FROM THE DESK
US Dollar breakout to new Cycle Highs and Commodities Crashing = #Quad4…
- OIL – the only major Commodity to NOT break @Hedgeye TREND support broke TREND ($107.03 WTI) yesterday and was like a hot-knife through butter towards the low-end of my Risk Range… so now we have a proper #Quad4 Disinflation playing out (Energy Stocks broke my TREND support in mid-June, don’t forget). With Copper’s crash now at -31% since March and Softs like Cotton and Oats down -9% and -27% (in a day!); reiterating our SELL call on Commodities as an Asset Class vs. Long USD
- GOLD – could have been worse! (see all other Commodities that you could/should be short against Gold)… but they took Gold down through @Hedgeye TREND support of $1771/oz yesterday and we’ll see if that TREND break holds – with my Vol of Vol (#VASP) Signal saying all Gold Volatility did was make emotional types cry at the top of a 18-22 Volatility Range (GVZ), I’ll have patience with my Long position here as it continues to generating alpha vs. Commodity Shorts
- CURVE – properly inverted with front-month at -3 basis points now on 10s minus 2s AFTER the Bond Market just priced-in -1.97 LESS rate hikes since the last rate hike (2yr Yield down -60bps since mid-June); like Oil crashing, this too is proper #Quad4 price response to the Fed TIGHTENING into #RecessionRisk Rising – 8 of 11 US Equity Sectors down on that yesterday with the 3 of 11 that were up being the ones that have crashed the most – entering a recession is not a buy signal – if anything both my 2yr and 10yr Yield Signals are that Yields are going to bounce here into Fed Minutes and another hawkish CPI print for June
OUR LEVELS
Immediate-term @Hedgeye Risk Ranges: SP500 = 3; UST 10yr Yield = 2.77-3.34%
KM
Keith R. McCullough
Chief Executive Officer