Yesterday, the S&P 500 finished flat in quiet trading. The restrained performance was not particularly surprising given the holiday-shortened week and the looming release on Friday of the March nonfarm payrolls. For the second day in a row, the Utilities (XLU) stands alone - broken on TREND.
On the MACRO front, a slight improvement in March consumer confidence was a peace offering to the Consumer Discretionary (XLY) which has had an amazing run in 1Q10. Consumer confidence rose to 52.5 in March from 46.4 in February, slightly ahead of the 51 consensus. The current situation component rose to 26 from 21.7 - the highest level since January - while the expectations component improved to 70.2 from 62.9 last month. Despite a sequential improvement from February, the confidence numbers are not anything to get overly excited about.
The S&P/Case-Shiller home-price index rose 0.3% month-to-month - the eighth straight monthly increase (a Bloomberg survey had a decline 0.3% in January). In response to the data, the S&P 500 Homebuilder index gave back some of its outperformance, declining 1.5% on the day.
The Dollar index recovered slightly yesterday up 0.14%. The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at: buy TRADE (81.21) and sell TRADE (82.40).
The VIX declined 2.6% yesterday and remains broken on all three durations - TRADE, TREND and TAIL. The Hedgeye Risk Management models have the following levels for the Volatility Index (VIX) – Buy TRADE (16.01) and Sell TRADE (18.23).
Yesterday the laggards in 1Q10 (Technology - XLK) outperformed, while the 1Q10 sector leaders (Financials - XLF and Consumer Discretionary - XLY) underperformed. The hype over AAPL and the Smartphone generated a significant amount of excitement in the technology space.
In early trading, crude oil is trading above $83 a barrel in New York for the first time in two weeks on signs that improving demand is eroding excess supplies. The Hedgeye Risk Management models have the following levels for OIL – Buy TRADE (80.95) and Sell TRADE (83.13).
In early trading in London, gold is trading higher and heading for a sixth quarterly increase. The Hedgeye Risk Management models have the following levels for GOLD – Buy TRADE (1,082) and Sell TRADE (1,114).
In 1Q10, Copper is up 6.4% and yesterday it reached the highest level since August 2008 as demand looks strong and inventories are declining. The Hedgeye Risk Management models have the following levels for COPPER – Buy TRADE (3.41) and Sell TRADE (3.56).
In early trading, equity futures are trading modestly below fair value after markets drifted off highs on a stronger dollar. As we look at today’s set up the range for the S&P 500 is 18 points or 1.2% (1,159) downside and 0.3% (1,177) upside.
Today's MACRO highlights are:
- MBA Mortgage Apps - +1.3%
- March ADP Employment -23 vs. 40K consensus
- March Chicago PMI
- March NAPM Milwaukee,
- February Factory Orders
- DOE Crude Oil Inventories