“Well, if everybody’s doing it, I should get in on the game too.”
-Tom Phillips
I remember a few good parties in college where it turned out that people were doing cocaine in the bathroom. I don’t do coke. And I didn’t chase yesterday’s mania in US Call Option buying either.
The aforementioned quote comes from a good #behavorial book I’ve been citing this year titled Truth: A Brief History of Total BS. Phillips sides with my Full Cycle Athlete #process when, back then, I made the right short-term decision for me too.
Phillips says “just not caring” about what others want/need to believe is particularly important. On “wanting it to be true”, he writes: “There are a whole host of things our brains do that make us particularly bad at sniffing out the difference between truth and not-truth. These have a bunch of technical names…
Like ‘motivated reasoning’ and ‘confirmation bias’ – but they all basically come down to the fact that, when we WANT to believe something, whether or not it’s actually true comes pretty far down our brain’s list of priorities.” (pg 34)
So let’s kick off this morning with what is empirically true as of yesterday:
- Yesterday’s 1-day Call Option Buying in SPX of 1.8 MILLION contracts was an ALL-TIME HIGH
- SPX made a new 1-month price MOMENTUM high, with the VIX UP on the day
- US Industrial Production growth #slowed to 0.2% year-over-year (y/y)
*Reminder (from yesterday’s EL): the last 2x this happened (new 1-month SPX high with VIX UP), the dates were epic chase/capitulation days (FEB 2, 2023 and NOV 5, 2021).
At the same time, Old Wall Media’s headlines were generally bullish citing “better than expected” US economic data (even though US Jobless Claims #accelerated alongside this visit to Dr. ZERO from the Industrial side of the economy).
Now, like you, I can be “right” or “wrong” on whatever market I risk manage on whatever day…
And while it may or may not be true that “AI” is going to be everything that “Blockchain” wasn’t, it’s 100% true that A) the US Consumer continues to SLOW on a TRENDING basis and we’re at 0.2% Industrial Production growth already.
That’s why my entire #process only deals with measuring and mapping 100% truth. The ROC (Rate Of Change) doesn’t lie; Old Wall and its Media’s people do.
So, before we get back to the #MOAB of this Call Options Buying frenzy, let’s review The Recent ROCs:
A) US Industrial Production Growth has #slowed from +1.5% y/y in JAN to +0.2% in MAY
B) US Retail Sales Growth has #slowed from +7.4% y/y in JAN to +1.6% in MAY
C) That takes our #Quad4 in Q2 y/y Nowcast for US GDP from +1.62% in Q1 to +1.38% in Q2
Unless you’re like an Old Wall Macro Tourist who doesn’t do math, you know that year-over-year #slowing imputes a sequential slowdown from Q1 to Q2. That updates our headline GDP (q/q SAAR) at -1.50% for Q2 vs. Atlanta Fed at +1.8%.
That’s just reported data. You can tell me I’m wrong, but I won’t believe you.
My #VASP Signals could be wrong, but I believe them a LOT more than I believe myself. Newsflash: that’s why I built my Signaling Process – to fade any thought I have in my head (I had the lowest SAT score in my class at Yale don’t forget):
A) Yield Curve is signaling our GDP Nowcasts are too high (-95bps on 10s2s is a new #Quad4 in Q2 Cycle Low)
B) 30yr UST Yield just broke @Hedgeye TREND support (that’s new and came on the heels of #slowing data)
C) 2yr UST Yield just broke-out on my immediate-term TRADE duration signaling a Fed Hike in July
So, Narrative Drifters, can you please tell me a fictional story about how:
A) The broad US economy continues to slow as the Credit Cycle continues to cycle
B) The Industrial economy is entering a Recession, joining a broadening Corporate Profit Recession
C) The Fed is going to RAISE RATES (again) into this part of the slowdown
And that = BUY SPX ZERO Days TO EXPIRATION Call Options!
I thought my 2 HIKES = BUY NVDA was a better “call” yesterday. I had that wrong. NVDA (and TSLA) were down on the day.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.80-3.96% (bearish)
UST 10yr Yield 3.62-3.85% (neutral)
UST 2yr Yield 4.40-4.75% (bullish)
High Yield (HYG) 73.91-75.16 (bearish)
SPX 4157-44440 (bearish)
NASDAQ 12,908-13,825 (bullish)
RUT 1 (bearish)
Tech (XLK) 163-176 (bullish)
Industrials (XLI) 99.01-105.98 (bearish)
Financials (XLF) 32.46-33.87 (bearish)
Shanghai Comp 3190-3290 (bearish)
Nikkei 31,465-33,810 (bullish)
VIX 13.63-20.00 (bullish)
USD 101.65-104.93 (bullish)
EUR/USD 1.062-1.095 (bearish)
USD/YEN 138.82-141.32 (bullish)
GBP/USD 1.236-1.281 (bullish)
CAD/USD 0.741-0.758 (neutral)
Oil (WTI) 66.73-72.32 (bearish)
Oil (Brent) 72.12-76.78 (bearish)
Nat Gas 2.14-2.59 (bearish)
Gold 1 (bullish)
Copper 3.62-3.91 (bearish)
Silver 23.26-24.63 (bullish)
NVDA 362-435 (bullish)
Bitcoin 24,612-26,621 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
