“It’s easy to go fast. It’s not always best.”
-Ryan Holiday
That’s a good quote from Ryan Holiday’s Discipline Is Destiny. The main point of the chapter he titled “Slow Down… To Go Faster” is an even better coaching quote.
In terms of what my teammates and I do every morning, it’s actually not easy to go fast and slow. A LOT of grind work needs to be done, as a team, before we can play The Game at any speed.
“Yes, it’s important to hustle. Yes, we must run with swiftness. At the same time, our path also requires disciplined pacing.” -Discipline Is Destiny, pg 55
Back to the Global Macro Grind…
Welcome to Macro Monday @Hedgeye where the disciplined measuring and mapping of everything matters. If you’re only looking at one thing (“YTD SPY”), what are you really looking at? A: > 30% of said “YTD Return” in AAPL.
Moreover, you’re not looking at #CTD (Cycle-to-date) so let’s start with what the Global Currency market is signaling:
- USD Index was -0.16% last week and continues to signal Bearish TRADE but Bullish TREND
- EUR/USD was +0.21% last week and continues to signal Bullish TRADE but Bearish TREND
- Japanese Yen was down another -1.3% vs. USD last week, signaling Bearish TRADE and TREND
- CAD/USD was -0.20% last week and continues to signal Bearish TRADE and TREND
- Colombian Peso dropped -3.9% vs. USD last week and remains Bearish TRADE and TREND
- Aussie Dollar was -1.2% vs. USD last week and, like CAD, remains Bearish TRADE and TREND
While I do “feel” for my new friends in Cartagena, Colombia, this is unfortunately the story of EM when the world is in the Global #Quad4 Recession that the Chinese reported for the month of April overnight.
Being long “Commodity” (Canada and Australia) and/or China proximity currencies is not good when China’s Manufacturing PMI #slows back into contraction like it did in April (49.2 vs. 51.9 in March).
But, if the Tourist takeaway is “weak Dollar chart” because all they see is Euro strength, let them eat #Quad4 cake.
Commodities didn’t “look like” AAPL or MSFT chart chasing last week. They looked like #Quad4 Demand (slowing):
- CRB Commodities Index was down another -1.0%, taking its Full Investing Cycle Crash to -20% mid-week
- Oil (WTI) was down another -1.4% last week, taking its #Quad4 Crash from The Inflation Cycle Peak to -39.1%
- Copper was down another -2.3% last week and remains Bearish TRADE and TREND
- Corn was down another -4.9% last week and remains Bearish TRADE and TREND
- Lumber was down another -11.6% last week and remains Bearish TRADE and TREND
- Nickel was down another -5.0% last week and remains Bearish TRADE and TREND
But, repeat after me, Tweeters, SPY chartists, and astrologers alike “can’t see #Quad4 Demand Slowing.” LOL
These types evidently don’t see the Bond Market Signals either:
- UST 10yr Yield was down another -12 basis points last week and remains Bearish TRADE and TREND
- UST Yield Curve (10s minus 2s) was +3bps to -58 basis points inverted and remains Bearish TREND
- High Yield OAS Spread was +4bps WIDER week-over- week as US CDS ramped to new #Quad4 highs
Even if you looked at US Equity Sector Styles, instead of just SPY, the message was crystal clear:
A) Consumer Staples (XLP) which are a #Quad4 Long were +1.1% on the week
B) Industrials (XLI) and Basic Materials (XLB) which are #Quad4 Shorts were -0.6%, and -0.3%, respectively
And, from a Factor Exposure perspective, you can “see” the same that the Russell 2000 did (-1.3% last week):
A) SMALL CAP, SLOW GROWTH, and HIGH BETA Factor exposures were DOWN -0.2-0.8% last week
B) LARGE CAP, LOW BETA, LOW SHORT INTEREST (i.e. quality balance sheets) were UP +0.3-5% last week
Yes, we get that AAPL and MSFT have Part B) of those Factor Exposures, for now. MSFT did show an #acceleration in Revenue Growth, but will AAPL? And will both get last week’s month-end markup when it’s not month-end this week?
So many questions about The Cycle are being answered at this point other than WHEN (as in literally “WHAT DAY KM?!?”)?… but I can tell you that the probability continues to rise that the surface of The Sinkhole is going to cave in.
That’s the thing about the surface. It’s always last to collapse. Stay patient and disciplined, my friends.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.36-3.63% (bearish)
UST 2yr Yield 3.85-4.34% (bullish)
High Yield (HYG) 74.24-75.48 (bearish)
SPX 4030-4179 (bearish)
NASDAQ 11,716-12,295 (bearish)
RUT 1 (bearish)
Tech (XLK) 143-152 (bearish)
Utilities (XLU) 68.07-70.32 (bullish)
VIX 15.26-21.07 (bullish)
USD 101.01-102.05 (bullish)
EUR/USD 1.092-1.106 (bearish)
USD/YEN 133.45-136.91 (bullish)
CAD/USD 0.731-0.746 (bearish)
Oil (WTI) 73.12-77.90 (bearish)
Gold 1 (bullish)
Copper 3.77-3.99 (bearish)
Silver 24.43-25.62 (bullish)
MSFT 269-310 (bullish)
AAPL 161-171 (bullish)
Bitcoin 26,794-30,693 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
