“I’m not getting out unless I’m eaten by a shark or unconscious.”
-Diana Nyad
For those of you who haven’t watched the incredible #behavioral story of Diana Nyad on Netflix, I highly recommend it. Alternatively, there’s an excellent chapter in The Right Call titled “Candor: The Language” where Sally Jenkins tells Nyad’s story too.
If you plan on trying to swim 110 miles from Havana to Key West, I’d say you should go with an objective coach who doesn’t mince words. On her coach, Bonnie Stoll, Nyad said “she’s clear and she’s strong and there’s not a lot of smooth talking around it.” (pg 93)
Don’t expect me to be everyone’s touchy-feely perma-anything coach either. When my signals change, I change. When the data #accelerates like the #5 ranked feature in our US GDP model does (Friday’s US Jobs Report), our numbers go up. While China continues to slow, USA is now heading for either a narrow #Quad4 or an outright #Quad1.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where the permanent #process is to help you preserve and protect your hard-earned capital so that you can A) avoid drawdowns and B) compound returns over time.
As a matter of #process, we like to start with what’s signaling in the Global Currency Market. Friday’s #Quad1 US Jobs report got us paid on the Long Side of the US Dollar:
- US Dollar Index was up another +0.5% last week to +1.7% in the last month = Bullish TRADE and TREND
- EUR/USD was down another -0.6% last week and continues to Break Bad = Bearish on both TRADE and TREND
- Japanese Yen was -0.1% vs. USD last week and also remains Bearish on both our TRADE and TREND durations
- GBP/USD corrected -0.5% towards the LOW-end of my Risk Range and is now Bearish TRADE, but Bullish TREND
- Aussie Dollar was -1.1% vs. USD last week to -3.7% in the last month and remains Bearish TRADE and TREND
- Norwegian Krone was -2.0% vs. USD last week to -2.7% in the last month and is also Bearish TRADE and TREND
Obviously when consensus was begging for 6 to 25 “Rate Cuts” (just throw another 19 in there for good storytelling measure, eh!) and the US LABOR DATA shocks them out of the water with a jobs report like that, the FX market read it as hawkish for USD.
Doves don’t swim with sharks. So the market did its Slowing CPI work for Powell on the Jobs report, Dis-inflating Commodities:
- CRB Commodities Index was dis-inflated another -2.1% last week, taking its TRENDING 3-month return to -5.1%
- Oil (WTI) dis-inflated a big -7.4% last week, breaking TRADE support, taking its 3-month TREND return to -11.0%
- Natural Gas deflated another -4.4% last week, taking its TRENDING Crash to -44.6% in the last 3 months
- Aluminum and Copper dis-inflated another -2.1% and -0.8%, respectively (both remain Bearish TRADE and TREND)
- Corn deflated another -0.8%, taking its 3-month drop to -5.8% and new Cycle Lows
On the margin, dis-inflating or deflating prices, are good for The People and their purchasing power. That’s why we’ve always called #Quad1 “Goldilocks” (since inventing The Quads) … but that’s only WHEN they aren’t getting fired and/or entering a recession.
While we had recessionary #Quad4s for what we call the “Monthly Quads” and we’ve seen plenty of SLOWING economic data in the last month (particularly on the Industrial Production & Manufacturing side where we entered a recession quarters ago!)…
The combination of:
A) Friday’s Jobs report (and Initial Jobless Claims)… and
B) Our Nowcast for a big #slowdown in the JAN CPI …
Gets our data driven US GDP Nowcast to either a narrow #Quad4 or an outright #Quad1.
I’ve written that twice now. So, if you’re a raging bear who chooses to stay in the water with #Quad1 Sharks while my SPY Signal continues to say “BULLISH TREND”, that’s up to you. I have 34 Long ETF Asset Allocations and no position in SPY.
That’s not to say that our Core Commodity and/or US Equity Shorts can’t keep working:
- Russell 2000 (IWM) was down another -0.8% last week (for the “YTD” crowd that’s -3.2% YTD)
- Energy Stocks (XLE) were down another -0.9% last week to -1.4% in the last month
- Real Estate (XLRE) stocks were down another -0.7% last week to -5.4% in the last month
It’s to say what I’m saying, which is there’s a big difference between a deep and a narrow #Quad4. And my signals to stay LONG Large Cap US Growth (XLG) and S&P Momentum (SPMO) front-ran Friday’s #Quad1 US Jobs report like a boss (or Bonnie Stoll!).
Our US Healthcare Longs (PINK and PJP) like this Quad Map too. Mainline Healthcare Stocks (XLV) were up another +2.0% last week to +2.3% in the last month. Our Core Asset Allocation to Insurance Stocks (IAK and KBWP) keep delivering alpha too.
On the International Equity front, Short China (EWH and CHIQ) vs. Long India (BSE Sensex up another +2.7% last week), Australia (All Ordinaries Index up another +1.9%) and the Netherlands (EWN) which is +5.7% in the last month keep delivering alpha as well.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.87-4.18% (bearish)
UST 2yr Yield 4.20-4.47% (bearish)
High Yield (HYG) 76.60-77.55 (neutral)
SPX 4 (bullish)
NASDAQ 15,175-15,830 (bullish)
RUT 1 (bearish)
Tech (XLK) 197-207 (bullish)
Insurance (IAK) 104.07-108.23 (bullish)
S&P Momentum (SPMO) 69.08-73.09 (bullish)
Shanghai Comp 2 (bearish)
BSE Sensex (India) 70,401-72,922 (bullish)
VIX 12.54-14.99 (bullish)
USD 103.01-104.49 (bullish)
EUR/USD 1.073-1.088 (bearish)
USD/YEN 146.31-148.98 (bullish)
GBP/USD 1.257-1.278 (bullish)
Oil (WTI) 71.19-76.05 (bearish)
Nat Gas 1.95-2.30 (bearish)
Gold 2006-2081 (bullish)
Copper 3.74-3.92 (bearish)
Uranium (URA) 29.53-32.33 (bullish)
MSFT 395-415 (bullish)
AAPL 179-191 (bearish)
AMZN 158-174 (bullish)
META 400-480 (bullish)
TSLA 170-206 (bearish)
NVDA 602-675 (bullish)
Bitcoin 41,002-43,990 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
