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Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets 8 10

 

Daily Market Data Dump: Wednesday - sector performance 8 10

 

Daily Market Data Dump: Wednesday - volume 8 10

 

Daily Market Data Dump: Wednesday - rates and spreads 8 10

 

Daily Market Data Dump: Wednesday - currencies 8 10

 

Daily Market Data Dump: Wednesday - commodities 8 10


Yields, Gold & Oil

Client Talking Points

YIELDS

Plenty of email traffic (after the move) on this topic, but will we see any emails this morning on the same as UST10YR Yields around the world A) fail @Hedgeye TREND resistance and B) fall in unison as Global #GrowthSlowing data continues? The UK 10YR is down -6 basis points to 0.52%. 

GOLD

Who said we weren’t bullish? On Gold – big time! Phelps wins #20 and #21 and Gold ramps another +1% to +28% year-to-date. Gold and Platinum are up +23% and +21% year-over-year, respectively (vs. TLT +11.9% and SPX +3.7%).

OIL

Oil fails (again) @Hedgeye TREND resistance as our Potomac Policy team reiterates their call on Saudi Supply. WTI is down -1.2% to $42.27 and there is no immediate-term support in the risk range to $39.12 (top end of the risk range = $43.70).

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/9/16 64% 3% 3% 9% 13% 8%
8/10/16 61% 3% 3% 10% 14% 9%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/9/16 64% 9% 9% 27% 39% 24%
8/10/16 61% 9% 9% 30% 42% 27%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration
GLD

See update on TLT/UUP.

TLT

Back to growth ... we’ll refrain from commenting on Friday’s headline non-farm payrolls number in isolation, and rather offer some perspective on the cyclical nature of the non-farm payroll data series (you’ve heard it before):

  • On a Y/Y rate of change basis, Non-Farm Payrolls peaked in February of 2015;
  • Once growth in this series peaks and rolls over, it doesn’t return and we move toward economic contraction on the margin. Read: Bullish for Long Bonds (TLT);

A print of +282K jobs was needed for July to avoid another Y/Y sequential deceleration in the series. NFP additions were +255K. While this beat expectations of +180K (which was cheered by just about every mainstream media outlet), the TREND in this series remains slow-moving, predictable, and most importantly past peak.

UUP

Our team’s macro process is both fundamental and top-down, and we get the top-down signals in real-time. The bottom-line is that both the CRB Commodities Index and crude oil have recently broken down from a quantitative risk management perspective. While this is a key factor contributing to our recent addition of the PowerShares DB US Dollar Index Bullish Fund (UUP), it also signals that TIP does not have as much upside as we thought. As Keith McCullough wrote to subscribers this week:

 

“Changing my mind on longer-term longs has happened infrequently this year, but it should happen. That’s how the game goes.”

Three for the Road

QUOTE OF THE DAY

"If you don't have confidence, you'll always find a way not to win."

-Carl Lewis

STAT OF THE DAY

Only about 3% of the 11 million containers that arrive at U.S. ports are screened with X-rays.


CHART OF THE DAY: The Widely Watched Widow-Maker (for Long Bond Bears)

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.

 

"... But, but… “they’re expensive” (Old Wall PM speak for I didn’t and don’t own them) and “eventually” the bubble in bonds “has to pop” (but in “stocks”, never – always room to go higher)…

 

That’s what’s been filling up my inbox for the past few weeks. And that’s primarily because long-term bond yields, globally, bounced off their all-time lows. The widely watched widow-maker (for Long Bond Bears) – Japanese Government Bonds – sold off 22 basis points!" 

 

CHART OF THE DAY: The Widely Watched Widow-Maker (for Long Bond Bears) - 08.10.16 chart


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 80.37%
  • SHORT SIGNALS 78.32%

Golden Opportunity

“We urge change.”

-Benoit Mandelbrot

 

I’m up in the homeland this week. This time of year is always a wonderful opportunity to spend time with my wife and kids. Selfishly, I do from time to time get to sneak away for some fishing and fractals. Reading about fractals fascinates me as much as the fish do.

 

The aforementioned quote came from the founding father of Fractal Geometry, Benoit Mandelbrot, in October of 2008. Fortunately, for all of us, the establishment in our profession has not yet heeded his advice. This presents us with the golden opportunity of change.

