US STRATEGY – JUNKY

Another day of being confidently mixed - the S&P 500 finished mixed and little changed on a quiet Monday. The major indices opened up strong, but ended up closing near their lows on the day.  Moody’s downgrade of Greece sovereign debt to junk was key driver of lower prices.   There was some positive news out of Europe in the form of a better than expected industrial production number.

 

The BP oil spill situation and Obama continued to provide the bulk of the headlines. BP closed down 10%.  The dollar and gold were weaker on the day; oil and other commodities were stronger (though the commodity equities were weaker).

 

The best performing sectors were Utilities (XLU +0.6%), Consumer Staples (XLP +0.6%) and Consumer Discretionary (XLY +0.3%).  The Hedgeye Risk Management models still have Energy (XLE) and Utilities (XLU) positive on TRADE; there are no companies positive on TREND.  The three worst performing sectors yesterday were Materials (XLB - 1.0%), Energy (XLE - 0.5%), Financials (XLF - 0.4%).

 

Precious metals/miners underperformed, with the XAU down 1.5%.  Stocks contributing to the underperformance were; CF (5.0%), DOW (3.1%) and MON (2.4%).

 

The DXY declined 1.1% on Monday and the Hedgeye Risk Management models have the following levels for the USD – Buy Trade (86.42) and Sell Trade (88.51).  The VIX declined only 0.7%, but is down 21.8% over the past week. The Hedgeye Risk Management models have the following levels for the VIX – Buy Trade (26.21) and Sell Trade (33.05).  The TED spread has expanded further to 0.46 as investors look to T-Bills for security.

 

In early trading, the EURO is trading higher by 0.4%, after rising 1.1% yesterday.   The Hedgeye Risk Management models have the following levels for the EURO – Buy Trade (1.18) and Sell Trade (1.23).

 

On the MACRO front, there was some positive economic data out of the Europe, with continued sovereign debt issues mixed in.  Eurozone April Industrial Production grew 9.5% year-over-year vs. consensus +8.7% and prior revised +7.7% (+0.8% m/m vs. consensus +0.5% and prior revised +1.5%).  Spanish officials did admit that a freeze up in interbank lending was affecting Spanish banks and Greece was downgraded midday by Moody’s to Ba1 from A3.

 

The Financials (XLF) also underperformed, with the BKX lower by 0.8% on continued reporting of possible regulation, especially as related to swaps trading desks. It was also reported that Senator Lincoln was considering compromise on her provision.

 

The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (73.57) and Sell Trade (76.97).

 

In early trading, Copper fell in London, ending the longest rally in more than five months, as the dollar strengthened after Greece’s credit rating was cut to junk, reviving concern about Europe’s sovereign debt crisis.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (2.88) and Sell Trade (3.05). 

 

Gold futures may extend their previous day's losses on Tuesday tracking a higher dollar.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,216) and Sell Trade (1,244).   

 

As we look at today’s set up for the S&P 500, the range is 19 points or 0.7% (1,082) downside and 1.0% (1,101) upside.  Equity futures are trading above fair value after equity markets gave up a triple digit gain near the end of Monday's session due to Moody's downgrading of Greece's sovereign rating to junk.

 

Howard Penney

 

US STRATEGY – JUNKY - S P

 

US STRATEGY – JUNKY - DOLLAR

 

US STRATEGY – JUNKY - VIX

 

US STRATEGY – JUNKY - OIL

 

US STRATEGY – JUNKY - GOLD

 

US STRATEGY – JUNKY - COPPER


Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more