Cartoon of the Day: Train Wreck

Cartoon of the Day: Train Wreck - VIX train wreck cartoon 02.11.2016


Rising global volatility and credit risk have dominated year-to-date performance. The VIX Volatility index, the implied volatility of S&P 500 index options, is up 54% this year as equity markets crash.

McCullough: Why Global Equity Markets Are Getting Eviscerated


In this brief excerpt of The Macro Show this morning, Hedgeye CEO Keith McCullough explains why global stock markets are crashing and why 10-year Treasury yields are hitting new all-time lows.

A Quick Look At The (Ugly) 2016 Global Equity Scorecard

A Quick Look At The (Ugly) 2016 Global Equity Scorecard - long helium cartoon 01.22.2016


If you were long equities, just about anywhere in the world, you're not having a good year. Below is a chart of the year-to-date performance of equity markets around the globe.


A Quick Look At The (Ugly) 2016 Global Equity Scorecard - global equity scorecard


Here's some added analysis from U.S. Macro analyst Christian Drake in today's Early Look:


"And with futures red and global equity & energy commodity markets continuing in crash mode overnight, the carnage score is currently (% chg off of 52wk high):


  • Brazil: -31.1%
  • China: -46.6%
  • France: -25.5%
  • Germany: -28.9%
  • Greece: -54.9%
  • India: -23.6%
  • Italy: -33.9%
  • Japan: -25%
  • Russia: -38.6%
  • Spain: -33.7%
  • USA (Russell 2k): -25.7%"


Keep your head up. It's getting ugly out there.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market?

Takeaway: A well-timed Macro research note from the Hedgeye vault. About stocks, Macro analyst Darius Dale asks if investors should "sell everything."

Editor's Note: Below is a particularly prescient Macro research note written by Hedgeye Senior Macro analyst Darius Dale and sent to institutional subscribers. It was published on July 20, 2015. The S&P 500 had just hit an all-time high and Dale laid out our bearish view on U.S. equities.


Well timed. The market ultimately tumbled -12% in August after that note was published. Dale's thinking is instructive for investors still wondering what is happening in the more recent stock selloff. We were and still are bearish.


[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - Bubble bear cartoon 09.26.2014  1


After nearly two months under water, the benchmark S&P 500 has finally made a new all-time high. While optically impressive, there are a myriad of quantitative signals underneath the hood that do not support chasing the market here.


Immediate-term TRADE Duration Risk: The SPX is at the top end of its immediate-term risk range of 2,091-2,130.


With nearly 2% downside, 0% upside and the VIX nearing the low end of our 11.29-14.59 immediate-term risk range, investors would do well to book gains in U.S. equities here (i.e. reduce gross and/or tighten net exposures). As Keith highlighted on today’s Macro Show, if 2,091 breaks, there’s no support to 2,035.


[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - SPX large


Intermediate-term TREND Duration Risk: Our Tactical Asset Class Rotation Model (TACRM) is now generating a “DECREASE Exposure” signal for U.S. equities. Currently, TACRM is generating a commensurate bearish signal for each of the six primary asset classes tracked by the model (slide 6).


Sell everything? As predicted in our previous refresh, the recent bullish-to-bearish reversals in Emerging Market Equities, Foreign Exchange and Commodities were, in fact, a harbinger for similar breakdowns across the Domestic and International Equities asset classes. Our recent decision to add SPY to the short side of our thematic investment conclusions confirm how we are thinking about this risk in real time. At the bare minimum, it implies investors would do well to reduce their gross exposure and/or tighten up their net exposure to global asset markets.  


CLICK HERE to learn more about TACRM, what these signals imply and how best to incorporate them into your investment process.


Long-term TAIL Duration Risk: Market breadth is broadly deteriorating and in dangerous territory.


One of the conventional “isms” of stock market analysis is that benchmark indices tend to peak very late into the economic cycle – well after broad-based signs of deterioration have emerged at the single-stock level.