 

As Mandelbrot wrote in The Misbehavior of Markets, “Financial economics, as a discipline, is where chemistry was in the 16th century: a messy compendium of proven know-how, misty folk wisdom, unexamined assumptions, and grandiose speculation.”

 

Golden Opportunity - Growth cartoon 05.19.2015

 

Back to the Global Macro Grind

 

If everyone’s already figured it all out, why haven’t they been ultra-long both duration and Gold for the last year? “All-time highs” in SPYs are fun to navel-gaze at, but reality is that on a year-over-year basis:

 

  1. Gold is up +23.2%
  2. Extended Duration Bond (EDV) is up +18.0%
  3. The Long Bond (TLT) is up +12.1%
  4. SP500 is up +3.7%

 

Yes. I know. There are some very bond-like components of the SP500 that have crushed it more than TLT has (Utilities (XLU) and REITS (RMZ Index) are +14-15% year-over-year, respectively), but … seriously, Gold has been going all power-law on the bears.

 

“Examine price records more closely… and you typically find a different kind of distribution than the bell curve: the tails do not become imperceptible but follow a power law. These are common in nature.” –Mandelbrot, The Misbehavior of Markets (pg 13)

 

Do your returns in the last year look more like equity beta than they do the power-law thing embedded in the Phelps Gold count? He won #21 and #22 last night. In fishing speak, that dude has ripped some serious lip!

 

Since July of 2015 (Global Equity Bubble Top), it’s been a Golden Opportunity to invest in Global #GrowthSlowing.

 

When both local (US GDP has slowed from 3% to 1%) and global growth are slowing, long-term bond yields fall. Then … central-market-planners try to make them fall further, in hopes that the illusion of growth (“stocks” in devalued currencies) fools you.

 

All the while, those who are long either duration and/or safe-yields get paid, taking on much less portfolio volatility.

 

But, but… “they’re expensive” (Old Wall PM speak for I didn’t and don’t own them) and “eventually” the bubble in bonds “has to pop” (but in “stocks”, never – always room to go higher)…

 

That’s what’s been filling up my inbox for the past few weeks. And that’s primarily because long-term bond yields, globally, bounced off their all-time lows. The widely watched widow-maker (for Long Bond Bears) – Japanese Government Bonds – sold off 22 basis points!

 

That’s in yield terms. But what does this immediate-term TRADE higher (in yields mean)?

 

  1. That growth is back, baby! (???)
  2. That a fiscal bazooka strapped to a Qe5 Heli-Ben might work?
  3. That what crashes (yields) eventually bounces, for a trade?

 

While #1 is what we continue to track like a bear (like in 2013 when our call on US #GrowthAccelerating had us bearish on both the Long Bond and Gold), it’s showing nothing but signs of TRENDING (multi-quarter cycle research) growth slowing.

 

When it comes to #2, there’s always a chance! So we’ll have to see about that (Krugman is sooo excited!). Meanwhile reason #3 is the winning answer, until Mr. Macro Market goes all fractal on us and signals otherwise.

 

On that score, here are some @Hedgeye intermediate-term TREND signal levels to watch:

 

  1. US 10yr Yield TREND = +1.87%
  2. Japan 10yr Yield TREND = +0.03%
  3. German 10yr Yield TREND = +0.24%
  4. UK 10yr Yield TREND = +1.39%

 

That last one (UK 10yr Gilts) is conspicuously kept out of the email chain on how “this is it… look at JGBs…” and that’s mainly because it doesn’t corroborate the view that “bonds yields can’t go lower.” Today alone the UK 10yr Yield is down 6 basis points to +0.52%

 

Oh, and US, German, and Japanese 10yr Yields are all lower too this morning to +1.54%, -0.10%, and -0.11%, respectively.

 

So if you nailed it (instead of being nailed for the last year shorting “expensive” bonds and their proxies) and shorted JGBs, Bunds, and Treasuries at the all-time lows in yields, I say you book those gains before the Gold Bond Bulls run you over.

 

We’re not yet Merrill’s thundering herd of stock chart chasers, but we’re a growing community of longer-term investors who crush it when growth slows. We continue to urge you to understand this causal factor and change your asset allocation accordingly.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.44-1.60%

SPX 2155-2189

RMZ 1

VIX 11.01-14.99
USD 94.80-97.00

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Golden Opportunity - 08.10.16 chart


JT TAYLOR: Capital Brief

JT TAYLOR:  Capital Brief - JT   Potomac banner 2

“The bud of victory is always in the truth.”

