“Ditch the facade, embrace reality.”
-Steve Magness
A new year brings a new batch of process-less Old Wall narratives. Last week consensus Perma Bulls tried to collectively embrace the narrative of a “soft landing” for the US economy. Ditch the narratives, embrace #Quad4.
You’re both mentally tougher and more patient than that. The aforementioned quote is one of the “Four Pillars of Real Toughness” from a good #behavorial book I recently finished titled Do Hard Things, by former runner Steve Magness.
“Real toughness isn’t just about helping you deal with real pain or perform better; it’s about making you a healthier, happier human being” (pg 23). If you’re happy getting long Profitless Tech and Meme Stocks here, good luck!
Back to the Global Macro Grind…
Welcome to a new week and Game 10 of 2023. I’m old enough to remember December 28th of 2022 (when NASDAQ crashed to new Cycle Lows) and Game 3 of 2023 when my Long/Short Book hit all-time highs.
I’m not at my all-time highs coming into Game 10. I lost some of my hard earned capital for the last 3 games. If you think a 3 game losing streak is going to shake me after building my pile for 23 years, think again.
As a matter of repeatable #process, we measure and map all of Global Macro markets, across 50 countries, and ALL of the available ROC (Rate of Change) data – there is no change to that data’s direction (downward sloping TREND).
Let’s start with a check-in on the Global Currency Signals in my #VASP (Vol Adjusted Signaling Process):
- US Dollar Index dropped -1.6% last week, challenging TREND support but holding long-term TAIL support
- EUR/USD ramped +1.7% last week and remains Bullish TRADE, but Bearish TREND
- Yen squeezed another +3.3% higher last week and remains Bullish TRADE and TREND vs. USD
- Canadian Dollar was only +0.4% last week vs. USD and remains Bearish TREND alongside Canadian Stocks
- Argentina’s Peso crashed another -1.8% vs. USD last week to -16.7% in the last 3 months alone
- Ghana’s Cedi crashed -14.3% last week and remains Bearish TREND vs. USD
Ghana? Really? Yep. We measure and map everything. And that happened.
This “Dollar Breakdown” has largely been driven by BOJ (Bank of Japan) panic squeezing the Yen AFTER it crashed in 2022. In the short-term, Yen strength is signaling immediate-term TRADE exhaustion to the upside vs. USD.
Dollar Down, Rates Down = Commodities Reflation last week (just what the Fed wants to see to pivot, eh?):
- CRB Commodities Index was up more than SPY fyi, at +4.2% on the week but still signaling Bearish TREND
- Oil (WTI) had a big bear market bounce of +8.3% last week (we call those Counter #Quad4 TREND moves)
- Copper ramped +7.8% last week and remains in Bullish @Hedgeye TREND breakout mode
- Nat Gas crashed another -7.8% last week to -49.2% in the last month (not a typo = Bearish TREND still)
- Coffee continued to crash, down another -4.2% last week, crashing -22.6% in the last 3 months
- Lumber squeezed +17.2% higher last week to -14.5% in the last 3 months = Bearish TREND Signal
We’ve been Bearish TREND on Lumber (WOOD), Coffee (JO), and Nat Gas (UNG) since going bearish on Commodities as an Asset Class as the Global Economy was entering its #Quad4 Demand Slowdown in Q3 of 2022.
None of that has changed on any of their Counter TREND Bounces. There are plenty of those in bear markets.
That said, we remain Long of #Quad4 Global Demand Slowing in Precious Metal terms:
A) Gold was up another +2.8% last week to +5.3% in the last month (vs. QQQ Short -1.6% in the last month)
B) Silver was up another +1.6% last week to +27.4% in the last 3 months (vs. QQQ Short +4.0%)
Whether you want to look at it week-over-week, month-over-month, or in the context of the Full Investing Cycle’s TREND (3 months or more), is up to you. I’ll keep doing it my way because it works.
Was last week the “breakout week” to panic-cover and/or chase our fav US Equity Index or Sector Style Shorts?
A) QQQ was +4.8% last week so I #timestamped it twice in Real-Time Alerts on the short side
B) Consumer Discretionary (XLY) was +5.8% last week so I sent you the Signal to re-short that too
That’s right, in US Equity Factor Exposure terms, all of 2022’s losers were the winners last week… and the winners were losers. Last week’s Hedge Fund Short Covering was in the 98th percentile of readings going back 5 years!
Can you imagine I had you panic cover and buy all of these #Quad4 Shorts for the past year anytime they allegedly “broke out” above some trivial Moving Monkey line and/or the VIX dropped below 19?
You wouldn’t be paying to read this right now, would you? In 23 years, I never thought I’d see the days when I was one of the most patient “long-term” Full Cycle Investors in print. Last week was a facade. So is a “soft landing.”
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.51-3.97% (neutral)
UST 10yr Yield 3.41-3.85% (bearish)
UST 2yr Yield 4.13-4.49% (bullish)
High Yield (HYG) 72.99-76.83 (bearish)
SPX 3 (bearish)
NASDAQ 10,144-11,199 (bearish)
RUT 1 (bearish)
Tech (XLK) 119-131 (bearish)
Shanghai Comp 3105-3240 (bullish)
DAX 14,302-15,316 (bullish)
VIX 18.11-24.99 (bullish)
USD 101.76-106.05 (bullish)
EUR/USD 1.044-1.088 (bearish)
USD/YEN 127.03-134.90 (bearish)
CAD/USD 0.732-0.752 (bearish)
Oil (WTI) 71.20-80.45 (bearish)
Nat Gas 3.32-4.29 (bearish)
Gold 1 (bullish)
Copper 3.66-4.35 (bullish)
Silver 23.25-24.55 (bullish)
Bitcoin 15,916-21,161 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
