“When you’re rich, they think you really know.”
Fiddler On The Roof

Key Takeaways

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  • GOLD: sees the #recession clearly again this morning, up another +0.6% and making a Bull Run for a fresh 3-month high
  • OIL CRASHES: Now down -20.4% since the US Recession started to get priced into demand in Q423 = #Quad4 in Q4
  • UST 2yr Yield trying to consolidate here at 4.95% (i.e. rates off Cycle Highs, but certainly no cuts pending)

The big picture

That was an appropriate quote that Rob Copeland used to introduce his controversial #behavioral book about Ray Dalio and Bridgewater Associates called The Fund.

It’s controversial because the first sentence of the book says “Ray Dalio does not want you to read this book.” So I did. The book’s bearish bias on Dalio’s behavior didn’t surprise me.

Copeland doesn’t really get the asset management side of the business. That didn’t surprise me either. The most important takeaway for me was that, from a Macro Research, content production, and process perspective, we can continue to build a better way.

Oil Down, Gold Up - gold cartoon 09.14.2016

Macro grind

Back to the Global Macro Grind…

Welcome to another Macro Monday @Hedgeye where I don’t get my team to write my morning “observations” and put my name on it! Is there a difference when you’re “bolted to the chair” (going through all the numbers yourself) vs. opining from upon high? A: big time.

Oil Down -1.5% this morning and Gold Up another +0.6% is just another signal that a #Quad4 recession is pending.

As a matter of #process, I get the numbers from my teammates every weekend and measure & map ALL of Global Macro markets across my TRADE, TREND, and TAIL durations myself.

So let’s start with what the Global Currency market is signaling:

  1. US Dollar Index had follow-through selling (down -0.5%) after breaking TRADE support (but remains Bullish TREND, barely)
  2. EUR/USD was up another +0.5% last week after moving to Bullish @Hedgeye TRADE and Neutral TREND
  3. Japanese Yen was flattish (+0.1% vs. USD) last week and remains Bearish on both TRADE and TREND durations
  4. GBP/USD was up a big +1.4% vs. USD last week and moves to Bullish on both TRADE and TREND durations
  5. Canadian Dollar was +0.9% vs. USD but, like the Yen, remains Bearish on both TRADE and TREND durations
  6. Colombia’s Peso was up +1.3% vs. USD last to +4.4% in the last month and broke out to Bullish TRADE and TREND

Why am I the only Global Macro market strategist writing to you about Colombian Pesos at this hour? After being short both the currency and Colombia’s Stock Market for a long time, I’m Long of Colombia via GXG.

In addition to Long Colombia (GXG) you can see all of my Long Only Asset Allocations in our new PORTFOLIO SOLUTIONS product either daily or weekly. When I say we’re building a “better way”, that’s because no one is going to give you our transparency & accountability.

Why are Canadian Dollars and Japanese Yens diverging from the British Pound (GBP/USD)? I don’t need to pull out reams of white papers from briefcases to tell you why.

It’s much more important to tell you WHEN particular TRENDs in Global Macro are changing.

*Hint: Canada has a lot of Oil & Natural Resource exposure (and the Japanese have the easiest monetary policy on the planet).

Is Canada and the Commodities Market still signaling a recession (in demand)?

A) CRB Commodities Index (19 Commodities) was down another -0.6% last week to -3.5% in the last month = Bearish TREND
B) Oil (WTI) was down another -0.7% last week to -9.0% in the last month and continues to signal Bearish TRADE and TREND
C) Corn was down another -0.6% last week to -3.1% in the last month and continues to signal Bearish TRADE and TREND too

Live Cattle was down -3.3% last week to -5.5% in the last month and continues to signal Bearish TRADE and TREND as well. Are you measuring and mapping ALL of it? I think that’s a must in being modern day Macro Aware.

While you’re measuring & mapping you’ll notice the big Global Macro Divergences between Gold/Silver and Oil/Copper again today:

A) Gold is up another +0.6% pushing towards new 3-month highs after being up another +1.1% last week
B) Silver is up another +1.8% this morning after being up +2.1% last week and moving back to Bullish TRADE and TREND
C) Copper is down -0.7% and down for the 2nd day after I signaled SELL on it in Real-Time Alerts last Wednesday

Not only am I writing about all of Global Macro, I am trading it myself with my family’s hard-earned capital. Again, instead of opining about it on TV, I am the Antichrist of CNBC, fully loaded with #timestamps of EVERY Real-Time Alert since 2008.

From a Global Macro Equity perspective, we had another good week in Asia:

A) LONG INDIA was up another +0.2% on the MSCI Index with Small Cap India (SMIN) hitting a new ALL-TIME HIGH
B) SHORT CHINA was down another -0.4% on the Shanghai Composite Index and we remain Short EWH, CHIQ, etc.

In US Equities, it was interesting to see LOW BETA lead last week with Staples (XLP) and Healthcare (XLV) +1.3% and +2.3%, respectively. Tech lagged with NVDA straight down post EPS.

Our Long Insurance (IAK) Asset Allocation was hitting all-time highs alongside our Long Only allocations to Nuclear & Uranium (Long NLR and URA). All-time is a long-time and we fully expect to provide you with differentiated research and positions vs. consensus.

Our levels

Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets

UST 10yr Yield 4.34-4.63% (neutral)
High Yield (HYG) 73.86-75.25 (bearish)           
SPX 4373-4587 (bearish)
NASDAQ 13,743-14,440 (bullish)
RUT 1714-1837 (bearish)
Tech (XLK) 178-187 (bullish)
Energy (XLE) 82.98-85.53 (bearish)
Utilities (XLU) 60.02-63.74 (bullish)                                               
VIX 12.25-16.21 (neutral)
USD 102.98-105.18 (neutral)
Oil (Brent) 78.03-83.83 (bearish)
Nat Gas 2.66-3.14 (bearish)
Gold 1962-2024 (bullish)
Copper 3.61-3.85 (bearish)
Silver 22.50-25.26 (bullish)

Best of luck out there this week,


Keith R. McCullough
Chief Executive Officer

Oil Down, Gold Up - chart