deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide...
Transcript of deGraaf’s Weekly - New Renmac Website Test · 2018. 11. 19. · deGraaf’s Weekly Survival Guide...
Jeffrey deGraaf, CMT, CFA 212-537-8822 [email protected] Rob Ginsberg 212-537-8819 [email protected] Alex Meintel , CMT 212-537-8820 [email protected] Chetan Jain 212-537-8818 [email protected] [email protected]
deGraaf’s Weekly
Survival Guide to
the Markets
Important legal disclaimer on page 49
October 15, 2013
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Policy Index and Volatility
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Washington has been a consistent driver of volatility over the last 5-yrs. Equities seem to be seeing through this latest issue.
Thursday’s Thaw Was Accumulative
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Volume Skews Were Unusually High
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5
Strongest Portion of Equity Seasonality
Daily Seasonality for Q4
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Typically a trading range for first 3-weeks of October, and then acceleration in last week that rarely looks back. Note year end surge.
Low Quality Dominating High
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We would expect high quality names to outperform low quality if the economy was on the brink of weakening. Not happening.
Industrials Still Strong
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IPO Index Outperforming
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10
Russell 2000 Makes a New High
Attribution in Month Before Peak – Russell 2000 (Sector Neutral)
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Peaks of 1990, 1994, 1998, 2000 & 2007 Peaks of 1989, 1994, 1998, 2000 & 2007
Attribution in Month Before Peak – S&P 500 (Sector Neutral)
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Peaks of 1990, 1994, 1998, 2000 & 2007
Current attribution is inconsistent with previous peaks. Usually valuation is shunned, while price momentum and historical growth rates are endorsed. This time may be different, but we believe behavioral mistakes tend to be an irresistible force near peaks.
Internal Trends Weakening
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600
800
1,000
1,200
1,400
1,600
1,800
S&P 500 (SP50)
Price - Close or Current Intraday
2009 2010 2011 2012 20130%
20%
40%
60%
80%
100%
Renaissance M acro Rese arch - Te chnic al Analysis
10/14/2013 = 77.00%
% OF ISSUES WITH 50 DAY M.A. > 200 DAY M.A.
Part of this weakness is due to the bond substitute trade unwind, but not all of it. This may be an early warning of breadth divergence. Very little additional evidence of a problem exist.
Consensus Sentiment Neutral
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Put/Call Spike Coincided w/ Low
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Term Structure Also Gave Buy Signal
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Cyclical Trend Repelled Yield’s Advance
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We believe positioning needs to moderate, and yields can contract back to 2.50% as mean-reversion to the most recent momentum. We can not turn bearish until the cyclical trend has been broken.
Bond Sentiment Still Offsides
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Bond Market Priced Extreme Outcome
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1-Year US Default Risk
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Approaching levels last seen during the debt downgrade of 2011 and equity lows of 2009. Forward returns post these types of spikes are obviously decent.
Overall Credit Remains Firm
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HY Spreads Remain Tame
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S&P 500 Leverage at a Low
Financials account for a large proportion of this contraction in leverage.
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Health Care is the Outlier
Leverage is expanding notably in healthcare.
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Leverage is Bullish
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The Fed believes that higher leverage is negative, but on further testing, our econ team (Neil Dutta and Rudy Narvas) found that when it turns positive from a negative condition it’s very good for equities and the economy. In other words, from a depressed level, the increase in leverage is a sign of confidence, not rampant speculation.
When Leverage Turns Up From <0
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Nonfinancial
leverage above
zero and rising
Nonfinancial
leverage above zero
and falling
Nonfinancial
leverage below
zero and falling
Nonfinancial
leverage below zero
and rising - Current
phase
DJIA 6% -5% 8% 16%
S&P 500 7% -8% 8% 19%
Energy 18% -22% 10% 20%
Materials 5% -19% 17% 18%
Industrials 8% -26% 17% 22%
Consumer Discretionary 7% -19% 24% 19%
Consumer Staples 4% -9% 15% 15%
Health Care 8% -16% 12% 19%
Financials 6% -30% 20% 23%
Info Technology 9% -29% 25% 20%
Telecom Services 10% -35% 12% 13%
Utilities 16% -33% 15% 6%
Russell 2000 9% -20% 18% 21%
CRB -2% 4% 7% 9%
Gold 11% 14% 6% 9%
Copper 12% -17% 10% 26%
WTI Oil 19% -13% 6% 14%
DXY 0% 3% -4% -1%
BoAML Corp Bond Index 6% 6% 13% 4%
Ryan Labs Securities Treasury Index 11% 8% 14% 0%
Source: Renaissance Macro Research, Haver Analytics
Note: Sectors, Russell and DXY data begins 1991; DJIA, S&P 500 & CRB 1974; gold 1975; copper 1990; oil 1982; BoAML 1987;
and Treasury index 1980.
Global PMI Improving
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European Banks Breaking Out
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FX is an Important Window Into EM
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Several Optimal Entries This Week
New entrants
highlighted in
green
Optimal entry
points outlined in
blue
Top Technically Ranked S&P 500 Names
Bar Width: Higher Ranks – Thicker Lower Ranks - Thinner Color Coding: Overweight- GREEN Underweight – RED Last Week
Healthcare: Industrials: Materials: Tech: Energy: Staples:
KEY CME DLPH TRIP ACT BA ECL FLIR COG KR
NYX JPM JCI PCLN MYL DAL LYB TEL PXD WAG
MCO NDAQ GT WPO LUV PPG JBL SWY
BAC BRK.B BWA VIAB RHI DOW CSC CVS
C MHFI F GCI EFX IP MU COST
ICE LNC GM FOXA DNB WFM
HOG CBS NLSN
SBUX TWX
CMG IPG
NFLX
Financials: Discretionary:
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Equal Weight Ranking
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Discretionary is a Mixed Bag
32
Seeing Some Weakening Internals
33
150
200
250
300
350
400
450
500
S&P 500 / Consum er Dis cretionary -SEC (SP285)
Price - Close or Current Intraday
2009 2010 2011 2012 20130%
20%
40%
60%
80%
100%
Renaissance M acro Rese arch - Te chnic al Analysis
10/14/2013 = 81.93%
% OF ISSUES WITH 50 DAY M.A. > 200 DAY M.A.
