“We sleep safely at night because rough men stand ready to visit violence on those who would harm us.”
-Winston Churchill
That’s one of my favorite quotes about our military and those who serve in the line of fire.
Last night was not unlike any other. Our bravest men and women stood ready and willing to give up their lives to defend our lives, liberties, and freedoms.
On behalf of everyone at Hedgeye Risk Management, I’d like to say thank you to all those who have and/or continue to serve their country. #VeteransDay2017
Back to the Global Macro Grind…
My job is far less brave. All I have to do is stand ready to buy the damn dips and sell the rips. We’re finally getting a 2-day-dipper to consider with US Equity Futures down double digits this morning.
What would get me to visit the bears and buyem?
- When either a major macro index or stock taps the low-end of the @Hedgeye Risk Range
- Currently the immediate-term @Hedgeye Risk Range for the SP500 = 2
- Currently the immediate-term @Hedgeye Risk Range for the Nadaq = 6
If you’re new to having my risk management #process help you with better decision making (read: time markets better than your emotions will), at the bottom of this rant are the Daily Risk Ranges for big macro factors:
A) You buy/cover at the low-end of the @Hedgeye Risk Range
B) You sell/short at the top-end of the @Hedgeye Risk Range
As you can see, during this “correction” in the US stock market (fresh all-time closing highs for the Nasdaq and SP500 were registered only 2 days ago), we registered SELLING opportunities in rate sensitive risk ranges like:
- Gold
- Utilities
- Treasury Bonds
Yep, there’s always something at the top-end of the risk range to sell somewhere. Not surprisingly, those sell/short signals in the ETFs that mimic the underlying (GLD, XLU, TLT, etc.) are all ways to be short of expectations for US #GrowthSlowing.
US growth isn’t slowing. It has been #accelerating with a reflationary kicker since September.
If you want to see the kick in that kicker, just pull up a chart of Oil:
- It broke out to signal Bullish TREND @Hedgeye in September
- Its immediate-term @Hedgeye Risk Range has only made higher-lows and higher-highs since
- It perpetuated a bearish-to-bullish TREND Phase Transition in Oil related equities
What is a Bullish Phase Transition @Hedgeye?
A) When the price of something goes from bearish-to-bullish on our TREND duration
B) When the volatility of that something goes from bullish-to-bearish on our TREND duration
Conversely, a Bearish Phase Transition @Hedgeye is:
A) When the price of something goes from bullish-to-bearish on our TREND duration
B) When the volatility of that something goes from bearish-to-bullish on our TREND duration
You’ll note the key to measuring and mapping macro risks and opportunities relies not only on the price of assets but the TRENDING volatility of those prices.
Wow. That’s too simple isn’t it?
Well, it’s a lot less simple than having your 3rd grader punch a simple-moving-monkey-average into a google search bar and come up with a broker level market “opinion”!
In a meeting with one of the world’s largest and best performing 2017 hedge funds yesterday, a senior macro analyst asked me how this could be so important? So I answered with a simple question – wasn’t the recent breakout in Oil important to get right?
If you’re going to build a “quantamental”, multi-duration, and multi-factor Global Macro Risk Management #process, you’re quantitative signals better be accurate leading indicators. Otherwise, you’re just wasting your time.
For me, the quantitative signaling #process is the primary back-check on our fundamental research #process.
That’s why I don’t have “favorite strategists and economists” on the Old Wall to who show me random “charts” and theories on what should be happening in markets. Instead, I rely exclusively on what Mr. Market says is actually happening.
God willing, I’ll stand ready here at my post every morning… waiting for the next bullish or bearish signal.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.29-2.42% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
XOP 33.56-37.59 (bullish)
RMZ 1130-1180 (bearish)
Nikkei 220 (bullish)
DAX 13089-13590 (bullish)
VIX 9.05-11.34 (bearish)
USD 93.89-95.05 (bullish)
EUR/USD 1.15-1.17 (bearish)
YEN 113.01-114.63 (bearish)
GBP/USD 1.30-1.32 (bullish)
Oil (WTI) 53.59-58.48 (bullish)
Nat Gas 2.90-3.28 (bullish)
Gold 1 (bearish)
Copper 3.07-3.21 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
