“We’ve existed for at least 200,000 years, but for most of that time we have next to no idea what was happening.”
- Graeber & Wengrow
And you want me to tell you, on every daily tick, precisely what is happening to every one of your macro portfolio positions? Cool. But that’s obviously not happening. Most of the time I call it Brownian Motion.
The aforementioned quote comes from a 692 page brick of a book that one of my good friends in this good life, Moshe Silver, sent me titled The Dawn of Everything – A New History of Humanity.
I’m digging deep, real deep, into this one. On the history of economies, so far I haven’t read anything about Deep #Quad4.
Back to the Global Macro Grind…
The book’s opening volley is a quote from 1948 that could easily be a good one from me this morning. If I was an intellectual, that is!
“This mood makes itself felt everywhere, politically, socially, and philosophically. We are living in what the Greeks called the Kairos – the right time – for a metamorphosis of the gods.” -C.J. Jung
Deep, eh? I’m definitely on board for a metamorphosis of the macro market gods. You all know my buddy, Floki, right? He’s so good at seeing what I rarely see coming. The dude does fractals.
We also trust the power of Floki’s #VASP (Volatility Adjusted Signaling Process) front-running economic Quad Shifts in the ROC (rate of change) in GROWTH and INFLATION above anything any human can tell us.
Yesterday, on The Macro Show, the #1 up-voted question was on what Esther George (talking Fed Head) thought about interest rates and forward looking inflation. That was a good trigger for me. I couldn’t care less what she thinks!
It’s not about her personally or whoever at the Fed that thinks whatever. Imagine you were the pension fund Asset Allocator who set up for their views on inflation being “transitory” at +2% at this time last year?
That’s partly why some people have gods. For those types of “forecasts”, I sincerely recommend prayer.
And now. How about now? Like right now – we are > 200,000 years into this Homo Sapiens-are-here thing and it’s time to position for the next ROC move in both GROWTH and INFLATION. What’s your Nowcast? What are you going to do?
If I haven’t been clear on what Quad I think the economy was heading into here in Q2, let me be crystal clear:
A) REAL GROWTH #slowing
B) #Quad4 Disinflation (i.e. INFLATION #slowing)
And seriously now. Why do you care what I think? You should care about what The Fractal Equity market gods think:
- Russell 2000 (core #Quad4 Short) teetering on #crashing (again) at -17.4% from its #Quad2 Cycle Peak
- NASDAQ (core #Quad4 Short) Drawdown back down to -13.5% from its Cycle Peak
- Tech (XLK) and Consumer Discretionary (XLY) down another -2.0% and -2.6%, respectively, yesterday
- Utilities (XLU = #1 Signal Strength Sector Long) up another +2.0% yesterday to +7.4% YTD
- REITS (XLRE = moving into the #3 slot behind Gold Miners on Sector Longs) +1.5% yesterday
- Japan’s Nikkei broke bad back to Bearish @Hedgeye TREND this week, down another -1.7% overnight
- China’s Shanghai Comp remains in a bear market, down another -1.4% overnight
- South Korea’s KOSPI remains Bearish TRADE and TREND after another -1.4% drop overnight
- Germany’s DAX barely bounces +0.2% post yesterday’s #Quad4 immediate-term TRADE oversold signal
- Italy’s MIB Index has a pathetic bounce of +0.3% off its immediate-term TRADE oversold signal = #Quad4
By the way, I get less and less pushback on what Equity Markets, Sector Styles, and Factor Exposures are signaling on REAL GROWTH #slowing other than maybe from someone who just stares at SPY which is only down -6.6% from its Cycle Peak.
Why on SPY? Do NOT tell anyone on ye Olde Wall this, but SPY has many more Bullish @Hedgeye TREND Sector Styles than the Russell and/or QQQ (i.e. Long Utes, REITS, Healthcare (we’re long PINK), Staples, and Energy).
For the many of you who keep pushing back on #slowing INFLATION, here’s Floki’s Fractal Early Look:
- CRB Commodities Index just broke @Hedgeye TRADE support and is currently -5.2% from its Cycle High
- Oil (WTI) broke TRADE Signal Support of $103.56 and is down -21% from its Peak Cycle Inflation highs
- Bitcoin broke @Hedgeye TRADE and TREND levels of support in the last 24 hours
- Copper is down -1% this AM and breaking its TRADE Support level of $4.71 (and signaling lower-highs)
- Lumber continues to #crash, down -39.5% in the last month alone
- Palm Oil is down another -1.8% this morning, taking its #Quad4 in Q2 Disinflation to -9.3%
Oh, you don’t do Palm Oil? Floki does.
You know what he knows that I know (but not what everyone Steiner and I talk to on Institutional Macro client calls know)? Based on March 2022’s Peak Cycle Inflation, when WTI’s average price was $108/barrel… wait on it…
To NOT have Disinflation during #Quad4 in Q2 (or Q3) of 2022 (i.e. to hold Oil’s +118% year-over-year ROC flat)
A) Oil will have to AVERAGE $144/barrel in Q2 of 2022…
B) And WTI will have to average $154/barrel in Q3 of 2022
Really? Yep. It’s just math. And while I’m always interested in “New Human History” narratives that are based on historical facts, it’s going to be real hard to beat the dogma out of me that Calculus is still the secret to the universe.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 2.25-2.62% (bullish)
UST 2yr Yield 2.20-2.56% (bullish)
High Yield (HYG) 80.15-82.80 (bearish)
SPX 4 (bearish)
NASDAQ 13,602-14,590 (bearish)
RUT 1 (bearish)
Tech (XLK) 150-162 (bearish)
Utilities (XLU) 72.09-77.37 (bullish)
Healthcare (PINK) 26.43-27.90 (bullish)
Shanghai Comp 3178-3297 (bearish)
Nikkei 26,662-27,959 (bearish)
DAX 14,004-14,707 (bearish)
VIX 18.11-26.01 (bullish)
USD 98.16-99.92 (bullish)
EUR/USD 1.084-1.105 (bearish)
Oil (WTI) 93.45-112.47 (bullish)
Gold 1 (bullish)
Bitcoin 41,002-46,466 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
