“Strokes gained driving shows that distance is more valuable than accuracy.”
- Sean Foley
It’s good to be back in the saddle this morning. While I was away, there was another correction in the US stock market that could have “been it”… you know, the big one – the big “call” so many have been trying to make…
I don’t blame people for going big. Big can work. It can also get you a triple bogey on a hole or fired altogether. Been there, done both. Imagine I was short Tech or QQQ or REITS or SPY last week?
The aforementioned quote comes from a good risk management book that a subscriber sent me called Every Shot Counts. No matter what the narrative is about golf scores or markets, “the thing is that the math doesn’t lie.”
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye! Just because I was “away” from writing and ranting doesn’t mean I wasn’t paying attention. My entire net wealth depends on paying attention to the process, don’t forget.
As usual, let’s start the weekly ROC (rate of change) review with the Global Currency market:
- US Dollar Index was down -0.1% on the week to -4.7% year-over-year, failing @Hedgeye TREND resistance
- EUR/USD was +0.1% on the week and currently signaling Bearish TRADE, but still Bullish TREND
- Yen was +0.8% vs. USD last week moving back to Bullish TREND, but still Bearish TREND
- GBP/USD was +0.6% last week but has moved to Neutral TREND (that means the next move really matters)
- Canadian Dollar broke TRADE support, -1.0% vs. USD last week, but remains Bullish TREND
- Iceland’s Krona was +0.6% vs. USD last week to +3.5% in the last 3 months = Bullish TRADE and TREND
Whether I’m “away” or not, from Iceland (no panic about variant covid) to Canada (perpetual gov panic about covid), I am measuring and mapping all of it, in ROC (rate of change) terms. It all matters.
Commodities, as an Asset Class, corrected last week. After an epic run to Peak Cycle Inflation panic, we definitely have some Phase Transitions (Bullish to Bearish TREND breakdowns) to consider alongside “no changes”:
- CRB Commodities Index corrected -1.5% last week to +13.4% in the last 3 months = Bullish TRADE and TREND
- Oil (WTI) corrected -0.8% last week to +26.3% in the last 3 months = (NO CHANGE) = Bullish TRADE and TREND
- Copper reflated +1.6% last week but is signaling Bearish TRADE and Bullish TREND
- Corn disinflated -10.8% last week moving to Bearish on both my TRADE and TREND durations
- Wheat disinflated -5.8% last week moving to Bearish on both my TRADE and TREND durations
- Nickel inflated another +2.3% last week to +12.8% in the last 3 months = Bullish TRADE and TREND
Yes, there’s a mathematical reason why I removed CORN from ETF Pro Longs and added REITS (XLRE), Tech (XLK), and Natural Gas (UNG) as higher conviction Longs in our Q3 Macro Themes presentation at the end of June…
That reason was Risk Range™ Signal Strength. Corn was weakening. REITS, Tech, and Natural Gas were strengthening. I added Hong Kong (EWH) on the short side as well… because it was weakening!
If you have friends who need to be bearish, ask them if they had Hong Kong on. Last week its stock market was down -3.4% to -4.9% in the last month (vs. US Tech, XLK, +6.7% in the last month to new all-time highs).
All-time highs, it is, eh…
It wasn’t all-time closing highs in European Equities last week, but it was more of what our economic Quad & Volatility Signaling Process thought it would be:
A) German Stocks (DAX) up another +0.2% off the low-end of their Risk Range = Bullish TRADE and TREND
B) Spanish Stocks (IBEX) down another -1.5% after breaking @Hedgeye TRADE and TREND
No, not everyone reading this is a Macro Pro Premium subscriber. And no, not everyone reads every number and back-test in that 110 slide Q3 Macro Themes deck. But I do…
Everything from the Top 10 Key #Quad3 (or #Quad4) @Hedgeye Signal Levels were in there alongside slide 108 that says “Spanish Stocks Are A Relative Laggard In Eurozone #Quad2”…
The other big thing that happened in Global Macro last week was obviously the UST 10yr Yield briefly breaking @Hedgeye TREND support of 1.29%... then recapturing TREND support, quickly, to close the week at 1.36%.
Could that “be it”? Could that be the beginning of #Quad3? A: Maybe. And maybe not. What I can definitely tell you is that it’s not #Quad4. Definitely not yet.
That’s not when Tech or QQQ punches new all-time highs and High Yield OAS Spread continues to make new Cycle Lows. #Quad2 Earnings Season should provide plenty of signals on maybe (or maybe not) too.
Like every shot in a professional golf round, every market day matters. I keep you up on how I see The Game developing. I don’t make all or none positioning calls, unless the process calls for taking that shot.
Immediate-term @Hedgeye Risk Range™ with TREND signal in brackets:
UST 10yr Yield 1.29-1.57% (bullish)
UST 2yr Yield 0.19-0.29% (bullish)
SPX 4 (bullish)
RUT 2 (bullish)
NASDAQ 14,417-14,757 (bullish)
Tech (XLK) 145.90-152.45 (bullish)
REITS (XLRE) 44.51-46.40 (bullish)
Shanghai Comp 3 (bearish)
DAX 15,402-15,798 (bullish)
VIX 14.08-18.48 (bearish)
USD 91.07-92.87 (bearish)
EUR/USD 1.178-1.201 (bullish)
GBP/USD 1.374-1.400 (neutral)
CAD/USD 0.79-0.81 (bullish)
Oil (WTI) 71.76-75.98 (bullish)
Nat Gas 3.45-3.70 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
