Bullish Illusions

“Illusion is the first of all pleasures.”

-Oscar Wilde


Chinese stocks “ripped” +4.3% overnight on “speculation of opening a north-south link” that were tied to a PBOC’s “Governor comments” published on their website yesterday… but the comments ended up being from May 27th.




That headline was easily more entertaining than my favorite US domestic-equity-navel-gazer of the night: “Tesla posts its biggest loss in 10 quarters… but strong delivery guidance has the stock up +9%.”


Back to the Global Macro Grind


Into “earnings”, if you didn’t know that Tesla (TSLA) had crashed -25% from its 2014-2015 US Stock Market #Bubble top (see Hedgeye’s Macro Theme from Q4 of 2014 called #Bubbles for timing details), you’d have the illusion that whoever chased it at $280 is back to break-even.


It’s all about being driver-less and earnings-less, baby!


Bullish Illusions - Earnings cartoon 11.03.2015


To be fair, the SP500 OCT #HPAD (Hedgie-Perf-Anxiety-Disorder) Squeeze story wasn’t part of the earning-less one we outlined in calling the US Stock Market #Bubble what we called it before 62% of stocks in the Russell 3000 (which is 98% of stocks you could have bought) broke their 200-day Moving Monkey.


That epic OCT squeeze of +8.3% for the SPY was the best OCT since, well, Global Growth Slowed fastest last time (2011).


While our competition may have the illusion that we “got killed” in October, we’re big on the whole transparency thing and would like to submit today’s Chart of The Day, in #timestamped terms – every closed signal I issued in OCT.


Back to what’s really been killed:


  1. Inflation Expectations (see our #Deflation Theme from last year)
  2. Growth Expectations
  3. Earnings Expectations


Here’s an update on what I am sure every 2015 US GDP and “Earnings” bull nailed:


  1. Of the 500 companies in the SPY, 383 have reported Q3 Earnings (100% of them should have nailed that, so far)
  2. SP500 Sales Growth is currently down -5.2%
  3. SP500 Earnings Growth is currently down -4.3%
  4. Industrials Sector Sales Growth of -5.7% is worse than the SP500’s
  5. Financials Sector Earnings Growth of -6.2% is worse than the SP500’s


So, if you “back out Energy”, and stayed long the Industrials and Financials (which are both DOWN YTD in absolute return terms), you’re the strategist (or PM) who actually got nailed this year.


Are we competitive? Are you?


Obviously the score in this game matters. And while I do risk manage the immediate-term as aggressively and proactively as any strategist you’ll find (in Real-Time Alerts, which is where all my #timestamps live), the main reason for that is the obvious one – only someone who has never run money in their life wouldn’t buy/cover low and short/sell high, as Macro Themes get priced in.


Is both Global and US #GrowthSlowing further (in both Q415 and 1H16) from here priced in?


I don’t think so. And you can be damn sure that I’ll be held accountable to that view.


What’s most amazing to me at this stage of the game isn’t that we’re still doing what we do. It’s that the consensus that missed both #GrowthAccelerating in 2013 and #GrowthSlowing in 2015 is still doing what they do.


I guess the illusion in many people’s minds is that they never had any of this wrong, all along.


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


UST 10yr Yield 1.98-2.26% (bearish)

SPX 2027-2116 (bearish)
RUT 1140--1198 (bearish)

NASDAQ 4 (bullish)

Nikkei 181 (neutral)

DAX 108 (neutral)

VIX 13.85-19.21 (bullish)
USD 96.31-98.02 (bullish)
EUR/USD 1.08-1.11 (bearish)
YEN 120.10-121.60 (bearish)
Oil (WTI) 42.98-48.23 (bearish)

Nat Gas 2.08-2.38 (bearish)

Gold 1110-1150 (neutral)
Copper 2.29-2.39 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


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