“You have to run the film forward, run it back, run it forward again, and run it back again two or three more times…”
-David Halberstam 

How does Bill Belichick and his New England Patriots get it done? What’s his process? Where did it come from? The aforementioned quote comes from one of the best books ever written about one of the greatest coaches in NFL history: The Education of A Coach.

“Very early on, Bill Belichik, not surprisingly, started seeing the game through the eyes of a coach. Studying the game and scouting off film is exhausting, repetitive work, which can quickly turn into drudgery as there is no short-cut.” (pg 81)

That’s very much how I think about writing down market prices and contextualizing them within intermediate-term @Hedgeye Research TRENDs. There are no shortcuts in executing on the process.

Running The Tapes - billbelichick

Back to the Global Macro Grind…

It’s Macro Monday! For those of you who are new to our Global Macro Risk Management #process, Mondays are the days where we review last week’s macro market moves and contextualize them within @Hedgeye TRENDs.

First, in FX:

  1. It was another bad week for the US Dollar which dropped another -0.4% week-over-week and remains Bearish TREND @Hedgeye
  2. EUR/USD was up another +0.2% on the week and remains Bullish TREND @Hedgeye
  3. Japanese Yen rose another +0.7% vs. USD last week but is still Bearish TREND @Hedgeye, albeit barely
  4. British Pound appreciated another +0.9% vs. USD last week and remains Bullish TREND @Hedgeye
  5. Canadian Dollar corrected -0.3% vs. USD last week and is signaling Neutral TREND @Hedgeye

Then in Commodities:

  1. The CRB Commodities Index corrected -0.3% last week but remains Bullish TREND @Hedgeye
  2. Oil (WTI) corrected -1.4% last week but remains Bullish TREND @Hedgeye
  3. Copper corrected another -1.0% last week but remains Bullish TREND @Hedgeye
  4. Corn bounced +1.8% last week but remains Bearish TREND @Hedgeye
  5. Coffee was down another -0.8% and remains Bearish TREND @Hedgeye
  6. Sugar got pounded for another -6.6% loss and remains Bearish TREND @Hedgeye
  7. Rubber was down -1.5% last week and remains Bearish TREND @Hedgeye
  8. Nickel was flat at 0.0% last week and is signaling Neutral TREND @Hedgeye

And in sovereign rates space:

  1. UST 2yr Yield ramped another +7 basis points on the week to 2.06% and remains Bullish TREND @Hedgeye
  2. UST 10yr Yield broke out with a +11 basis point pop last week to 2.66% and remains Bullish TREND @Hedgeye
  3. French 10yr Yield was down -1 basis point last week to 0.84% and remains Bearish TREND @Hedgeye
  4. Germany’s 10yr Yield was down -1 basis point last week to 0.57% and is Neutral TREND @Hedgeye
  5. Italy’s 10yr Yield dropped -2 basis points last week to 1.96% and remains Bearish TREND @Hedgeye
  6. Greece’s 10yr Yield fell another -5 basis points last week to 3.85% and remains Bearish TREND @Hedgeye

In summary, some of the takeaways from FICC (FX, Fixed Income, and Commodities) are that:

A) Consensus positioning remains Bearish on Dollars and Bullish on Reflation (and market prices agree with that consensus)
B) “Reflation” is largely about Oil – most agriculture and “soft” markets remain Bearish TRENDs @Hedgeye
C) #GlobalDivergences remains a new Macro Theme @Hedgeye that you can see in both equity returns and sovereign bond yields

Oh no it didn’t. Did it take me this long into the note to review US Equities? Here’s the summary: all-time highs (again):

  1. SP500 up another +0.9% last week to close the week at another all-time high = Bullish TREND @Hedgeye
  2. Nasdaq was up another +1.0% last week to close the week at another all-time = Bullish TREND @Hedgeye
  3. Russell 2000 was up +0.4% last week to close the week at another all-time high = Bullish TREND @Hedgeye

In contrast, here’s how some of the major Global Equity markets did last week:

  1. UK’s FTSE was DOWN -0.6% last week but is a Bullish TREND @Hedgeye
  2. Swiss Stocks was DOWN -0.4% last week and remain Bearish TREND @Hedgeye
  3. German Stocks (DAX) were +1.4% last week and remain Bullish TREND @Hedgeye
  4. Australian Stocks were DOWN -0.9% last week and are a Neutral TREND @Hedgeye
  5. Hong Kong’s Hang Seng was up a big +2.7% last week and remains Bullish TREND @Hedgeye
  6. Nigerian Stocks were up another +5.1% last week and remain Bullish TREND @Hedgeye

Nigeria? You mean you’re not long Nigeria (+17.9% YTD) via the ramp in Oil’s reflation? Too bad. You could definitely charge 2 and 20 for generating cross asset class and country returns like that!

In all seriousness, unless I wrote down what market prices do, globally, every single day and week, how would I know what’s happening in Australia, Nigeria, or in Switzerland for that matter?

Should I be a Macro Tourist and just read what Old Wall Media notices on delay? Or should I just do my job running the price, volume, and volatility tapes instead of political ones? Congrats to the Patriots and Eagles coaching staffs on making it to the Super Bowl!

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:

UST 10yr Yield 2.49-2.66% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 7 (bullish)
DAX 13186-13454 (bullish)
USD 89.50-91.98 (bearish)
EUR/USD 1.20-1.23 (bullish)
YEN 109.71-112.18 (neutral)
GBP/USD 1.36-1.40 (bullish)
Oil (WTI) 61.90-64.89 (bullish)
Copper 3.18-3.25 (bullish) 

Best of luck out there this week,
KM 

Keith R. McCullough
Chief Executive Officer

Running The Tapes - 01.22.18 EL Chart