“I can’t even do the math.”
- Drew Bledsoe
That’s what the former New England Patriots quarterback said to reporters in 1995 after signing “the highest average salary and the highest signing bonus in NFL history.”
What did Bob Kraft think about the deal? “This is one of the best investments of any kind that I have ever made... this solidifies the future of the organization for many years to come.” -The Dynasty, pg 77
In other news, at the age of 45, the oldest (and greatest) QB in NFL history won again in Dallas last night.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where it doesn’t matter if Bledsoe can’t do math. It doesn’t matter if Bob Kraft can’t nail the CPI number tomorrow either. It’s all about measuring and mapping The Cycle, in TRENDING Signal & Quad terms.
Let’s start with what’s a BIG opportunity in Global Currencies this morning:
- US Dollar Index had its 1st down week in 4, correcting -0.5% last week, and remains Bullish TRADE and TREND
- EUR/USD was +0.9% last week and is right at the top-end of its Risk Range™ Signal this morning #FadeIt
- Yen was DOWN -1.6% vs. USD last week, taking its 2022 Crash to -19.2%
- GBP/USD was +0.7% last week and is also approaching the top-end of its Risk Range™ Signal this AM #FadeIt
- Pakistan’s Rupee continued to crash, -4.2% vs. USD last week to -11.6% in the last 3 months
- Chile’s Peso got smoked for a -3.6% decline vs. USD last week to -9.2% in the last 3 months
Whether it was last week’s headline “news” about the Chilean Constitution or the alleged end to the Russian army this morning, it’s best if you don’t consider every single thing as “THE” thing. It’s The Singularity of the Signals & Quads that matters most.
Perversely, if the US Dollar were to actually break down, on a TRENDING basis (my #VASP Signal isn’t remotely close to signaling that today), that would likely make Commodities bust a move back to an #InflationAcccelerating TREND.
Then what would the latest Macro Tourist narrative about “peak CPI, buy stocks” be?
As a reminder, when The ROC (rate of change) of INFLATION slows alongside both Commodities and REAL GROWTH, that is the definition of #Quad4. Commodities markets bounce like Equities do, but ex-Nat Gas remain Bearish @Hedgeye TREND:
- CRB Commodities Index was -0.1% last week, taking its TRENDING 3-month Full Cycle Return to -13.8%
- Oil (WTI) was -0.1% last week, taking its TRENDING 3-month Full Cycle Crash to -23.9%
- Copper’s Counter @Hedgeye TREND bounce of +4.5% last week takes its 3-month return to -18.9%
Yes, there are other Commodities that could test TREND resistance this morning (Corn is one of them), but what is the demand for Commodities going to be after the 3rd and 4th quarters of #Quad4 Recession?
Commodities, unlike uniquely American Stocks, don’t have the short-term FOMO dynamics (Retail Investors) and/or short-term panic-attack-short-covering (Hedge Funds). The Top 2 Sector Styles to be long last week are 2 of the biggest #Quad4 Losers:
A) Consumer Discretionary (XLY) had a bear market bounce of +5.8% last week and remains Bearish TRADE and TREND
B) Basic Materials (XLB) had a bear market bounce of +5.0% last week and also remains Bearish TRADE and TREND
Some people hate it when I call it “uniquely American”, because the aforementioned FOMO and Squeeze dynamics are!
A) South Korean Stocks were DOWN another -1.2% last week, taking their TRENDING 3-month return to -10.3%
B) German Stocks were only up +0.3% last week, taking their TRENDING 3-month return to -7.8%
‘But, but… KM… I read something this morning about…’
#FadeIt, like the bond market did last week:
A) UST 2yr Yield was +17 basis points to new Cycle Highs of 3.56%
B) UST 10yr Yield was +12 basis points last week and remains Bullish TRADE and TREND (bearish for bonds)
And, of course, the Yield Curve (10s minus 2s) inverted -5 basis points last week, signaling a rising probability of a #Quad4 Recession. Love Bledsoe, but betting neither he nor Bitcoin Maxis are doing the #Quad4 math this morning at BTC $22k.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 3.19-3.57% (bullish)
UST 10yr Yield 3.05-3.40% (bullish)
UST 2yr Yield 3.36-3.58% (bullish)
High Yield (HYG) 73.31-76.23 (bearish)
SPX 3 (bearish)
NASDAQ 11,298-12,215 (bearish)
RUT 1 (bearish)
Tech (XLK) 129-140 (bearish)
Utilities (XLU) 73.41-77.99 (bullish)
Energy (XLE) 76.50-83.64 (bullish)
Nikkei 27,512-28,611 (bullish)
DAX 12,605-13,13316 (bearish)
VIX 22.14-28.67 (bullish)
USD 108.07-110.45 (bullish)
EUR/USD 0.990-1.019 (bearish)
USD/YEN 138.66-145.16 (bullish)
GBP/USD 1.142-1.174 (bearish)
Oil (WTI) 79.66-90.83 (bearish)
Nat Gas 7.53-9.80 (bullish)
Gold 1 (bullish)
Copper 3.34-3.65 (bearish)
Bitcoin 18,705-22,343 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
