INSIDE THE NOTEBOOK SEPT. 21, 2010 - Notebook Image Hedgeye




Another day, another grind of new DATA and PRICES. Here are the bullish and bearish bullets in my notebook from the last 48 hours:
1.      SP500 remains immediate term bullish with TRADE line support = 1124

2.      All 9 sectors in our SP500 Sector Risk Mgt model remain bullish from an immediate term TRADE perspective

3.      SP500 return from the AUG26 low = +9.1%; that 1047 low was a higher-low than the YTD closing low of 1022

4.      Thailand Exports accelerated sequentially (AUG vs JUL) from 20.6% to 23.9%

5.      Taiwan Exports accelerated sequentially (AUG vs JUL) from 18.2% to 23.3%

6.      India’s stock market continues to make higher-highs post last week’s rate hike (5th of 2010, citing inflation pressures)

7.      Chinese Yuan continues to rally early this week as Malaysia was a noteworthy buyer of Yuan denominated bonds for reserves

8.      Chinese Bank Regulation looks tougher than Basel3; reducing one of the larger global macro risks (China having a US style credit blowup)

9.      RAB’s Glen Stevens considering a rate hike rather than pandering to the Bernanke/Japan QE turbo prop helicopters

10.  European equities continue to A) diverge from a performance standpoint and B) see Germany win and Greece lose performance

11.  FTSE and DAX remain bullish TRADE and TREND with both outperforming SP500 YTD

12.  Brazil and Canada remain bullish TRADE and TREND from an equity market perspective

13.  Commodities remain on a tear with the CRB Index +9.8% since beginning of July; seeing very high inverse correlation to US Dollar now

14.  Gold prices hit higher-all-time-highs that we sold into yesterday but we’ll buy back on a pullback to 1261 (maybe)

15.  Euro and British Pound continue to flash bullish TRADE and TREND as the Yen and US Dollar wallow in the Fiat Republic strategies


1.      SP500 remains bearish from an intermediate term TREND perspective; our Bear Market Macro line of resistance remains 1144

2.      Our immediate term SP500 RISK/REWARD model is flashing a 10:1 downside (RISK) vs upside (REWARD) signal = rare

3.      Volatility (VIX) is oversold again in the 21-22 range; the inverse relationship b/t VIX and SPY is critical to acknowledge

4.      Hearing very negative Q3 hedge fund performance numbers (real as opposed to rumor); perpetuating the September squeeze

5.      Obama praising his economic team on the TV Game Show thing that CNBC was embarrassing for America

6.      Chinese stocks are down for 4 of the last 5 days; bearish immediate term TRADE and threatening a TREND line breakdown of 2578 on the SSEC

7.      Japanese Yen has had no legitimate bid since intervention day; re-assuring us that there is legitimate TAIL risk mounting that Japan implodes

8.      China/Japan political relations broke down this week on the Chinese fisherman issue = rising tensions that we don’t see priced into oil

9.      Greek equities continue to get hammered on both an absolute and relative basis (-32% YTD) despite Greek politicians doing their road-shows

10.  Sweden re-elects Reinfeldt as PM but he takes a minority government as anti-immigration votes (Swedish Democrats) build momentum

11.  Portugal’s budget gap for AUG was worse than expected  - big miss on the revenue lines (like Greece) as they focus on the spending line

12.  Oil prices have broken their intermediate term TREND line of $76.12 again = bearish US demand signal

13.  Natural gas prices are broken across all 3 of our core risk management durations (TRADE, TREND and TAIL) = bearish US demand signal

14.  Copper prices continue to make lower-highs, much like the SP500, versus April levels

15.  2yr US Treasury yields continue to flag bearish from an immediate term TRADE perspective = bearish US demand signal

16.  Yield Spread (10s minus 2s) has compressed small for the week-to-date, less bullish than last week’s expanding spread was for Financials

17.  US Dollar continues to look God awful; bearish TRADE, TREND and TAIL (down now for the 14th week out of the last 17)

18.  Inflation readings across all of our Hedgeye models are signaling a sequential rise in September versus August

19.  IL’s pension fund “time bomb” potential finally broke as news from Bloomberg this week

20.  Japan’s Pension Fund (largest on the planet) is considering investing in emerging markets as they chase yield

21.  Russia and Costa Rica issuing sovereign debt now as the list of those piling debt upon debt upon debt grows like bark on a bonfire

Altogether, I started leaning more bearish than bullish in the last 24 hours. I expressed this by taking up the CASH position in the Hedgeye Asset Allocation Model up from 46% at Friday’s close to 61% this morning. I’ve also gone from net long to net short (longs vs shorts) in the Hedgeye Portfolio which has 10 LONGS and 11 SHORTS as of 11AM EST.

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