The Grind: What's In My Notebook

Another day, another grind…

Here are the bullish/bearish DATA and PRICE moves in my notebook from the last 48 hours.

BULLISH:

  1. SP500 continues to hold its immediate term TRADE line of support = 1111
  2. The range in our 3-day probability model for the SP500 continues to tighten (46 points now)
  3. All 9 sectors in our SP500 TRADE/TREND model continue to flash bullish TRADE, confirming the index signal
  4. India raised rates by 25bps to 6%, making its 5th hike of 2010, and the BSE Sensex continued to make higher-highs
  5. Chile raised rates by 50bps to 2.5% on inflation concerns (yes, they are real) and Chilean equities are +32% YTD
  6. FTSE and DAX continue to flash bullish TRADE and TREND
  7. Netherlands reported a better than expected unemployment rate of 5.3% (down 20bps m/m) and now that stock market is bullish TRADE/TREND
  8. Russian and Norwegian stock markets have recovered their bullish intermediate term TREND lines (bullish oil signal)
  9. Both the Euro and British Pound (were long FXB) are back to bullish TRADE and TREND relative to the USD
  10. Both Brazil and Canada continue to trade bullish on both TRADE and TREND durations
  11. Commodity prices continue to be in a Bullish Formation (bullish across all 3 of our core investment durations: TRADE, TREND, and TAIL)
  12. CRB Index and soft/agricultural immediate term TRADE correlations (inverse) continue to be north of .80 across the board
  13. Gold prices continue to make higher-highs and higher lows (fear of US Congress and Japanese Bureaucrats trade)
  14. The Yield Spread (10s minus 2s) has expanded week/week by 8 basis points; bullish immediate term TRADE signal for financials
  15. US CPI and PPI inflation reports came in very much benign for august, support the storytellers at the Fed who never will see inflation
  16. Texas Instruments (TXN) buyback of $7.5B was a beast, stoking the “cash on corporate balance sheet” bull case that we heard in 2007
  17. Spanish Debt sales were both longer duration (30yr) and lower yield (5.07% vs. 5.9% last) than prior auctions

BEARISH

  1. SP500 continues to flash bearish from an intermediate term TREND perspective = 1144 resistance
  2. Volatility (VIX) is holding its 21-22 level of intermediate term support = sell signal
  3. US stock market breadth has deteriorated this week = 1st week it has done that in the last 3
  4. US Dollar continues to be a train wreck: down -1.8% w/w and down 13 of the last 16 weeks
  5. Short term US Treasury Yields (2s) have broken their immediate term TRADE line of support again of 0.52% = bearish US GDP signal
  6. Philly Fed survey -0.7 was another miss
  7. University of Michigan Consumer confidence drops to 66.6 here in September (from 68.9 in AUG) despite low-volume stock market strength
  8. Waxman, Weiner, Schumer all picking up the government intervention/fear-mongering from gold to china = bearish US Dollar and bond yield factor
  9. UBS comes out with their super duper “idea” list of “39 Potential M&A candidates” this week; smacks of 2007 sellside hope
  10. Chinese equities closed down for the final 3 days of the week; still bullish TREND, but bearish immediate term TRADE is as bearish does
  11. China is a “manipulator” rhetoric really turning up the volume on anti-Congress commentary in Asian publications
  12. Japanese Yen has finally broken its immediate term TRADE line of support and looks to have locked in a 3-6 month high in the rear-view
  13. Pakistan showing some equity weakness into week’s end; geopolitical risk? its certainly being priced into commodity inflation
  14. Greece continues to act like the dog of dogs after breaking critical TREND line of support at 1575 on the ATG Index (down -29% YTD)
  15. UK Retail Sales dropped sequentially to +0.4% (AUG) vs +1.0% (JUL)

On balance, still more immediate term bullish than bearish DATA and PRICE moves in my notebook and I guess that explains partly why I have the longest invested position I’ve had in our Hedgeye Asset Allocation Model in months (cash position has dropped from a peak of 79% to 46% today), but I’m getting very nervous about holding my longs here (13 LONGS, 10 SHORTS). Congress scares the hell out of me.

Enjoy your weekend,

KM

The Grind: What's In My Notebook - The Grind