REITs Dominate Lower Ranking
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Industrials Strength is Persistent
35
Technology is Decent
36
Optimal Entry Point In Staples
37
35
40
45
50
55
60
65
CVS-US RenMac Rank: 1CVS Caremark Corporation Drug Retail
Price 50 Day Moving Average 200 Day Moving Average
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13
100
105
110
115
120
125
130
Optimal Entry Point In Energy
38
15
20
25
30
35
40
COG-US RenMac Rank: 1Cabot Oil & Gas Corporation Oil & Gas Exploration & Production
Price 50 Day Moving Average 200 Day Moving Average
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13
80
100
120
140
160
180
Optimal Entry Point In Financials
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6
7
8
9
10
11
12
13
KEY-US RenMac Rank: 1KeyCorp Regional Banks
Price 50 Day Moving Average 200 Day Moving Average
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/1395
100
105
110
115
120
125
130
135
140
Optimal Entry Point In Financials
40
70
80
90
100
110
120
BRK.B-US RenMac Rank: 1Berkshire Hathaway Inc. Class B Multi-Sector Holdings
Price 50 Day Moving Average 200 Day Moving Average
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13
95
100
105
110
115
Optimal Entry Point In Financials
41
30
35
40
45
50
55
JPM-US RenMac Rank: 1JPMorgan Chase & Co. Other Diversified Financial Services
Price 50 Day Moving Average 200 Day Moving Average
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13
90
95
100
105
110
115
120
125
130
Optimal Entry Point In Industrials
42
60
70
80
90
100
110
DNB-US RenMac Rank: 1The Dun & Bradstreet Corporation Research & Consulting Services
Price 50 Day Moving Average 200 Day Moving Average
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13
90
95
100
105
110
115
120
125
Optimal Entry Point In Industrials
43
30
35
40
45
50
55
60
65
EFX-US RenMac Rank: 1Equifax Inc. Research & Consulting Services
Price 50 Day Moving Average 200 Day Moving Average
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13
100
110
120
130
140
Big Base Breakout
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5
10
15
20
25
30
35
40
45
DOW-US RenMac Rank: 1
The Dow Chemical Company Diversified Chemicals
Price 50 Day Moving Average 200 Day Moving Average
'09 '10 '11 '12 '13
40
50
60
70
80
90
100
110
Vulnerable Name
45
4
5
6
7
8
9
10
20
30
40
50
60
70
EXPE-US RenMac Rank: 4
Expedia, Inc. Internet Retail
Price 50 Day Moving Average 200 Day Moving Average
'09 '10 '11 '12 '13
50
100
150
200
250
300
350
Vulnerable Name
46
15
20
25
30
35
40
45
URBN-US RenMac Rank: 4
Urban Outfitters, Inc. Apparel Retail
Price 50 Day Moving Average 200 Day Moving Average
'09 '10 '11 '12 '13
60
70
80
90
100
110
120
130
Vulnerable Name
47
6
7
8
9
10
20
30
40
50
60
70
RHT-US RenMac Rank: 4
Red Hat, Inc. Systems Software
Price 50 Day Moving Average 200 Day Moving Average
'09 '10 '11 '12 '13
100
150
200
250
300
Top 25 Portfolio
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Sold STZ
Sold MCO
Sold EMN, CRM
Sold PHM, LYB
Sold FLS
Sold CCI
Sold MPC
Sold WHR, VLO
Sold CSC
Sold STX
Sold FSLR
Sold THC
Sold TSO
Sold NWL
Sold HD Acquisition S
Sold C
Sold SCHW
Current Holdings: NFLX HIG TRIP LOW
V BAC EFX
PPG PNR DLPH
Q2 Replacements: REGN EA ACT
MU GME WDC
Q3 Replacements: BBY SWY YHOO GT
DAL CELG ETFC
Renaissance Macro Research, LLC Global Disclaimer This document has been prepared by Renaissance Macro Research, LLC (“RenMac”), an affiliate of Renaissance Macro Securities, LLC. This document is for distribution only as may be permitted by law. It is published solely for information purposes; it is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained in this document. The information is not intended to be a complete statement or summary of the markets, economy or other developments referred to in the document. Any opinions expressed in this document may change without notice. Any statements contained in this report attributed to a third party represent RenMac's interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Nothing in this document constitutes a representation that any investment strategy or recommendation is suitable or appropriate to an investor’s individual circumstances or otherwise constitutes a personal recommendation. Investments involve risks, and investors should exercise prudence and their own judgment in making their investment decisions. The value of any investment may decline due to factors affecting the securities markets generally or particular industries. Past performance is not indicative of future results. Neither RenMac nor any of its directors, employees or agents accepts any liability for any loss (including investment loss) or damage arising out of the use of all or any of the information. Any information stated in this document is for information purposes only and does not represent valuations for individual securities or other financial instruments. Different assumptions by RenMac or any other source may yield substantially different results. The analysis contained in this document is based on numerous assumptions and are not all inclusive. Copyright © Renaissance Macro Research, LLC. 2013. All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Renaissance Macro Research, LLC. None of the material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of Renaissance Marco Research, LLC.
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