Yesterday we sold our position in Healthcare; shorted the US Oil Fund and Carnival Corp (CCL).  Todd Jordan doesn't see what consensus sees coming for Carnival in 2010. We think demand will continue to languish as the supply and debt issues refuse to go away.


Yesterday, the move in the S&P 500 to the upside was impressive.  The S&P 500 closed up 1.3% on 13% day-over-day improvement in volume.  The two-day move in the S&P 500 is now 2.73%.  The SAFETY trade would be the overriding catalyst for the two-day move as Healthcare (XLV) and Consumer Staples (XLP) are the only two sectors back to positive on both TRADE and TREND. 


Yesterday we sold our position in Healthcare.  As Keith said yesterday, “As the Pelosi factor creeps into our craws, we are mindful of political risk. Healthcare is up +1.6% here, so Tom Tobin and I will get off the bus, for now.”


In addition, RISK AVERSION was fashionable for a second straight day with a positive data points from Greece (the European Commission's is expected to back a deficit reduction plan); the VIX declined 4.91%, to 21.48 and is now broken on TRADE and TREND.  The Hedgeye Risk Management models have the following levels for VIX – buy Trade (20.63) and Sell Trade (22.26).  With the earning season more than half over the trends from machinery, AG-products, personal care selected industrial groups are providing additional support to the market. 


On the MACRO front, an improvement in December pending home sales coupled with better-than-expected earnings out of DR Horton set a more constructive macro tone to the housing sector and the RECOVERY trade.  Pending home sales increased 1% month-to-month in December, in-line with expectations, but significantly better that the downwardly revised 16.4% plunge in November.   It should be noted that consensus expectations are for pending home sales to strengthen into the spring on the back of low prices and mortgage rates and the extension of the homebuyer tax credit.


The Industrials (XLI) was the second best performing sector yesterday and Hedgeye Risk Management models have the XLI moving back to positive on TREND.  A strong earnings number out of Emerson Electric (EMR) took the stock up 10.1% on the day.  In addition, the machinery group outperformed for the 2nd straight day with the S&P Machinery Index up 1.9%. It also should be noted that there were better-than-expected January auto sales from F and GM. 


The Financials (XLF) was the 3rd best performing sector yesterday, improving 1.7%.  The improvement can be attributed to the belief that banking regulation will get severely diluted if it is ever passed into law. Within the XLF, the money-center banks (JPM, C and BAC) outperformed the regional’s. 


Yesterday, Consumer Discretionary outperformed by 10bps and moved to positive on the TREND duration.  The retail group was a contributor to the outperformance; the S&P Retail Index rose 1.35%.  Department stores outperformed for a 2nd straight session day and Barnes & Noble was up 7.78% after Ron Burkle is looking to acquire a significant position in the company.  The lower-beta names like the discount and dollar-stores underperformed.


As we look at today’s set up the range for the S&P 500 is 45 points or 2.9% (1,071) downside and 1.1% (1,116) upside.  Equity futures are trading above fair value after yesterday’s strong performance.  Today performance will likely be driven by more earnings which continue to be better than expectations.  


The Dollar Index decline for the second day in a row and the Hedgeye Risk Management models have the following levels for DXY – buy Trade (77.94) and sell Trade (79.56). 


In early trading Copper is extending its gains for a 3rd day, as the rally in RECOVERY trade and a weaker dollar is helping the demand outlook.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (2.96) and Sell Trade (3.21).


In early trading Gold is up for the 4th straight day as the dollar has weakened.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,076) and Sell Trade (1,119).


Crude oil rose in New York for a 3rd day before data that is expected to show that U.S. supplies of distillate fuels shrank last week.  The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (72.21) and Sell Trade (78.31).  Yesterday, we shorted the US Oil Fund.  We have been waiting, patiently, to short the US Oil Fund on an up day.


We continue to be bullish on the Buck and bearish on China. These factors contribute to our multi-factor (bearish) intermediate term stance on the oil price.


Howard Penney

Managing Director














Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more