“The day you stop racing is the day you win the race.”
- Bob Marley
Being dead wrong in 2022 and losing a lot of money with the Fed tightening into #Quad4 is one thing. Chasing EVERY big lower-high on bear market bounces (after panic-selling lower) is entirely another.
I know you’re not doing that. You are capitalizing on that FOMO driven #behavior. I care about you and your behavior. I want you to stay with The Cycle. Stay in the gain and out of the emotional gaps.
Here’s another way to say the same thing from The Gap & The Gain: “Measuring yourself against an ideal is an endless race to nowhere. That ideal can be in the form of a (market) hope or expectation.”
Back to the Global Macro Grind…
Whoever bought/chased stocks on the “call” of “not 75bps” deserves to lose money today, tomorrow, and throughout the thralls of #Quad4. I’ve seen plenty of preposterous Old Wall memes in 22 years of calling bear markets, and that’s right up there!
Old Wall? Oh yes. If you’re in the “desk chats” and prime-brokerage “flow” of it all you could see Goldman and BAML not only long the “event” but pushing their own books, big time, into very short-term SPY call expirations.
It’s a good thing those Old Wall options desks aren’t ripping their clients off. Lol
The top 15 most active SPY options contracts expired YESTERDAY, making up for about 50% of total SPY options volume (on the day prior, Tuesday). Throughout the day dealers sold vol right down to the LOW end of my Risk Range™ Signal.
If there’s zero Capital Markets (new Issue) flow and High Yield is dead in the water (note: HY OAS Spread was UP to +390bps over Treasuries yesterday with weak-handed hedgies covering and chasing), Old Wall’s gotta get paid somewhere!
Oh, so it really wasn’t about what the new freedom and inflation fighting PE Powell actually said?
Nope. If the market traded (like it is TRENDING) on what he actually said, that was an outright hawkish presser:
- He started it with his Captain America speech to The American People about being the next Volcker
- He reiterated TWO MORE +50 basis point hikes in addition to the one he just did
- He was right out to lunch on the strength of the labor market citing the bloody “Beveridge Curve”!
So, again, no matter what he said or did yesterday, he did NOT change the #1 thing that I needed to see change to NOT lock-and-unload on the short side of the Russell (IWM), NASDAQ (QQQ), and Tech (XLK) yesterday = TRENDING F-Bucket Volatility:
A) #RussVol (front-month) closed at 30.24 with a Risk Range™ Signal = 29.26-39.96
B) #NazVol (front-month NASDAQ Volatility) closed at 31.98 with a Risk Range™ Signal = 30.43-41.24
So, you’re saying there’s a chance Russell Volatility gets to 29.26 before it rips the bulls back up to 40? #Nice. What do you tell your clients for the next 1-3 months (or quarters) when we’re still in #Quad4 and the Fed is still tightening?
Yep, that’s right. I put it in the title (again). Because selling stocks is always about The Cycle.
While the Sell Side was spewing about their big “Fed Day” trade (remember the last one from 3/16? Did that change The Cycle?), the thing they always get wrong (i.e. The #Quad4 Cycle Data) got way worse:
- ISM Services for APR #slowed (again) and New Orders #slowed to a 15-month low
- ISM Services Employment #slowed, big time, to a contractionary 49.5 vs. 54.0 last month
- ADP Small Business Employment #slowed the 4th most (monthly) in the HISTORY of the series (-120K)
And Powell is talking “Beveridge”? #drink
So once again, I say everyone from Gary Cohn (didn’t realize he was such a Fed Fan Boy, but he was commenting on CNBC so he gets the ring-kissing shout-out this morn) to whoever chased yesterday can eat #Quad4.
As my partner and DOR, Jonesy Buds, tweeted, “soft is to landing as inflation was to transitory.”
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 2.71-3.02% (bullish)
UST 2yr Yield 2.48-2.81% (bullish)
High Yield (HYG) 77.79-79.95 (bearish)
SPX 4072-4337 (bearish)
NASDAQ 12,117-13,139 (bearish)
RUT 1 (bearish)
Tech (XLK) 138-149 (bearish)
VIX 24.49-36.47 (bullish)
USD 100.99-104.61 (bullish)
EUR/USD 1.038-1.078 (bearish)
Oil (WTI) 98.28-108.94 (bullish)
Nat Gas 6.75-8.71 (bullish)
Gold 1 (bullish)
Copper 4.21-4.55 (bearish)
FB 166-226 (bearish)
Bitcoin 37,131-40,915 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
