“Poor interoception → poor predictions → worse decision making.”
-Steve Magness
Not to be confused with making an interception and/or covering your shorts before they have a bear-market-ramp on green, interoception has to do with what most of us are trying to deal with every day: how do we really feel?
It’s not just you and me that struggle with this. It’s people who run the big bucks too. The number of times I get told how the economy and/or markets “feel” by a Portfolio Manager is countless.
The number of people who bought SPX and/or AAPL puts AFTER the prior 4-day decline last week isn’t countless. They scored bigly (3.6x on a 1yr z-score), then they capitulated and bought and covered into Friday’s close.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where we had all sorts of feelings yesterday post the epic HedgeyeLIVE Bash in Greenwich, CT on Saturday night. As my Partner Jonesy said: “now that was a shift!”
My sincerest thanks to all of you who attended our 3-day conference. Prior to the closing party, we accomplished so much as a community. We have much to be grateful for and to look forward to. Our decision-making processes won’t have poor interoception.
As Steve Magness also wrote: “your emotions are messengers, not dictators.”
I’ll review the aforementioned options market setup in my Top 3 Things and on The Macro Show this morning. The rest of the EL will be all about process – the measuring and mapping of last week’s macro market moves.
Let’s start with Global FX:
- US Dollar Index was -0.4% last week and is signaling Bearish TRADE and now Neutral on our TREND duration
- EUR/USD was down -0.3% last week and is signaling Bullish TRADE and now Neutral on our TREND duration
- Japanese Yen was +0.9% in a Counter TREND bounce vs. USD but remains bearish TRADE and TREND
- GBP/USD was up another +0.4% last week and remains Bullish TRADE and TREND
- Argentina’s Peso continues to crash, down another -1.6% vs. USD to -16.9% in the last 3 months
- Mexico’s Peso was +1.2% vs. USD last week and remains Bullish TRADE and TREND
But “why, why, why?” I can go off on tomorrow’s Debt Ceiling event in Washington and why USD weakened last week or I can write you a white paper on relative Japanese monetary policy vs. USA’s, but I will do neither.
Measuring and mapping (i.e. my decision making process) is more important than trying to sound smart.
Since there are far less “retail investor” and/or panic-stricken hedgie behaviors to observe in Commodities, as an Asset Class, than in how the crowd is trading yolo weekly TSLA options (did you see those rip on Friday? Lol) and/or AAPL:
A) CRB Commodities Index continued to signal #Quad4 Demand Slowing with a -2.4% drop last week = Bearish TREND
B) Oil (WTI) got smoked for another -7.1% loss last week and remains in #Quad4 Crash (in demand) mode
C) Copper was -0.2% last week and remains Bearish TRADE and TREND
D) Silver was +2.8% last week to +15.7% in the last 3 months and remains Bullish TRADE and TREND
One of these Commodities is not like the others… one of these commodities just doesn’t belong (in my Short Book). And that, of course, is D) Silver, which, alongside Gold (GLD), continues to absolutely crush a broad basket of US “Stocks”:
A) Gold was up another +1.4% last week to +8.1% in the last 3 months
B) Russell 2000 (large basket of US Stocks) was down -0.5% to -11.4% in the last 3 months
But, “but, KM… the NASDAQ and SPY have been better than the Russell”…
A: ok, but that’s a low bar compared to owning what one of the best buyers of Gold and Silver bars told my small group dinner about at HedgeyeLIVE on Friday night (he recently bought so much physical silver that the concrete slab in his garage sunk, lol!).
Here are 3-months of TRENDING Returns in QQQ, SPY, etc.:
- SPY was down -0.8% last week to 0.0% in the last 3 months
- NASDAQ was flat last week to +1.9% in the last 3 months
- Financials (XLF) were down -2.6% last week to -11.6% in the last 3 months
Oh, and our Short Energy (XLE) position was down another -5.8% last week to -6.7% in the last 3 months.
So when we talk about the interoception of people’s feelings about their performance, there’s a lot of either nothingness in the last 3 months or somethingness (if you’ve been Long Gold & Silver vs. Short Russell, Fins, and QQQs, from the right prices).
What else might make one “feel” better about executing on their #process instead of chasing Bitcoin (which is down -4% this morning)? A: Long Japanese Stocks (Nikkei up another +1.0% last week to +6.0% in the last 3 months).
How about Long Utilities (XLU)? They were up an exciting +0.1% vs. Short Oil, Energy, etc. last week. Utilities are now in a tied 3-month return race with QQQ after its AAPL markup. I’ll go with XLU Long vs. XLK Short (Tech) on the open this morning.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.30-3.57% (bearish)
UST 2yr Yield 3.75-4.21% (bullish)
High Yield (HYG) 74.18-75.08 (bearish)
SPX 4026-4159 (bearish)
NASDAQ 11,747-12,305 (bearish)
RUT 1 (bearish)
Tech (XLK) 143-153 (bearish)
Gold Miners (GDX) 32.60-36.02 (bullish)
Utilities (XLU) 67.53-70.02 (bullish)
Nikkei 28,209-29,327 (bullish)
VIX 16.18-20.99 (bullish)
USD 100.71-101.98 (neutral)
EUR/USD 1.095-1.107 (neutral)
USD/YEN 132.46-137.81 (bullish)
GBP/USD 1.241-1.265 (bullish)
Oil (WTI) 66.98-75.61 (bearish)
Gold 1 (bullish)
Copper 3.80-3.96 (bearish)
Silver 24.54-26.41 (bullish)
Bitcoin 27,302-30,033 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