-Benjamin Harrison

 

A PARTY DIVIDING?: Following one of his campaign’s worst weeks yet, Donald Trump claims he won’t change his strategy or alter his temperament even slightly. His Second Amendment comments were beyond the pale - overshadowing yet another headline on Hillary Clinton’s State Department emails and influence from the Clinton Foundation - and will likely cost him more party members and donors as some are now making their support of Hillary Clinton very public. The list continues to grow - this time including ME Senator Susan Collins saying she would not vote for Trump. In addition to Collins, and other high-profile former Bush Administration defections, a letter signed by 50 senior Republican national security officials warned that a Trump presidency would “risk our country’s national security and well-being.”  

 

TRUMP ECON 101: Amid protesters’ interruptions, Trump’s economic speech to the Detroit Economic Club was a mix of the good, the bad, and the ugly. The plan stitched together old ideas from the left and the right, including a large dose of tax cuts mixed with outdated protectionism, reformed conservative social policy and a deregulation plan that would make Wall Street cheer. Will the unusual mix of policy captivate those outside of Trump’s constituencies and stall his recent slide in the polls and recapture the momentum that led him to the nomination? Clinton is expected to lay out her rebuttal later this afternoon.

 

UNANSWERED QUESTIONS: It’s hard to dismiss the fact that Clinton is leading by double digits in most national polls and now with just 90 days until election day, Trump still has not spent a dime on television advertising, even as Clinton continues to flood the airwaves with more than $50 million in ad spending. It's not for lack of money as the Trump campaign raised $80 million in July and finished the month with $37 million cash-on-hand. We’re stymied that he hasn’t tried to make up any lost ground not even posting during the Olympics as Clinton drops $5.5 million on prime time ads.

 

GIVE ME FIVE: Five candidates are now in the presidential race with Evan McMullin, a CIA veteran and former House Republican policy adviser, launching his independent bid amid angst over Trump and his policy agenda. McMullin, a longtime anti-Trump advocate, believes he has the funding ties and conservative support he needs to be competitive in the race.  Many obstacles exist for third-party candidates entering the race at this juncture, but it’s still likely that McMullin will pull votes from Trump if he makes the ballot; couple that with votes for Gary Johnson and Trump’s disadvantage becomes even greater.

 

FREEZE SEPTEMBER SEQUEL WILL HAVE SIMILAR ENDING: NO AGREEMENT: Our Senior Energy Analyst Joe McMonigle shared his insight on why the target of freeze talk is sentiment, not production; and how Saudi Arabia and Iran will not be able to come to an agreement because the September timing is too soon. You can read his piece here.

 

PENTAGON OCO FUNDING TAKEN HOSTAGE IN WASHINGTON: Our Senior Defense Policy Advisor LtGen Emo Gardner shared his thoughts on Overseas Contingency Operations funding and how it has become a game of political football in the debate between increasing all federal spending or only defense spending. You can read his piece here.

 

NICE INCREASE IN REIMBURSEMENT FOR SNFS BUT FOCUS ON VALUE-BASED PROGRAM: Our Healthcare Policy Emily Evans shared her insight on the Skilled Nursing Facility Value-Based Purchasing Program’s increase in reimbursements and how it’s not a big negative in the short term, but does represent a challenge for providers. You can read her piece here.

 

COPYRIGHT OFFICE OBJECTS TO FCC SET-TOP PLAN: Our Telecommunications-Media Policy Analyst Paul Glenchur shared his insight on the Copyright Office’s legal doubts about the FCC plan to unleash retail set-top competition and why cable operators and STB vendors should benefit. You can read his piece here.

 

ISLAMIC TERROR: SHRINKING CALIPHATES, EXPANDING NARRATIVES: Our Geopolitical Analyst Dan Christman shared his insight on the shrinking caliphates in Iraq, Syria, and Libya, and the increase in jihadist adherent attacks around the globe. You can read his piece here.

 

 


The Macro Show with Keith McCullough and Christian Drake Replay | August 10, 2016

CLICK HERE to access the associated slides.

 

 

An audio-only replay of today's show is available here.


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