“Let him answer with facts and not with arguments.”
-Abraham Lincoln
The aforementioned quote came from a newbie congressman from the 7th District of Illinois by the name of Abraham Lincoln in 1847. He was taking President James Polk to task on the Mexican War.
Lincoln didn’t hold anything back, directly challenging President Polk “to establish whether the particular spot on which the blood of our citizens was so shed was or was not at the time on our own soil…”
“Let the President answer the interrogatories I proposed… let him answer fully, fairly, and candidly… let him remember he sits where Washington sat, and so remembering, let him answer as Washington would answer.” (Polk, pg 287)
Back to the Global Macro Grind…
While I’m in plenty of arguments about macro markets, being an independent research provider who is not beholden to any political party, brokerage, or bank, I don’t have the luxury of making my arguments without market-based facts.
That’s probably why Sunday and Monday are my favorite 2 work days of the week. That’s when my process provides time for a full review of weekly macro market moves within the context of intermediate-term TRENDs and long-term TAILs.
TRADEs, TRENDs, and TAILs…
Yep, for those of you who are new to following us: 3 weeks or less (TRADE), 3 months or more (TREND) and 3 years or less (TAIL) are my factual overlay durations for all macro-economic and global capital market rate-of-change data.
I can argue with market prices and reported data (especially if it’s a non-trending, one-off economic report or market move), but unless it’s from somewhere like the Chinese government, I usually can’t dismiss it as a non-fact.
Since market returns don’t lie (some people who aren’t generating them do), here were some of last week’s most important Global Macro market moves:
- US Dollar Index held long-term TAIL support of $92.11, closing +0.3% on the week at $93.49
- Commodities (CRB) Index failed @Hedgeye TREND resistance, -0.8% on the week at -6.1% YTD
- Oil (WTI) failed @Hedgeye TAIL resistance, correcting -0.3% on the week at -13.0% YTD
- Natural Gas continued to crash, -5.7% on the week to -21.9% YTD (bearish TAIL @Hedgeye)
- Gold corrected -0.8% just north of @Hedgeye TREND support at +8.5% YTD
- Soy (-5.6% week-over-week), Wheat (-5.5% w/w), and Corn (-1.8% w/w) remains bearish TREND
- US Equity Volatility (VIX) dropped another -2.5% on the week and remains in crash mode at -29% YTD
- SP500 added another +0.2% on the week, closing 1 point off its all-time high at +10.6% YTD
- US Financials (XLF) led SPX gainers at +1.9% on the week and +9.2% YTD (new bullish TREND)
- US Energy Stocks (XLE) led SPX losers at -1.2% on the week and -12.9% YTD (bearish TREND)
- UST 10yr Yield was down -3 basis points week-over-week to 2.26% (bullish TAIL; bearish TREND)
- Swiss 10yr Yield was down 11 basis points week-over-week to -0.13% (bearish TREND and TAIL)
- German Stocks (DAX) bounced +1.1% on the week to +7.1% YTD but remain a new bearish TREND
- French Stocks (CAC) bounced +1.4% on the week to +7.0% YTD but remain a new bearish TREND
- Italian Stock (MIB) led European Equity gainers +2.4% on the week to +14.0% YTD (still bullish TREND)
No, we didn’t nail all of those moves. That said, within the context of our intermediate-term Macro Themes @Hedgeye, a lot of it made sense to some of our current macro research arguments:
A) Reflation’s Rollover (Inflation #Slowing) continues to TREND and is broader based than just an Oil argument
B) Strong US Real Growth + Labor Market TRENDs are the offset to Reflation’s Rollover (bullish Financials)
C) Global Yields = Lower-For-Longer as European growth and inflation data continues to slow
As always, there are some market prices (facts) that do not agree with our current arguments:
- USD is bullish from a long-term TAIL perspective, but bearish on the TREND duration (94.26 USD Index resistance)
- Italian Stocks aren’t signaling bearish TREND like German and French stocks are
- Copper (+14.4% YTD) doesn’t look like Corn or the CRB Index, currently
So I can make a good argument that Italian Stocks (EWI) should mean revert (from here) and start to under-perform US growth stocks inasmuch as most Global “Value” exposures have. That’s how putting on a contrarian view starts.
But, to be clear, it’s a lot easier to win an argument like that when the market is already scoring the facts in our favor!
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.23-2.35% (neutral)
SPX 2 (bullish)
NASDAQ 6 (bullish)
DAX 12070-12364 (bearish)
VIX 9.31-10.82 (bearish)
USD 92.50-94.46 (neutral)
Oil (WTI) 46.55-50.36 (bearish)
Nat Gas 2.71-2.93 (bearish)
Copper 2.77-2.91 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
