US STRATEGY - From Greece to China

Ahead of the long weekend the S&P 500 declined 0.27%, on a 35% increase in volume.  The global MACRO issues that are focused on Greece and China continue to drive sentiment.  On Friday, it was China’s turn to take center stage.  Seven of the nine sectors we track outperformed the S&P 500, but we only have two sectors positive on TREND - Healthcare (XLV) and Consumer Discretionary (XLY).  The Industrials (XLI) broke TREND on Friday. 

 

With the XLI breaking TREND on Friday it was the worst performing sector.  Some of the underperformance can be tied to tightening in China and worse than expected GDP numbers in Europe, which is weighting on the global RECOVERY trade.

 

Last week China hiked the Reserve Requirement Ratio for banks by 50 basis points; this follows a 50 basis point hike in January.  Concerns regarding Greece will not go away, as there does not seem to be real commitment buy the EU on how it will help out Greece.  The EU also has a lack luster economy to deal with.  The 16 country Euro area reported Q4 GDP of +0.1% sequentially vs. consensus +0.3% and prior +0.4%; dragged down by Germany reporting flat Q4 preliminary GDP vs. consensus +0.2% and prior +0.7%.

 

All of this was good news for our “Buck Breakout” theme. The Dollar index up 0.40% last Friday; the Hedgeye Risk Management models have levels for DXY at – buy Trade (79.60) and sell Trade (80.80). 

 

In the US, the January retail sales +0.5% vs. consensus 0.3% and prior of -0.3%.  As we wrote about on Friday the February University of Michigan Confidence preliminary number was 73.7 vs. consensus 75.0 and final January 74.4.

 

Consumer Discretionary (XLY) and Consumer Staples (XLP) outperformed the S&P 500 on the better than expected January Retail sales report and despite a disappointing preliminary February University of Michigan Confidence came in lower than expected and below last month. There were a number of earnings among the Restaurant industry; CAKE, CMG and PNRA were significant outperformers, while BWLD was the biggest loser.

 

On Friday, Technology was the best performing sector rising 0.2%.  MOT and the semiconductors were a source of strength.

 

Last week the VIX declined by 12.95% and closed at 22.73.  The Hedgeye Risk Management models have the following levels for VIX – buy Trade (22.05) and Sell Trade (28.27).  As we look at today’s set up the range for the S&P 500 is 53 points or 2.6% (1,046) downside and 2.2% (1,099) upside. 

 

At the time of writing, equity futures are trading above fair value as investors return from the Presidents’ Day extended weekend.  European markets were broadly higher with Financials outperforming following the earnings from Barclays. 

 

In early trading, copper rose for a second day as the dollar weakened.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (2.99) and Sell Trade (3.21).

 

In early trading gold is trading at a two-week high.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,046) and Sell Trade (1,121).

 

Crude oil rose as much as $1.33, or 1.8%, to $75.46 a barrel in New York.  The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (70.38) and Sell Trade (77.17).

 

Howard Penney

Managing Director

 

US STRATEGY -  From Greece to China - sp1

 

US STRATEGY -  From Greece to China - usd2

 

US STRATEGY -  From Greece to China - vix3

 

US STRATEGY -  From Greece to China - oil4

 

US STRATEGY -  From Greece to China - gold5

 

US STRATEGY -  From Greece to China - gold6

 


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

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more