“The day before something is truly a breakthrough, it’s a crazy idea.”
- Peter Diamandis
The day before headline “news” that US inflation is peaking, it’s a crazy idea. Our US #InflationAccelerating idea to buy Commodities in June of 2020 was too, I guess.
For those of you who don’t know who Diamandis is, he’s a big time American Entrepreneur from the Bronx. He founded the X-Prize and co-authored the book I recently finished called Life Force.
There have been plenty of #Quad4 breakthroughs and breakdowns in the last two weeks. If you positioned for #Quad3 at the end of it in March (buying Tech and Growth Stocks), that was a crazy idea that clearly didn’t work out.
Back to the Global Macro Grind…
The most obvious breakthrough of this vintage of #Quad4 in Q2 of 2022 is the breakout of the US Dollar (UUP) to new Cycle Highs.
Ramping through the $100 line this morning with immediate-term upside to $100.61, is what my Risk Range Signal for the US Dollar Index implies. In turn, the Japanese Yen continues to collapse to new Cycle Lows.
And, for those of you who missed my Sri Lankan Rupee #Crash callouts a month ago, that’s ok. It’ll be headline Macro Tourist news today that Sri Lanka is defaulting on its external debt.
Front-running the Russian (RSX), South Korean (EWY), and American (QQQ) #Quad4s required no “inside information” or living amongst the privileged who know what today’s CPI report is going to be.
Nope, it simply required executing on a breakthrough Go Anywhere Full Investing Cycle Process. And I sincerely thank you for having an open mind to a #BetterWay. Your family and/or investors do too.
Since the establishment’s “charts” were “breaking out” into March month-end, what have been the most obvious #Quad4 in Q2 breakthroughs and breakdowns? Let’s do the big breakdowns first:
A) Bitcoin resumed its #Quad4 Crash taking its collapse from its NOV 8th, 2021 #Quad2 Cycle Peak to -41.2%
B) SMALL CAP Factor Exposure (Russell 2000) drawdown is back down to -18.9% since peaking on NOV 8th too
C) LARGE CAP GROWTH (NASDAQ) drawdown is back down to -16.5% from its #Quad2 Cycle Peak (NOV 19th)
I know. It’s a good thing no one owned any of those big things and/or chased their charts again 2 weeks ago.
Drawdown & Crash Math isn’t hard to understand. It is VERY difficult to recover your hard earned capital AFTER crashes and drawdowns, however:
A) If you went laser-eyes on NOV 8th buying Bitcoin, you need to be up +70% from here to get back to breakeven
B) If you bought the Russell (IWM) chart on NOV8, you need to be up +23.5% from here to get back to breakeven
C) If you bought NASDAQ on NOV 19th, 2021, you need to be up almost +20% from here to get back to breakeven
Oh, but KM, you’re just cherry picking the big stuff that you were A) Long until November of 2021 and B) talking up your book of Top #Quad4 Shorts. Yep, pretty much. Would you rather I carry on about Sri Lanka?
How about some of the US Equity Sector Style #Quad4 Breakouts here in Q2?
A) Consumer Staples (XLP) are +3.3% for #Quad4 in Q2 to-date
B) Healthcare Stocks (XLV) are +2.2% for #Quad4 in Q2 to-date
C) Utilities (XLU) are +2.0% for #Quad4 in Q2 to-date
With our Top 2 Sector Shorts for this particular #Quad4 in Q2 down -4.8% (Consumer Discretionary) and -6.5% (Tech), respectively, we’ll take the alpha awarded to those of you who didn’t panic and chase the “charts.” That’s how you generate alpha.
What’s next? And, more importantly, what’s more important?
A) Today’s rear-view looking Peak Cycle Inflation (CPI) report?
B) Q1 Earnings Season and #GrowthSlowing guidance on #Quad4 in Q2?
C) JPM’s Kolanovic “booking gains”?
Alex, I’ll take B) for ALL of the hard earned capital in my Thunder Bay, Ontario account. The late Canadian All-Star, Trebek, was born south of my hometown in a great hockey and mining town called Sudbury.
We call that place “The Big Nickel” and/or “Sudz.” Being long of both of those things haven’t been so bad in #Quad4 either.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 2.22-2.87% (bullish)
UST 2yr Yield 2.25-2.61% (bullish)
High Yield (HYG) 79.26-81.62 (bearish)
SPX 4 (bearish)
NASDAQ 13,271-14,083 (bearish)
RUT 1 (bearish)
Tech (XLK) 146-157 (bearish)
Utilities (XLU) 72.99-77.74 (bullish)
Healthcare (PINK) 26.84-28.37 (bullish)
VIX 19.51-26.22 (bullish)
USD 98.55-100.61 (bullish)
USD/YEN 121.56-125.92 (bullish)
Oil (WTI) 91.69-102.66 (neutral)
Gold 1 (bullish)
Silver 24.18-25.45 (bullish)
MSFT 277-301 (bearish)
Bitcoin 39,090-44,041 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
