“Backpain treatment was a microcosm of everything that was wrong with the health care system.”
- Cathryn Jakobson Ramin
And you thought your friends in NYC getting the sniffles was bad! I’d take those over throwing my back out all day, every day, and twice on Christmas.
The aforementioned quote came from an investigative journalist who wrote a critical book about the Back Pain Industry called Crooked. Yeah, it’s super popular amongst the establishment’s chiropractors and spine surgeons, lol.
Not unlike me taking on ye Olde Wall with a big nasty bear market call in 2008, “as an investigative reporter with 3 decades of experience in digging for the facts, I’d arrived on the scene at the ideal moment.” - Jakobson Ramin
Back to the Global Macro Grind…
Yep, while I’m sometimes embarrassed about how bullish I was on things like Commodities and related growth or value stocks when the mother of all #Quad2’s were hitting in late 2020 and for 3 out of 4 quarters in 2021…
I’ve gotten over it. The best of those #Quad2’s are yesterday’s news. Now it’s onto the next.
For those of you who are new to subscribing to Hedgeye, I am no Perma Bull. I’m not going to pretend to be your back doctor this morning either. In all macro markets, I’m just a guy who goes both ways… and I like it.
That’s the biggest thing to know about Cycles – they cycle.
It’s a lot easier for me to “call” the topping #process in the following #Quad2 Cycles than it is for SPY:
A) The Commodity Cycle
B) The INFLATION Cycle
C) The RATES Cycle
And related policy cycles… you know… like the Fed’s episodic-and-non-TRENDING-Hawkishness cycle!
Why is it easier to call those than SPY?
A) Those 3 things only really go up in #Quad2 (Commodities & INFLATION still go higher in #Quad3)
B) If it’s #Quad1 in Q1 of 2021, SPY should hit new all-time highs
C) If it’s a NARROW #Quad4 in Q1 of 2021, SPY could easily punch out new all-time highs too
You know that SPY is only -3.1% from the ALL-TIME closing high that both it and Tech (XLK) made on December the 10th, right? NASDAQ is down -6.7% from its recent all-time high.
While the NASDAQ (QQQ) took a peek at the really-bad-word-bucket of Volatility yesterday, the SP500 didn’t even try to go there. As a reminder The (think a letter that comes after E) Bucket is when the VIX ramps > 30 and stays there.
According to me, there are 3 Buckets of Volatility (let’s use VIX as the easiest example):
A) The Investable Bucket = VIX 9-18, where you can buy every damn dip and make money in SPY
B) The Chop Bucket = VIX high teens to high 20s, where you can get chopped up if you can’t fade/trade
C) The Bad Word Bucket = VIX > 30 going towards 80, where levered long dip buyers die
Unlike most people who have been bearish (the whole way up) on things like “valuation”, money-printing, and Variant Narratives that span debts to government defaults and now viruses, I have experience accurately calling bear markets.
*See Hong Kong’s Hang Seng crashing to a 2-year low yesterday for recent details
And it’s not that I have some crystal ball calling these. It’s actually the opposite. I have the humility to not tell either the market or The Cycle what it should do.
Instead, I just do what The Cycles (i.e. The Quads) are doing.
All the while, I let my #VASP (Volatility Adjusted Signaling Process) tell me how much time and space I have left before episodic-and-non-TRENDING Volatility becomes TRENDING Volatility.
*See my call for a breakout in both UST Yields and Treasury Bond Volatility in November of 2020 for recent details
That’s what keeps people out of an asset or an Asset Class, eh – TRENDING (higher) Volatility. Look at Oil’s Volatility (OVX) this morning. It’s still at 60! That is not a buy signal when heading into DISINFLATIONARY Quads 1 or 4.
So it’s not that I want to embarrass myself and keep telling you to “buy-the-damn-dip” in SPY every time that Mike at Morgan Stanley thinks he’s calling the top. No, no, no. Not at all. Look how quickly I turned on Oil or Energy (XLE).
It’s that my Vol of Vol Signal on SPY still has a VIX Risk Range™ Signal of 17.20-24.28 this morning with the top-end of my SPX Risk Range™ Signal still signaling another all-time high at 4752 (December 10th’s was 4712).
Ultimately I don’t know when I’ll turn on SPY. And I’m ok with that. Not knowing beats “feeling” like you know.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.38-1.53% (neutral)
UST 2yr Yield 0.56-0.70% (neutral)
SPX 4 (bullish)
NASDAQ 14,874-15,889 (bullish)
RUT 2108-2261 (bearish)
Tech (XLK) 164.75-176.36 (bullish)
Consumer Discretionary (XLY) 189-207 (bearish)
Housing (ITB) 76.08-84.40 (bullish)
Shanghai Comp 3 (bullish)
VIX 17.20-24.28 (bearish)
USD 95.80-96.78 (bullish)
Oil (WTI) 67.07-72.87 (bearish)
Nat Gas 3.52-3.94 (bearish)
Gold 1 (bullish)
Bitcoin 45,008-52,690 (neutral)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
