“The Patriot’s blood is the seed of freedom’s tree.”
-Thomas Campbell
O’ Tom Brady! Our home and native land. True patriot love, in all thy sons command. With glowing hearts, we see the rise – the true north strong and free!
No apologies for this Canadian’s rendition of a #Patriot song to Giants fans in CT. My 9 year old son Jack was jumping up and down on my bed last night after the most epic comeback in Super Bowl history.
What a game! And, btw, what a show by Lady Gaga (known in our house by our by youngest daughters as “Lady Mama”)!
Back to the Global Macro Grind…
Oh, and what a run on Friday for the US stock market after the best rate of change (month-over-month) acceleration in non-farm payrolls (+1.64%) in 23 months. It’s nice to not have #JobsSlowing again.
The Nasdaq clocked yet another all-time closing high on that at 5,666. The Financials ripped +2% (XLF). And mainstream financial media spent their entire day whining about headline “wage growth”, missing the entire point about the jobs report altogether.
As you can see in our Chart of The Day, a broad measure of “wage growth” that matters (Private Payroll wage growth for non-supervisory workers = 80% of workers) actually accelerated back to the cycle highs at of +2.9% growth (y/y NSA).
Riveting, I know. Can we go back to watching Lady Mama again?
While Friday’s ramp in US stocks was a lot of fun to watch (consensus clearly isn’t positioned Bullish Enough, yet), contextualizing that move within the week-over-week move was somewhat boring:
- SP500 closed +0.1% on the week, just shy (1 point) of its all-time closing high at +2.6% YTD
- Nasdaq closed +0.1% on the week and +5.3% YTD and at a new all-time closing high
- Healthcare Stocks (XLV) led gainers, +2.4% on the week at +3.6% YTD
- Basic Materials (XLB) led losers, correcting -1.4% on the week at +4.8% YTD
- US Equity Volatility (VIX) was +3.7% on the week, but remains in crash mode -21.9% YTD
Are you already up +2.6-5.3% YTD? Imagine you had a partisan portfolio that was betting on Trump being “volatile for stocks”? Oh boy, down -21.9% YTD and -50.4% in the last 3 months, the VIX is!
The other major focus of Old Wall media appears to be that the “Dollar is weak.” To me, that’s the equivalent of saying Tom Brady looked weak when down 28-3. It was only 1 month ago that the US Dollar was making a decade long high!
Everyone has an opinion from the cheap seats. Having been a long-term US Dollar bull since 2013, I’ll just say that you’d need to 1st break US Dollar Index TREND support of $97.11, then its long-term TAIL support of $94.05 for me to be concerned.
Yes, the strongest athletes and currencies have corrections. But they come back with a vengeance too.
From a sentiment perspective, here’s the latest positioning update on non-commercial CFTC futures & options:
- SP500 (Index + E-mini) net LONG position was only +3,587 last week to +62,759 contracts
- Russell 2000 net LONG position came in a big -21,798 last week to +54,446 contracts
- US Dollar net LONG position came in -1,874 contracts last week to +46,452 contracts
In other words, with 1-year z-scores of +0.45x and +1.25x, respectively, the SP500 and Russell 2000 net long positions are neither Bullish Enough, nor bubbly.
Since the 90-day correlation between the SP500 and USD is +0.76, can you imagine what the US stock market can do if the US Dollar holds TREND and TAIL levels of support and makes another #StrongDollar move from here?
After watching that Patriot comeback last night, I’m feeling pretty good about being long the long-term winners on pullbacks!
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.42-2.54% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 5 (bullish)
VIX 10.07-12.68 (bearish)
USD 99.10-101.25 (bullish)
EUR/USD 1.05-1.08 (bearish)
Oil (WTI) 52.56-54.31 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
