US STRATEGY - EVERY LITTLE BIT HELPS

The S&P 500 closed higher by 0.6% yesterday as breadth expanded for the third straight day.  With Energy’s (XLE) out-performance yesterday, the sector moved to positive on TRADE and TREND.  The Utilities (XLU) now stand alone - broken on TREND. 

On the MACRO front, a number of smaller, but positive data points helped lift the RECOVERY/REFLATION trade. 1) the S&P affirmed the UK’s AAA rating, but with an negative outlook; 2) Europe had better than expected confidence numbers for March and; 3) Greece managed to raise €5B in 7-year bonds at 5.9% after an agreement at the EU summit last week.

In the US, personal spending was in-line with consensus at 0.3%. This is the fifth month in a row with an increase in personal spending.  On the other hand, February personal income was flat vs consensus +0.1%, but January Personal Income was revised to +0.3% from +0.1%. With spending up and income flat, the savings rate declined to 3.1% in February from 3.4% in January.

Yesterday, Energy (XLE) was the best performing sector, with support from a weaker dollar and higher crude prices.  The Philadelphia Oil exploration index was up 3.3% and the S&P 500 Coal index was up 3%.  Crude was up 2.7% to $82.17.

The Dollar index is in a three day correction, declining another 0.39% yesterday.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy TRADE (80.62) and sell TRADE (82.51).  The Materials (XLB) continue to benefit from the weaker dollar, as it was the best performing sector on Friday and the third best performing sector yesterday. 

Yesterday, Financials (XLF) was the worst performing sector, but closed in positive territory for the sixth day in a row. With the regional and money center banks down slightly, asset management and brokers outperformed. 

The VIX declined 1% yesterday and 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 (18.34). 

In early trading, crude oil rose for a second day in New York on a resurgence in the REFLATION trade, as the U.S. economy continues to show signs of recovery.  The Hedgeye Risk Management models have the following levels for OIL – Buy TRADE (80.87) and Sell TRADE (83.49). 

Gold is higher for a fourth day in London as the dollar index weakens.  The Hedgeye Risk Management models have the following levels for GOLD – Buy TRADE (1,082) and Sell TRADE (1,116).

Yesterday, copper surged to an 11-week high as inventories declined and the dollar declined.  Stockpiles of copper in warehouses monitored by the London Metal Exchange fell for a 19th straight time - the longest slump since July.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy TRADE (3.36) and Sell TRADE (3.51).

In early trading, equity futures are trading above fair value with markets buoyed more by a lack of any bad news rather than anything distinctly positive. Events in Greece and Ireland remain in focus.  As we look at today’s set up the range for the S&P 500 is 8 points or 0.5% (1,167) downside and 0.2% (1,175) upside. 

Today's MACRO highlights are:

  • January Case-Shiller Home Price Index
  • March Consumer Confidence
  • ABC Consumer Confidence

Howard Penney

Managing Director

US STRATEGY - EVERY LITTLE BIT HELPS - S P

 

US STRATEGY - EVERY LITTLE BIT HELPS - DOLLAR

 

US STRATEGY - EVERY LITTLE BIT HELPS - VIX

 

US STRATEGY - EVERY LITTLE BIT HELPS - OIL

 

US STRATEGY - EVERY LITTLE BIT HELPS - GOLD

 

US STRATEGY - EVERY LITTLE BIT HELPS - COPPER