US STRATEGY – DAY 2 – Dollar up, Stocks up

The S&P 500 finished higher by 1.1% in light, pre-holiday trading yesterday.  The news worthy items in focus yesterday were the amended healthcare reform legislation out of the Senate, continued M&A activity and the sell-side generally getting more bullish at the end of the year. 


Yesterday, Sanofi-Aventis agreed to acquire Chattem for $1.9B in cash.  In addition, TreeHouse Foods gained 12.3% after announcing that it had signed a definitive agreement to acquire Sturm Foods, a private label manufacturer of hot cereal and powdered soft drink mixes. 


For the second day in a row the Dollar index was higher and stocks followed.  Yesterday, the Dollar index rose 0.3% to 78.03.  Every sector was positive on the day with the high beta Financials, Materials and Consumer discretionary leading the way.  Utilities and Consumer staples were the two worst performing sectors.   


The Healthcare (XLV) underperformed on a relative basis, but managed care stocks were among the best performers with the HMO index up 3.0%. The performance was driven by developments out of Washington as Senate Democrats reached a deal on healthcare reform legislation.  The news of the demise of the elimination of the public option was welcome news.  Also showing strong relative outperformance were the PBMs such as CVS +3.6%, ESRX +3.3% and MHS +1.7%.


The Materials (XLB) was the second best performing sector yesterday despite the continued bounce in the dollar. Upbeat sell-side commentary provided support for the steel and fertilizers sectors. 


From a risk management standpoint, the ranges for the S&P 500, the Dollar Index and the VIX are seen in the charts below.  The range for the S&P 500 is 16 points or 0.5% upside and 1.0% downside.  At the time of writing the major market futures are slightly higher.


In early trading crude oil dropped after OPEC agreed to maintain production targets at a meeting in Angola.  OPEC will hold total production quotas at 24.845 million barrels a day.  The Research Edge Quant models have the following levels for OIL – buy Trade (69.71) and Sell Trade (74.31).


Gold declined $15.00 to 1,097 in Hong Kong; gold is trading at its lowest level in six weeks.    The Research Edge Quant models have the following levels for GOLD – buy Trade ($1,090) and Sell Trade ($1,151). 


Copper fell in London as stockpiles expanded to almost a seven-year high, signaling demand related issues.  The Research Edge Quant models have the following levels for COPPER – buy Trade (3.08) and Sell Trade (3.14).


Howard Penney

Managing Director


US STRATEGY – DAY 2 – Dollar up, Stocks up   - sp1


US STRATEGY – DAY 2 – Dollar up, Stocks up   - usdx2


US STRATEGY – DAY 2 – Dollar up, Stocks up   - vix3


US STRATEGY – DAY 2 – Dollar up, Stocks up   - oil4


US STRATEGY – DAY 2 – Dollar up, Stocks up   - gold5


US STRATEGY – DAY 2 – Dollar up, Stocks up   - copper6


Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more