“A wealth of information creates a poverty of attention.”
-Herbert Simon
While I often cite Mandelbrot’s The (Mis)Behavior of Markets as one of the most influential books that helped create the foundation of my Global Macro Risk Management #process, Herbert Simon’s Models of My Life is right up there in my Top 10.
In The Stillness Is The Key, Ryan Holiday cites Simon in a chapter titled “Limit Your Inputs.” I re-read that chapter last night.
This morning, there is nothingness. There was no change in Fed Policy yesterday. There is no change in my Powell (UST 2yr) signal. There was little to no follow-through in Global Macro Markets overnight. Uniquely American stock market panic/FOMO remains #noise.
Back to the Global Macro Grind…
While my life would be a lot simpler if I didn’t have to answer to other people’s emotions, noise, and questions, I signed up for this. I could obviously sell Hedgeye and retire. But I will not. I want to help coach people so that they don’t lose their hard earned capital.
If I didn’t spend endless hours holding both my process and others to account, I’d still spend the same amount of time executing on my process. I’d still silently sell into yesterday’s close. I’d still sell this morning’s open. I’d still be still.
Why? Two words: Quad Four.
That is all you need to know. If you’d like detail on that, review the 162 slides in the most recent Q4 Macro Themes deck. The models of my life are summarized there. If you’d like a shorter version of that wealth of information, here’s the “call”: sell.
That’s it this morning.
Sell-SOME of your Core Longs:
A) 13 of our 18 Core Asset Allocation (LONG) ETFs are near or at the TOP END of their respective Risk Ranges
B) The most immediate-term TRADE overbought signals = XLP, XLV, PINK, ITA, PPLT, GLD, GDX, SLV, and TAN
Sell SHORT our Core #Quad4 Shorts:
A) 10 of our 18 Core #Quad4 Shorts are near or at the TOP END of their respective Risk Ranges
B) The most immediate-term TRADE overbought signals = XLY, XLK, HYG, JNK, QQQ, HYMB, BITO, EWZ, JO, and GXG
Why? Reiterating, two words: Quad Four.
The month-end markup in Crypto has zero follow-through. If you weren’t shorting more Bitcoin via BITO into the close yesterday, I’m already front-running you. I don’t want to front-run you. I want to walk through this Full Investing Cycle process with you.
While the moral-less pit that has become our profession’s media was quite literally applauding Bankman-Fried Fraud at the NYT Dealbook event last night (while Ross Sorkin was getting paid), I was shorting more QQQ.
This morning’s implied volatility DISCOUNT on Tech (XLK) is a capitulatory (panic stricken hedge fund short covering) is -40% (vs. 30-day realized volatility) with front-month VIX nearing the LOW END of my Risk Range.
If you don’t know what do to with that, GOOGL, TSLA (or what information is in $160B CRM and $50B SNOW #BubbleCaps being down -6-8% on the open after having to report economic reality), that’s ok.
You can learn the models of our Full Investing Cycle life too. Yesterday was not a day to do nothing.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.67-3.99% (bullish)
UST 10yr Yield 3.60-3.95% (bullish)
UST 2yr Yield 4.32-4.63% (bullish)
High Yield (HYG) 73.03-75.87 (bearish)
SPX 3 (bearish)
NASDAQ 10,748-11,506 (bearish)
Tech (XLK) 127-136 (bearish)
Consumer Staples (XLP) 73.48-77.60 (bullish)
Healthcare (XLV) 133-140 (bullish) `
Shanghai Comp 3042-3175 (bearish)
Nikkei 27,750-28,408 (bullish)
VIX 19.56-25.83 (bullish)
USD 105.05-109.99 (bullish)
EUR/USD 1.012-1.045 (bearish)
Oil (WTI) 75.18-82.70 (bearish)
Gold 1 (bullish)
Silver 20.57-22.78 (bullish)
AAPL 138-150 (bearish)
AMZN 90-99 (bearish)
GOOGL 93-101 (bearish)
TSLA 163-199 (bearish)
Bitcoin 15,667-17,205 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
