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There appears to be a bit of waning upside momentum, but the daily pattern of higher-highs and higher-lows remains intact.  The S&P 500 closed down 0.5%, with volume up 3.3% day-over-day.  Breadth declined significantly with the advance/decline at -2353 to -992. 

The US MACRO data points continue to come in with a mixed message.  On one hand, the durable goods report was positive for the third month at 0.5%, though slightly below expectations of 0.6%.  On the other hand, housing continues with a string of disappointments as new home sales hit a record low.   The February new home sales were 308,000; lower than consensus 315,000 and down from a revised January report of 315,000. The Census Bureau estimate of new houses for sale at the end of February was 236,000, which represents 9.2 months of supply; up slightly from 9.1 months in January.  Overseas, Fitch’s downgrade of Portugal created increased sovereign debt concerns. 

The Dollar index had another strong day improving 1.2% and is down slightly in early trading today. 

The VIX was up 7.3% yesterday, the biggest up day since February 4, 2010.  The VIX continues to be broken on all three durations - TRADE, TREND and TAIL. 

The Financials (XLF) was the only sector to close up on the day.  The XLF was driven by the banks with the BXK +0.4% on the day.  BAC is leading the money center names higher after the company announced that it would start forgiving mortgage loan principal for homeowners who owe more than 120% of their homes' value.  MBIA and Genworth Financial were the two best performing stocks in the XLF. 

Despite the disappointing news in housing, the S&P 500 Homebuilding index rose +1.9%; the third straight daily gain.  LEN reported a much smaller loss than expected and said that it is on track to achieve profitability in fiscal 2010.

Crude was down 1.6% following a larger than expected build in crude inventory.  Yesterday, crude broke the Hedgeye immediate term risk management line, so we sold out of our position in the USO.  With Global Sovereign Debt risk mounting, we don't get paid to hope oil holds support.

Yesterday, gold prices are trading lower nearing a six-week low as continued negative Euro zone news lifted the dollar.  In early trading, copper is trading lower also as the dollar is trading higher. 

In early trading, equity futures are trading above fair value, in an effort to reverse yesterday's declines.  As we look at today’s set up the range for the S&P 500 is 17 points or 0.7% (1,160) downside and 0.5% (1,174) upside. 

Today's MACRO highlights are:

  • weekly jobless claims
  • Bernanke testifies on the FEDs exit strategy
  • weekly natural gas inventories

Howard Penney

Managing Director