“Did you hear about the rose that grew from a crack in the concrete?”
-Tupac Shakur
Did you hear about the broadening US stock market rally that happened yesterday? It grew from the worst ROC #slowdown (for Retail Sales) of The Cycle. Cool. Stay with The Flow’s signals and not how smart you think you are, “fundamentally.”
The aforementioned quote comes from Adam Grant’s latest #behavorial book: Hidden Potential, The Science of Achieving Greater Things.
He starts the book with Tupac’s lyrics and a story about a 1991 chess team from Harlem called the “Raging Rooks.”
These poor kids from the projects went up against the likes of Dalton, “an elite Prep School in New York City that had won 3 straight national titles… Dalton’s crown jewel was the child prodigy, Josh Waitzkin… no one saw the Rooks as contenders.”
But, “in just 2 years the poor kids from Harlem travelled the distance from novices to National Champions.”
How’d they beat the “smart”/rich kids? Their coach, Maurice Ashley, “reminded them that they could control only their decisions – not their results.” (pg 3)
Back to the Global Macro Grind…
You can study the coaching strategy of a 24yr old Jamaican Immigrant (Maurice Ashley) or of a Hall of Fame Coach of the San Francisco 49ers, Bill Walsh, and you’ll see what I see. You’ll “fundamentally” believe to:
Focus on mastering your behavior and #process, not on every short-term result.
The latter would be called what Annie Duke calls “resulting.” It doesn’t work in playing professional poker inasmuch as it doesn’t in trying to beat Bobby Fischer in chess.
What works is making dispassionate, rules-based, decisions that are designed to fade your feelings.
So let’s get back to that US Retail Sales Bomb:
A) It #slowed an epic -470 basis points from DEC to JAN
B) It’s ROC (rate of change) dropped to a measly +0.6% year-over-year
C) It was a new LOW for The Cycle
And you know what my US Stock Market #VASP (Volatility Adjusted Signaling Process) Signaled right after that was reported? A: Buy Stocks.
Can you get there, emotionally and intellectually? Why not? The Machine’s Flows don’t care how “smart” you are.
Where did the US Stock Market Signal further broadening for The Bulls?
A) 83% of Stocks in the SP500 were up an average of +1.6% on the day
B) This happened despite what everyone owns (Tech = XLK) being DOWN (small) on the day
C) My Russell 2000 @Hedgeye TREND Signal went Bullish for the 1st time in 26 months
‘Oh, but you said… and didn’t you say…’
Stop it. Not withstanding how much money we made for 26 months, shorting the Russell 2000 at EVERY lower-high within its Bearish @Hedgeye TREND signal, I don’t care what I said.
I only care about what I just did in my accounts.
And it’s not like I didn’t “say” anything leading you to what I was going to do next. Tuesday’s Early Look was titled “Broadening Bull Markets”, and I gave you mathematical specificity on what would change my positioning in IWM.
So what did I do after Tuesday?
A) I did what I always do: OODA Loops (Observe, Orient, Decide, and Act)
B) I stopped shorting the Russell 2000 (IWM) – there were no Real-Time Alerts to Short-More
C) Then I covered all of the IWM I had left as my intraday signals developed post the Retail Sales report
Could IWM break bad back to Bearish @Hedgeye TREND? A: TREND is now 204, so yes. Anything can and will happen.
But it hasn’t yet, so I don’t have to live in the past and hope for one of the great Bear Markets we’ve ever “called” to continue until I’m on the wrong side of the grass.
OODA Loopin? What else are we observing this morning that’s new?
A) Our BUY-more India (INDA and SMIN) Signal was accurate (India’s Stock Market is up for 4 straight days)
B) Our Breakout For Bond Yields Signal is being reiterated this morning, across The Curve (Short XLU)
C) Our Long Dollar, Long Stocks Signal is being reiterated this morning
Did you know that ever since the really smart people on the Old Wall that were begging for Rate Cuts didn’t get their cuts that US Stocks (SP500), really #liked that? Yep, do this OODA Loop:
A) US Dollar Index 30-day Correlation to SPX = +0.83
B) Bond Yields are breaking out (on my TRADE and TREND Signals) as SPX breaks out to new ATH
C) ATH = All-time Highs
So, instead of being “smart” about what could or “should” happen, why not execute alongside what IS happening?
Personally (and I don’t want to get emotional about this and cry on The Macro Show), I really appreciate a 5% Risk Free Return on a portion of my hard-earned capital.
If only The State and The Elites understood that about NO RATE CUTS. They’re too smart to see that long-term play.
“Did you hear about the rose that grew
From a crack in the concrete
Proving nature’s law is wrong it
Learned 2 walk without having feet
Funny it seems but keeping by its dreams
It learned 2 breathe fresh air.”
-Tupac Shakur
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.25-4.50% (bullish)
UST 10yr Yield 4.00-4.35% (bullish)
UST 2yr Yield 4.35-4.66% (bullish)
SPX 4 (bullish)
NASDAQ 15,504-16,067 (bullish)
RUT 1 (bullish)
Tech (XLK) 200-209 (bullish)
Insurance (IAK) 105.78-110.48 (bullish)
S&P Momentum (SPMO) 71.99-75.67 (bullish)
Healthcare (PINK) 29.01-30.22 (bullish)
Shanghai Comp 2 (bearish)
Nikkei 37,110-38,601 (bullish)
BSE Sensex (India) 71,045-72,522 (bullish)
DAX 16,850-17,198 (bullish)
VIX 12.74-15.85 (bearish)
USD 103.60-104.95 (bullish)
EUR/USD 1.070-1.081 (bearish)
USD/YEN 148.05-151.52 (bullish)
Oil (WTI) 72.31-79.52 (bullish)
Oil (Brent) 77.63-84.74 (bullish)
Nat Gas 1.47-1.93 (bearish)
Gold 1 (neutral)
Copper 3.64-3.81 (bearish)
MSFT 400-421 (bullish)
AAPL 181-188 (bearish)
AMZN 166-175 (bullish)
GOOGL 141-150 (bullish)
NVDA 675-750 (bullish)
Bitcoin 46,094-53,904 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
