US STRATEGY - MONETARY LUNACY

In early trading, equity futures are trading sharply above fair value after the EU and ECB unveiled a €750B rescue package to prevent the Euro zone financial system collapsing.  In addition, the EU and IMF approved the loan agreement with Greece with the first disbursement set to proceed before its May 19th bond redemption.

 

The European markets moved sharply higher in response to European policy makers agreeing on the rescue package.  The upward move in stocks, which saw all industry groups trade higher, was led by banks and financials with average gains of over +12%.  Also in early trading, all members of the FTSE 100 are higher.

 

When the US levered up its balance sheet to save the nation the market rallied 75% over the next twelve months and the Euro zone is now taking the same path as the US.  How is this all the MONETARY LUNACY going to end?  Leverage is bad, not good!  That being said, we are managing risk around what the market gives us and coming into today’s trading, we have the following positions in the Hedgeye virtual portfolio:

 

On 05/07/2010 (10:18 AM) LONG QQQQ - The reactive are making forced sales here in early trading, so we'll take our US Equity allocation up from 3% to 6% with this addition to our long exposure.

 

On 05/06/2010 11:29 AM SHORT UUP $24.75 - We have been bullish on a Buck Breakout since the beginning of the year but, for a TRADE, the buck stops here. Shorting high as US debt issues aren't going away either.

 

On 05/06/2010 01:25 PM LONG SPY $114.98 - May Showers it is! We'll get long some US Equity exposure now, taking our Asset Allocation in US Equities to 3% (from zero). KM

 

With US equities finishing substantially lower on Friday, all of the US sectors were broken on TRADE and TREND except Consumer Discretionary, which did not break TREND. 

 

The Hedgeye Risk Management models have the following levels for the S&P 500 the US dollar, The Euro, VIX, OIL, Copper and Gold: 

  • As we look at today’s set up the range for the S&P 500 is 33 points or 0.08% (1,110) downside and 2.9% (1,143) upside.  
  • The Dollar index is currently trading down 1.4%; the Hedgeye Risk Management models have levels for the DXY at: buy Trade (83.09) and sell Trade (84.59). 
  • The Hedgeye Risk Management models have levels for the VIX at: buy Trade (25.23) and sell Trade (40.95). 
  • The Hedgeye Risk Management models have the following levels for the EURO – Buy Trade (1.26) and Sell Trade (1.31).  
  • The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (75.01) and Sell Trade (80.40).  
  • The Hedgeye Risk Management models have the following levels for COPPER – Buy Trade (3.06) and Sell Trade (3.34). 
  • The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,180) and Sell Trade (1,212).

 

Howard Penney

Managing Director

 

US STRATEGY - MONETARY LUNACY - S P

 

US STRATEGY - MONETARY LUNACY - DOLLAR

 

US STRATEGY - MONETARY LUNACY - VIX

 

US STRATEGY - MONETARY LUNACY - OIL

 

US STRATEGY - MONETARY LUNACY - GOLD

 

US STRATEGY - MONETARY LUNACY - COPPER


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