“You can’t buy a map to the top. If you could, everyone would be up there.”
-Tim Grover
Whether it was Katie Ledecky giving up the lead last night to an excellent Australian swimmer or Canada’s Maggie MacNeil winning her country’s 1st Gold Medal in the Butterfly, I loved watching all of it – I love watching the best athletes in the world win!
My daughter Callie’s 2010 CT Jr. Rangers Brick Team won Gold at The Clash tournament (big national tourney in New Jersey) yesterday. My former teammate and Yale Hockey’s all-time leading scorer, Jeff Hamilton, was our Head Coach. He was dialed in!
As Grover reminded me in Winning, very few win Gold or Championships. In striving for greatness at the highest level, “you’ll slip and tumble and lose everything you just gained.” That happens in markets too. Your resilience and process keeps you in The Game.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where we review last week’s Global Macro market moves within the context of both The Cycle and our proprietary TRADE and TREND signals.
As usual, let’s start with the Global Currency market:
- US Dollar Index was +0.2% last week and remains Bullish TRADE but Bearish TREND
- EUR/USD corrected another -0.3% last week and is now signaling Neutral on our intermediate-term TREND duration
- Canadian Dollar was +0.4% vs. USD last week and remains Bearish TRADE but Bullish TREND
- GBP/USD was -0.1% last week and remains bearish on both TRADE and TREND durations
- Russian Ruble was +0.2% vs. USD last week and +1.3% in the last 3 months = Bullish TREND as well
- South African Rand was -2.9% vs. USD last week to -3.9% in the last 3 months = Bearish TRADE and TREND
Not everyone has a Quad Map (and my TRADE and TREND Signals) to help them in generating alpha across the Full Investing Cycle. If they did, everyone would be making the right moves in and out of country exposures like China, before it’s too late!
Staying in big Macro exposures and Asset Allocations across the Full Investing Cycle matters too! Despite all the Macro Tourist talk about #Quad4 in the USA and Deflation, Commodities reflated to new Cycle Highs alongside SPY’s all-time high last week:
A) CRB Commodities Index inflated +1.9% last week to +10.5% in the last 3 months and a new Cycle High
B) SP500 inflated another +2.0% last week to +5.5% in the last 3 months and a new ALL-TIME HIGH
For those of you who like to watch winning, all-time is a long time. There are only 2 Quads that have that Similar Set of A) and B) happening at the same time: #Quad2 and #Quad3.
In the USA, the #Quad2 to #Quad3 Phase Transition was very obvious from a Sector Style and Factor Exposure perspective. As a reminder, that’s when you pivot from SMALL to LARGE CAP and up your exposure to GROWTH and QUALITY (balance sheet):
A) GROWTH: Top 25% SALES Growers (in the SP500) were up +2.8% on the week
B) QUALITY: Low Debt/Enterprise Value Stocks (in the SP500) were up +3.1% on the week
For those of you who crushed it for the Full Cycle of Global #Quad2, you’ll recall that #Quad2 loved being long crap. Small cap crap, all the better (see our long GME call way back then for peak return details before #Quad3 started sneaking in).
Since that GROWTH Factor return looked very much like being long Tech or the NASDAQ (both were up another +2.8% on the week to new all-time closing highs as well), there were plenty of #Quad3 pivots that paid off last week including Long Natural Gas.
I know the Tourists all know about “Lumber”, so they wouldn’t have missed Lumber’s +18% reflation to +53% year-over-year last week. But I highly doubt they’re long Gas, Tech, and REITS (our 3 new adds in our Q3 Macro Themes deck) and short Hong Kong:
A) Natural Gas inflated another +10.5% last week taking its TRENDING (3-month) return to +39.5%
B) Hang Seng (Hong Kong, EWH) deflated another -2.4% last week taking its TRENDING (3-month) loss to -6.0%
The Game is hard, real hard. But, if you have a Go Anywhere Strategy and you can go both ways, winning gets less hard. Instead of whining about whatever, why not be long some Commodity Exposure via Coffee (JO) which inflated another +17.1% last week?
Neither that nor Orange Juice inflating another +7.1% last week was talked about in the mainstream much. Then again, most in the mainstream media aren’t winning championships and Gold medals either. They’re reporting about them.
Congrats to all of our 2010 CJR (CT Jr. Rangers) Elite Hockey players on achieving greatness this past week. Congrats to all of the Olympic Athletes who have gone from short to long of Gold now too!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.18-1.45% (bearish)
UST 2yr Yield 0.18-0.26% (bullish)
SPX 4 (bullish)
RUT 2131-2260 (bearish)
NASDAQ 14,409-14,916 (bullish)
Tech (XLK) 148.73-155.36 (bullish)
REITS (XLRE) 45.40-46.88 (bullish)
Shanghai Comp 3 (bearish)
Nikkei 27,011-28,334 (bearish)
VIX 14.07-21.56 (bearish)
USD 91.59-93.11 (bearish)
EUR/USD 1.175-1.190 (neutral)
GBP/USD 1.361-1.391 (bearish)
Oil (WTI) 67.54-76.39 (bullish)
Nat Gas 3.63-4.10 (bullish)
Gold 1 (bullish)
Copper 4.21-4.47 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
