“You’re trying to decouple the feeling and the response.”
-Steve Magness
That’s one of the many excellent coaching points by Steve Magness in a #behavioral book that I’ve now cited multiple times: Do Hard Things.
While it’s probably been pretty difficult for some of the less-experienced Bear Market players to stay with my process for the last few weeks, that’s the easy part of The Game for me. The hardest part is not actively trading it like I almost always do!
I took last week as an opportunity to do so in Ireland. I limited myself to 5 trades and less than that in Real-Time Alerts. The Cycle data remains squarely in #Quad4. That’s easy to see. It was hard to imagine what my P&L would do. It isn’t now. It’s what it always is, onto the next play.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where the measuring and mapping of it all goes on as time and space does. Unless you’re new to this and all you do is read the cover of Barron’s (“The Bull Is Back”) and watch CNBC for Macro Tourist direction, it’s easy to see the Global Macro market #divergences vs. what many (in the US) have been forced to chase.
Since performance chasing isn’t new (I’ve never chased Bear Market rallies), I’m not doing anything new for you this morning either. I can guarantee you this Independent & Data Driven research note will look nothing like Old Wall FOMO does now.
As always, let’s start with what the Global Currency market is signaling (hint: #Quad4):
- USD Index has a shallow -0.4% correction last week to +1.9% in the last month and remains Bullish TRADE and TREND
- EUR/USD was +0.3% but remains Bearish on both my TRADE and TREND durations (I’m shorting some this AM)
- Yen had a +0.2% Counter @Hedgeye TREND bounce vs. USD and remains Bearish TRADE and TREND
- Argentina’s Peso continued to have a #Quad4 Crash, down another -1.7% to -18.4% in the last 3 months
- Turkey’s Lira crashed (again) down -10.7% on the week to -18.9% in the last 3 months
- Russia’s Ruble was down another -1.6% vs. USD last week and also remains Bearish TRADE and TREND
When currencies are crashing and no one on Old Wall Street talks about it, pay attention. Actually, let me take that reading of the putting green back. #PayAttention to what ALL Global Macro markets are doing ALL of the time.
When few talk about the #Quad4 Bear Market in Commodities (because demand is slowing), stay with your position:
- Oil (WTI) was down -2.2% last week and is down another -3.0% this morning = raging #Quad4 Signal
- Copper had a Bear Market bounce of +1.7% last week and is red this morning = Bearish TRADE and TREND
- Palladium (PALL) was down -7.0% last week to -17.4% in the last month alone = Bearish TRADE and TREND
What did the Yield Curve signal last week (hint: #Quad4):
A) UST 2yr Yield was +11 basis points last week to 4.62% and continues to signal NO RATE CUTs
B) UST 10yr Yield minus the 2yr was down another -5 basis points, re-inverting to -86bps
What does a fresh 3-month low of -87 basis points on 10s2s mean at the top of the risk mgt morning (today) when the Exit Liquidity crowd is pushing the US Equity FOMO Futures green for inspired CNBC commentary?
A: #Quad4 Recession
You’ll get more of that TRENDING ROC (rate of change) US Consumption Slowing and Industrial Recession data later this week.
That’s why, prior to last week’s Counter @Hedgeye TREND bounces in US Retailers (XRT) and Industrials (XLI), they were testing new Bear Market and Cycle Lows.
Ah, that’s the one #Divergence left. It’s not a new one either. There’s no uniquely American stock market chasing in London, Paris, or Sydney for that matter:
- London’s FTSE was down another -0.6% last week to -2.6% in the last month
- Paris’ CAC40 was down another -0.8% last week to -2.5% in the last month
- Australia’s All-Ordinaries Index was down another -0.3% to -1.9% in the last month
That’s not cherry picking. Irrespective of what puffer-fish US “Retail Sentiment Investor” or panic/perf stricken “YTD” money manager might “see” when they look at what they call “the market”… that’s what happened.
If I were to cherry pick a major Global Equity Index, I’d choose the one we’re most long of (Japan):
A) Japan’s Nikkei225 Index was up another +2.4% last week to +10.4% in the last month
B) CNBC’s beloved SP500 “chart” was only +0.4% last week to +4.4% in the last month
Over the course of 18 of God’s holes at Ardglass in Ireland, an Irish Caddie by the name of Ciaran kept asking me what I saw in certain putts. Not once did he ask me what I saw in terms of what part of the links fairway I should try to hit off the tee…
Fortunately, I was raised to know what I don’t know (so I listened to Ciaran!). I’ve also worked 24 years on this Global Macro market course that’s been laden with former Bull Market bubbles bouncing to Bear Market sand traps…
I’m staying with what I see this morning. I’ll let the Tourists swing away on their own.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.80-3.96% (neutral)
UST 10yr Yield 3.57-3.82% (neutral)
UST 2yr Yield 4.32-4.65% (bullish)
High Yield (HYG) 73.33-75.05 (bearish)
SPX 4119-4319 (bearish)
NASDAQ 12,751-13,374 (bearish)
RUT 1 (bearish)
Tech (XLK) 160-168 (bullish)
Industrials (XLI) 96.16-104.25 (bearish)
Shanghai Comp 3182-3246 (bearish)
Nikkei 30,759-33,761 (bullish)
VIX 13.49-20.36 (bullish)
USD 103.05-104.57 (bullish)
EUR/USD 1.065-1.081 (bearish)
USD/YEN 138.15-140.43 (bullish)
Oil (WTI) 67.01-72.24 (bearish)
Oil (Brent) 72.12-77.40 (bearish)
Gold 1 (bullish)
Copper 3.59-3.83 (bearish)
Silver 23.03-24.62 (bullish)
Bitcoin 25,695-27,704 (bearish)
Best of the Irish luck out there to you this week,
KM
Keith R. McCullough
Chief Executive Officer
