“People have tried to cut corners and skip steps in this process for as long as hard work has been hard.”
-Arnold Schwarzenegger
I love that quote. And I get it, some of you might not. You might not “like” him because of his politics or whatever he tweeted during the pandemic. That’s totally fine with me. But also know that I couldn’t care less about what anyone “feels” about those things.
What I care about when citing Ah-nold, is his #process. No, not his process as a politician – the work ethic, discipline, and #process that got him to America and made him the best in the world at something that’s hard. He knows how to #DoHardThings:
“I bet you and I have a lot in common. We’re not the most connected or the most talented. But what we do have is something a lot of people will never have: the will to work. There is one unavoidable truth in this world; it’s that there is no substitute for putting in the work.”
-Be Useful (pg 75)
Back to the Global Macro Grind…
The BEST part about doing my job is waking up to a PARTICULAR thing that changes at a particular point in Cycle Time. While I can sometimes “see” it coming (because my #process often front-runs it), I rarely know what day it will CONFIRM.
Today I get one of those critical confirmations: Consolidation Signals from the US Bond Market.
No, this is not going to make a SPY Monkey jump out of bed this morning (most of them are sleeping when I’m working). Most US Stocks only Chart Monkeys wouldn’t know what I’m about to explain if it was staring them in the face…
But it is going to fortify a LOT of my sizing, timing, and Asset Allocation decisions. And, selfishly, that’s ALL that matters to me.
So let’s do this. Let’s walk through what my #VASP (Volatility Adjusted Signaling Process) is signaling:
A) Big LOWER-Highs in my Risk Range™ Signals, across The Yield Curve
B) Big HIGHER-Lows for The Cycle in my Risk Range™ Signals
Mathematically, you should be able to notice these PARTICULAR Signals by #Payingattention to my Risk Range™ Signals:
- UST 30yr Yield 4.49-4.75% (bearish)
- UST 10yr Yield 4.35-4.60% (bearish)
- UST 2yr Yield 4.80-5.00% (bearish)
If it’s not obvious to you, let me explain (briefly):
A) 4.75%, 4.60%, and 5.00% are all Lower-Highs for 30s, 10s, and 2s
B) 4.49%, 4.35%, and 4.80% are all Higher-Lows for 30s, 10s, and 2s
*(bearish) in brackets means that all of this is happening within the context of my intermediate-term TREND Signals.
Then we have my Longer-term TAIL duration levels of Support:
- UST 30yr Yield = 4.15%
- UST 10yr Yield = 4.01%
- UST 2yr Yield = 4.49%
Putting this PARTICULAR multi-duration math into words:
A) This implies that US GROWTH is slowing towards our recessionary outlook (TREND breakdowns in Bond Yields)
B) This implies that US INFLATION isn’t slowing enough to break the Longer-term TAIL Risk of Higher-For-Longer
Unless you are either biased or blind as a bat, you know that these recent immediate-term TRADE and intermediate-term TREND breakdowns in Bond Yields came on US Growth #Slowing data in November (see our calendar of data in today’s Chart of The Day).
And if you have Old Wall friends who aren’t biased or blind …. But haven’t done the real work, that doesn’t mean that neither the data was reported and/or these Bond Yield Signals happened all the while.
We don’t cut corners. We don’t spew lazy narratives. We do ALL the work.
The other thing we do is transfer the learnings of doing the work into market timing and Asset Allocation Decisions:
- Short-term Bond Yields (1-3yr) breaking down has had us Long SHY
- Long-term Bond Yields (10-30yrs) breaking down had us get Long BNDD (which was up a full +1% yesterday)
We’re long plenty of Fixed Income Exposures (BUXX, TFLO, TBIL) that hold the Longer-term TAIL view that the Fed is NOT going to CUT rates below my 4.49% (TAIL Risk) level of support anytime soon.
We’re also Long of The Bull Market that MANY “investors” have been missing since we went long it in the $1700s in NOV of 2022 = Gold. And make no mistake, the only thing that matters is WHEN we got long that (because we were short of it prior!).
Don’t tell the “broadening stock market rally” Chart Monkeys who chased the Russell 2000 (IWM) at Lower-highs in July… but Gold is hitting a new 6-month high this morning with the Russell still in a -10% DRAWDOWN since July.
And definitely don’t tell Real Estate Bulls that we started re-loading on XLRE on the Short Side at yesterday’s Lower-highs. That’s yet another of the many ways to capitalize on these big Bond Market Consolidation Signals.
Lower Bond Yields? A: Yes. But Higher-For-Longer too…
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 4.49-4.75% (bearish)
UST 10yr Yield 4.35-4.60% (bearish)
UST 2yr Yield 4.80-5.00% (bearish)
High Yield (HYG) 73.96-75.25 (bearish)
SPX 4 (bearish)
NASDAQ 13,790-14,362 (bullish)
RUT 1 (bearish)
Tech (XLK) 180-186 (bullish)
Energy (XLE) 83.19-85.68 (bearish)
Utilities (XLU) 60.90-63.24 (bullish)
Shanghai Comp 3017-3068 (bearish)
BSE Sensex (India) 64,818-66,356 (bullish)
VIX 12.36-16.05 (neutral)
USD 102.96-104.96 (neutral)
EUR/USD 1.075-1.098 (neutral)
Oil (WTI) 73.02-79.32 (bearish)
Nat Gas 2.69-3.20 (bearish)
Gold 1 (bullish)
Copper 3.63-3.84 (bearish)
Silver 22.90-25.27 (bullish)
MSFT 366-383 (bullish)
AMZN 142-150 (bullish)
TSLA 222-245 (bearish)
NVDA 472-508 (bullish)
Bitcoin 36,120-38,491 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
