“When we explore instead of avoid, we are able to integrate the experience into our story.”
-Steve Magness
My 24-year-old career story is that I’m still building my #process and always evolving it. Consider the alternative: being an Old Wall chart guy who thinks a 1-factor Moving Monkey is economic truth!
Changing and evolving gets tougher for many as they get older, especially if their old ways keep getting them paid! Fortunately, for me, that’s not life in the Hedgeye fishbowl. Transparency, Accountability, and Trust: you can see me swimming around, every day.
The aforementioned quote is another important one by Magness in one of my favorite #behavioral books: Do Hard Things. It’s from a chapter titled “Finding Meaning In Discomfort.” Personally, I was quite comfortable with yesterday’s Macro market moves.
Back to the Global Macro Grind…
A funny thing happened on the way to the SPY Monkey Forum yesterday…
As their beloved SPY was hitting “year-to-date” highs, my MFO (Mucker Family Office) Long Only Asset Allocation account was hitting both #CTD (Cycle to-date) and ATH (all-time highs). I loved that.
Why the love this morning? Because I know you love me. And I love not only The Game but having built a #BetterWay than having to be a SPY Monkey or 60/40 Pie Chart Macro guy. My Top 5 Gainers in my Long Only yesterday were:
- Uranium (URA) +1.6%
- Japan (EWJ) +1.4%
- Japan Again (JPXN) +1.4%
- Japan Value (EWJV) +1.3%
- Gold (GLD) +1.1%
Did I say I was Long Japan? The Nikkei was up another +1.2% overnight vs. SPY +0.7% on the day.
Since I don’t have a position in SPY, I’m giving it far too much air-time this morning. The only thing that should matter to YOU, as a Full Cycle Investor, is WHAT your hard-earned capital is doing. If it’s making an all-time high, that means you didn’t get killed last year.
One way to get killed is to assume that every bloody SPY move means something about the economic cycle.
That’s just dumb.
Why? Well, notwithstanding that Mandelbrot died a while ago but his timeless teachings on what percentage of the time market moves mean nothing vs. the economic TREND (he called those short-term moves Brownian Motion), now we have The Machine!
So let’s go there this morning and do SLOWING (US Economic) DATA vs. The Machine.
SLOWING DATA:
- US Retail Sales #SLOWED to a new CYCLE LOW of +1.5% year-over-year in JUN vs. +2.0% in MAY
- US Industrial Production #SLOWED to a new CYCLE LOW of -0.43% year-over-year in JUN vs. +0.03% in MAY
That’s right, the #Quad4 US Industrial Production Recession we’ve already entered is so obviously bad that I had to move to 2 decimal points this morning to remind you that MAY was only +0.03%.
So you’re saying there’s a chance…
And, in context, our call on the US Consumer SLOWING since FEB was spot on. You’ll recall there was a one-off (i.e. NON-TRENDING) US Consumption #acceleration in JAN of 2023 that got The Machine going. US Retail Sales have SLOWED from +7.4% in JAN to +1.5%.
‘But KM, you won’t admit you were wrong.’
That’s even dumber. On The Cycle (i.e. the data), we’re as right as right can be on #Quad4. Defined: WHEN The ROC (rates of change) of both GROWTH and INFLATION are slowing at the same time.
But my haters need/want me to be wrong on The Cycle because WHEN its implied gravity impacts The Machine negatively, there will be ZERO economic evidence that wasn’t already REPORTED as economic FACT that supports their bag-holding.
Now let’s do THE MACHINE:
- Today is monthly OPEX (options expiration) for the VIX
- Friday is monthly OPEX for everything else with $1.1 TRILLION in SPY and SPX contracts expiring
Rather than avoiding the glaringly obvious #MOAB (Mother of All Bubble) impacts of this super short-term (0DTE) Options Bubble, I’ve not only integrated it into my risk management #process but partnered with pros who know this part of the market better than me.
Here’s what our new partners at Tier 1 Alpha have to say about Gamma Exposure in The Machine as of yesterday’s close:
- Dealers have pushed back into positive Gamma. This suggests lower volatility. Dealers will be forced to sell SPX Futures WHEN the market rises and forced to buy futures if the market falls in order to maintain a delta-neutral position
- Gamma Exposure by STRIKE shows favor towards CALLS, with the 4550 ATM STRIKE a likely pin. If markets start to fade, the 4525 STRIKE is likely the next stop
That’s it. They already pinned it yesterday. That’s giving every monkey with live quotes and an 80% Asset Allocation QQQs, Memes, and AI the “view” that the US economy didn’t SLOW in JUNE. And I like that. Now is the WHEN to start re-loading on my #Quad4 Shorts.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.85-4.08% (bullish)
UST 10yr Yield 3.69-4.08% (bullish)
UST 2yr Yield 4.57-5.07% (bullish)
High Yield (HYG) 73.42-75.89 (bearish)
SPX 4 (bearish)
NASDAQ 13,441-14,460 (bullish)
RUT 1 (bearish)
Tech (XLK) 171-181 (bullish)
Industrials (XLI) 105.64-110.65 (bearish)
Financials (XLF) 33.18-35.11 (bearish)
Defense (ITA) 115-119 (bullish)
Healthcare (PINK) 25.90-26.99 (bullish)
Shanghai Comp 3169-3237 (bearish)
Nikkei 31,700-33,516 (bullish)
DAX 15,421-16,212 (neutral)
VIX 12.94-17.33 (neutral)
USD 99.08-103.31 (bearish)
USD/YEN 137.33-143.25 (bullish)
GBP/USD 1.278-1.310 (bullish)
Oil (WTI) 71.73-77.94 (bullish)
Oil (Brent) 76.30-82.13 (bullish)
Gold 1 (bullish)
Copper 3.66-3.96 (bearish)
Silver 22.55-26.01 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
