“You need pushing-the-envelope-type preparation.”
- Cameron Hanes
Bears are not herding animals. If you want to be a good one, you better have patience, discipline, and #process. At any moment of any day you might see The Bulls rallying to kill you while their year is getting killed.
I’m not interested in being average. I don’t want you to be beta. I don’t want your hard earned wealth constantly living in fear and frustration. That’s for people who don’t play The Game at the highest level.
I’m interested in Cameron Hanes because his goal is to bow-hunt at the highest level. As he goes on to explain in Endure, “everything revolves around confidence and belief in myself… and that comes from practice and preparation.” (pg 35)
Back to the Global Macro Grind…
Ever drive on the 401? We Canadians call that the “four-oh-one”, eh.
It’s the busiest highway network in my homeland. It’s about 515 miles long running through TO (pronounced Tron-to, eh bud) all the way up to Mun-tree-all.
There are bears there. Like me this year, they are real ones. You won’t see them as often as you will up there in Thunder Bay, eh. But, seriously buds, you don’t want to be on the wrong side of one of these wild animals when they are TRENDING!
Where are The Bears Crossing The 401 in my notebooks this morning?
A) The LOW end of my Risk Range™ Signal for the US 2yr Treasury Yield = 4.01%
B) The TOP end of my Risk Range™ Signal for the US 10yr Treasury Yield = 4.01%
In going on 23 years of deliberately studying market prices (writing them down in my notebooks), I have never seen 2 #Quad4 Grizzly Bears on the 401 lines. Why are they dangerous?
A) If you get a bearish GROWTH/INFLATION data point, the best you can get is a 2yr Yield falling towards 4.01%
B) If you get a bullish GROWTH/INFLATION data point, you can see 4.01% on the 10yr in a hurry
While Macro Tourists who keep coming up with new narratives on why their American kids should try to feed bears and pet Powell probably don’t see the Mama-Bear-with-baby-bear dynamics here… that’s ok… both the FX and Bond Markets do.
Yesterday’s intraday “rally off the lows” in the US FOMO market provided more petting-zoo food for a certain type of bull:
A) But it was a very LOW VOLUME day with Total US Equity Volume down -12% vs. its 1-month average… and
B) Someone bullied the tape buying 22,100 emini contracts in SPY around lunchtime (that was $4.1 BILLION in notional!)
As everyone who plays The Game knows, it doesn’t take much “flow” when there’s no liquidity (I call 1130AM-1PM the “Lunch-time-lull” volume … because that’s when Institutional traders eat lunch)… to move the market.
Especially in Crypto and US Futures & Options markets, I could go off on the market manipulation that’s in plain sight…
But I won’t do that this morning… because this bear’s gotta eat. And I’d prefer to just proactively prepare for bulls to do what bulls need to do so that I can do what I need to do to feed both my family and #HedgeyeNation!
Back to The Cycle, remember, it’s not the average or “valuation” of things that matters in markets – it’s particular things.
For those of you who don’t get it from me at around 6AM ET, here are 3 PARTICULAR THINGS to #PayAttention to today (in addition to not texting in stopped traffic on the 401 while your 5yr old feeds bears FOMO puffs):
- OIL – how does the latest reflation of Energy prices fit in that “Peak Inflation/BuyStocks” narrative? First, The INFLATION Cycle Peak is in – that’s not a bull case. Inflation not collapsing (like people who can’t model it need to see happen) is part of the bear case, especially if Oil (WTI) can hold @Hedgeye TRADE momentum support of $85.35 – my signal stopped me out of shorting Energy Stocks yesterday – when my signal changes, I do
- RATES – the FX and Bond Markets get what is a lot tougher for uniquely American FOMO followers of stocks (Davey Day Trader) to see – remember the UK news of “falling bond yields”? That was a TRADE, not the TREND. The TREND for US and UK (and Global) Bond Yields remains UP with UKT 10yr +6bps this AM to +101bps in the last month and UST 2yr Yield +14bps in the last 48 hours alone
- RUSSELL – even if my #VASP Signals changed on Rates, I’d still be shorting SMALL CAP, LEVERAGE, and GROWTH Factor Exposures in a #Quad4 Recession - #RussVol closed squarely in the F-Bucket at 34.62 yesterday and I have immediate-term downside in my Russell 2000 RISK RANGE of -8.1% heading into what is going to be a brutal Earnings Season for the levered who lack liquidity (including the HFs that own them)
Don’t spend your precious life and Cycle Time living in fear and frustration of every market move. Stay with your process… and… as Cameron Hanes says, “keep hammering.”
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 3.58-3.91% (bullish)
UST 10yr Yield 3.52-4.01% (bullish)
UST 2yr Yield 4.01-4.35% (bullish)
High Yield (HYG) 69.99-73.71 (bearish)
SPX 3 (bearish)
NASDAQ 10,505-11,293 (bearish)
RUT 1 (bearish)
Tech (XLK) 118-128 (bearish)
Utilities (XLU) 64.59-69.46 (bearish)
Energy (XLE) 66.11-81.93 (neutral)
DAX 11,807-12,668 (bearish)
VIX 27.67-33.91 (bullish)
USD 109.90-114.88 (bullish)
EUR/USD 0.952-0.999 (bearish)
GBP/USD 1.052-1.146 (bearish)
Copper 3.23-3.57 (bearish)
TSLA 222-267 (bearish)
Bitcoin 18,240-20,531 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
