“If he doesn’t show more respect for the truth most Americans may conclude he’s a fake President.”
-@WSJ
That was a beauty to wake up to this morning. I guess the Old Wall Journal boys needed to one-up the email you received from WSJ.com Editors within minutes of yesterday’s US stock market smack-down close that:
“Stocks Suffer Worst Day of Year as Confidence in Trump’s Agenda Wavers”
Joe Scarborough was quick to retweet that one. Mainstream Media has had that headline in the hopper since November the 9th. For whoever has built their portfolio on an anti-Trump-anti-data #accelerating political view, I hope they had a great day!
Back to the Global Macro Grind…
As investing legend, Ray Dalio asks: What is the truth? Do we have fake media or a fake President? Or do we simply have a bunch of analytically incompetent political hacks pumping out click-bait headlines about markets every day?
If you want to blame Trump for yesterday’s decline, have at it. Just don’t blame my “raise cash because the US stock market is at the top-end of its risk range” (last week) call on anything but my math. It knows no political ideology.
And today, you can blame Bannon or Gorsuch or Kim Young-Un on my buy’em back signal for the SPYs and QQQs too. With all of the political spew being flung around the aisles, someone has to objectively tell you where to buy and sell this thing!
I don’t have to win political arguments. All I have to do is help you win in market return space.
So what are the Top 3 things to buy on today’s US Equity Beta oversold signal?
- Financials (XLF) – signaled buy in Real-Time Alerts into the close yesterday, fyi
- Nasdaq and/or Tech (QQQ and XLK) is signaling buy pre-open this morning
- SP500 (SPY) is signaling buy pre-open this morning
Why?
A) Not only have we been waiting for a correction, but we were proactively prepared for one
B) Our non-consensus US growth view is an intermediate-term TREND call, not a day-trade
Yep, I get that:
- Many hedge funds were having a tough year prior to this correction (some are having a great year too)
- Many of them have to “take their gross exposure down” when 30-day price momentum changes
- Many of them have to start selling when 2-3 week price momentum “breaks”, trying to get ahead
No I’m not blaming the over-supply of under-performing managers. I would never do such a thing. I’d rather blame Canada, eh. But seriously. If you didn’t know why consensus long positions get un-wound in a hurry, now you know.
This, of course, has been happening across US Equity Sector Styles for years now:
- First going-out-of-business risk came during the 2015 Energy Crash
- Then (not long after) it was the correlated Industrial Recession correction and crash
- Concurrent to both of those crashes was the JUL 2015 to FEB 2016 crash in the Russell (-27%)
More recently, in both NOV and DEC 2016 it was the FANG un-wind vs. everyone and their brother going over-weight the Financials (after moving to under-weight at the all-time lows in bond yields in Q2/Q3).
And now what? Yep. Now consensus 30-day price momentum chasers have to be long Tech/FANG, etc. vs. short the Financials (XLF). You wonder why people are beating their heads against that Old Wall!
Unlike many who write about macro markets, I can and will be wrong (in a very public way – and I like that – it gets me up in the morning)… but imagine for a second that there’s some probability that I’m not…
If US growth, profits, and employment continue to accelerate from Q1 to Q2 to Q3, that is…
Then I just take advantage of selloffs in “Tech” (like we did in NOV/DEC) and get more aggressive telling you to buy the banks now. Instead of playing a 30-day marathon version of Pac-Man, I’ll just be long both sector styles and like that too.
If you don’t like it (or hate it like many in MSM do), just call all of the economic data and market returns fake, but still have it in you to blame yourself if your year (in portfolio performance terms) doesn’t play out like you wish your political view should.
Our immediate-term Global Macro Risk Ranges (intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.38-2.65% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 5 (bullish)
XOP 35.24-37.01 (bearish)
Nikkei 185 (bullish)
DAX 118 (bullish)
VIX 10.69-12.87 (bearish)
USD 99.25-102.20 (bullish)
EUR/USD 1.05-1.08 (bearish)
YEN 111.01-115.25 (bearish)
Oil (WTI) 47.09-49.84 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
