“I do everything by hand… and no one lays a hand on the merchandise but me.”
- Pere Loyau
For those of you who read voraciously, you know when you have a moment? You know, like a moment where your focus is nowhere stressful, nowhere else… and only on that book… and you read something that really resonates?
I had one of those while I was on the lake in Canada last week, reading about Pere Loyau’s wine curation in the historic Loire region of France: “In his cave, where the work is done, there’s not even a telephone…”
“I need tranquility here”, he says -Adventures On The Wine Route, pg 29
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where everything I write about this morning was written down, by hand, yesterday. No one touches my notebooks. No one sees the screens that generate the numbers for my notebooks but me.
Let’s start with the most important number on the page today – the @Hedgeye TREND level of $93.46 on the USD Index:
- USD Index was +1.1% last week closing 4 cents above @Hedgeye TREND resistance (and is back below it this AM)
- EUR/USD was -0.8% last week and remains Bearish on my TRADE duration and Neutral on my TREND duration
- Japanese Yen was only down -0.2% last week vs. USD and is actually up +0.1% in the last month = Neutral TREND too
- GBP/USD broke @Hedgeye TREND support as it lost -1.8% last week
- Canadian Dollar also broke @Hedgeye TREND support as it lost -2.4% last week
- AUD/USD = bearish on both TRADE and TREND durations (down -3.2% on the week and -8.3% in the last 3 months)
Why did GBP and CAD break? A: because they did. The Signal doesn’t have me go into a thematic macro dissertation on why – it has me making decisions and acting on them.
If you really need to know why, some answers are very obvious and include two words: Quad Four. AUD’s (Aussie Dollar) breakdown last week was part of an ongoing breakdown with our GIP Model now Nowcasting 3 straight quarters of #Quad4 there.
But why? Why? Why? Uh, China slowing to its #Quad3 Stagflation knees and Commodities dis-inflating last week?
A) CRB Commodities Index broke immediate-term TRADE support of 208, closing down -4.6% last week (still Bullish TREND)
B) Oil (WTI) broke immediate-term TRADE support of $67.96, closing down -8.9% last week (also still Bullish TREND)
C) Copper broke immediate-term TRADE support of $4.27, closing down -5.9% last week (barely above Bullish TREND)
D) Corn broke immediate-term TRADE support of $5.56, closing down -6.3% last week (barely above Bullish TREND)
Why? Because that’s what happens (dis-inflating inflation) during a Dollar Up #Quad4 Scare.
I know, some of you want me to publish every TRADE and TREND line (plus their Risk Range™ Signals) in real-time, daily. Sorry, that’s not happening because A) I don’t have time to do that and B) I’m not giving up the codes for someone to steal that!
That said, unlike any other Institutional Asset Manager who is playing The Game at the highest level, I will wake-up at 4:30 AM for you every day, grind through ALL of it by hand, and let you know what I think I know from the tranquility of my cave!
What else happened during that Dollar Up move last week? Countries that are A) linked to China and/or B) #Quad4 economic ROC (rate of change) realities in the rest of the world (which include some of our fav Country Style Shorts) got smoked:
A) Emerging Markets (MSCI Equity Index) were down another -4.7% on the week to -8.2% in the last 3 months
B) Chinese Stocks (Shanghai Comp) were down another -2.5% and remain Bearish TRADE and TREND @Hedgeye
C) Hang Seng #crashed, down another -5.8% on the week, and down -20.2% from its #Quad2 Cycle Peak in Q1 of 2021
D) Japanese Stocks (Nikkei225) were down another -3.5% last week with Japan’s economy in #Quad4 Deflation
There’s obviously a big difference between absolute #Quad4 Deflation (Japan right now) and a #Quad4 Scare that’s trying to knock you out of your #Quad3 Stagflation portfolio in the USA, but here were some glaring differences:
A) US Utilities (XLU) were up another +1.8% last week to new #Quad3 Cycle Highs and +6.8% in the last month alone
B) US Large Cap Tech (XLK) was up another +0.5% last week to +3.5% and +13.7% in the last 1 and 3 months respectively
C) Gold was up +0.3% last week to -1.7% in the last month, trying to find its #Quad3 bearings!
Since you aren’t a Moving Monkey type, you get that being Long Gold was better than being long US Small Cap, as a Factor Exposure, with the Russell 2000 (IWM) down another -2.5% last week.
You also know that Gold currently has an immediate-term TRADE inverse correlation of -0.7% to a rising US Dollar. Why? I don’t really care why. It is what it is. I’m long Gold and dealing with it. I’m still long a lot of crypto exposures too.
Consider the alternative: being long Silver or Palladium last week (I am long of neither because The Signal said stay away). Palladium deflated -14.3% last week to -20.7% in the last 3 months!
Maybe it wasn’t just a #Quad4 Scare. I’ll report back from my macro man cave tomorrow morning. We’ll see.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.20-1.39% (bearish)
UST 2yr Yield 0.20-0.26% (bullish)
SPX 4 (bullish)
RUT 2136-2223 (bearish)
NASDAQ 14,417-14,950 (bullish)
REITS (XLRE) 46.13-47.50 (bullish)
Tech (XLK) 152.27-156.91 (bullish)
Utilities (XLU) 67.46-70.25 (bullish)
Shanghai Comp 3 (bearish)
Nikkei 26,872-27,793 (bearish)
VIX 13.37-22.23 (bearish)
USD 92.29-93.63 (neutral)
EUR/USD 1.166-1.181 (neutral)
USD/YEN 108.95-110.79 (neutral)
GBP/USD 1.359-1.382 (bearish)
CAD/USD 0.77-0.79 (bearish)
USD/CHF 0.90-0.92 (neutral)
Oil (WTI) 61.77-71.22 (bullish)
Nat Gas 3.76-4.15 (bullish)
Gold 1 (bullish)
Copper 4.01-4.49 (bullish)
MSFT 288-307 (bullish)
AAPL 144-153 (bullish)
Bitcoin 43,704-51,108 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
