US STRATEGY – RISK AWAY

The S&P 500 finished modestly higher on Tuesday.  The MACRO data points are few and far between ahead of earnings season next week and the issues that Greece faces are becoming less of a MACRO concern for the markets. 

 

Leading the market higher yesterday was the RISK trade, replacing the REFLATION trade of the past two days.  Yesterday the VIX declined 4.6% and continues to be broken on all three durations.  The Hedgeye Risk Management models have levels for the Volatility Index (VIX) at: buy TRADE (16.23) and sell TRADE (17.74).  We are currently long the VXX.

 

Along that theme, the Financials were the best performing sector yesterday.  Leading the XLF higher were the banks, with the BKX +2.4%; up for a fourth straight day.  The KBW regional index was up 3.4%, up only three straight days.  The minutes from the FOMC meeting provided support to the XLF, as there was nothing in the release that hinted at any shift in the central bank's thinking that interest rates will need to remain low for an "extended and exceptional" period.

 

With the dollar up yesterday and the CRB index down, both the materials and energy sectors were fairly resilient, especially in light of the outperformance over the past week.   The Dollar index closed at 81.387, up 0.36% on the day.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy TRADE (80.70) and sell TRADE (82.24).

 

Yesterday Oil climbed above $87 for the first time since October 2008 on accelerating momentum in the global economy.  The Hedgeye Risk Management models have the following levels for OIL – Buy TRADE (83.56) and Sell TRADE (88.22). 

 

In early trading, gold is unchanged as it's trading near a one-month high, and looking to head higher as concern about Europe’s recovery hinders the RISK trade.  The Hedgeye Risk Management models have the following levels for GOLD – Buy TRADE (1,116) and Sell TRADE (1,143).

 

Copper is trading at its highest level since August 2008 and is slightly lower today on a stronger dollar.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy TRADE (3.53) and Sell TRADE (3.70).

 

In early trading, equity futures are trading modestly below fair value in a continuation to yesterday's late afternoon pullback.  As we look at today’s set up the range for the S&P 500 is 17 points or 1.3% (1,174) downside and 0.1% (1,191) upside. 

 

Today's MACRO highlights are:

  • MBA Mortgage applications - Refis drop 17% w/w
  • DOE Crude Oil Inventories
  • February consumer credit

 

Howard Penney

Managing Director

 

US STRATEGY – RISK AWAY - S P

 

US STRATEGY – RISK AWAY - DOLLAR

 

US STRATEGY – RISK AWAY - VIX

 

US STRATEGY – RISK AWAY - OIL

 

US STRATEGY – RISK AWAY - GOLD

 

US STRATEGY – RISK AWAY - COPPER


SECTOR SPOTLIGHT | Live Q&A with Healthcare Analyst Tom Tobin Today at 2:30PM ET

Join us for this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more


Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more