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“Monday, October 9th, 1933. A gray day in a gray time.”

-Daniel James Brown

Looking for some inspiration ahead of our Q4 Global Macro Themes Call on Thursday, I started reading The Boys In The Boat last night. It’s the story of 9 Americans and their quest for Gold at the 1936 Olympics in Berlin.

While the aforementioned quote probably doesn’t inspire you to get out of bed this morning and chase another no-volume US stock market chart on green, it is Daniel James Brown’s opening sentence to an epic story. I love opening sentences.

I read #history in order to stay away from the Old Wall’s noise. In gray times of both US and Global #GrowthSlowing, history provides me calm and context. Without knowing where we’ve come from, how on earth could we know where we’re going?

Back to the Global Macro Grind

The 1 period was one of sustained #Deflation. While we’ve seen deflationary shocks in markets in both 2008 and 2015, we have not had to deal with it being pervasive. That’s why consensus continues to chase “reflation” rallies like yesterday’s.

The most basic thesis on the illusion of growth (artificially inflated asset prices) is that central planners around the world can offset the gravity of oversupply and secular slowing with currency devaluation.

A Gray Time - Deflation cartoon 02.24.2015

*Click here to join Keith LIVE on The Macro Show this morning at 9am ET.

But, after 600 or so “rate cuts”, globally… what you have is a lot of inventory (supply – see Chart of The Day from our pending Q4 Themes Call), slowing demand, and … well… graying times for long-term global growth forecasts.

Roger that. What’s next?

  1. More economic data confirming what macro markets have been pricing in for the last 3-6 months
  2. More lower-highs in stock markets around the world that remain in crash mode
  3. More hope for moarrr #cowbell on currency devaluation to resuscitate asset prices

Oh, and more pre-announcements like Caterpillar (CAT) and Dupont (DD), more #LateCycle jobs cuts (including pro-cyclical CEO firings), and more and more and more hope that this is all “priced in” after 77 months of a US economic expansion.

Knocking the #process pins down 1 by 1 this a.m., let’s do the data first:

  1. US non-manufacturing (Services) ISM slowed from its cycle-peak yesterday to 56.9 in SEP from 59.0 in AUG
  2. German Factory Orders slowed (again) sequentially by -1.8% in AUG after slowing -2.2% in the prior month
  3. Swiss CPI remained deflationary at -1.4% y/y in SEP vs. -1.4% y/y in AUG

Actually, the “prices” component of the US Services PMI moved into the recessionary zone (like Switzerland that has a negative -0.23% yield on a 10yr bond as a result) yesterday at 48.4 SEP vs. 50.9 in AUG.

New orders dropped -10% month-over-month in the US Services PMI too. So I signaled SELL the Dow Jones Industrial Index (DIA) on that in Real-time Alerts. #timestamped

Whether I’m an hour or a week early on another US equity SELL signal really doesn’t concern me. I’m as focused as I’ve ever been in my career – focused on the research and quantitative signaling #process that has been working vs. consensus gone bad.

Got Lower-Highs on decelerating volume days? Big time:

  1. Japan’s Nikkei signaled immediate-term TRADE overbought within its bearish TREND last night (short it)
  2. Hong Kong’s Hang Seng failed @Hedgeye TRADE resistance and has -6% immediate-term downside from the close
  3. Germany’s DAX is struggling to stay out of #crash mode (-20.5% since April and no support to 9145)

But no worries, Spanish stocks rallied yesterday on a -8% drop in its Services PMI print for SEP… because consensus thinks Spain’s GDP is going to ramp back up to +3% in 2016.


It’s ok to laugh. I have to at this hour, or I’d be right grumpy. The grayness of it all can be all so consuming if one is considering the data within Mr. Macro Market’s score.

Finally, on the effervescent hope of the aforementioned “What’s Next” #3:

  1. Dr. Copper doesn’t appear to be hearing #Cowbell this morning, dropping -7% (and still crashing)
  2. UST 10yr Yield back down to 2.05% continues to signal a series of secular lower-highs (range = 1.95-2.08%)
  3. Gold, the barbarous relic of ancient times, has held support with immediate-term upside to $1157

And that’s all I have to say about that.

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:

UST 10yr Yield 1.95-2.08% (bearish)

SPX 1 (bearish)
RUT 1070--1157 (bearish)
DAX 9 (bearish)
VIX 18.55-29.47 (bullish)
USD 95.25-96.65 (neutral)
EUR/USD 1.11-1.13 (neutral)
YEN 119.11-121.65 (bullish)
Oil (WTI) 44.08-47.91 (bearish)

Gold 1124-1157 (bullish)
Copper 2.22-2.38 (bearish)

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

A Gray Time - zz 10.06.15 chart