“Average effort yields average results.”
- Cameron Hanes
Particularly in the modern era of The (multi-duration-and-multi-macro-factor) Machine, it requires very little effort to punch up a bunch of “charts” and tell yourself a story about the latest color on your screen.
I get how many Old Wall Technician types added some “value” pre-internet, when simple calculations and some slide-rules would take more manual effort. It’s too bad no one was back-testing the 50-day Moving Monkey back then too!
If you bought the “charts” at July’s lower-highs, you’ve just received another #Quad4 Education.
If you’re just learning what not to do in #Quad4, be thankful for that. As for the weeks of pain I had to endure in order to stay with the months and quarters of the Full Investing Cycle TREND, I like how Hanes describes our experience:
“I’ve become good friends with pain as he’s with me on all my most memorable and rewarding challenges.” -Endure, pg 9
Back to the Global Macro Grind…
With crashing Global Macro markets all over their screens this morning, the same people who chased them higher will sell them lower this morning.
In particular for those who make zero effort to incorporate The Quads & Pods (CTAs), that’s all they can do.
Think of how much of a blessing it is to not do that? What we call modern “Quantamental” Macro Investing (Volatility Adjusted Signals that front-run Fundamental economic, revenue, and cash flow data) is doing its job, again, in 2022.
How’s the rest of 2022 going to “look” economically? A: QUAD FOUR.
I’ll review my refreshed #VASP (Volatility Adjusted Signaling Process) Signals and all of the ROC fundamental data/models this morning at 11AM on what we now call our Macro Themes Coaching Session.
It’s a popular format for a presentation because I spend more time Coaching The Process. And, even though some don’t like to admit it publicly, they actually do like being coached!
On slide 19, I’ll show you what my #VASP Signal was already front-running:
A) The Conditional Probability of #Quad4 in Q4 of 2022 has ramped up to 70.9%
B) Q4 starts in t-minus a month
And for the next two quarters after that, the probability is high and rising of #Quad4 as well.
While plenty have completely botched the risk management of it, what’s embedded in #Quad4 in Q4 of 2022 from a headline US INFLATION (CPI) standpoint is on slide 15. We have CPI going from its 8.63% Cycle Peak to 8.37% then 7.71%.
What does the bond market think about that?
A) The Fed isn’t “pivoting dovish” anytime soon (yield curve remains deeply inverted)… and
B) The Fed is going to be tightening (plus doing epic QT) right into the throat of this #Quad4 Bear in SEP/OCT
What do FX, Commodity, and Equity markets think about that (in #VASP terms)?
- FX – stay long and strong your #1 Asset Allocation in both #Quad4 and in 2022 (Cash in US Dollars)
- COMMODITIES – crashing
- EQUITIES – crashing
In case you have friends who missed it by chasing MSFT and NVDA’s charts to lower #BubbleCap highs in JUL/AUG, Oil (WTI) and Dr. Copper have now #crashed -28.5% and -30.3% from their Inflation Cycle Peaks.
Was that “bullish for the NASDAQ” and Russell 2000 SMALL CAP (Short) Factor Exposures?
A) NASDAQ’s #Quad4 Crash is now -26.4% from its #Quad2 #BubbleCap Peak
B) Russell 2000’s Crash is now back down to -24.5% from that same NOV 2021 Peak
This is what I warned you (as best I could) about during those JUL/AUG made-for-CNBC-Meme-Bubble green days. This is what we call Phase II of The Bear.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 2.86-3.21% (neutral)
UST 2yr Yield 3.21-3.51% (bullish)
High Yield (HYG) 74.10-76.77 (bearish)
SPX 3 (bearish)
NASDAQ 11,605-12,420 (bearish)
RUT 1 (bearish)
Tech (XLK) 132-142 (bearish)
Utilities (XLU) 74.03-78.10 (bullish)
Healthcare (PINK) 24.27-25.89 (neutral)
Shanghai Comp 3170-3262 (bearish)
DAX 12,577-13,518 (bearish)
VIX 20.38-28.07 (bullish)
USD 107.15-109.30 (bullish)
EUR/USD 0.991-1.013 (bearish)
Oil (WTI) 87.08-97.01 (bearish)
Gold 1711-1780 (bullish)
Copper 3.43-3.71 (bearish)
MSFT 255-276 (bearish)
Bitcoin 19,502-22,873 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
