“I already knew that I would last the full ten days.”
- James Lawrence
Before doing 50 Ironmans in 50 states (in 50 days), that was the Iron Cowboy’s first big mental test of endurance – riding a bloody Ferris Wheel for 10 days, lol.
“Except for two ten-minute breaks separated by six hours, we would ride non-stop until the wheel shut down at midnight… we could not eat, drink, read, or listen to Walkmans while on the wheel…”
“It took less than an hour for the first contestant to snap. I couldn’t believe it. Just sitting there was the easiest thing I had ever done” (pg 19). Now try your best to just sit there long the Iron QQQ’s for the next 10 all-time highs!
Back to the Global Macro Grind…
Maybe we won’t make another one today, but QQQ’s made yet another all-time closing high on Friday, closing up another +1.6% on the week, taking their TRENDING Full Investing Cycle Return to +12.8% in the last 3 months.
Our core Long Tech (XLK) Asset Allocation has been even better than that = +16.0% in the last 3 months.
“Three-months or more”, that’s what has always defined at @Hedgeye TREND. Just sitting there, riding them works, until there’s a Quad Shift. The thing about being long Tech or QQQ’s is that they work in both #Quad2 and #Quad3.
Post the long weekend in the USA, it’s not Macro Monday. It’s Tuesday! So get back on the wheel and ride what the Global Currency market gives you relative to the TREND that remains (i.e. Down Dollar, Up Commodities and Stocks):
- USD Index was down another -0.7% last week, breaking @Hedgeye TRADE support (and still Bearish TREND)
- EUR/USD was up another +0.7% last week and back to Bullish on both our TRADE and TREND durations
- Japanese Yen was +0.1% vs. USD and still signaling nothingness (i.e. Neutral TREND)
- GBP/USD was up another +0.8% last week, joining The Euro back at Bullish @Hedgeye TREND
- Aussie Dollar was squeezed +2.0% higher vs. USD last week and is knocking on the door of a TRADE breakout
- New Zealand’s Kiwi was +2.1% vs. USD last week and has also moved back to Bullish TRADE and TREND
Why do Australia and New Zealand matter to Global Macro? A: Because everything does. Doing Global Macro is never about doing one thing and/or the simple moving average of things. It’s about everything.
If you need a narrative born out of these numbers, it’s that Australia and New Zealand are already tapering. Since everything is relative in FX, relative to PE Powell’s recent dovishness, that’s hawkish for their currencies.
What’s dovish for US Dollars is bullish for big Global Macro Asset Allocations (like Commodities) priced in Dollars:
- CRB Commodities Index inflated +0.4% last week right back towards its Inflation Cycle Highs
- Oil (WTIC) reflated another +0.8% last week taking its 3-month return to +2.6% and YTD to +44.1%
- Natural Gas inflated another +7.4% last week taking its 3-month return to +53.4% (not a typo)
- Cocoa inflated another +2.8% for the home team taking its 3-month return to +6.6%
- Copper lagged, again, at only +0.1% on the week taking its 3-month return to -3.2%
Why were our Gas (UNG) and Cocoa (NIB) Longs up and Copper (which I’m currently not long because my signal kept me out) down? Well, if you really need to know “why”, the Chinese sold 30,000 tons of it early last week!
Natural Gas is still one of the most consensus net SHORT positions (futures & options contracts) on Wall Street too.
Where else did Full Cycle Investors who stayed on the wheel, Long of #Quad3, get paid last week:
A) REITS (XLRE) inflated another +3.7% last week to new all-time highs (taking their 3-month return to +8.2%)
B) Utilities (XLU) were up another +1.4% last week taking their 3-month return to +6.1%
C) Gold was up for the 4th week in a row, up another +0.8% week-over-week
If we were back to full blown #Quad2 (i.e. not in #Quad3), Utes and Gold would be going down on both an absolute and relative basis (like Financials did, down -2.4% last week taking their 3-month return to down -0.8%).
Emerging Markets are starting to like riding the Down Dollar wheel too. I got squeezed being Short China last week (biggest component of EM) with EM (MSCI Equity) +3.4% on the week taking its 3-month return to down -4.9%.
On the long side of EM we still like India (which is in #Quad1 here in Q3) and Russia (Oil & Gas Longs) whose equity markets were up another +4.3% and +4.2%, respectively, last week and remain Bullish TRADE and TREND Signals too.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.25-1.39% (neutral)
UST 2yr Yield 0.19-0.25% (bullish)
SPX 4 (bullish)
RUT 2 (bullish)
NASDAQ 14,942-15,494 (bullish)
REITS (XLRE) 47.04-49.53 (bullish)
Tech (XLK) 156.07-160.69 (bullish)
Utilities (XLU) 67.80-70.22 (bullish)
Shanghai Comp 3 (neutral)
Nikkei 27,201-29,995 (neutral)
DAX 15,760-15,981 (bullish)
VIX 15.06-18.46 (bearish)
USD 91.85-93.13 (bearish)
EUR/USD 1.171-1.191 (bullish)
USD/YEN 109.46-110.30 (neutral)
GBP/USD 1.366-1.387 (bullish)
Oil (WTI) 67.01-71.17 (bullish)
Nat Gas 4.14-4.90 (bullish)
Gold 1 (bullish)
Copper 4.19-4.40 (bullish)
Bitcoin 46,508-52,109 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
