US STRATEGY - A SUNDAY TO REMEMBER

“The object of golf is not just to win. It is to play like a gentleman, and win.”

-Phil Mickelson

It’s hard not to like the storyline coming out of Augusta, Ga. on Sunday and the Drudge Report having a picture of Tiger Wood with the caption “WHATEVER.”  It’s hard not to like the storyline the market is telling either.  That being said, due for release on Wednesday, April 14th, the March 2010 CPI should show inflation accelerating, thanks to higher oil and gasoline prices, as well as to the slowly spreading broad impact of higher energy costs.  A gambling man would favor something on the plus-side of consensus expectations. 

Looking at last Friday - there we have it the steady pattern of daily higher-lows and higher-highs continues; the S&P 500 finished higher on Friday by 0.67%.  Friday’s MACRO tailwind was the better than expected wholesale inventories data, while the news concerning Greece seems to be mere distraction.  For the 6th day in a row all sectors are positive on TRADE and TREND, and all sectors closed higher on the day.

February wholesale inventories are better than expected up 0.6% vs. consensus at 0.4%. The inventories data provided more support for the idea that the economy is getting stronger. The January Wholesale Inventories number was revised to +0.1% from (0.2%).  The February Inventories/Sales ratio was 1.16; same as last month and lower than the year-ago reading of  1.38.

Today, Greece continues to generate headlines as Euro-region politicians said yesterday they would bail out Greece to the tune of $41 billion in loans; Greece is up 5% on the news. 

Last week, the best performing sectors were Financials (XLF), Consumer Discretionary (XLY) and Energy (XLE).  The XLE was the best performing sector on Friday.  Dollar weakness provided some support for the REFLATION trade as oil fell 0.55% on the day.  Chevron and ExxonMobil provided leadership, with the S&P 500 coal index up 1.2%.  Despite a weaker dollar, Materials (XLB) was the worst performing sector on the day. AA was down 3.2% after a downgrade by JPM ahead of earnings on Monday.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy Trade (80.68) and sell Trade (81.77).

The Hedgeye Risk Management models have levels for the VIX is: buy Trade (15.84) and sell Trade (17.42).

In early trading, crude oil is looking higher on strong demand from China and a weaker dollar.  The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (82.69) and Sell Trade (87.63). 

In early trading gold is trading at a 4 month high.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,131) and Sell Trade (1,169).

The river card on the move in copper is in! Copper is trading at the highest level since the collapse of Lehman Brothers in September 2008; Imports of copper and products by China were 456,240 tons last month vs. 322,280 tons in February (up 42%) and 22% more than in March 2009.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (3.54) and Sell Trade (3.63).

In early trading, equity futures are trading above fair value as markets react positively to news of an EU support package for Greece.  Today's MACRO data points are light, but Alcoa kicks off the Q2 reporting season after the close.  As we look at today’s set up the range for the S&P 500 is 17 points or 1.1% (1,181) downside and 0.3% (1,198) upside. 

Howard Penney

Managing Director

US STRATEGY - A SUNDAY TO REMEMBER - S P

 

US STRATEGY - A SUNDAY TO REMEMBER - DOLLAR

 

US STRATEGY - A SUNDAY TO REMEMBER - VIX

 

US STRATEGY - A SUNDAY TO REMEMBER - OIL

 

US STRATEGY - A SUNDAY TO REMEMBER - GOLD


US STRATEGY - A SUNDAY TO REMEMBER - COPPER