When You Look At The Market, What Do You See?

“What do you see when you look in the mirror?”
-Arnold Schwarzenegger

What do you see when you look at your “market” screens? What do you see when you “look” at the incoming data? How about your volatility adjusted signals?

These are all critical questions for you, not me. I know, with mathematical precision what I see. And I know that what I’m looking at is never what the crowd is staring at.

Ever stare at yourself in the mirror? As Arnold goes on to ask us in Be Useful, “what color are your eyes? And don’t tell me they’re blue or brown or whatever. Those are bullshit answers for your driver’s license. What color are they really?” (pg 32)

Back to the Global Macro Grind…

When I look at the incoming data from 3 of the heaviest weights (countries) what do I see?

1. USA: last week’s ISM and US Labor data is #slowing like it always has into a recession
2. GERMANY: Industrial Production #slowing (again) to a recessionary -3.7% y/y this morning
3. CHINA: Exports #slowing (again) to a recessionary -6.4% y/y this morning

While most power-users of the Hedgeye #process get the difference between measuring and mapping in ROC (rate of change) terms vs. being a Macro Tourist (jumping from headline to headline on what was “expected”), most don’t.

If they did, most “investors” wouldn’t lose the amount of money they always do from Peak Cycle into recessions.

When I look at The Market this morning what do I see?

A) Let’s start with what I see but spend little to no time on = where SPY Monkey Futures are trading
B) I always start with what the Global Currency Market is doing relative to the aforementioned DATA
C) I always see the Fractal Dimensions of the market, across multiple factors and multiple durations

Yep, Part C of what I see gives me 100% certainty that what I’m looking at isn’t what anyone else is looking at.

No, no, no. That doesn’t mean that what I’m looking at and what I “see” is going to promise me “being right” and/or the riches that MANY of the newly minted “YOLO investors” yearn to HODL…

Nope, it just means what it means. When I look in the mirror, I know the specific Fractal Patterns in my eyes.

Oh, does that offend some of your friends in this profession? Do they try to mock it instead of understand it? Good.

I want that. Because when they look in the mirror, “it’s too uncomfortable. Too scary…

Because the person in the mirror is often a stranger who looks nothing like the person they see when they close their eyes and picture the person they want to be.” -Ah-nold, pg 32

When you looked at the US Stock Market (no that’s not The Market) yesterday, what did you see?

A) A “bull market” that was up for the 6^th straight day? (and down for the 3 months prior)
B) A bear market bounce?
C) Another #MarkupMonday in SPX that looked nothing like a broader basket of US Stocks (IWM)?

This is what I saw yesterday:

1. SPX +0.18% on the day with 7 of 11 of US Sector Styles DOWN on the day (Losers, led by Real Estate -1.4%)
2. SPX +0.18% on the day with 68% of stocks DOWN on the day with an average DECLINE of -1.2%
3. Russell 2000 (IWM) down another -1.3% on the day, taking its DRAWDOWN to -13.1% since July 2023

I know, I know. This is precisely what “The Judge” saw when deliberating about “markets” yesterday on CNBC. LOL

And how about this morning? What do I see when looking at The Market?

1. US Dollar bouncing off the LOW-end of its Risk Range™ Signals vs. EUR, GBP, AUD, Yen, etc.
2. UKT and German 10yr Yields down -5-7bps on the heels of more European Recession data
3. Oil getting tagged for a -1.9% loss after Breaking Bad on both my TRADE and TREND Signals
4. Dr. Copper crushed for another -1.4% loss post the China Export Recession report
5. Hang Seng hammered for another -1.7% loss overnight with Dr. KOSPI down another -2.3%
6. European Stocks DOWN for the 2^nd day this week (because they don’t have #MarkupMondays)

Those are just 6 of the 36 Core Lines of Sight in my multi-duration, multi-factor, risk management model. I’d go through the rest of them, but I’ve run out of time.

It’s my son Jack’s 16^th birthday. I want to make time to look him in the eye and shake his hand. That’s how we raise our kids. When they look in the mirror, like Hedgeye (born when Jack was), they’ll know who they are and what they see.

Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets

UST 10yr Yield 4.54-5.03% (bullish)
UST 2yr Yield 4.83-5.14% (bullish)
High Yield (HYG) 70.85-74.41 (bearish)            
SPX 4050-4390 (bearish)
NASDAQ 12,336-13,625 (bearish)
RUT 1 (bearish)
Tech (XLK) 160-174 (bullish)
Energy (XLE) 83.55-88.01 (bearish)                                              
Shanghai Comp 2 (bearish)
DAX 14,540-15,286 (bearish)
VIX 14.43-22.93 (bullish)
USD 104.77-107.11 (bullish)
EUR/USD 1.049-1.074 (bearish)
USD/YEN 149.00-151.53 (bullish)
GBP/USD 1.203-1.241 (bearish)
Oil (WTI) 78.48-84.42 (bearish)
Oil (Brent) 83.21-88.05 (bearish)
Gold 1 (bullish)
Copper 3.54-3.73 (bearish)
Silver 22.33-23.50 (neutral)
MSFT 336-360 (bullish)
AAPL 164-181 (bearish)
Bitcoin 34,015-35,546 (bullish)

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer