“I don’t need a man. But I’m happier with one. I like to have someone I can touch and squeeze and kiss.”
-Cher
I don’t need to be bullish. But I’m happier when I’m bullish. I like to watch what could have been me, kissed and touched with annoying “all-time high” Dow Bro headlines and squeezed like the fundamentalist pig-head I can be as a short-seller.
I’m in Los Angeles this morning and have spent the entire week meeting with institutional investors in California. Shockingly, there’s an even thicker partisanship (anti-Trump) tone to portfolio positioning down here.
And since I’ve been irritating passionate political types for the past few weeks reminding them that partisan bias should have no place in one’s rate-of-change-data-driven-process, I guess I just did it again this morning.
Back to the Global Macro Grind…
All-time, by our historical records of non-alternative facts, is a very long time. If you weren’t positioned Bullishly (or Bigly) Enough ahead of this YTD move in High Beta US Equity exposure, I think you probably just learned something.
If you were long enough (and added to your short positions in Gold, Long-term Bonds, etc.), congrats. Now you can sell-some so that you’re proactively prepared to buy-some back on the next pullback to the low-end of the risk range.
That’s right. I said sell-some. And if you don’t want to, don’t.
It’s just a short-term view inasmuch as one might have a view to sell-some because something is “overdone.” I don’t define overdone as “over-valued.” Valuation, as you know, is not a catalyst. Rates of change in growth and inflation are.
To each their own, but I overlay my fundamental (growth and inflation) views with a quantified risk range.
My “risk range” is not Democratic, Republican, or Irish. It’s a price/volume/volatility signal that I built so that I could remove the natural emotion I have as a human being. For the SP500, this is the 1st immediate-term TRADE overbought signal of 2017.
I can go on and on this morning and write you different things that say the same thing. Before I write the Early Look in the morning, I write a shorter, earlier Early Look (if you’d like to be on that distribution, ping our team).
This is what I wrote earlier this morning:
Freshly squeezed all-time high for the SP500 on both US growth and inflation data accelerating…
- ATH – all-time remains a long time and whether people want to call it “over-done” and/or “overvalued” (code for they aren’t long enough), I’ll simply call it the score. At 2303 the SP500 will finally signal immediate-term TRADE overbought – that is what it is ahead of a “sell-some on the news” of accelerating US GDP and Durable Goods reports tomorrow, but stay bullishly positioned
- VOLATILITY – 30-day realized volatility has been smashed to 6-7% - this is called the Pain Trade (for US stock market bears) and those who shorted too early in 2006-2007 know this pattern all too well (30D volatility got to as low as 5.3% in AUG-SEP 2016 – from SEP 2006 to FEB 2007 realized volatility never went above and 8-handle and that’s 6 straight months!)
- 10YR – nice ramp to 2.54% on the 10yr Yield and staying with the Gold and TLT shorts appears to be the right call, for now. Inasmuch as US stocks (SP500) are signaling immediate-term overbought this morning, at $1177 Gold and 2.58% UST 10YR, long-term bonds should signal immediate-term TRADE oversold within their bearish intermediate-term TREND
TOP 7 LONGS: US Dollar (UUP), SPY, Japanese Stocks (JPXN), Financials (XLF), Semis (SMH), Industrials (XLI), Russia (RSX)
TOP 6 SHORTS: Gold (GLD), EUR/USD, LT Treasuries (TLT), German Bunds, Japanese Yen (FXY), Turkey (TUR)
SP500 immediate-term risk range 2260-2303; UST 10yr Yield 2.38-2.58%
That’s it. Short and to the point. I don’t paint the fence on positioning. When I have a view, I #timestamp it. The 13 long/short ideas in today’s earlier Early Look are no different than the ones I’ve had all year.
Having been on the other side of short squeezes, I get how this might feel right now. As you all know, I get plenty of things wrong. I just hope it’s politically correct to be happy that I don’t have to feel that way this morning.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND Research Views in brackets) are now:
UST 10yr Yield 2.38-2.58% (bullish)
SPX 2260-2303 (bullish)
RUT 1355-1391 (bullish)
NASDAQ 5510-5665 (bullish)
XOP 40.24-41.99 (bullish)
RMZ 1142-1171 (neutral)
Nikkei 18780-19446 (bullish)
DAX 11515-11883 (bullish)
VIX 10.37-12.87 (bearish)
USD 99.70-102.50 (bullish)
EUR/USD 1.04-1.07 (bearish)
YEN 112.56-116.19 (bearish)
Oil (WTI) 51.80-53.97 (bullish)
Nat Gas 3.18-3.57 (bullish)
Gold 1177-1215 (bearish)
Copper 2.55-2.75 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
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