This note was originally published at 8am on January 12, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“It’s not the dreamers that are remembered, it’s the doers.”
This morning one of our top Global Macro leadership sources (ESPN) reports Tim Tebow is now America’s favorite athlete.
“The poll, calculated monthly, had the Denver Broncos quarterback ranked atop the list for the month of December. In the last 18 years of the ESPN Sports Poll only 11 different athletes (Michael Jordan, Tiger Woods, etc.) have been No. 1.” (ESPN.com)
I can already hear the mumbling from the weenie bins - ‘there goes that knucklehead hockey player talking about winners again’…
Yep – and I love it.
Back to the Global Macro Grind…
When it comes to playing at the highest level of Global Macro Risk Management, you really have to do it each and every day. Global Markets wait for no one.
We were on a Hedgeye Morning Call in mid-December and our Financials guru, Josh Steiner, said ‘look Keith, people are just exhausted out there.’ On a call in late December, our Gaming Ace, Todd Jordan, said ‘no one is picking up the phones – it’s dead.’
And I love that too.
If you want to drive absolute returns, consistently, in up and/or down markets, dealing with emotions, losses, and exhaustion is part of this profession. You have to suck up its adversity, absorb it, and turn it into something positive. The alternative to not playing this game confidently is deer-in-headlights.
When I watch Europe trade this morning, that’s exactly what I see. I see a lot of people reacting to what was 2011’s playbook. I see journalists claiming authority on what to do with European positions into and out of bond auctions. And I see one mother of a short squeeze in almost everything that was going down in November.
This Game of Risk is globally interconnected. You can’t anchor on 1 fear-factor and react. You have to work your tail off to proactively prepare for where the game is going next.
“Hard work beats talent when talent doesn’t work hard.”
-poster above Tebow’s bed growing up in Jacksonville, Florida
What’s going on in Global Macro markets across our Multi-factor, Multi-duration, model this morning?
- US Dollar Index remains King (up +11.5% since the end of QE2)
- US Equities remain in a Bullish Formation (bullish TRADE, TREND, and TAIL)
- SP500’s immediate-term TRADE range moves to 1277-1299 (so buy red closer to 1277, sell green closer to 1299)
- US Equity Volatility (VIX) is breaking down into a Bearish Formation (bearish TRADE, TREND, TAIL)
- Strong/Stable US Dollar = Lower Volatility (30-day inverse correlation between USD and VIX = -0.77%!)
- US Equity Volume Studies are starting to shift to the bullish side (up volume days on up moves)
- US Treasuries not yet confirming a breakout in US Growth expectations (10yr under my TREND line of 2.03%)
- US Yield Spread (10yr yields minus 2s) = 170 bps wide = 6 basis points wider than where it started 2012
- The 3-day range (lead indicator for VIX) in my model is only 44 points wide = very trade-able market vs OCT-NOV
- All 9 Sectors in our S&P Sector ETF model are bullish from an immediate-term TRADE perspective
- 7 of 9 Sectors in our S&P Sector ETF model are bullish from an intermediate-term TREND perspective
- 2 of 9 Sectors in our S&P Sectors ETF model are bearish from a long-term TAIL perspective (Financials and Basic Materials)
REST OF WORLD
- Chinese Equities = +3.5% for 2012 YTD and breaking out > immediate-term TRADE line support (Shanghai Composite)
- Chinese Consumer Inflation (CPI) falls to a 15-month low this morning at 4.1% = Deflating The Inflation
- Hang Seng (Hong Kong) = +3.6% YTD = bullish TREND
- Japan’s Nikkei is flashing a very negative divergence at down -0.8% for 2012 YTD = bearish TREND
- South Korean unemployment unchanged m/m at 3.1% for DEC and the KOSPI was up +1% overnight = bullish TREND
- India down -0.6% last night to 16,077 on the Sensex = bearish TREND
- Germany’s DAX is powering forward again this morning to +5.6% YTD = bullish TREND
- France’s CAC is up +1% this morning and has moved to bullish on our immediate-term TRADE duration
- Italian and Spanish stocks are getting squeezed after lower bond yields (vs last auction)
- Russia, Norway, Hungary – all markets that got spanked in 2011 = up and frustrating shorts
- Dr Copper breaking out > $3.45/lb TREND line support (this was new as of yesterday) = bearish TAIL up at $3.99/lb
- Gold is up +0.7% this morning and is trading in between a rock (TREND resistance = $1682) and TRADE support = $1633
That’s about ½ of what’s already hand-written in my notebook, every day, before 6AM.
What do we do with all of it? We hold ourselves accountable to every play we make, time-stamping every position, so that you can trust that the summary of all our hard work has conclusions that we have the convictions to act on.
Sometimes (like now in Europe), we have no positions. Sometimes we have many. But all of the time, we want to try to make this Tebow Time at Hedgeye Risk Management.
My immediate-term support and resistance ranges for Gold, Oil (Brent), EUR/USD, US Dollar Index, Shanghai Composite, and the SP500 are now $1633-1663, $111.89-115.99, $1.26-1.28, $80.64-81.73, 2235-2292, and 1277-1299, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer