“Remember, we choose how we’ll look at things.”
-Ryan Holiday
When I look at a market price, I know what I see. I don’t see the price. I don’t see your emotions. I only see my signal. I see a signal that is fully loaded with PRICE, VOLUME, and VOLATILITY.
In an excellent #behavioral chapter in The Obstacle Is The Way that Holiday titled Alter Your Perspective, he uses a timeless Viktor Frankl quote: “Man does not simply exist but always decides what his existence will be, what he will become the next moment. By the same token, every human being has the freedom to change any instant.”
I live that. I try to coach that. Every hour of every market day you have the opportunity to change your positioning. For me, my #VASP (Volatility Adjusted Signaling Process) is what makes me wait, watch, and/or execute. I don’t overthink it. The Signal is constantly front-running the economic reality of The Quads.
Back to the Global Macro Grind…
As Mandelbrot taught me a long time ago, markets aren’t always asking you to execute on and/or rationalize every market move – your emotions are. Most of the time there’s Brownian Motion (nothingness) within The Cycle’s TREND.
Some of the time, it’s time to act.
That’s why it’s particular moments in Cycle or Clock-Time where my #VASP gets me to execute. Again, it’s not the “valuation” or moving “average” of things. It’s the particular things.
I didn’t tell my #VASP to do this today (Floki and the Fractal Gods did!), but today is not a day to do nothing:
- UST 10yr Yield Risk Range™ Signal just CONSOLIDATED
- US Dollar Index Risk Range™ Signal just CONSOLIDATED
- Gold’s Risk Range™ Signal just CONSOLIDATED
This all happened while:
- Oil confirmed its recent Bearish @Hedgeye TRADE and TREND breakdown
- Platinum and Silver confirmed their recent Bullish @Hedgeye TREND breakouts
- Long/Short US Equity Sector Styles confirmed their Bearish and Bullish #Quad4 TRENDs
So now you know what I see. Do you know what to do with that?
A) Do more of what we’ve been doing, but do so more aggressively when we get opportunities
B) Do not chase
Part A) of that is relatively easy to execute on, especially if you’ve been following me for 10-15 years. Even if you’ve only followed the patience and discipline embedded in the execution #process for the last 1-3 years, I think you’re good.
Part B) is really hard for newbs. It’s harder for those that have Old Wall chart-chasing baggage (example: it’s hard for those who aren’t yet long something that I already bought (Platinum, PPLT) to not buy it because I just wrote this and it’s up).
Don’t worry. If you’re not yet perfect like Vitalik’s Ethereum story sounded to rookies in The Game, I get it.
We’re all human. If this was easy, most “fundamental” Long Only and/or Long/Short managers wouldn’t suck at this when The Signals and Cycles turn.
Don’t suck.
Instead, focus. Focus on evolving your decision-making and execution #process. I’m going into year 24 of doing this and I’m still learning something from my deliberate study of PRICE, VOLUME, and VOLATILITY, every day.
Back to the top: what does CONSOLIDATED in ALL CAPS mean?
A) That the Risk Range™ Signal narrowed in a PARTICULAR way that matters
B) CONSOLIDATING Risk Range™ Signals imply falling volatility – that’s where you want to allocate assets
So let’s just spell out the math for you in English (with numbers, not narratives):
- UST 10yr Yield Risk Range™ Signal has a HIGHER LOW above its 3.56% TREND Signal (and a lower-high)
- US Dollar Index Risk Range™ Signal has a HIGHER LOW above its 103.66 TREND Signal (that’s bullish)
- Gold’s Risk Range™ Signal has a BIG HIGHER LOW above its $1711 TREND Signal level
“But, why is this … and why is that?” Stop it. No one needs a white paper on this:
A) It’s a Global #Quad4 Recession where the US Dollar remains a Bullish @Hedgeye TREND
B) It’s a HAWKISH Fed that is NOT pivoting (the Yield Curve is confirming DEEP inversion)
C) Real Rates have peaked alongside rear-view Peak Cycle Inflation (back in June)
If you think Real Long-term Rates can’t fall while the Fed doesn’t cut rates, you don’t know what a central bank tightening into a #Quad4 slowdown implies. But you are learning something here this morning. So am I. I learn when I coach.
Consensus is clearly figuring out that Peak Cycle Inflation is yesterday’s news and the way forward is risk managing a recession. How many of you have ever seen a recession, never mind risk managed one successfully?
Be honest about your past and your experiences. That’s the only way to learn.
At Hedgeye Regional in Dallas, I asked #HedgeyeNation 3 questions: How many of you made money yesterday? How many have made money this year? How many of you made money during the last recession (2008)?
Most people had their hands up for the first two questions. Only 1 person did for the last one.
Let’s keep learning together. We can all #GetBetter, every day. Happy Thanksgiving to you and your families.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.75-4.33% (bullish)
UST 10yr Yield 3.61-4.21% (bullish)
UST 2yr Yield 4.28-4.73% (bullish)
High Yield (HYG) 71.80-74.71 (bearish)
SPX 3 (bearish)
NASDAQ 10,395-11,319 (bearish)
Tech (XLK) 120-134 (bearish)
Energy (XLE) 88.43-95.05 (bullish)
Consumer Staples (XLP) 72.07-75.97 (bullish)
Healthcare (XLV) 131-136 (bullish)
VIX 21.87-26.96 (bullish)
USD 105.57-111.84 (bullish)
Oil (WTI) 78.40-85.99 (bearish)
Gold 1 (bullish)
TSLA 163-191 (bearish)
Bitcoin 14,981-17,786 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
