US STRATEGY - CHARACTER CORRECTIONS

The S&P 500 was mixed on Friday. At the end of the day, it was clear the character of the rally was weaker at the end of the week than at the beginning. The Hedgeye models still have Energy (XLE) and Utilities (XLU) broken on TRADE and TREND. On the MACRO front, there was some support that the euro-zone reached an agreement on a plan in which they would jointly bail out Greece with IMF help. 

In the US, there was a positive tone set from the better-than-expected final reading of the March University of Michigan Confidence. Final March University of Michigan Confidence was 73.6; higher than consensus 73.0 and up from preliminary reading of 72.5.  That said, confidence in this country continues to make a long term series of lower-highs.

The third report on Q4 GDP came in at 5.6%, which was lower than consensus and the second read, both of which were 5.9%.

The Dollar index corrected 0.54% on Friday, but was up 1.18% for the week.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy TRADE (80.59) and sell TRADED (82.52).  The Materials (XLB) benefitted from the weaker dollar as it was the best performing sector on Friday.  Steel stocks outperformed, as the NYSE ARCA Steel Index was up 1.5%.  With crude weaker on Friday, Energy underperformed on Friday and continues to be broken on TRADE and TREND.

The commodity correction continues on the back of anticipated higher interest rates. The CRB was down 0.2% on Friday and down every day last week. 

Consumer discretionary (XLY) outperformed on Friday and was the best performing sector last week.  The retail sector, leads by apparel companies were especially strong. In addition, homebuilders were up on the day; closing higher five days in a row. 

Financials (XLF) only slightly outperformed on Friday, but was the second best performing sector last week.  Last week, the Obama administration introduced a new mortgage plan that seemed to provide support for the XLF. 

The VIX rallied 4.7% last week, but remains broken on all three durations - TRADE, TREND and TAIL.  The Hedgeye Risk Management models have levels for the Volatility Index (VIX) at: buy TRADE (16.01) and sell TRADE (18.45). 

In early trading, crude oil rose for the first time in four days on expectations demand will increase as the global economic recovery gains momentum.  In early trading oil is trading higher for the first day in the last three as the dollar weakens.  The Hedgeye Risk Management models have the following levels for OIL – Buy TRADE (77.79) and Sell TRADE (80.76). 

Gold is higher for a third day in London as the dollar index weakens.  The Hedgeye Risk Management models have the following levels for GOLD – Buy TRADE (1,080) and Sell TRADE (1,116).

In early trading, copper rose to a 2 1/2-month high in London as inventories are declining and a weaker dollar is making all metals more appealing.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy TRADE (3.35) and Sell TRADE (3.47).

In early trading, equity futures are trading above fair value despite Friday's late day sell-off and volatility higher last week.  This week's highlight will be the March employment report on Good Friday, though equity markets will be closed.  As we look at today’s set up the range for the S&P 500 is 16 points or 0.8% (1,157) downside and 0.5% (1,173) upside. 

Today's MACRO highlights are:

  • February Personal Income& Spending
  • February PCE Deflator 
  • Mar Dallas Fed Manufacturing activity

Howard Penney

Managing Director

US STRATEGY - CHARACTER CORRECTIONS - S P

 

US STRATEGY - CHARACTER CORRECTIONS - USD

 

US STRATEGY - CHARACTER CORRECTIONS - VIX

 

US STRATEGY - CHARACTER CORRECTIONS - OIL

 

US STRATEGY - CHARACTER CORRECTIONS - GOLD

 

US STRATEGY - CHARACTER CORRECTIONS - COPPER