“Winning is craziness. It doesn’t sleep, and doesn’t understand why you do.”
- Tim Grover
In addition to the hair and “tone” critiques, plenty of people think I am certified. You know, as in crazy. Sometimes I like crazy. Sometimes I don’t – it woke me up an hour early this morning.
Why? Well, ever since I started running my own money all-in actively again (i.e. when I was in lockdown @Hedgeye HQ during COVID), I set alarms for overnight TREND breakdowns (that’s what I did running OPM). I got a big one last night.
I’ll get to that in a bit. Back to doing what it takes to win, across cycles, at the highest level of the Global Macro game, as Grover reminded me in Winning, it’s “unforgiving. If you screw up, if you lay down… you are done.”
Back to the Global Macro Grind…
I lost 7 basis points of my hard earned capital yesterday and I did not like that one bit. In fact, I hated it. Yes, I hate. I hate losing more than I enjoy winning.
Since I run my active trading account on a long/short basis, my long REITS (XLRE) and short EWH and SMALL CAP Factor Exposure hedge helped offset what would have been a day where I lost a lot more money than that.
Why? I’m long Energy. And that got pounded.
If you play The Game the way I do, you’re going to get pounded plenty of times. “For everyone, there are endless setbacks, challenges, roadblocks, letdowns, and issues that force people out of the race.”
“But if you can stay with it, if you can survive the battlefield in your mind, if you can tolerate fear and doubt and loneliness… winning would like a word with you.” -Grover, pg 5
Who else am I going to talk to other than my dog when that alarm went off at 3:23AM?
What was that alarm all about? A: Shorting Japan. It was a #Quad4 alarm in both Japanese Government Bonds and Japanese Equities. If you’re modelling risk fractally, that’s a Similar Set that should wake you up.
It’s called opportunity knocking for a new place to win.
So, now The Game gets more complex. For a long time, Global #Quad1 and #Quad2 made masterminds out of people who should stick to pizza reviews. Now we have multiple crosswinds to navigate in #Quad3s and #Quad4s:
- China – they hated admitting it, but #ChinaSlowing was their #Quad3 Stagflation reality in Q2
- Spain – they hated getting pounded again this morning, but Spanish Stocks (EWP) are -7% in a month
- Japan – I did not hate on that alarm clock - that sucker is signaling #Quad4 in Nikkei and JGB terms
There you go. Just like that. The Game changes slowly, then all at once. Just like we kept telling you it would WITHOUT having the arrogance to tell you precisely WHEN it would.
Risk happens as it is happening.
In addition to Short China, Spain, and Japan, I am actively shorting Hong Kong (EWH) and New Zealand (ENZL). All of our power users who are paying attention to the moves I make know that. Japan is the only thing that is new this morning.
In America, it’s not new that the SMALL CAP and HIGH BETA Factors are getting pumped. Russell 2000 (SMALL CAP) is teetering on a @Hedgeye TREND breakdown here – Russell Volatility (RVX) will determine that sick #Quad3 puppy’s fate.
Another way to see what The Machine did yesterday is this:
A) HIGH BETA stocks were -0.7% in an up tape (SPY was +0.12%), taking 1-month price momentum to -2.8%
B) LOW BETA stocks were +0.1% (in line with SPY), taking 1-month price momo to +1.5%
Again, if it was a DEEP #Quad4 in the USA, MSFT and APPL (basically the Tech ETF, XLK, which is in my Top 3 Sector Style Risk Range™ Signal STRENGTH alongside REITS, XLRE) would be the ones getting pumped.
You know what else enjoyed some of that #Quad2 to #Quad3 Phase Transitioning yesterday? Gold (GLD) which just moved from Neutral to Bullish @Hedgeye TREND along with Utilities (XLU).
Before you lose your mind with all of these changes, take a deep breath and remind yourself that all of the players who can’t calm their mind and embrace uncertainty and change are your competition. Winning means beating them.
Immediate-term @Hedgeye Risk Range™ with TREND signal in brackets:
UST 10yr Yield 1.28-1.51% (bullish)
UST 2yr Yield 0.18-0.28% (bullish)
SPX 4 (bullish)
RUT 2182-2281 (neutral)
NASDAQ 14,502-14,790 (bullish)
Tech (XLK) 147.58-153.93 (bullish)
Energy (XLE) 50.14-55.32 (bullish)
REITS (XLRE) 44.70-46.91 (bullish)
Shanghai Comp 3 (bearish)
Nikkei 27,945-29,009 (bearish)
DAX 15,434-15,917 (bullish)
Spain’s IBEX 8 (bearish)
VIX 14.23-18.53 (bearish)
Oil (WTI) 71.76-76.23 (bullish)
Nat Gas 3.56-3.81 (bullish)
Gold 1 (bullish)
MSFT 273-285 (bullish)
AAPL 142-151 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
