The Grind: What's In My Notebook Today...

Another day, another grind. Here are the bullish and bearish DATA and PRICES in my notebook from the last 24 hours:

BULLISH:

  1. SP500 continues to hold our bullish immediate term TRADE line of support = 1107
  2. The Range in our 3-day probability model (upside/downside for SP500) narrowed day/day to 52 points from 78 yesterday
  3. Our S&P Sector Risk Management Model continues to flash bullish across all 9 sectors on immediate term TRADE (3 weeks or less)
  4. Japanese Equities reacted very bullishly (+2.3% overnight) on the Yen devaluation, taking out the crash call we’ve seen in Nikkei since April
  5. Indonesia ripped a big positive divergence (vs global equities) to the upside last night with a +3.9% price move; we remain bullish on Indonesia
  6. Both the FTSE and the DAX continue to flash bullish on both TRADE and TREND with the DAX holding TREND line support of 6084
  7. UK unemployment remains impressively below that of the US at 7.8% y/y (in line with last month as opposed to seeing the rate rise y/y)
  8. Commodities (CRB Index) continues to flash Bullish Formation (bullish on all 3 of our investment durations: TRADE, TREND, and TAIL)
  9. Corn pushing back towards $5 and Cotton prices hitting 15 year highs as the softs/ags continue to rock and roll
  10. Oil prices continue to hold our intermediate term TREND line of support (was resistance 3 weeks ago) of $75.31/barrel
  11. Gold is golden as the fear of US Congress trade reaps gains; higher-highs and higher-lows
  12. Yield spread expands day over day by 2bps
  13. TED spread remains extremely tame (15bps wide)
  14. JPM’s Jaime Dimon says he’s going to pay the dividend and hire 10,000 people

BEARISH:

  1. SP500 still down -8% from its April YTD peak and broken from an intermediate term TREND perspective (resistance = 1144)
  2. Our risk/reward daily model for the SP500 is now flagging lower-highs of resistance and risk outrunning reward by 2 to 1
  3. US market breadth deteriorated yesterday for the 1st day in 5
  4. Financials and Small Caps led yesterdays decliners  - Americans need both for US GDP growth to hold above 1%
  5. Chinese equities had their 1st down day today in the last 4, selling off -1.3%
  6. Greek Equities broke our circuit breaker line yesterday (1575 on the ATG Index) and see follow through selling this morning
  7. Brazilian equities backed off 50bps yesterday and are flagging the same marginal immediate term (overbought) sell signal that the SP500 is
  8. 2-year US Treasury yields broke their immediate term TRADE line of support (0.52%) intraday yesterday and see follow through bond buying today
  9. US Dollar continues to flash Bearish Formation (bearish across all 3 of our investment durations: TRADE, TREND, and TAIL)
  10. ABC/Washington Post Consumer Confidence stopped improving week/week, stuck in mud at minus -43
  11. MBA mortgage applications stopped improving week/week, dropping -0.4% this week vs last
  12. II Bullish to Bearish Survey has popped 1500 basis points to the bullish side of the ledger in the last 3 weeks with Bulls up 400bps w/w to 37%
  13. Tea Party wins in NY, Delaware, etc last night impose a headwind to the consensus/expected Republican romp at midterms
  14. US Industrial Production growth reported this morning slows sequentially for the 3rd straight month to 6.2% (AUG) vs 7.4% (JULY)

Net net, we’ve started making some sales in the last 24 hours in the Hedgeye Portfolio (12 LONGS, 8 SHORTS vs. 14 LONGS 12 SHORTS yesterday) and we’ve taken some beta out of our Hedgeye Asset Allocation Model (selling Cocoa/Commodities, buying Bonds).

Finally, the CHART OF THE DAY below stands behind my 14th bearish point of the day and should elicit plenty of questions in any risk managers mind about go forward US growth expectations. US industrial production “comps” only get tougher from here – that doesn’t mean we are calling for a newsy “double dip” (which implies negative Q3/Q4 US GDP growth), but it definitely suggests US GDP growth can continue to drop sequentially for the next 3-6 months.

I’ll leave you alone with that red arrow to noodle over for today.

KM

The Grind: What's In My Notebook Today...  - 2