – 5 for 6 quarters
  • Price Impact – On average -4.5% for 5 of the last 6 quarters

 

SHORT INTEREST – SI is at a 5 year high.  Began 2016 at 8.2% and is now 15.5%.

 

EARNINGS REVISION – Will 2Q start to see a stabilization in the negative revision trends? No guidance from the company.

  • 2Q16 – Was $1.58 in MAR currently $0.95 down 40%
  • FY16 – Was $15.97 in DEC ‘15 currently $4.41 down 72%
  • FY17 – Was $16.73 in JAN currently $11.38 down 32%

CMG | 2Q16 QUARTERLY DASHBOARD - CHART 2

 

VALUATION – Currently trading at 22.5x NTM EV/EBITDA - YTD the EV/EBITDA multiple has risen 8.0x due to the decline in profitability. 

CMG | 2Q16 QUARTERLY DASHBOARD - CHART 3

 

OPERATIONAL PERFORMANCE

COMMENTARY – Aggressive store growth is the Achilles heel of the company.  CMG’s profitability trends remain a disaster, and there is no visibility on the trajectory of the recovery.   

  • UNIT GROWTH – 12.8% or opening 52 stores (ending stores 2,118)
  • SAME-STORE SALES - CM is looking for -20.3% or -8.0% on a 2-year basis vs -9.7% in 1Q16; Traffic  -17.6% vs -21% in 1Q16.
  • RESTAURANT LEVEL MARGINS – 15.2% vs. 27.98% LY
  • SG&A – 7.2% vs. 5.9% LY (knowing the LT run rate of this number is critical)
  • OPERATING MARGINS – 4.01% vs. 18.9% LY

CMG | 2Q16 QUARTERLY DASHBOARD - CHART 4

 

CIVICSCIENCE CONSUMER SURVEY

Closing out 2Q16 , the CMG consumer brand survey results held steady versus our last publishing (VIEW HERE). Now, two weeks into 3Q, we have received a few hundred responses to our survey, and it shows a minor trend to the positive for CMG, but before releasing we would like to gather more responses to get a reading representative of the broader population. 

CMG | 2Q16 QUARTERLY DASHBOARD - CHART 5

 

GUIDANCE

The only guidance the company gives is store growth of 220-235 new units.

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


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