“Guess who’s back, back again, [Quad 2s] back, tell a friend”
-Eminem
In honor of Eminem’s daughter getting married (Hailie), we shall start with an Eminem quote: “Guess who’s back, back again, [Quad 2s] back, tell a friend.”
I do have to say, seeing the process through multiple cycles is becoming a large advantage. This time, I was ready for Quad 2. Here is what Keith used to say back in 2021 when we had Quad 2s: In Quad 2, you can tell me any story, and I will believe it; the crazier the story, the better [kind of like Disney where dreams come true]. Quad 4, on the other hand, is when I won’t believe any story you tell me and the financials matter.
Monthly Quad 2 started in May and ends in June.
But with this, if you are feeling FOMO, find the dips. If you were buying and have winners, ride them.
This is also when we should recognize that the K shaped economy (wealth gap) is about to get larger. Because the people with money are in stonks (which are making new all time highs) and the people without money watch as the price of things gets more expensive.
Back to the Global Macro Grind...
My first callout here has to be volume because I have never seen this much volume for such a sustained amount of time. 5/14 volume +16% (on a 1m basis, just under SPX ATH (all-time high), 5/15 +24% (ATH), 5/16 +46%, 5/17 +22%, 5/20 +13%, 5/21 +32% (ATH), 5/22 +9%. The whole time this has been happening VIX went to 11.86, the lowest since 11/25/2019. The VIX is now at 11.55! The last time VIX was this low was on 8/9/2018 (SPX pushed towards ATHs set on 1/26/2018 when the VIX went to 11.08). Just because I was curious (not saying we are going here), the all-time low of the VIX was 9.14 on 11/3/2017.
But that is a one-factor model; let’s do the check down of Teir1 Alpha data. Short-dated Vol coming down into next week (CHECK). Gamma, positive (CHECK). 1M realized vol below 3M realized vol, yup (CHECK). That’s bullish.
Here is the summary on NVDA: up +6.8% in after hours, Q1 beat modest, Q2 guide lower, 10 for 1 stock split. Felix added to our Top Stock Picks product mid-day yesterday. From Felix, “roll on for another quarter."
Here are some great stories for one month performance (crypto land), the best performers of 388 tickers: constitutionDAO $PEOPLE (+147%), Tellor TRB (+99%), HarryPotterObamaSonic10 $BITCOIN (+97%), Arcblock ABT (+87%), MAGA $TRUMP (+83%), Pepe $PEPE (+81%), Livepeer LPT (+62%), Paal AI $PAAL (+57%). 4 of these are memes. Like I said, Quad 2 is like Disney, where dreams come true. While you should use your own discretion within crypto, it’s important to understand the flow of money and that even the memes are back.
Let's get into today's opportunities (things that were up on a trending basis but down in the immediate term). This is where I would say let's give Macro a car in the Top Stock Picks product!
Copper Miners COPX, Junior Copper Miners COPJ, Copper CPER, Gold Miner GDMN, Transition Metals SETM, Argentina ARGT, Green Metals GMET, Junior Uranium Miners URNJ, Junior Gold Miners GDXJ, Peru EPU, Rare Earth CRIT, Junior Silver Miner SILJ, Disruptive Material DMAT, Nickel Miners NIKL, Gold Miners GDX, Uranium Miner URNM, Oil & Gas Services XES, Silver Miner SIL, Electrification KMET, Physical Silver SIVR, Silver SLV, Uranium URA, Greece GREK, Colombia GXG, Global Infrastructure GII.
Do you notice a trend? Metals. That makes, for me, the most important thing to watch today, Dr. Copper. So, while everyone will be talking about the NVDA stock split, we here at Hedgeye will be looking for Metals on sale.
The Chart of the Day shows the risk range for copper (yesterday's). If you want to know if and what Keith will be buying (of all those ETFs I listed), I highly recommend Portfolio Solutions. Copper was down -5% yesterday and is down another -1% this morning. Copper still has 3.1% downside risk (to the low end of the range). After something goes up +38% in 3 months, this type of volatility is normal, and patience is the key. This will be my first question to Keith on The Macro Show.
My second question will be on AMZN. Why? Because of all the Bullish trends, that one is closest to the Low-End of the Risk-Range. AND Our AI signals (HedgAI Signals) put a Buy on XRT. Our AI signals currently have four other positions, including a currency position, but you will have to sub to see those (they cost $15 a month and had a buy on NVDA on 4/19, when no one was talking about it #alpha).
Now that I've got you excited, let me take you back down. Quad 2 ends in June, it’s May 23rd. We then go towards a Quad 3, which is where tech does not perform very well. In fact, it’s NVDA’s worst Quad. But what do both Quads 2 and 3 have in common? Inflation accelerating, making Energy one of the best sectors on a blended basis for both quads (as well as some commodities). We break this down in 40 slides within our Macro Themes deck. Also note that inflation has easing base effects until July, then August and September have tougher comps, and then easing base effects resume in October. So don’t get too fired up, understand the environment you are in, understand that the environment is temporary, and stick to the process.
This is Hedgeye Risk Management, so we will risk manage and guide you through any changing environment.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 4.35-4.55% (bullish)
UST 2yr Yield 4.75-4.96% (bullish)
High Yield (HYG) 76.75-77.55 (bullish)
Investment Grade (LQD) 106.13-107.93 (bullish)
SPX 5 (bullish)
NASDAQ 16,313-16,999 (bullish)
RUT 2052-2123 (bullish)
Tech (XLK) 207-221 (bullish)
Insurance (IAK) 114.71-117.85 (bullish)
Energy (XLE) 91.75-95.39 (bullish)
Basic Materials (XLB) 90.89-92.83 (bullish)
Industrials (XLI) 124-126 (bullish)
Shanghai Comp 3110-3175 (bullish)
Nikkei 37,998-39,271 (bullish)
BSE Sensex (India) 72,667-75,751 (bullish)
DAX 18,623-18,869 (bullish)
VIX 11.29-13.78 (bearish)
USD 104.20-105.28 (bullish)
Oil (WTI) 77.47-80.19 (bullish)
Nat Gas 2.25-3.09 (bullish)
Gold 2 (bullish)
Copper 4.65-5.21 (bullish)
Silver (SLV) 28.60-33.26 (bullish)
NVDA 901-1,034 (bullish)
Bitcoin 63,774-72,092 (bullish)
Best of luck out there,
Ryan Ricci
