“Going up the mountain is optional, coming down is mandatory.”
– Ed Viesturs
Good morning! Well, I’m not going to lie, it has been quite the morning for me as I was on the phone with customer service for two hours to start my day. So, if you are reading this asking where is the implied volatility table… it is coming. Once again, I was reminded that Hedgeye is one of the first companies awake on the east coast, as I’m the first person to notify providers of data breakdowns. But the show must go on!
Yesterday was something though… Bitcoin was up +3.3% at about 5am, then by 10:30a it was down -4.8% from there.
This part of the movie reminds me of the adage Keith was talking about at the beginning of this Bear market from Ed Viesturs. “Going up the mountain is optional, coming down is mandatory.” If the market is moving like this before earnings come out, I can’t imagine the emotional roller coaster it is going to have once earnings are released and companies must report reality.
What is the reality? That earnings in the next year are not going to shoot back up to all time highs like what happened coming out of the 2020 pandemic. Need proof? Well, that is what our 163 macro themes deck is for. But I personally love the long-term chart of M2 YoY.
Anyway, let’s get to the data because I’m already talking about the data in the section where I should be talking about mountaineering and getting down mountains.
Back to the Global Macro Grind…
On accelerating volume, we have a down day where 11 of 11 sectors were down with Energy and Consumer Discretionary leading the way. What surprised me the most was that in a short week we have accelerating volume.
But also, the Move index went from 110.53 to 134.63 on the day, which makes me grateful to Keith for getting us #out of $TLT (-1.41% on the day) and into $BNDD (-0.55% on the day). Although an important question to listen for on The Call is to see if the signal still likes $BNDD. The current move in the 2y yield is with the market pricing in a 59% chance for 2 rate hikes by year end. Since the last meeting, Powell has been guiding for 2 more rate hikes so what happens when that 59% chance turns to a 100% chance?
Let’s keep moving though, yesterday was definitely not the day to do nothing… this current market move is with the Vix only at 15.44. It has yet to enter the chop bucket. Although, what I believe to be more important than that level is where the risk range was yesterday, which was 17.08. We will see if the top of the range moves higher this morning, but the upside to downside potential will definitely be favoring the probabilities of a downwards move in the Vix.
If you are tracking Real Time Alerts, we saw it go from 12 shorts and 1 long, to 5 shorts and 4 longs. Meaning capital was moved from the short FIRR (Financials, Industrials, Retail, Real Estate) and into core longs like Healthcare and Japan.
On the down day though, the tickers that were up which peaked my interest were Dry Bulk Shipping $BDRY (+2.97% after being down -15% in the last month), Gasoline $UGA (+1.08% with $XLE down -2.25%), Corn $CORN (+2.66% after being down -9.29% in the last 3 months), and Turkey $TUR (+0.61%).
Now let’s see how the economic data is looking:
- The 10s/2s yield curve remains inverted at -94 bps
- Norway $NORW Industrial Production for May: -11.1% YoY from -4.9% YoY. Lowest since September 2016
- Manufacturing Production +1.5% YoY vs -3% YoY
- Sweden $EWD Industrial Production for May: +3.8% YoY from +3.9% YoY
- Construction Output: -6.3% YoY from -4.7% YoY. Lowest since June 2019
- Household Consumption: -1.1.% YoY vs -0.8% YoY
- United Kingdom $EWU House Price for June: -2.6% YoY from -1.1% YoY
- BBA Mortgage Rate for June: 7.54% from 7.44%
- Taiwan $EWT Exports for June -23.4% YoY from -14.1% YoY with expectations of -13.35% YoY. Lowest since 2009
- This might be the most important data point of the quarter
- In the chart of the day, I put Exports YoY vs Nvidia’s sales YoY. The orange part of the blue line shows the estimates of the Street on where they believe Nvidia sales will be YoY next quarter (+65% YoY from -13.2% YoY).
- I don’t disagree that it is possible Nvidia could have an acceleration from -13.2% YoY. Exports in Taiwan for April and May did in fact come off the cycle lows. Although June just put in a new cycle low… I will leave the exact estimate of Sales for Nvidia to Ami but I have a feeling that I know what his estimate is going to show, and I don’t think it is sales up +65% YoY.
- Just in case you are thinking, yes but Nvidia is an EPS story, well I also put a chart of Nvidia EPS, GAAP YoY vs Taiwan Exports YoY below. I see the same story.
- We will continue to track this to see if more economic data confirms or denies this because it is never one data point
- Exports to: China & Hong Kong (-22.2%), ASEAN (-27.6%), Japan (-24.7%), and the U.S.A. (-25.2%)
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.76-4.04% (bearish)
UST 10yr Yield 3.64-4.06% (bullish)
UST 2yr Yield 4.67-5.09% (bullish)
High Yield (HYG) 73.34-74.70 (bearish)
SPX 4 (bearish)
NASDAQ 13,317-13,846 (bullish)
RUT 1 (bearish)
Healthcare (PINK) 25.85-26.72 (bullish)
Shanghai Comp 3136-3242 (bearish)
Nikkei 32,390-33,907 (bullish)
VIX 13.31-17.14 (neutral)
USD 102.01-103.61 (neutral)
USD/YEN 142.16-145.13 (bullish)
Oil (WTI) 67.61-72.51 (bearish)
Gold 1911-1969 (bullish)
Copper 3.60-3.90 (bearish)
Bitcoin 28,615-30,997 (bearish)
Ryan Ricci
Macro
