“Eat your betting money, but don’t bet your eating money.”
-Some Guy At The Track
I remember the first time I went to the dog track (please don’t cancel). I was new to America and in college at the time. I really had no money… but some of my Yale Hockey buddies did!
I have 3 distinct memories of that experience: 1. It was the closest scene I’d been a part of since being on Simpson Street in Thunder Bay, Ontario (lots of homeless people there, unfortunately), 2. Right before the dogs were let loose, this thing came whipping around on a metal pole and the announcer would say “HERE COMES WISHBONE! and 3. I lost money.
That new shiny thing whipping around on a wire is #0DTE Call Option Buying. When they put that sucker on in size, everyone sees it - it’s exhilarating! And oh do the momentum dogs chase it!
Back to the Global Macro Grind…
I was just standing there in silence at my desk yesterday, listening to Powell speak. He didn’t really say anything new or dovish. He basically said the same thing he’s been saying…
And then, I saw it … I saw what I heard at that dog track: “HERE COMES WISHBONE!”
“Holy Hyena” (I thought to myself in my head)! That’s a massive 0DTE (Zero Days To Expiration) order on the $410 FEB1 SPY Line (the highest number on the Most Active Options Board heading into Powell’s Presser was $405)!
And right away, the flush…
They flushed front-month VIX like a high powered toilet at Madison Square Garden… because that’s what The Dealers need to do to get these trades on. VIX Go 19... then VIX Go 18 then…
I saw my Contra Stream (Twitter feed I built of popular Macro Tourists who tweet about market moves in real-time) flip from “he’s hawkish” to “uh, he looks dovish?”… LOL
You just can’t make it up. Gotta love The Game!
In real world news (i.e. the reported economic data of the day), the US ISM Manufacturing report for JAN entered 1980s style Greg Louganis Pike Formation – it looked just like the Yield Curve and the inverse of US CDS risk!
No worries though, Powell doesn’t think we’re going to have a recession… even though we’ve had one 100% of the time in the US when headline ISM and New Orders crash like they just did:
A) Headline ISM #slowed to 47.4 in JAN vs. and already recessionary 48.4 in DEC (and 51 at Q322 end SEP)
B) ISM New Orders #crashed to a New Cycle Low of 42.5 in JAN vs. 45.1 in DEC
So what I call the Peak of the Soft Landing narrative is in…
And the probability of US Industrial Production Growth #slowing from +5% in SEP (at 51 ISM) to 0% by the end of Q1 of 2023 just went up, again.
If the Perma Bulls who lost 77% of their capital last year in Crypto are “up 22% YTD” in Bitcoin Sensitive Equities (they only need to be up +335% from down -77% to get back to breakeven at the track) can tell you they’re “expecting” the recession that I am, I’ll buy them some coins (“pick a coin, any coin”). I’m betting they have no idea.
Oh, and since I made money last year and my pile hit an all-time high on both DEC 28th 2022, then again on JAN 3rd 2023, yesterday was an awesome day for me and the MFO Fam. Our Long Only Asset Allocation Accounts hit new ATH!
“Huh? How’d you do that you little Mucker? I have a 30% short position in TSLA”…
Well, A) it’s Long Only and B) 13 of my 23 Macro Pro ETF Asset Allocations beat what the beloved and bullied 0DTE SPYs did on the day. My Long Gold and Silver Positions are up another +1.5% and +3.3% this morning, which is cool.
I don’t bet with my family’s hard earned eating money. I don’t chase wishbones either. I execute on MY #process.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.38-3.60% (bearish)
UST 2yr Yield 4.05-4.29% (bullish)
High Yield (HYG) 75.20-76.96 (bearish)
SPX 3 (bearish)
NASDAQ 11,044-11,932 (bearish)
RUT 1 (bearish)
Tech (XLK) 128-140 (bearish)
Defense (ITA) 109-116 (bullish)`
Shanghai Comp 3182-3305 (bullish)
VIX 17.81-21.46 (bullish)
USD 100.93-104.95 (bullish)
Oil (WTI) 75.93-81.20 (bearish)
Nat Gas 2.38-3.32 (bearish)
Gold 1 (bullish)
Copper 4.09-4.32 (bullish)
Silver 23.27-24.61 (bullish)
META 139-189 (bullish)
TSLA 119-192 (bearish)
Bitcoin 19,506-23,998 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
