“Talk low, talk slow, and don’t say too much.”
-John Wayne
I won’t say too much about Trump this morning. I’ll leave that to the establishment’s experts. They’re so smart.
How about on US stocks? Why not lower? When I went to my biggest cash position of the year (on May 11th), the title of this note was “Why Not Higher?” That’s where I explained why the US stock market was signaling immediate-term TRADE overbought.
Don’t confuse today’s immediate-term TRADE oversold signal with a bearish intermediate-term TREND. I’ll happily invest in US #GrowthAccelerating exposures (again) while the political class causes consensus to sell them to us.
Back to the Global Macro Grind…
I know, I know. The guy is “going to get impeached” and the world as you know it is going to end. After the Nasdaq registered an all-time closing high of 6169 on Tuesday, US growth bears are back, baby (as of Wednesday?).
Btw, if he’s going to get impeached, wouldn’t that be bullish to everyone who hates him?
Oh yes. Everything has an oversold and an overbought price. That’s why we wake up at the top of the risk management morning waiting and watching for oversold and overbought signals. We don’t do the puke low after chasing high thing…
But, why not lower? First, let’s review the tapes from my May 11th Early Look on why not higher?
A) At 2405 on the SP500, it signals what we call immediate-term TRADE overbought
B) At 9.58 on the front-month VIX, US Equity Volatility signals immediate-term TRADE oversold
C) At 100.05 the US Dollar Index signals immediate-term TRADE overbought
D) At 2.44% the UST 10yr Bond Yield signals immediate-term TRADE overbought
E) Both Tech and Consumer Discretionary are both within 0.5% of signaling TRADE overbought
Cool. That wasn’t luck. That was process.
So, let’s grind through what the process says about points A, B, C, D, and E this morning:
A) At 2345 on the SP500, it signals what we call immediate-term TRADE oversold
B) At 16.11 on the front-month VIX, US Equity Volatility signals immediate-term TRADE overbought
C) At 97.25 the US Dollar Index, it signals immediate-term TRADE oversold
D) At 2.17% the UST 10yr Bond Yield, it signals immediate-term TRADE oversold
E) Both Tech and Consumer Discretionary are within 0.5% of signaling TRADE oversold
“Why?”
A: Because they are. It’s just math.
Isn’t it a relief to see someone who goes both ways in this business? In its classical definition, I am a liberal. But I’m also conservative. So you can call me whatever you want politically. But I am not joining any of their political parties.
Maybe I’ll start the Buy Low, Sell High Party? What would my party signal “buy” to you on this morning?
- FX: Buy the US Dollar (UUP) and/or short the Euro against it
- FIXED INCOME: Book some gains in some of those Municipal Bonds, and Short Some TLT
- US EQUITIES: Buy US Growth (IWO) and the SP500 (SPY) at the low-end of the risk range
How about some stock specific signals? Thematically, with a non-consensus forecast that real US GDP growth continues to accelerate here in Q2 and at a faster year-over-year rate in Q3, you also still want to be Long Rich People.
One way to express that is via high-end Real Estate, so you saw me issue a BUY signal in Real-Time Alerts on one of Josh Steiner and Christian Drake’s favorite US Housing Stocks yesterday, Realogy (RLGY).
Steiner’s favorite regional bank stock remains Citizens Financial (CFG) so I signaled immediate-term TRADE oversold in that one yesterday (when it was down -6% on the day) too.
Today, I’d say buy more Time Warner (TWX) as well because if you thought the deal risk was that “Trump blocks the deal based on his CNN views”, we highly doubt he meddles with the FCC now! AT&T is buying it at $107.50 and the stock closed at $96.75.
We have plenty of accurate, independent, and apolitical research ideas. But we haven’t had many buying opportunities in Q2. So, after a noisy market correction like this, we want to start moving faster again.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.17-2.43% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 5 (bullish)
VIX 10.91-16.11 (bearish)
USD 97.25-99.30 (bullish)
EUR/USD 1.08-1.11 (bearish)
Oil (WTI) 45.23-49.81 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
