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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