“I cut the legs off all my sweatpants so I couldn’t avoid seeing them in the mirror.” -Arnold Schwarzenegger
That was one of my favorite stories in Arnold’s Be Useful (his calves weren’t big enough).
“I could see that mine weren’t big enough. Calves are basically the biceps of the legs. I had 24-inch biceps. I did not have 24-inch calves. In my mind that threw my body out of proportion, which jeopardized my chances of winning Mr. Olympia.” (pg 49)
So what if you cut the @Hedgeye TREND and TAIL Risk levels of support off of Bond Yields? You know that means we’re right and the US economy is entering a broadening recession right? It’s also called #Quad4.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where the measuring and mapping process rolled through Las Vegas this weekend. If you’ve never been to a live Formula 1 racing event, you should get to one. It’s all about process, process, process.
As a matter of process, we like to start our weekly review with the Global Currency market:
- US Dollar Index had a big Counter @Hedgeye TREND correction of -1.8% last week with Rates Down hard
- EUR/USD was +2.0% last week, moving to Bullish TRADE @Hedgeye and now Neutral TREND
- Japanese Yen had a Counter @Hedgeye TREND bounce of +1.3% and remains Bearish TRADE and TREND
- GBP/USD had a Counter @Hedgeye TREND bounce of +2.0% and is Bullish TRADE, Bearish TREND
- Canadian Dollar had a Counter @Hedgeye TREND bounce of +0.8% and remains Bearish TRADE and TREND
It’s one thing for the US to react to recessionary economic data with an initial Down Dollar, Down Rates move. It’s entirely another thing for that to sustain itself and break the US Dollar’s TREND while entering #Quad4 (where USD goes up).
Don’t forget that Europe and the UK (GBP/USD) are already in recessions. They’re going to impact USD all the while. Yen up another +1.0% vs. USD this morning is going to have impact as well. TREND support for USD/JPY = 147.55, fyi.
Oil gets that. It’s not just Rates Down when entering a recession. Here’s a quick Commodities review:
A) CRB Commodities Index was only +0.1% last week and continues to signal #Quad4 Recession (Bearish TREND)
B) Oil (WTI) was down another -1.7% last week to -11.2% in the last month alone
C) Gold loved the Real Rates Down move, gaining +2.2% on the week = Bullish TRADE and TREND
D) Silver ramped +7.1% higher on Rates Down too, moving back to Bullish TRADE and TREND
So it’s a good thing I bought as much Gold Exposure as I did when it was for sale 2 weeks ago!
If longer-term US Bond Yields break TREND and TAIL support (here are those levels on 10s), Gold should ramp higher:
A) UST 10yr Yield TREND support = 4.40%
B) UST 10yr Yield long-term TAIL support = 4.01%
We get the shorter-term view that a performance-chasing and panic-stricken US Equity Market has on Rates Down. It’s rear-view looking now. The Question is how do you break-down Bond Yields, from here, without “2% Inflation” and/or Rate Cuts?
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.55-4.89% (bullish)
UST 10yr Yield 4.40-4.73% (bullish)
UST 2yr Yield 4.80-5.10% (bullish)
High Yield (HYG) 73.51-74.98 (bearish)
SPX 4 (bearish)
NASDAQ 13,402-14,325 (bullish)
RUT 1 (bearish)
Tech (XLK) 173-185 (bullish)
Energy (XLE) 82.01-85.81 (bearish)
Utilities (XLU) 59.30-63.11 (bullish)
Shanghai Comp 3016-3078 (bearish)
Nikkei 31,875-33,831 (bullish)
BSE Sensex (India) 64,105-66,180 (bullish)
DAX 14,933-15,969 (bearish)
VIX 13.55-17.43 (bullish)
USD 103.11-106.45 (bullish)
EUR/USD 1.059-1.095 (neutral)
USD/YEN 148.01-152.75 (bullish)
GBP/USD 1.215-1.255 (bearish)
CAD/USD 0.721-0.733 (bearish)
Oil (WTI) 73.17-79.99 (bearish)
Oil (Brent) 77.23-83.90 (bearish)
Nat Gas 2.81-3.29 (bearish)
Gold 1 (bullish)
Copper 3.56-3.86 (bearish)
Silver 22.17-24.25 (bullish)
Bitcoin 35,416-38,204 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
