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    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

The S&P 500 finished higher by 0.53% in light, pre-holiday trading on Thursday.  The positive tone for the day and week overall was set on the back of strong global markets and generally upbeat economic data points.  As expected the volume was very light, but the breadth was positive.

On the MACRO calendar, jobless claims fell 28,000 to 452,000, well below the 470,000 expected by a Bloomberg survey.  This was the lowest reading since September 2008.  Additionally, the November durable goods data further lifted sentiment as orders ex-transportation increased 2.0%, above expectations for a 1.1% gain; while total orders came in at 0.2% and were slightly below expectations of 0.5%.  The durables data offered more support to the global RECOVERY trade. 

In Washington, the Senate's passing of a healthcare reform bill dominated headlines.  As a result, Healthcare (XLV) was the worst performing sector on Thursday.  Consumer Staples and Consumer Discretionary rounded out the bottom three.   

The positive Economic backdrop gave support to a modest return of the REFLATION trade, as Materials was the second best performing sector on Thursday (+0.8%) and for the week (+3.8%) as a whole.  The best performing sector last week was technology (+4.2%), which benefited from continued M&A activity and better-than-expected earnings. 

While Financials (XLF +0.9%) was one of the best performing sectors on Friday; it remains the only sector that is broken on both the TRADE and TREND durations.

The range for the S&P 500 is 17 points or 0.5% upside and 1.0% downside.  At the time of writing the major market futures are slightly higher.

The futures are benefiting from a positive tone in Asia and Europe.  Last night the Nikkei rose +1.33%; Hang Seng declined 0.17% and the Shanghai Composite was up +1.51%.  In Asia volume remained thin, but optimism about prospects for the global economy continues to be in focus.  China’s strong performance was on reports that the economy is growing faster than expected.

In early trading crude oil was little changed after reaching its highest price since Dec 1st as colder-than- normal weather in the U.S. is helping demand.  Crude oil for February delivery traded at $78.26 a barrel, the highest since Dec. 1.  The Research Edge Quant models have the following levels for OIL – buy Trade (75.45) and Sell Trade (78.29). 

Gold is trading higher for a third day in London on speculation that a bottom might be in after a 12% from a record high.  The Research Edge Quant models have the following levels for GOLD – buy Trade ($1,071) and Sell Trade ($1,151). 

Copper in Shanghai climbed to the highest price in 16 months on optimism demand is improving in the US and China.  The Research Edge Quant models have the following levels for COPPER – buy Trade (3.16) and Sell Trade (3.32).

Howard Penney

Managing Director

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