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For the past three days the S&P 500 has treaded water as continued concerns surrounding the momentum behind the global economic recovery are offset by the largely upbeat June quarter earnings and corporate commentary.

Yesterday the concern on the MACRO front was focused on the slowing momentum in the manufacturing sector following the release of the New York and Philadelphia-area manufacturing surveys for July.  These concerns were offset by initial jobless claims which fell 29K to 429K in the week-ended July 10th, the lowest level thus far this year (the improvement was driven by seasonal factors). 

Treasuries fared well again today on the back of the weaker-than-expected regional manufacturing surveys.  The VIX has risen for the past three days, as the S&P 500 has treaded water.  The Hedgeye Risk Management models have the following levels for the VIX – Buy Trade (22.15) and Sell Trade (28.15).

The dollar index continues to get smoked, trading down 1% yesterday and it is trading down again today.  The Hedgeye Risk Management models have the following levels for the USD – Buy Trade (82.56) and Sell Trade (83.79).

The euro is breaking out above our intermediate term TREND line of 1.28; we are long the Pound Sterling.  The Hedgeye Risk Management models have the following levels for the EURO – Buy Trade (1.24) and Sell Trade (1.29).

As I said before, the MACRO calendar remained a headwind for equities, particularly those levered to the RECOVERY trade.  For a second straight session, the Financials (XLF) was the worst performer, weighed down by the banks. The group failed to garner much support from the Q2 beat out of JPM, which was driven by significantly better-than-expected credit quality.

The three best performing sectors yesterday were Utilities (XLU), Consumer Discretionary (XLY) and Technology (XLK).

Copper traded higher despite concerns for a slowing economy.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (2.97) and Sell Trade (3.19).

Gold continues to trade higher as the dollar hit a two month low.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,191) and Sell Trade (1,218). 

Crude oil declined yesterday on continued concern that the U.S. economic recovery will slow.  The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (76.02) and Sell Trade (78.44).  

As we look at today’s set up for the S&P 500, the range is 44 points or 1.8% (1,077) downside and 2.2% (1,121) upside.   Equity futures are trading above fair value, despite a miss from GOOG.  On the MACRO calendar today:

  • US CPI m/m June SA  - consensus (0.1%)
  • US CPI m/m ex-food & energy June - consensus 0.1%
  • US CPI Index Level June SA - consensus 218.18
  • TIC Flows (May)
  • U. of Michigan Confidence (July-Prelim) - Consensus 74.5

Howard Penney

US STRATEGY –  TREADING WATER - S P

 

US STRATEGY –  TREADING WATER - DOLLAR

 

US STRATEGY –  TREADING WATER - VIX

 

US STRATEGY –  TREADING WATER - OIL

 

US STRATEGY –  TREADING WATER - GOLD

 

US STRATEGY –  TREADING WATER - COPPER