“I had grown up in an era of high volatility and learned that the best way to play it was to get a hold of a big move and ride it.”
-Ray Dalio
If you’ve been riding the bearish break-downs in both Global Equities and Global Bond Yields for the past month, you’ve had a great end to the first quarter. Riding a bear isn’t easy. But it’s just as fun as riding a bull!
As Dalio goes on to explain in Principles: “We used our indicators to catch shifting fundamentals and our technical trend-following filters to confirm that price movements were consistent with what the indicators were suggesting.” (pg 53)
Easier said than done? Certainly. So is selling a big bounce when the entire edifice of the Old Wall and its media is cheering it on.
Back to the Global Macro Grind…
Lots of big macro moves yesterday that are seeing follow-through on non-tariff “news” this morning:
- #ChinaSlowing confirmed by the Chinese “Beige Book” report
- Chinese Stocks dropped another -1.4% in Shanghai taking the draw-down to -12% since JAN
- Copper continues to break-down alongside other base metals… #ChinaSlowing
- Reflation’s Rollover getting priced into the UST 10yr Yield getting smoked to 2.76%
- Swiss 10yr Yield falls back to NEGATIVE -0.01% on #EuropeSlowing
- Oil failing to “breakout” beyond its JAN highs – WTI is down -1% this morning
- NASDAQ snapping @Hedgeye TREND support of 7134
- SP500 confirming our Bearish @Hedgeye TREND break-down signal from last Thursday
- Facebook (FB) in crash mode, down -22% from its FEB high = Bearish TREND @Hedgeye
- European Stocks down, hard, again with the DAX, CAC, IBEX, etc. all Bearish TREND @Hedgeye
Or is all of that because of Trump? C’mon. Let’s keep it real this morning.
It was easier to make our Reflation Rollover Part Deux call when:
- Most of Wall Street was shorting Treasuries on fears of “inflation breaking out” to the upside … and
- We were the only Independent Research firm on the same Street seeing #GlobalDivergences
But The Question this morning is whether we are starting to see that rollover in inflation expectations priced in?
- USA’s 10yr Yield has dropped toward the low-end of my 2.75-2.85% @Hedgeye Risk Range
- Germany’s 10yr Yield has dropped toward the low-end of my 0.46-0.59% @Hedgeye Risk Range
- France’s 10yr Yield has dropped toward the low-end of my 0.69-0.85% @Hedgeye Risk Range
“So”… inasmuch as the answer to selling the bounce in US and/or European stocks yesterday was YES, if inflation expectations are constantly being priced on the long-end of sovereign bond market yield curves, the answer there is partly YES.
Put another way, today is a good day to book some gains on the long side of European Sovereign Bonds and start covering some European Equity Shorts. No one ever went broke booking gains.
Like short-selling bounces though, covering for gains on draw-down days is all part of Riding A Bear. Not everyone you read has a better track record as a short seller than they do riding bulls. I do.
Do you mind me saying that?
I sincerely hope not. While I was able to get a hold of big bullish moves and ride them in the US stock market in 2003-2006, 2009-2010, 2013, and the most recent one, I didn’t build this firm as a perma bull. We started Hedgeye in early 2008 calling for a crash.
I’m not trying to be cocky or remind long-time subscribers of these facts. We actually have many new followers that only know me as a US growth bull. So I just wanted to keep the record straight. I have no problem going both ways.
I obviously get plenty of things wrong. But the biggest things I’ve had wrong over the course of an almost 20 year career staring at these damn screens is not listening to Mr. Market when it mattered most. I do not want to make that mistake this time.
Does this mean I’m calling for a crash?
Absolutely not. If and when I do, I’ll make that clear. Calling for corrections and/or Bearish @Hedgeye TRENDs (the list at the bottom of today’s note is long) is more a risk management exercise in how to not violate Warren Buffett’s Rule #1 of Investing:
“Don’t Lose Money.”
Reality is that most of us can ride bulls. Some of us know how to get off them (and know where to run). And very few of us immediately look for a bear to ride in the woods outside the arena.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.75-2.85% (bullish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 6 (bearish)
Nikkei 208 (bearish)
DAX 115 (bearish)
VIX 16.37-26.88 (bullish)
USD 88.60-90.27 (neutral)
Oil (WTI) 60.63-66.14 (bullish)
Nat Gas 2.50-2.83 (bearish)
Gold 1 (bullish)
Copper 2.93-3.05 (bearish)
AAPL 163.33-173.35 (bearish)
AMZN 1 (bullish)
FB 146-170 (bearish)
GOOGL (bearish)
NFLX 294-329 (bullish)
TSLA 273-310 (bearish)
Bitcoin 7 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
