“S-Curves are not isolated moments in time, but parts of a perpetual process.”
- Aidan McCullen
Gotta love an Irishman who perpetuates #process!
I introduced McCullen’s S-Curve in Undisruptable within the lens of my ROC (rate of change) Sine Curve last week. It’s a good way to visualize a re-acceleration (#Quad2 in Q4) AFTER a short-term (#Quad3 in Q3) real growth deceleration.
Instead of thinking about Old Wall Perma Bulls vs. Bears, think about caterpillars. “When the S-Curve doubles back on itself, it mirrors the ouroboros and reflects the concept of the caterpillar eating its own egg to fuel its future.” (pg 44)
Back to the Global Macro Grind…
On a lot of proprietary #process levels, yesterday was a good day. Post ye Olde Wall seeing a “higher than expected” headline US INFLATION report, the bond market traded where I expected it to.
I got rates right, but I got Gold wrong. However short-term being wrong is, I wanted to get something wrong. I was getting a little tired of writing about how wrong others have been not being long of #Quad2!
Unlike my competition, I have no problem “admitting” when I’m wrong. It’s sad and pathetic that an “admission” is held in such high regard in this profession. Everyone knows when we’re wrong. It shouldn’t require a proclamation.
Here’s how I summarized my views on Rates, Gold, and US Equity Volatility in my Top 3 Things this morning:
- 2YR – our Street High Nowcast for #Quad2 in Q4 INFLATION #accelerating to +6.09% and an ongoing breakout in short-term (2yr) UST yields remains fully intact with UST 2yr ramping back towards the top-end of my Risk Range yesterday and the US Dollar loving that relative rates/policy move (vs. ECB in particular)
- GOLD – I got rates and stocks right this week, but I’m dead wrong on Gold for reasons that aren’t yet clear (reasons don’t matter – being wrong is being wrong); Rates Up, Gold Up isn’t what I was expecting – I wasn’t expecting Gold to pick up a POSITIVE +0.68 short-term TRADE correlation to USD Index either – stay tuned on this one
- VIX – this buying opportunity in #Quad2 US Equity Exposures (MTUM, XLF, XLK, IWN, XLE – in that order of my current position sizing) is straightforward with A) front-month VIX at the top-end of my Risk Range and B) the implied volatility DISCOUNT of -9% on SPY from only 1-week ago ballooning into a panicked +41% PREMIUM (vs. 30-day realized)
I publish that note to Institutional Macro Subscribers at the top of the risk management morning… because that’s what I am seeing at the top of the risk management morning! (published around 6AM ET)
Going a little deeper on those 3 points:
- 2YR – this was not a comment on the long-end of the curve (which I still think is also going higher). It was what it was – a comment on the short-end because that’s what moves on FED POLICY expectations and with headline INFLATION accelerating from 5.34% year-over-year in Q3 to 6.2% in OCT, that’s a clean cut #Quad2 move
- GOLD – most of the time that I get something wrong, it’s breaking out or breaking down on my @Hedgeye TREND duration. Plenty of these are short-term head-fakes. Some are not. From here, within the lens of my Risk Range, Gold has -6% of immediate-term downside vs. +0.3% on the ups. TREND = $1837/oz
- VIX – as a #process reminder, ALL of my long/short positions dynamically re-organize themselves for Risk Range™ Signal Strength in real-time. I try to update power-users of the process on those “re-ranks” daily through multiple content distributions (Macro Show, The Morning Shift macro data dump, etc.)
I can keep going, deeper and deeper, on the “why”… but, eventually, you’re going to either stop reading or just ask me WHAT to do and WHEN. That’s good. It saves us time having to read other people’s numberless soliloquys.
Right or wrong, I love the perpetual motion of The Game and timestamping every move I make.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.44-1.65% (bullish)
UST 2yr Yield 0.40-0.54% (bullish)
SPX 4 (bullish)
NASDAQ 15,406-16,129 (bullish)
RUT 2 (bullish)
Tech (XLK) 160.50-169.92 (bullish)
Utilities (XLU) 66.01-67.64 (bearish)
Financials (XLF) 39.68-40.96 (bullish)
VIX 14.26-18.96 (bearish)
USD 93.55-95.12 (neutral)
EUR/USD 1.146-1.162 (bearish)
Oil (WTI) 78.95-85.87 (bullish)
Gold 1 (neutral)
Bitcoin 60,745-68,999 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
