“The catalyst is an event that finally terminates the Unravelling mood and unleashes the Crisis mood.”
-Neil Howe
Winter is coming. And heading into a reported US Recession, we have a framework to consider that.
In my Partner Neil Howe’s The Fourth Turning Is Here, there’s an excellent longer-term Full Cycle Investor chapter titled “A Winter Chronology” where he reminds us that a Crisis Era “begins with a catalyst.” He’s long argued that was back in 2008.
And what are you staring at on your screens today? Today has a different color on the screen (so maybe you’ll “feel” different). On Friday, it was an epic squeeze day with everything you can’t believe can happen is happening. Then it stops happening.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where we won’t panic and/or chase. Plenty are chasing our Bull Market Longs in Indian Stocks (INDA, SMIN) and Gold (GLD, AAAU), which are both hitting all-time highs. So, we’ll sell-SOME into that chasing.
*Newsflash: despite their chasing the Russell 2000 +3% on Friday, it’s still -23.8% from its 2021 Bull Market Peak.
As a matter of #process, we like to start with where US Stocks/Charts Only peeps don’t – The Global Currency Market:
- US Dollar Index was -0.1% last week and remains Bearish TRADE, but still Bullish TREND (barely)
- EUR/USD was down -1.0% last week after failing, critically, @Hedgeye TREND resistance of 1.10
- Japanese Yen busted a +1.3% move vs. USD moving to Bullish TRADE and TREND for the 1st time since Q422
- GBP/USD was up another +0.2% last week and remains Bullish on both our TRADE and TREND durations
- Colombian Peso was up another +1.9% vs. USD last week to +3.7% in the last month and remains Bullish TRADE
That’s great for The People of Colombia who have been getting pounded by a devalued currency for a long time. In November, we went from Short to Long of Colombian (GXG) Equities for the 1st time in a long time.
We’re long this Bull Market Breakout in Bitcoin (BITO) for the first time in a long time too. The Signal always knows something.
With both the Bond Market and the Commodities Market signaling that the US is entering the #Recession that both China and Europe have already entered, what could possibly go wrong?
A) CRB Commodities Index was down another -0.5% last week to -3.0% in the last month and remains Bearish TREND
B) Oil (WTI) was down another -2.0% last week to -7.5% in the last month and remains Bearish TRADE and TREND too
C) Natural Gas continued to crash last week, down another -6.2% taking its #Quad4 Crash to -25.0% in the last month
D) Sugar (CANE) was down -7.0% last week after signaling a Bullish to Bearish @Hedgeye TREND reversal
Yeah, Copper got squeezed like the Goldman Most Rolling Short Basket (which SQUEEZED for a monster +6.2% move on Friday alone) did last week, but Copper also A) failed @Hedgeye TREND resistance and B) is down -2.0% this morning.
Oil has re-entered #Quad4 Crash Mode (i.e. recessionary demand) this morning at -22% from WHEN GDP accelerated in Q3.
I know. Old Wall Econs and Perma Bull Strategists don’t want to talk about the biggest coincident collapse in Oil and Bond Yields since the US entered the 2008 recession “because it’s not like 2008” (which none of them called correctly back then either, btw)…
But that doesn’t mean NOV wasn’t the biggest MONTHLY decline in the UST 10yr Yield since that 2008 recession:
A) UST 2yr Yield was down a monster -40 basis points last week after breaking bad to Bearish TRADE and TREND
B) UST 10yr Yield was down another -25 basis points last week after breaking bad to Bearish TRADE and TREND too
Did High Yield Spreads move on consensus being forced to chase the Russell (IWM +3% last week but all of that came on 1-day, Friday)? A: Nope. High Yield OAS Spread was down 1 basis point last week to +374bps over USTs.
You know what really moved last week in US Recession Signaling terms? A: GOLD:
A) Our Core Asset Allocation to Gold pounded the NASDAQ with a +3.4% breakout move last week
B) Unlike the NASDAQ (down -11% from its all-time high), Gold made an ALL-TIME HIGH last week
In Cycle Time, all-time remains a very long time @Hedgeye. And many people are missing this Bull Market in Gold.
The other major Bull Market that many are missing that hit a new ALL-TIME HIGH this morning is in India. India’s Stock Market (BSE Sensex) was up another +1.9% overnight after ramping +2.7% last week.
What we know when The Fourth Turning Is Here is that the crowd will chase those Gold and India Charts!
Unlike the USA, India’s real GDP accelerated closer to +6% year-over-year in the most recent quarter … AND they aren’t going to hit a recession anytime soon. How about that US Recession data from Friday btw? Here’s USA’s ISM report:
- Headline = unchanged M/M = 46.7 = 13th consecutive month of contraction
- New Orders = +2.8 pts to 48.3 = 15th consecutive month of contraction
- Employment = -1 pt to 45.8 = 2nd month of contraction and 5-month low
- Backlogs = -2.9 pts and re-breaching the 30-handle to 39.3 = 14th month of contraction
- Export Orders = -3.41 pts to 46.0 = 6th month of contraction and lowest reading since June 2020
- Number of industries reporting growth = 3 (out of 20)
Yeah, I get it. Perma Bulls like Telecom Tom are “feeling it” (not Long Gold) like they were in July when saying things like the USA was “slipping into an expansion.” That’s an odd set of “expansionary” data, isn’t it?
Especially in terms of divergences between Bonds, Commodities, and Stocks, globally… there’s plenty that becomes odd, especially during #MOAB (The Mother of All Bubbles). But that’s a uniquely American #behavioral thing…
And I think that panicked behavior will finally “terminate” with a Neil Howe type “Unravelling” that many will not be able to withstand like my 27 LONG Asset Allocations have while being “bearish” on the US economic Cycle’s current reality.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.39-4.67% (bearish)
UST 10yr Yield 4.21-4.53% (bearish)
UST 2yr Yield 4.55-5.04% (bearish)
High Yield (HYG) 74.12-76.11 (bearish)
SPX 4 (neutral)
NASDAQ 13,899-14,337 (bullish)
RUT 1 (bearish)
Tech (XLK) 183-187 (bullish)
Energy (XLE) 82.95-85.60 (bearish)
Utilities (XLU) 61.45-63.72 (bullish)
Shanghai Comp 3006-3065 (bearish)
BSE Sensex (India) 65,746-69,001 (bullish)
VIX 12.25-15.62 (neutral)
USD 102.65-104.40 (neutral)
EUR/USD 1.081-1.099 (neutral)
USD/YEN 145.71-150.28 (bearish)
GBP/USD 1.245-1.275 (bullish)
Oil (WTI) 72.77-78.38 (bearish)
Oil (Brent) 76.82-82.91 (bearish)
Nat Gas 2.62-3.05 (bearish)
Gold 2001-2105 (bullish)
Copper 3.71-3.93 (bearish)
Uranium (URA) 28.01-29.73 (bullish)
Bitcoin 37,345-42,166 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
