US STRATEGY – HOLDING ON

Yesterday the Russell 2000, S&P 500, NASDAQ and Dow Jones were the four best performing indices globally.  For the time being, fears of a “double-dip” are being dismissed due in part to yesterday’s retail sales figure and today’s news that the IMF is raising its 2010 world growth forecast.  The retail sales data on Wednesday showed the strongest pace of growth in four years.  Despite the reported good news for the consumer, the Consumer Discretionary sector (XLY) unperformed on the day.  Yesterday’s 3.1% move in the S&P 500 came on an unconvincing 1% sequential improvement in volume.       

 

Overnight there was some follow-through in Asia; Japan was up 2.8%.  India (up 1%), Hong Kong (up 1%), and Australia (up 2.25%) also showed strength.  China declined 0.25% on the day amid speculation that China would implement a new round of property market tightening measures.  

 

In Europe, the supposed transparency and credibility surrounding the European bank stress tests also helped to underpin sentiment.  While the euro has traded higher in four of the last five days, it closed down 0.24% yesterday at 1.26.  The Hedgeye Risk Management models have the following levels for the EURO – Buy Trade (1.24) and Sell Trade (1.27).

 

Yesterday, treasuries were weaker with the dampened risk aversion in the markets.  The VIX declined 9.5% yesterday: a 22.3% decline over the past week.  The Hedgeye Risk Management models have the following levels for the VIX – Buy Trade (25.01) and Sell Trade (29.99).

 

The dollar index was down 0.31% breaking our intermediate term TREND line of $83.96. It is now down -5.5% since the Hedgeye Q3 Macro theme of American Austerity started.  The Hedgeye Risk Management models have the following levels for the USD – Buy Trade (83.35) and Sell Trade (84.96).

 

Looking at the sector performance, the Financials (XLF +4.4%), Materials (XLB +4.0%) and Energy (XLE +3.5%) were the three best performing sectors.  While Consumer Discretionary (XLY +2.8%), Healthcare (XLV +2%), Consumer Staples (XLP +1.9%) were the bottom three. 

 

Driving the XLF higher was the banking group as the BKX posted its biggest one-day gain today since May 10th.  The Trust names NTRS +6.9% and BK +6.4% were among the standouts in the group following the positive Q2 pre-announcement from STT.  Regional banks outperformed with the pickup in risk appetite; the KRE was up 4.5%.

 

Yesterday, we shorted the Industrials (XLI) into the significant outperformance.  The S&P steel index rose 6%; the industrial metals names have some of the best leverage to the risk/recovery trade.  Our GDP growth forecast remains below consensus.

 

The consumer related names underperformed as the risk aversion trade saw a move into higher beta names.  The low priced retailers and dollar stores provided the big headwind for the retail space.  With retail sales being reported today, it’s expected to be one of the more influential directional drivers for the broader market today. 

 

Commodity related equities outperformed, despite OIL and Copper being broken on TREND and TRADE.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (2.83) and Sell Trade (3.09).

 

Yesterday GOLD fell to $1,185 an ounce yesterday, the lowest price since May 24, before rebounding to close above $1,200.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,180) and Sell Trade (1,229). 

 

Oil continues to trade higher as the Hedgeye Risk Management models have the following levels for OIL – Buy Trade (70.51) and Sell Trade (75.28).  

 

As we look at today’s set up for the S&P 500, the range is 71 points or 5.2% (1,005) downside and 1.5% (1,076) upside.   Equity futures are trading mixed to below fair value ahead of the initial jobless claims number. 

 

Howard Penney

 

 US STRATEGY – HOLDING ON - S P

 

 US STRATEGY – HOLDING ON - DOLLAR

 

 US STRATEGY – HOLDING ON - VIX

 

 US STRATEGY – HOLDING ON - OIL

 

 US STRATEGY – HOLDING ON - GOLD

 

 US STRATEGY – HOLDING ON - COPPER


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

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