“Congrats, you could have made worse mistakes, and you didn’t panic like last time.”
-Rickson Gracie
It’s infrequent that I get an opportunity to study how another Player/Coach does his coaching. That’s why Gracie’s Breathe: A Life In Flow is one of the best #behavioral books I’ve read in the lasty year.
The aforementioned quote is an example of what Gracie would tell his students after losing a match. After winning one, he’d say “props to you for winning, but you could have won smarter and faster.”
With an increasing number of players in The Game I play/coach being forced to be less flexible and more narrowly positioned, I find Phase III of The Bear Market fascinating. Patience and timing have rarely been more critical.
Back to the Global Macro Grind…
No matter how many uniquely American players want/need to be positioned AFTER their beloved Growth Stock picks move, I will never choose narrow positioning and a lack of flexibility.
Our principal orientation is quite literally the opposite of that. We employ a Go Anywhere (any Asset Class, long or short) Full Investing Cycle #process where we’re trying to find the next TRADE that becomes an investable TREND.
If you’re just a SPY Monkey, what you’d have seen yesterday was a +0.88% up day. But did they see:
A) That 3 stocks (NVDA, MSFT, and GOOGL) made up +100% of the SPY’s “return”
B) That 8 of the 11 Top Sector Styles were DOWN On the day (XLK was +3.8% vs. XLE -1.8%)
C) That a broad basket of US Stocks (Russell 2000) was down another -0.7% on the day
At the end of the day, I don’t care what the other players who aren’t playing our game see. We’re playing against them, don’t forget. As Sun Tzu taught me in The Art of War, “never interrupt your enemy when he is making a mistake.”
That’s not to say I don’t make mistakes. I have more #timestamped mistakes than ANYONE on Wall Street (no one else has #timestamped every Real-Time Alert since calling the last bear market in 2008, so the bar is low!).
But don’t ever mistake a short-term loss as a #process mistake. “You could have made worse mistakes, if you panic”:
A) And SELL a Core Long like Gold yesterday at the LOW-end of the Risk Range … or
B) COVER a Core Short like Energy (XOP) 2 days ago at the TOP-end of the Risk Range … or
C) Just waste your precious life and Cycle Time listening to CNBC pump NVDA all day long
I’m neither Long nor Short NVDA. Beyond measuring and mapping its implied Risk Range and TRADE, TREND, TAIL levels (which have been signaling Bullish on all 3 durations since I put it in my RISK RANGE product), what do I see?
A) Just another ticker with a Risk Range of $314-401/share this morning … reiterating Bullish TREND after
B) My Tech Analyst, Ami Joseph, explained the Pod 1 #acceleration in REVs yesterday
That’s it. It’s just a ticker. My #VASP Signal had it right. Irrespective of what economic #Quad we’re in and/or heading towards, The Pods trump The Quads at the ticker level. What does that mean?
A) POD 1 (REV) #Accelerations combined with POD 2 (EPS or Cash Flow) #accelerations = LONGS
B) POD 1 (REV) #Decelerations combined with POD 3 #decelerations = SHORTS
NVDA is a glaring example of A) and US Retailers (XRT) are a shining example of B). Since I had no position in NVDA but have been short “the consumer is in great shape” bs narrative for 17 months, I cared a lot more about XRT yesterday.
The #Quad4 Energy (XOP) and Real Estate (XLRE) Shorts have crushed it this month, but Retailers (XRT):
A) Are the ones reporting the most current reality of The Cycle (they report at the end of EPS season)… and
B) Have crashed to LOWER-LOWS, crashing -22% from where the CNBC Crowd chased them in JANUARY
Imagine I covered my US Retail Shorts in January and/or covered my Crypto Shorts at their big-bear-market-LOWER-Highs in April? For a Full Cycle Investor who has been short those for 17 months, that would be a MAJOR mistake.
100% of our Institutional Investor clients don’t pay me to opine on NVDA and MSFT. They pay me to help them preserve and protect their hard-earned capital WHEN the crowd is narrowly paying attention to NVDA and MSFT.
The Global Macro Update on that is as follows:
A) The Cycle is Slowing at a faster pace in April/May
B) The Sinkhole is hollowing out under the surface at a much more obvious pace
We’re talking trivial TOP-level Surface area Factors (not little canaries in coal mines):
A) Commodities, as an Asset Class (CRB Index), have crashed -22% from Cycle Peak too
B) Credit (our High Yield and Junk Shorts) have made fresh 2-month lows
Oh, and C) at -71 basis points on 10s2s this AM, the Yield Curve is at fresh 2-months lows (signaling Recession).
Both Chinese and European Equities are breaking bad back to Bearish @Hedgeye TREND and plenty of US Equity Sector Styles and stocks have too. No need to panic. Just execute on the Full Investing Cycle #process and breathe…
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.78-4.03% (neutral)
UST 10yr Yield 3.39-3.85% (neutral)
UST 2yr Yield 3.92-4.52% (bullish)
High Yield (HYG) 73.26-74.36 (bearish)
SPX 4073-4192 (bearish)
NASDAQ 12,246-12,830 (bearish)
RUT 1 (bearish)
Tech (XLK) 152-162 (neutral)
Gold Miners (GDX) 29.88-34.24 (bullish)
Shanghai Comp 3180-3296 (bearish)
Nikkei 29,565-31,501 (bullish)
DAX 15,680-16,290 (neutral)
VIX 16.33-20.36 (bullish)
USD 101.94-104.43 (bullish)
EUR/USD 1.071-1.093 (bearish)
USD/YEN 136.06-140.75 (bullish)
CAD/USD 0.731-0.745 (bearish)
Oil (WTI) 69.88-74.27 (bearish)
Gold 1 (bullish)
Copper 3.51-3.77 (bearish)
Silver 22.90-24.61 (bullish)
NVDA 314-401 (bullish)
Bitcoin 25,833-27,843 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
