Global #Quad4, Reiterated

“He wasn’t born an athlete. He made himself one.”
-Ryan Holiday

Were you born a Full Cycle Investor or are you making yourself one? If you’re relatively new to this discipline, you’re realizing that you have a lot of work to do. The deliberate study of data is a big thing. Fading your feelings might be a bigger thing.

All of it matters. It did for Lou Gehrig too. The aforementioned quote is about Gehrig. Holiday uses his story to introduce his latest #behavioral book: Discipline Is Destiny – The Power of Self Control.

Including the disease named after him, this guy grinded through everything. “For 2,130 consecutive games, Lou Gehrig played First Base for the New York Yankees, a streak of physical stamina that stood for the next five-and-a-half decades.” (pg 2)

Back to the Global Macro Grind… 

Welcome to another Macro Monday @Hedgeye where I’m trying to get to Game 6,000 in my notebook. Given everything that’s already happened in 2023, it’s hard to believe that we’re less than 25% of the way into the season. Today is Game 58.

Let’s start with reviewing our weekend work (every Monday we review the prior WEEK’s market moves within the context of our Multi-Duration TRADE, TREND, and TAIL model). Our weekly lead-off hitter isn’t FOMO US Equity Futures, it’s Global FX:

1. USD corrected for the 2^nd week in a row, -0.6%, but remains Bullish on both our TREND and TAIL durations
2. EUR/USD had a Counter @Hedgeye TREND bounce of +0.8% last week
3. Japanese Yen was +1.1% vs. USD last week, moving it back to Bullish TRADE and TREND
4. CAD/USD was -0.1% last week and remains Bearish TRADE and TREND alongside Commodities, as an Asset Class
5. Argentina’s Peso continued its #Quad4 Crash, down -1.1% vs. USD to -15.0% in the last 3 months
6. AUD/USD was down another -0.6% last week and remains Bearish on both our TRADE and TREND durations

While Argentina’s currency collapse is not new news, CAD (Canadian Dollar) and AUD (Australian Dollar) breaking down at the same time is relatively new. It has coincided with the recent #Quad4 Crash in Commodities.

Did you know that Canada is about to report its 3^rd straight #Quad4? Did you know that our current Nowcast for Canada’s 4^th straight #Quad4 in Q2 of 2023 has its first NEGATIVE year-over-year GDP of -0.30%? Now you know.

Did you know that both Oil and Commodities, as an Asset Class, had a Counter @Hedgeye TREND bounce last week?

1. CRB Commodities Index was +1.5% last week to -7.1% in the last 3 months and remains Bearish TREND
2. Oil (WTI) bounced +3.5% last week to -12.8% in the last 3 months and remains Bearish TREND @Hedgeye too
3. Copper bounced +4.7% last week but is breaking bad (again) this morning below @Hedgeye TREND signal support
4. Corn bounced +1.4% last week to -3.5% in the last 3 months and remains Bearish TRADE and TREND
5. Wheat did not #bounce last week, down another -3.1% week-over-week and remains Bearish TRADE and TREND
6. Nickel did not #bounce last week, down another -1.8% week-over-week and remains Bearish TRADE and TREND

Why is it that a +4.7% bounce in Copper or a +1.4% one in Corn (which was right in line with the SPY bounce) don’t generate the FOMO that any one-day bounce in the US stock market does? Because this Asset Class doesn’t have uniquely American FOMO.

But it still tells disciplined Full Cycle Investors what they need to know about The Cycle…

And how about that US Equity Market?

A) SPY bounced +1.4% last week but remains Bearish on both our TRADE and TREND durations
B) Russell 2000 bounced +0.5% off its 2023 lows (bulls didn’t want to discuss that) and remains Bearish TREND
C) NASDAQ continued to create foam in the mouths of FOMO, +1.7% on the week, but remains Bearish TREND

Again, you don’t have to play The Game like a bunch of chasing and panting dogs if you’re a Full Cycle Investor who hasn’t been getting tagged long NASDAQ or the Russell 2000 from their #Quad2 Cycle Highs:

A) SPY is currently -17.2% from its Cycle High
B) Russell (IWM) is currently -29.0% from its Cycle High
C) NASDAQ Is currently -26.4% from its Cycle High

If you’ve lost -26.4% of your hard-earned pile, you need to be up +35.9% (from here) to get back to break-even.

If/when I lose -0.5% in a week in my Long Gold position (that’s what Gold corrected last week, to +10.0% in the last 3 months), it will move to the top of The Macro Show Queue as a top-ranked question. Imagine I was down -26.4-29.0%? 

The other big thing that happened last week is that we started getting paid on the Long Side of Duration (EDV and BNDD). That’s nice, especially against our Core #Quad4 High Yield (HYG) and Junk (JNK) Shorts:

A) UST 10yr Yield was down 1 basis point last week but the top-end of my 10yr Yield Range just collapsed to 3.66%
B) High Yield OAS Spread WIDENED another +7 basis points last week to +97 basis points in the last month alone

Why is it that the undisciplined Tourists we play against can cite where US Equity FOMO Futures are but don’t even have a live quote of where High Yield or CDS Spreads are during the day? 

A: Don’t know. Don’t care. Let’s stay with our deliberate study and disciplined #process. 

Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets

UST 30yr Yield 3.57-3.79% (bearish)
UST 10yr Yield 3.30-3.66% (bearish)
UST 2yr Yield 3.65-4.31% (neutral)
High Yield (HYG) 72.66-74.21 (bearish)            
SPX 3 (bearish)
NASDAQ 11,177-11,981 (bearish)
RUT 1 (bearish)
Tech (XLK) 136-147 (bearish)
Gold Miners (GDX) 28.71-32.14 (bullish)
VIX 20.30-27.59 (bullish)
USD 102.01-104.62 (bullish)
EUR/USD 1.054-1.085 (bearish)
USD/YEN 129.65-134.30 (bearish)
GBP/USD 1.203-1.235 (bearish)
CAD/USD 0.724-0.732 (bearish)
Oil (WTI) 65.93-71.91 (bearish)
Oil (Brent) 71.93-77.47 (bearish)
Nat Gas 2.08-2.59 (bearish)
Gold 1 (bullish)
Copper 3.76-4.12 (bearish)
Silver 21.22-23.60 (bullish)

Best of luck out there this week,
KM

Keith R. McCullough
Chief Executive Officer