“What do you want to be remembered for?”
- LT. General Robert Caslen
I certainly don’t want to be remembered for being a Perma Bear. That would be embarrassing. That said, so far so good on having never missed making a #Quad4 US stock market crash call.
Life in this profession can be very humbling. The aforementioned quote comes from a great #behavioral book that a subscriber sent me. On the insert, retired 3-Star General Caslen was kind enough to send me a note of thanks for “living a life of character.”
General Caslen served in the US Army for 42 years and was also the Commandant at West Point. I nearly dropped the book from my arthritic hockey hands when I read that. The book is appropriately titled The Character Edge – Leading and Winning with Integrity.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where it’s never been more important to, as General Caslen also wrote to me, “stay with the #process.” Thank you, General (and subscriber Dan Gusty). That is precisely what we will do during #Quad4 in Q2.
As usual, let’s begin our week-over-week ROC (rate of change) review with the Global Currency market:
- US Dollar Index was up a big +1.7% last week, explicitly signaling deep #Quad4 in Q2 at +7.6% for 2022 YTD
- EUR/USD was down another -2.3% last week and remains Bearish on both my TRADE and TREND durations
- Yen’s crash/collapse continued, down another -1.0% vs. USD and remains Bearish TRADE and TREND
- GBP/USD got smoked again, down another -2.1% and remains Bearish TRADE and TREND
- Norway’s Krone was down, hard, -4.7% vs. USD to down -7.6% in the last month alone = Bearish TREND
- Hungary’s Forint was down, hard, -4.1% vs. USD to down -7.6% in the last month too = Bearish TREND
In other words, no matter where you go (West or North West of the Ukraine in the case of Norway and Hungary), here we are with the US Dollar as strong as it was since the last #Quad4 call I made back on January 30th of 2020 (USD at same level as MAR 2020 now).
While it wasn’t in Oil last week (it bounced to lower-highs, but is #disinflating -2.8% this morning after breaking @Hedgeye TRADE support of $103.26/barrel WTI), Disinflating Peak Cycle INFLATION became more obvious in some major Commodities:
A) Copper #disinflated -4.2% last week to -6.9% in the last month and broke bad to Bearish @Hedgeye TREND
B) Aluminum #disinflated -6.0% last week to -11.6% in the last month and remains Bearish TRADE and TREND
C) Silver #disinflated -5.1% last week to -6.9% in the last month and I was stopped out of that long position
The Credit Cycle component of the Bond Market gets #disinflation inasmuch as it gets #EarningsSlowing (if you’re selling Lumber, Copper, Aluminum, etc. they’re one and the same thing):
A) High Yield OAS Spread widened another +24 basis points last week to +53bps in the last month
B) High Yield (HYG) and Junk (JNK) Bonds got buried to new #Quad4 Cycle Lows … as
C) #FOBS (Fed Operation Break Stuff) remains 100% in motion with the UST 2yr Yield up +5bps to 2.71%
Think General Caslen would put PE Powell and Bullard in the seat in Iraq to do some OODA Looping for their country? Uh, no. Unless you continue to fade the Fed’s forecasts on pending US Growth, you’re not deploying a #Quad4 Risk Management strategy.
When we say “Break Stuff”, we’re not talking Gold correcting -1.2% to +6.8% in the last 3 months. We’re showing you:
A) Russell 2000 (IWM) down another -4.0% last week taking its Full Investing Cycle Crash to -23.7% from its #Quad2 Peak
B) NASDAQ eviscerated for another -3.9% deflation last week, taking its crash to -23.2% from its #Quad2 peak in NOV 2021
C) Consumer Discretionary (XLY) and Financials (XLF) down another -7.4% and -4.6%, respectively, last week
To be fair, being long Elon’s storytelling and/or consensus AMZN hope into the print (the two heaviest weights in XLY) isn’t as bad as being long Sri Lanka (its stock market is down -21% in the last month), but I won’t be remembered for being a bag holder on those.
With the VIX +77% in the last month from where the 50-day #MovingMonkeys thought it was time to BUY more of what everyone already owns (Crypto and Growth Story Stocks), it’s tough enough to stay with Utes (XLU) and Staples (PBJ)!
Where’s the bottom going to be during deep #Quad4 in Q2? I don’t know. That’s always the character of #Quad4. I never know. And I almost never “call the bottom” anyway. I’ll just “stay with the process” and let you know what I think the market knows.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 2.68-2.97% (bullish)
UST 2yr Yield 2.43-2.75% (bullish)
High Yield (HYG) 78.12-80.39 (bearish)
SPX 4046-4299 (bearish)
NASDAQ 12,005-12,990 (bearish)
RUT 1 (bearish)
Tech (XLK) 136-147 (bearish)
Utilities (XLU) 70.43-77.48 (bullish)
VIX 24.60-38.16 (bullish)
USD 100.55-104.16 (bullish)
EUR/USD 1.044-1.082 (bearish)
USD/YEN 126.72-130.95 (bullish)
GBP/USD 1.231-1.288 (bearish)
Oil (WTI) 96.85-106.34 (bullish)
Gold 1 (bullish)
Copper 4.25-4.61 (bearish)
Silver 22.12-24.58 (bearish)
AMZN 2 (bearish)
TSLA 811-955 (bearish)
Bitcoin 37,117-41,255 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