In the face of a #LateCycle slowdown, benchmark indices are able to continue higher due to the fact that investors increasingly crowd into large-caps and/or stocks that have idiosyncratic growth opportunities that are less tethered to the [deteriorating] economic cycle, at the margins. Ultimately the cycle always prevails (see: 2000-2002 or 2007-2009), but positive absolute returns can be sourced from an increasingly narrow group of stocks and/or style factors well into the start of any given bear market.


[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - SPX 2000 02

Source: Bloomberg L.P.


[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - SPX 2007 09

Source: Bloomberg L.P.


There’s a number of ways to measure market breadth on a trending basis (e.g. % of stocks making new highs, % of stocks correcting, % of stocks crashing, etc.), but for the sake of simplicity we track the percentage of stocks below their respective 50-day and 200-day moving averages in the Russell 3000 Index – which, at covering about 98% of the investable public equity market, makes it the broadest measure of the U.S. stock market.


On this measure, broad U.S. equity market breadth is as poor as it has been at any local peak since 10/9/07 – the previous cycle’s all-time high closing price for the SPX – surpassing the deterioration we saw at the 5/21/15 high, which was very much on par with the 7/19/07 local peak.



[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - BMBI 7 20 15


October 9th, 2007:

[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - BMBI 10 9 07


May 21st, 2015:

[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - BMBI 5 21 15


July 19th, 2007:

[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - BMBI 7 19 07


While not useful as a timing indicator, the aforementioned deterioration does imply the duration and scope for prospective returns are substantially worse than many investors may assume given consensus expectations for the length and strength of the current economic cycle, which we can loosely infer from consensus expectations for U.S. monetary policy.


Checking back in with TACRM, we are seeing market leadership increasingly concentrated amongst the exact style factors we’d expect to outperform in the latter innings of an economic and market cycle: large-caps (defensive safety and dividends), healthcare (increased consumption and the ability to maintain pricing power during economic downturns) and growth (many biotech and new tech companies don’t have earnings to speak of, therefore investors don’t have to worry about earnings misses derailing the momentum of the respective charts).


[UNLOCKED] Flashback (7/20/2015): Dangerous New Highs for the Market? - 8


All told, we hope you find these quantitative signals helpful with respect to your individual investment mandate. As always, feel free to email us with questions.


Best of luck out there,




Darius Dale


Under 60 Seconds: Twitter's Earnings Report

Hedgeye highlights three key points from Twitter's lackluster quarter

courtesy of our Internet & Media analyst Hesham Shaaban.

2 Charts That Aren't "Transitory" & Defy Fed Storytelling

Takeaway: Despite the December rate hike, Long Bond yields are falling. Meanwhile, the Fed says commodity deflation is "transitory."

2 Charts That Aren't "Transitory" & Defy Fed Storytelling - yellen pic


As we write this post, Fed head Janet Yellen is testifying before Congress. We have been highlighting how the Fed's economic forecasts are consistently wrong and serially overoptimistic. 


Most importantly, the Fed continues to call everything they have missed in the past year "transitory." Below are two charts that absolutely aren't transitory no matter what the Fed says.


1. The Fed hiked rates in December and yet Long Bond yields have plunged from 2.27% back then to 1.57% today. That's a macro market signal that growth is slowing but the Fed says it's all good. Who is right?




2 Charts That Aren't "Transitory" & Defy Fed Storytelling - rate hike update


2. Yellen has consistently said that deflation is "transitory." The CRB Commodity index is down -33% from it's 2015 high.


Is that transitory?


2 Charts That Aren't "Transitory" & Defy Fed Storytelling - CRB Index


Bottom line: The Fed's credibility is crashing and macro market economic data continues to bear that out. Stick with the firm that called both #Deflation and #LowerForLonger (rates).

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 80.52%
  • SHORT SIGNALS 78.70%