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“It’s true. All of it. The Dark Side, the Jedi. They’re real.”

-Han Solo

I’m at a hockey tournament in Simsbury, CT this week and after yesterday’s game I took my son Jack to see Star Wars. Oh boy, am I glad I did! There’s nothing more important than teaching our children about truth, character, and principles.

Don’t worry, I’m not going to spoil the movie for those of you who haven’t seen it. I do, however, think it’s a great time of the year to reflect upon why something like “The Resistance” against The Establishment has always mattered in America.

I came to this country in the 1990s fundamentally believing in free-markets, liberty, and The American Dream. I know many of you still believe. And while we may feel like we’re outnumbered, The Force is strengthening in all of us. We can be the light. It’s real.

Back to the Global Macro Grind


“How do we blow it up? There’s always a way to do that.”

-Hans Solo

Yep. While the Fed is just one component of the dark side of central-market-planning, they’ve been causal in perpetuating the asset price bubbles that have been blowing up during my entire career.

The Resistance - Yellen Yoda cartoon 12.01.2015

#Bubbles, Jedi? “Transitory, they are supposed to be.”

Yep. Internet Bubble, Real-Estate Bubble, LBO Bubble, “Emerging Market” Bubble, Commodity Bubble, Credit Bubble, M&A Bubble… all “transitory.” Absolutely. I am certain they are certain about that.

I’ll move along and get back to today’s tape (and apologies in advance for leaving out FANG and more than a few other bubbles), but that’s effectively what the ZIRP created – a galaxy of “unintended consequences”, that were A) intended and B) real.

Creating the illusion of growth that is inflation expectations – i.e. the belief system that prices cannot go down – gave birth to every centrally-planned bubble I’ve ever attacked with live ammo from the short side.

The Resistance to Yield Chasing and Kinder Morgan, Hedgeye was.

Understanding what ideology underpinned many of these asset bubbles has been as critical in not trying to call “bottoms” and/or “reflations” of them inasmuch as mapping the economic cycle has been.

That’s why my (and Mr. Macro Market’s) main resistance to the perma-bull narratives this year has been where we are in the cycle. Until we get through at least Q2 of 2016, there is both a profit cycle and credit cycle to continue to price in.

If you think yesterday’s +1% no-volume “rally” changes our cycle call, think again. That was only the 15th up day in the last 37 and on total US Equity Market Volume (including dark pool) that was down -16% and -18% vs. the 1-month and 1-year averages.

Moreover, Jedi Signals this morning remind us that:

  1. #StrongDollar remains firmly intact (China has devalued Yuans -1.4% in the last month to a 5yr low)
  2. #Deflation in both Commodity and Credit Markets remains obvious (Oil -2.3% breaking $37, again)
  3. Russia is down another -1.5% (down -10% in the last month) after printing a recessionary PMI of 48.7 for DEC
  4. Dr. KOSPI (South Korea) is closing out DEC on a down note (-1.5% for the month) and remains bearish TREND
  5. Yield Spread (10yr Treasury Yield minus 2yr) just flattened to its YTD low

In the universe of correlating mathematical truths, there are few more consistent than the rate of change in the Yield Curve (flattening or steepening) that reflect the rate of change in the US economy.

It’s true. And it’s measurable. All of it.

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

UST 10yr Yield 2.16-2.32% (bearish)

SPX 2001-2093 (bearish)
RUT 1108--1169 (bearish)

NASDAQ 4 (neutral)

Nikkei 182 (neutral)

DAX 105 (neutral)

VIX 14.30-21.71 (bullish)
USD 97.41-99.40 (bullish)
EUR/USD 1.07-1.10 (bearish)
YEN 119.84-121.52 (neutral)
Oil (WTI) 34.83-38.29 (bearish)

Nat Gas 1.69-2.36 (bearish)

Gold 1049-1081 (bearish)
Copper 2.03-2.15 (bearish)

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

The Resistance - 12.30.15 EL chart