“Fear of any kind is the number one enemy of all golfers.”
- Jack Nicklaus
After spending some solid family time in my homeland, it’s good to be back in my American saddle this morning. Congrats to the boy with a Canadian looking mullet (from Brisbane, Australia) on winning The Open this weekend. Cameron Smith showed no fear when others did.
If you’re relatively new to this and you have “feelings” that are hard to fade, that’s par for the course. It doesn’t mean you’re going to master it. Going on 24 years of doing this, I haven’t mastered anything other than the mental component of my Full Investing Cycle game.
The aforementioned quote comes from a good book I read while on vaca titled Fearless Golf. In that sport, my short game is a mental train wreck, so I needed the advice. As Jack went on to explain “fear happened to me before my early success enabled me to control my fear.” (pg 11)
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye! I’ve been awake since 2:21AM ET waiting to write that. I don’t know about you, but I absolutely love my 1st day back at my post in the office. After the Early Look, it’s The Call @Hedgeye – then The Macro Show. #LFG!
Seriously, how fired up can I get you to read about Global Currencies right now? Let’s measure and map the macro message:
- US Dollar Index was up another +1.0% last week and up for the 6th week in the last 7 to +13.0% YTD = Long #Quad4
- EUR/USD collapsed to new Cycle Lows -1.1% last week as Europe tightens into a #Quad4 Recession
- Japanese Yen continued to crash, down another -1.8% last week vs. USD, and remains Bearish TRADE and TREND
- GBP/USD bloodied the British for another -1.5% loss of their purchasing power last week = Bearish TRADE and TREND
- South Korean Won was down another -1.9% vs. USD last week to -6.8% in the last 3 months = Bearish TRADE and TREND
- Thai Baht dropped another -2.0% vs. USD last week and remains Bearish TRADE and TREND as well
Oh, you have hedge fund friends who are having another panic-attack about their consensus shorts (including SPY) this morning while you read about Bahts and Wons? #Good. Don’t be them. Cover on #oversold red days, so that you can re-short on green ones.
You know that SPY got to the low-end of the Risk Range intra-week last week, eh? You also know that A) that’s the #1 catalyst for a bear market bounce, especially when B) the US Dollar has back-to-back DOWN days.
Yep, amidst all of the fear and “frustration” some people have with Goldman’s “most shorted basket” (it goes straight up during bear market rallies), there was plenty of money to make on the short side of what the crowd is still long - Commodities:
- CRB Commodities Index was down another -3.5% last week to -11.8% in the last month = Bearish TRADE and TREND
- Oil (WTI) got smoked for another -6.9% loss last week to -13.7% in the last month = Bearish #Quad4 TRADE and TREND
- Copper’s crash continued, down another -8.2% last week, to -22.7% in the last month alone
- Corn was down another -3.2% last week to -16.3% in the last month getting Hedgeye Bears paid
- Wheat collapsed another -12.9% on the week, to down -27% since Hedgeye went bearish on Commodities as an Asset Class
- Palladium got pounded for a -15.2 loss last week, taking its Full Investing Cycle (3-month) Return to -22.4%
‘But, but… KM, the Palladium chart looked good on a 5 and a 10-day #Moving Monkey Chart prior to the -15.2% pounding.’ Yep, I’d like to thank the Old Wall technicians for coming out and chasing price when we’re shorting things that crash in #Quad4.
It wasn’t just misery for Commodity Bulls last week. Look at what over-owned Energy Stocks (XLE) did on a relative basis last week:
A) Energy Stocks (XLE) down -3.3% to -16.7% in the last month alone = Bearish TRADE and TREND
B) Utilities (XLU) only down -0.1% last week to +4.5% in the last month alone = Bullish TRADE, Neutral TREND
C) Consumer Staples (XLP) were actually UP +0.1% last week and are also Bullish TRADE, Neutral TREND
Why is SPY a less-good short in #Quad4 than the NASDAQ with the VIX in The Chop Bucket?
A) #Quad4 Sector Style LONGS like Utes and Staples (and parts of Healthcare) work with VIX < 30
B) Those Sector Styles are NOT in the NASDAQ (they’re in SPY)
C) You don’t need a C)
Amidst the fear and “frustrations” of many who don’t really have a good track record either calling for #Quad4 bear markets BEFORE they happen and/or trading them AS THEY ARE happening:
A) Consumer Discretionary (XLY) still sucked last week, down another -1.1%, despite Friday’s bear market bounce
B) Italian Stocks (one of our favs on the short side) continued to crash, down another -3.9% last week … and
C) The Yield Curve inverted another -18 basis points week-over-week to -20bps on 10s minus 2s
Yes, you did need to know about that part C)… but back in January, then again during the bear market bounce in March… then again in May… because, by the time we got to June/July… everyone on Wall Street (other than the Fed) understood #RecessionRisk Rising!
And, yes, that’s why we now have a consensus NET SHORT position in both SPY and the Russell to deal with (see non-commercial CFTC futures and options data that I’ll review on The Macro Show this morning for detail on those positions).
But AFTER the crashes and collapses, there are also consensus NET SHORT positions in Silver, Platinum, Corn, and Cotton that didn’t prevent us from getting paid on the short side of Commodities last week.
Yes, The Game gets harder the deeper we go into #Quad4. That’s why you better check your emotions at the door and stay with the math and my signals or you’re going to be living in fear, covering on green and re-shorting on red… and blowing up your 2022 score card.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 3.00-3.28% (bullish)
UST 10yr Yield 2.81-3.13% (bullish)
UST 2yr Yield 2.82-3.27% (bullish)
High Yield (HYG) 72.85-75.72 (bearish)
SPX 3 (bearish)
NASDAQ 11,091-11,670 (bearish)
RUT 1 (bearish)
Tech (XLK) 126-134 (bearish)
Shanghai Comp 3 (bullish)
DAX 12,319-13,136 (bearish)
VIX 24.01-30.32 (bullish)
USD 105.59-108.92 (bullish)
EUR/USD 0.993-1.031 (bearish)
USD/YEN 135.33-139.20 (bullish)
GBP/USD 1.178-1.210 (bearish)
Oil (WTI) 92.34-105.06 (bearish)
Nat Gas 5.26-7.23 (bearish)
Gold 1 (bearish)
Copper 3.13-3.62 (bearish)
Bitcoin 18,913-22,994 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
