“If we are emotional, subjective, and short-sighted, we only add to our troubles.”
- Ryan Holiday
Good news: we don’t manage our hard-earned moneys like a bunch of panting dogs. We don’t chase. We don’t panic. We know that if/when the Fed actually pivots (from rate hikes to rate cuts), even they’ll know the US is in a recession.
As Holiday reminds us in The Obstacle Is The Way, panic vs. patience matters. “Our perceptions can be a source of strength or of great weakness. It takes skill and discipline to bat away the pests of bad perceptions, to separate reliable signals from deceptive ones… to filter out prejudice, expectation, and fear.” (pg 11)
That’s why I built the #process this way. My #VASP (Volatility Adjusted Signaling Process) doesn’t have feelings or fears. It front-runs the ROC (rate of change) of economic reality. It doesn’t chase Old Wall Journal articles and Macro Tourist headlines.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye. I haven’t read an article about anything this morning. All I read pre-game are numbers. That’s what the measuring and mapping process is. It’s, as Holiday likes to say, “calm and imperturbable.”
Let’s start where most “stah-ks” only Tourists don’t - the Global Currency market:
- US Dollar Index had a Counter @Hedgeye TREND correction of -1.2% last week but remains Bullish across durations
- EUR/USD had a Counter @Hedgeye TREND bounce of +1.4% last week to -13.3% YTD and remains Bearish TREND
- Japanese Yen was +0.7% vs. USD last week but remains in #Quad4 Crash mode at -22.0% YTD
- GBP/USD bounced +1.2% as well last week but also remains Bearish on both our TRADE and TREND durations
- Argentina’s Peso was down another -1.5% vs. USD last week, crashing -15.6% in the last month
- Colombia’s Peso was down another -4.5% vs. USD last week, crashing -10.3% in the last month
Do you know what’s going on in Pesos or Yuan terms this morning? Do you live in Argentina or China? The Chinese Yuan has collapsed to its lowest level since the GFC in 2008 this morning. Did you see what happened to Chinese stocks overnight?
While the Hang Seng getting hammered for another -6.4% decline overnight (crashing -15.4% in the last month alone) may not be enough SIGNAL for the dude who’s still hoping for another article from an American guy named Nick, it is for us.
Global Equity Markets didn’t all signal the #PivotPanic all clear last week:
A) China’s Shanghai Comp Index was -1.0% taking its TRENDING 3-month return to -7.1%
B) Taiwan’s stock market was down another -2.8% last week taking its TRENDING 3-month return to -15.9%
Did you know that China “pivoted” a while ago? Does it look like going from rate hikes to cuts changed China’s economic gravity? Chinese Retail Sales just #slowed (again) to +2.5% y/y in SEP from +5.4% y/y in AUG.
Did you see Tesla (TSLA) is cutting prices in China this morning? I wonder why that is? Should Elon call Nick?
Yes, TSLA rallied “off the lows” on Friday (alongside everything else that consensus American Retail Investors still own like AAPL, MSFT, etc.) and that helped drive:
A) Tech (XLK), which is 40% AAPL + MSFT, +6.5% on the week to -10.6% in the last 3 months
B) Energy (XLE), which we still own, +8.3% on the week to +21.2% in the last 3 months
So I was selling-SOME of my XLE and XOP into strength last week. Why? Because that’s what I do A) on green when B) things I own (like PFIX) are approaching the top-end of my Risk Ranges. It’s totally Zen, eh.
While many were chasing on Friday, #Quad4 Commodities that don’t have uniquely American FOMO were crashing:
A) Nat Gas crashed -23.2% last week alone to -36.6% in the last month
B) Cotton continued to crash, down another -4.8% last week to -18.4% in the last month
And how about that “Pivot” in interest rates?
A) UST 10yr Yield was UP +20 basis points last week towards new Cycle Highs at 4.22%
B) UST 30yr Yield was UP +34 basis points last week towards new Cycle Highs at 4.33%
Lol.
Again, if/when rates are falling alongside US GDP and Profits (to NEGATIVE year-over-year growth), we’ll still be bearish on GROWTH, HIGH BETA, HIGH SHORT INTEREST, etc. as Factor Exposures, fyi.
Regardless, for now, like the US Dollar, US Bond Yields (2s, 10s, 30s) are all signaling Bullish TRADE and TREND @Hedgeye.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 3.85-4.35% (bullish)
UST 10yr Yield 3.83-4.28% (bullish)
UST 2yr Yield 4.24-4.68% (bullish)
High Yield (HYG) 70.45-72.99 (bearish)
SPX 3 (bearish)
NASDAQ 10,246-10,995 (bearish)
RUT 1 (bearish)
Tech (XLK) 113-125 (bearish)
Energy (XLE) 77.81-87.28 (bullish)
Financials (XLF) 29.72-32.61 (bearish) `
Shanghai Comp 2 (bearish)
VIX 28.75-34.30 (bullish)
USD 111.24-114.05 (bullish)
EUR/USD 0.964-0.989 (bearish)
USD/YEN 145.64-151.27 (bullish)
GBP/USD 1.088-1.142 (bearish)
Oil (WTI) 81.13-89.26 (bearish)
Nat Gas 4.65-6.01 (bearish)
Gold 1 (bearish)
Copper 3.30-3.51 (bearish)
TSLA 199-227 (bearish)
Bitcoin 18,464-19,899 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
