The US equities indices finished mostly higher on Thursday and the Dow, S&P, NASDAQ and Russell all recorded their sixth straight day of gains.  But underneath the hood it was not so green.  Five of the nine sectors were actually down on and Healthcare looks to be breaking down.  Every day this week, Volume has accelerated day-over-day as the advance/decline line is breaking down.   


On the MACRO front, the earnings season is a tailwind so far, with much of the good news yesterday coming out of the early-cycle Industrial (XLI) names.  The big disappointment came from initial claims, which unexpectedly jumped 24,000 to 484,000, the highest level since late February (but the government gave us the Easter caveat).


Also on the MACRO front the Empire Manufacturing Index, improved to 31.9 in April from 22.9 in March and the Philadelphia Fed Index improved to a better-than-expected 20.2 in April from 18.9 in March.  While industrial production raised just 0.1% m/m in March vs. consensus expectations for a 0.7% gain. 


Internationally, sovereign concerns surrounding Greece remained above the fold and adverse liquidity developments out of China are working against the RECOVERY trade.


The Industrials (XLI) was the best performing sector on the back of the transportation names.  The sector benefited from a positive pre-announcement from UPS which traded up 5.3% yesterday.  The company pointed to a significant acceleration in its international package and supply chain businesses, along with improved operating margins across all three segments.  Consolidation speculation continued to provide some support with Continental and United in merger talks. 


The Technology (XLK) outperformed, with the SOX +0.3% - PC-leveraged names such as INTC +3% and AMD +2.7% were among the best performers.  GOOG reported after the close, missing some estimates.   


After a big up day on Wednesday, the Financials (XLF) was the worst performing sector yesterday.  The banking group declined with the BKX down nearly 1.0% on the day.  The regional names, which have come under some heightened scrutiny from a valuation perspective, were among the laggards in the group.


For the second day in a row the Energy (XLE) and Materials (XLB) just slightly underperformed the Market.


Crude is looking to have only one up day this week due to below expectation MACRO economic data.  The Hedgeye Risk Management models have the following levels for OIL – Buy TRADE (83.35) and Sell TRADE (87.61). 


The commodity complex was hurt by a stronger dollar yesterday.  The Dollar Index was up 0.36% yesterday.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy TRADE (79.57) and sell TRADE (80.80).


Yesterday we bought the VXX and shorted the SPX.  The VIX rallied 1.9% yesterday; the Hedgeye Risk Management models have levels for the VIX at: buy TRADE (15.30) and sell TRADE (17.07).


In early trading, gold is trading higher as a hedge against inflation.  The Hedgeye Risk Management models have the following levels for GOLD – Buy TRADE (1,123) and Sell TRADE (1,169).


Copper prices are trading lower as the Chinese continue to signal that their white-hot economy needs to cool down.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy TRADE (3.48) and Sell TRADE (3.64).


In early trading, equity futures are trading slightly below fair value on disappointing reaction from Google's earnings.  This is also creating weakness in the Asian markets overnight, which has spilled into European trade. Today’s highlight will be March housing starts, earnings from BAC and GE, plus any further developments regarding Greece.  As we look at today’s set up the range for the S&P 500 is 19 points or 1.4% (1,195) downside and 0.2% (1,214) upside. 


On the MACRO calendar today:


  • March Housing Starts
  • Building Permits
  • April U. of Michigan Confidence


Howard Penney

Managing Director













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