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MUST-SEE | 5 Key Charts Capturing Our Bearish Market View

Takeaway: From "sell everything" to "buy the dip" ... Wall Street storytelling is all over the map.

MUST-SEE | 5 Key Charts Capturing Our Bearish Market View - bounce cartoon 01.12.2016

 

We've been bearish on stocks since July and consistently bullish on the Long bond (TLT). In related news, we've been right. 

 

Below are five key charts this morning with analysis from Hedgeye CEO Keith McCullough.

 

"With the CRB Index closing at 162 yesterday (Oil sub $30, Copper $1.94, Nickel -5.7% on the day!, etc) macro markets are bouncing on those crashes bouncing, not Chinese trade data (Shanghai was -2.4%)," Hedgeye CEO Keith McCullough wrote in a note to subscribers earlier this morning. "#Deflation/Recession reports pending on Friday with USA’s PPI and Industrial Production reports."

 

Does this look "transitory" to you?

 

Take a look at copper...

 

meanwhile, Over in Bond Land...

 

"Not much of a bounce in 10yr Yield terms this morning = 2.14% with immediate-term downside to 2.06% this week if we continue to be right on that #Deflation data – looking for the JPM report tomorrow to be bearish on the margin too."

 

 

Pivoting to equity markets

 

Ford (F) is a good example of Old Wall storytelling that investors should buy on "gas prices are low" and "auto sales are good." Nope. That didn't work out so well.

  

Across the world...

 

No matter what you read from mainstream this morning, Chinese export/import data remains decisively bearish TREND. Take a look.

 

What about the rest of Asia? Funny you should ask...

 

We're sticking with our process that's helped our subscribers through these turbulent economic times.

As Keith Is Fond of saying, "Do macro or macro will do you."



RTA Live: January 13, 2016

 

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.65%
  • SHORT SIGNALS 78.63%

CHART OF THE DAY: Dear Fed, Sorry Deflation Is Not Transitory

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... After this 1-day bounce off the Russell 2000’s crash (20% decline from July) intraday low yesterday, and commodities “bouncing” off 5-13 year lows (CRB Commodities Index down -20% in the last 3 months alone – see 5-year non-“transitory” deflation chart for details), I’m looking forward to swimming with both Potomac and the non-peddled-rate-of-change data. I won’t drown our clients that way."

 

CHART OF THE DAY: Dear Fed, Sorry Deflation Is Not Transitory - 01.13.16 EL chart


Swimming With Potomac

“President Can’t Swim.”

-Lyndon Johnson

 

That’s what President Johnson said “if one morning I walked on top of the water across the Potomac River.”

 

For those of you still trying to decipher fact from fiction from Obama’s State of The Union address last night, there is a long history of US Presidents being straight up with people on certain matters.

 

Sometimes to a fault, I’m going to tell you like it is. We built our firm on the principles of transparency, accountability, and trust. And we’re super excited to have announced that we acquired another truth-telling firm, in D.C. based Potomac Research Group yesterday.

 

Swimming With Potomac - potomac

Click here to read more about our PRG acquisition.

 

Back to the Global Macro Grind

 

When the President of the United States feels compelled to use a mainstream media stage like #SOTU to suggest his economic critics are “peddling fiction”, you know we’re telling the truth about #Deflation and #GrowthSlowing into the end of his reign.

 

One of the main reasons why I’m so excited to partner with Potomac’s thought-leader in chief, Suzanne Clark, is that she calls it like it is too. She’s built a culture of truth-seekers at Potomac. And, together, we’re going to open Pandora’s box on people who get paid to lie to you.

 

“What’s the truth?”

 

It’s such a basic but differentiating question in this age of people from Wall Street to Washington doing “whatever it takes” to get themselves paid. It’s also the #1 question one of the world’s best macro investors (Ray Dalio) wakes up to every morning.

 

For anyone who has a 10th or 11th grade education in math (the new baseline for Americans being able to understand who is telling the truth), whether the US economy is accelerating or slowing, in rate of change terms, is a trivial matter.

 

Commonly called calculus, or the mathematical study of change, “in the same way that geometry is the study of a shape” (Wikipedia). Unlike political ideologies, rate-of-change is very easy to see on these things we call charts.

 

Whether it’s #Deflation or US #Recession data, you’ll see on Friday that both:

 

  1. US Producer Prices (PPI) continue to TREND (rate of change slowing) bearish
  2. US Industrial Production (IP) growth continues to TREND recessionary

 

To boil this down for who Obama calls the “folks” (are they people who don’t do math? or can only “rich” people do math?), there is a difference between:

 

A)  Growth Slowing from its cycle peak (these are called #LateCycle factors like employment, consumption, auto sales, etc.)

B)  And Recessionary Data – i.e. when the rate of change goes from slowing to negative year-over-year growth

 

Corporate profits, for example, are not only #LateCycle (they peak at the end of an economic cycle like they just did in Q2 of 2015), but critical to understand when they become recessionary.

 

CSX Corporation (CSX) is a $24B railroad company that, right before The Big O called me a peddler, said “with negative global growth and industrial market trends… our earnings are going to be lower in 2016 versus 2015.”

 

Sounds like some truth-telling to me.

 

A railroad is called an “industrial cyclical.” And I’ll be damned if the truth about a stock like CSX is that it peaked when the US Industrial growth cycle did in 2014.

 

An auto company (like Ford) is called a “consumer cyclical.” And they typically outperform industrial cyclicals at the end of an economic cycle. That’s why they’re called #LateCycle stocks.

 

If you bought CSX when Hedgeye went bullish on US #GrowthAccelerating (end of 2012) and sold it when the Industrial Cycle peaked, you made +105%. If you bought CSX “on valuation” (using the wrong #s) when the cycle peaked, you’re down -34%.

 

If you don’t do the macro truth about cycles, the cycle is going to do you.

 

What’s next? Earnings season:

 

  1. It started with an industrial cyclical, Alcoa (AA), hitting a fresh cycle low this week (down -60% from cycle peak in 2014)
  2. And continues with a #LateCycle financial (JPM) reporting tomorrow (still only -15% from its cycle peak in 2015)

 

After this 1-day bounce off the Russell 2000’s crash (20% decline from July) intraday low yesterday, and commodities “bouncing” off 5-13 year lows (CRB Commodities Index down -20% in the last 3 months alone – see 5-year non-“transitory” deflation chart for details), I’m looking forward to swimming with both Potomac and the non-peddled-rate-of-change data. I won’t drown our clients that way.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.06-2.20%

SPX 1
RUT 1010-1087

VIX 19.82-27.93
Oil (WTI) 29.45-34.21

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Swimming With Potomac - 01.13.16 EL chart


The Macro Show Replay | January 13, 2015

 


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