Every Asset Class Signaling #Quad4

“Truth has ever one father, but lies are a thousand men’s bastards and are begotten everywhere.”
-Thomas Dekker

Before the Old Wall and its pump and dump media gets going on everything “AI” this week, allow me to introduce myself. I may have been an idiot on sophisticated tales from Sam Bankman Fraud, but I’m not a long-term bag holder of FTX, tulips, or artificial narratives.

The aforementioned quote comes from an appropriately titled book I’ve been citing at this stage of The Cycle: Truth – A Brief History of Total Bullshxt. The ROC (rate of change) truth is that the US economic and profit cycle continues to slow.

Truth: consensus just went from a Cycle Low Net Short position of -133,005 NASDAQ futures & options contracts in the past year to a NET LONG position of +23,086 contracts and MSFT has an uber-complacent implied volatility DISCOUNT of -12% vs. 30-day realized.

Back to the Global Macro Grind… 

Welcome to another Macro Monday @Hedgeye where we don’t wax intellectually on what dot.bombs and blockchains can do for your yolo accounts. We measure and map The Cycle. 

Let’s start with the Global Currency market that went on a #Quad4 rip last week, eh bud!

1. US Dollar Index was +1.5% last week after breaking out back to Bullish on our immediate-term TRADE duration
2. EUR/USD was down -1.3% after breaking bad below @Hedgeye TRADE support
3. Japanese Yen continued to weaken vs. USD, down another -0.3%, and remains Bearish TRADE and TREND
4. CAD/USD was down another -0.7% last week and remains Bearish on both our TRADE and TREND durations as well
5. Argentina’s Peso continued to crash, down another -1.4% vs. USD last week, crashing -17.0% in the last 3 months
6. South Africa’s Rand was down hard (-4.7% vs. USD last week) to down -7.3% in the last 3 months 

I spent the last 4 days coaching against some Canadian teams down in the Low Country (Charleston, South Carolina), so I got the Canadian “Eh, Bud” correlation going on alongside the one that works in #Quad4 between Canadian Dollar (CAD) and Commodities. 

Truth: if you live in Argentina, South Africa, and/or Canada, you know it’s #Quad4 in Commodity and Currency terms. Maybe we should export them some AI narratives, eh buds? 

How about doing some week-over-week Commodity Asset Class signaling #Quad4 eh? 

1. CRB Commodities Index was down another -1.4% last week to -6.5% in the last month and remains Bearish TREND
2. Oil (WTI) was down another -1.8% last week to -15.7% in the last month and -43% from Cycle Peak
3. Dr. Copper was down another -4.0% last week to down -8.6% in the last month and remains Bearish TREND
4. Corn was down another -1.7% last week to down -10.6% in the last month and remains Bearish TREND
5. Wheat was down another -3.8% last week to down -6.5% in the last month and remains Bearish TREND  
6. Lumber was down another -5.4% last week to -12.5% in the last month and remains Bearish TREND

It’s the gravity and #slowing demand that gottem, eh. 

How about the “stocks”?

1. Energy Stocks (XLE) were down another -2.1% to -13.0% in the last 3 months
2. Financials (XLF) were down another -1.3% to -12.6% in the last 3 months
3. Utilities (XLU) were flat last week taking their Full Investing Cycle Return to +1.9% in the last 3 months 

We’re long Utes (XLU). But if you’re still bag-holding NASDAQ (it’s still in #Quad4 Crash Mode at -23.5% from its Full Investing Cycle peak), you’re loving the AI stories. They helped you claw back another whopping +0.4% of that loss last week. 

I know all these people rave about “how well its done year-to-date” (but did they tell us what they were down owning that exposure last YTD?). We do Cycle-To-Date. For the last 3 months of the Full Investing Cycle:

1. Gold is +7.8%
2. Silver is +9.4%
3. NASDAQ is +4.8% (highly concentrated in a handful of #BubbleCaps) 

And I hate to mention it, but a much broader basket of US “stocks” (Russell 2000) is DOWN -9.3% in the last 3 months because it doesn’t have enough AI in the market cap, eh!

Bottom line: literally every major Asset Class is signaling #Quad4. 

That includes, of course, Currencies, Commodities, and Fixed Income. Long-term bond yields break-down during #Quad4 and continue to signal a series of lower-highs within the UST 10yr Yields Bearish @Hedgeye TREND Signal.

The Yield Curve (10s minus 2s) re-inverted to -53 basis points last week. Both High Yield and Junk Bonds continue to signal the same. What’s the AI narrative going to be for Credit? Artificial Profits in Q2? #APQ2. Sounds like R2D2. So cool. 

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

UST 10yr Yield 3.31-3.56% (bearish)
UST 2yr Yield 3.76-4.15% (bullish)
High Yield (HYG) 74.01-74.94 (bearish)            
SPX 4051-4166 (bearish)
NASDAQ 11,907-12,362 (bearish)
RUT 1 (bearish)
Tech (XLK) 146-153 (bearish)
Gold Miners (GDX) 33.07-36.31 (bullish)
Utilities (XLU) 67.90-69.58 (bullish)
Staples (XLP) 76.11-77.66 (bullish)                                               
Shanghai Comp 3 (neutral)
Nikkei 28,601-29,654 (bullish)
VIX 16.02-20.62 (bullish)
USD 100.66-102.73 (neutral)
EUR/USD 1.084-1.099 (neutral)
USD/YEN 133.50-137.71 (bullish)
CAD/USD 0.729-0.747 (bearish)
Oil (WTI) 67.28-74.35 (bearish)
Gold 2001-2059 (bullish)
Copper 3.68-3.91 (bearish)
Silver 23.80-26.85 (bullish)
Bitcoin 25,862-29,704 (bearish)

Best of luck out there this week,
KM

Keith R. McCullough
Chief Executive Officer