“I fell in love with teaching and my ability to change people and their behavior from within.”
-Rickson Gracie
Not everyone falls in love with either Jiu Jitsu or Short Selling, but someone’s gotta love coaching both! From his #behavioral book, Breathe – A Life In Flow, Gracie’s teachings resonated with me, big time:
“It was much more than teaching Jiu Jitsu; it was also adding something to someone’s life. My father taught me that if you want to be a great instructor, you need to think of not only techniques to be taught, but as a psychological education as well…
In addition to fighting, students learn how to better sense danger, the difference between patience and passivity, and how losing is not the same as being defeated” (pg 57). Sound familiar?
Back to the Global Macro Grind…
Especially when in #Quad1 or #Quad2, I find being a bull relatively easy. You just wait for the LOW-end of my Risk Ranges and buy the damn dips.
Being a bear in #Quad4 is much more difficult, especially for people who have never done it before. You should sense danger from the TOP-end of the Risk Ranges and be patient waiting for those opportunities to attack.
Losing a little money on the short side of bear markets is not the same as being defeated across the Full Investing Cycle.
The fractal beauty of #Quad4 is that bears have many places to eat. We can short Commodities and both Cyclical and Growth Stocks, for example. Why do Perma Growth Bulls struggle with that? They’re Perma Bulls and don’t know anything else.
Why do Growth Investors feel so smart (most of the time)? A: Growth works in 3 of 4 Quads. Why do Cyclical “Investors” fail fast some of the time? A: they don’t do ROC (rate of change) Macro and think they own stuff that’s “cheap.”
We did Sell MAGMA #BubbleCap Growth last week (on green). Today, let’s do Sell Commodities & Cyclicals on green:
A) CRB Commodities Index will open at the TOP-end of its 250-264 Risk Range this morning
B) Oil (WTI) is currently ramping up towards the TOP-end of its $65.49-73.75/barrel Risk Range this morning
C) Basic Materials (XLB), Oil & Gas Stocks (XOP), and Small Cap Energy (PSCE) are all seeking TOP-ends in kind
While it won’t work 100% of the time, with that setup I’ll take the shots 100% of the time.
Remember, our decision making #process doesn’t rely on me being more intelligent than any other player in The Game. It depends on being more disciplined and patient than most players in The Game:
- For most, waiting for the TOP and/or BOTTOM end of Risk Ranges isn’t easy… because
- They don’t know where those particular decision-making levels are… and
- They don’t have a Full Investing Cycle TRADE, TREND, and TAIL Levels to contextualize them
To be clear, I’m not bearish on being intelligent. I try to maintain a pace of reading a book every 10 days and I’ve been doing that for 15 years. I do that because I know I’m not that smart. I need to keep learning and evolving alongside my learnings.
Ask yourself, are you doing that? Or are you hoping that something like “Down Bond Yields = Buy #BubbleCap Growth” is going to make it different this time, even though the NASDAQ is down -26.7% from where #Quad4 began?
Btw, if your hard-earned capital has crashed -26.7%, you need to be up +36.4% (from here) to get back to break-even.
And, don’t worry, I get it. I get brokers and Telecom Tom type bulls get paid to give some of you Talking Points about “YTD” or whatever. When it comes to YOUR hard-earned capital, all that matters is your Full Investing Cycle Return, not 2023 to-date.
Back to the A,B, and C setups this morning:
A) CRB Commodities Index has immediate-term downside to -5.3% which would = Full Cycle Crash of -24.5%
B) Oil (WTI) has immediate-term downside of -11.1% which would = Full Cycle Crash of -47.6% from Cycle Peak
C) Oil & Gas Stocks (XOP) have a Risk Range™ Signal of $114.08-124.96 and remain Bearish TREND
What a lot of inexperienced but intelligent bears get wrong is thinking they “missed it” on something like being Short Oil and/or XOP as the aforementioned example. If you get to short XOP again at $124.96, you have immediate-term downside of -8.8%.
That’s why the simplest analysis I can provide you within a bear market is to deliberately study LOWER-HIGHS within Bearish @Hedgeye TREND Signals. When they signal TREND, they often trend.
Down -25-50% #Quad4 Crashes tend to keep crashing when the LOW-end of my ranges are signaling LOWER-LOWS too.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.58-3.79% (bearish)
UST 10yr Yield 3.31-3.64% (bearish)
UST 2yr Yield 3.67-4.34% (neutral)
High Yield (HYG) 72.63-74.19 (bearish)
SPX 3 (bearish)
NASDAQ 11,325-11,968 (bearish)
RUT 1 (bearish)
Tech (XLK) 136-1466 (bearish)
Gold Miners (GDX) 28.76-32.35 (bullish)
VIX 20.03-26.98 (bullish)
USD 102.02-104.58 (bullish)
EUR/USD 1.055-1.087 (bearish)
Oil (WTI) 65.49-73.75 (bearish)
Oil (Brent) 72.01-79.11 (bearish)
Nat Gas 2.02-2.57 (bearish)
Gold 1 (bullish)
Copper 3.77-4.14 (bearish)
Silver 21.38-23.74 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
