Risk Managing Bounces

“Nothing's harder than writing. There's no comparison. With directing, you can bounce a lot of ideas around.”
-Sylvester Stallone

Markets bounce around a lot too. Especially with Macro Tourists jumping from headline to headline (instead of from growth and inflation time series to time series), that can make directing clients every bit as hard as writing about it can be. 

This morning isn’t my first rodeo. I’m writing this Early Look from a car in Washington that’s en route to Pittsburgh after spending time with Institutional Investors in Baltimore yesterday as well.

Writing from the road is easier than writing about markets from home. There’s no comparison. Being on the road means we get to bounce a lot of ideas around with clients and get well rounded feedback on where we might be more right or wrong. 

Back to the Global Macro Grind… 

I never thought I’d be a writer. Neither did my first English Lit professor @Yale. She deemed by 1^st essay “ungradeable.” She was right. I had a lot of learning to do. I’m still learning how to write – so thanks for being a patient audience! 

Many of us are still learning how to buy things on red and sell them on green too. I try my best to help you buy things before they bounce. Ideally, then we can sell some on the bounces and/or #overbought signals. That’s one way to make money. 

One way to lose a lot of money is to chase Bearish @Hedgeye TRENDs after they bounce. There’s a behavioral component to why many people chase high and freak out (sell) lower. It’s called loss aversion. 

This morning, in the spirit of writing with brevity (still in car to airport!), here’s what I’m thinking across 20 big things in macro that may or may not be bouncing post the SP500 signaling immediate-term #oversold 24 hours ago: 

1. UST 10yr Yield bounces to 2.90% within its 2.87-2.98% @Hedgeye Risk Range = higher-lows, lower-highs
2. SP500’s @Hedgeye Risk Range = 2 post a text book bounce of the low-end of the range
3. Russell 2000 registered another all-time closing high yesterday = +10.7% YTD = pure play on US domestic growth
4. NASDAQ is still signaling higher-all-time-highs with an @Hedgeye Risk Range of 7
5. Energy Stocks (XLE) have an immediate-term risk range of 73.96-77.40 = Bullish TREND, but lower-highs  
6. REITS (VNQ) are a new addition to the long side as of last week with a @Hedgeye Risk Range of 78.09-80.00  
7. Industrials (XLI) got spanked for a -2.1% loss yesterday = down -3.2% YTD and remain a Top 3 Sector SHORT
8. Nikkei bounced +1.3% overnight within a @Hedgeye Risk Range of 226 = Neutral TREND @Hedgeye
9. DAX is bouncing +0.5% to lower-highs within a @Hedgeye Risk Range of 126 = Neutral TREND @Hedgeye
10. US Equity Volatility (VIX) almost tapped the top-end of its @Hedgeye Risk Range of 11.50-14.98 yesterday  
11. US Dollar (Index) remains a big Bullish @Hedgeye TREND breakout call with a risk range of 93.60-95.11
12. EUR/USD remains a Bearish @Hedgeye TREND call with a @Hedgeye Risk Range of 1.14-1.17 #EuropeSlowing
13. YEN (vs. USD) continues to oscillate within its @Hedgeye Risk Range of 109.10-110.92 and remains Neutral TREND
14. GBP/USD is hitting a 7 month low at $1.31-1.34 and remains a Bearish @Hedgeye TREND
15. Oil (WTI) is bouncing again but signaling a series of higher-lows and lower-highs like the UST 10yr Yield is  
16. Nat Gas is +0.5% this morning after tapping the low-end of its risk range yesterday 2.89-3.03 = Bullish TREND  
17. Gold is down again this morning within a @Hedgeye Risk Range of $1 and remains Bearish TREND  
18. Copper has no bounce (Chinese stocks barely bounced are getting smoked yesterday too) = Bearish TREND
19. Corn is trying to bounce this am but is confirming its new Bearish @Hedgeye TREND with a risk range of $3.50-3.80
20. Bitcoin bounced yesterday (after crashing to fresh YTD lows) and has a @Hedgeye Risk Range of  $5 

Yep, bulls and bears bounce a lot. Our risk management process is built to help you differentiate between immediate-term TRADEs and intermediate-term TRENDs while keeping long-term TAIL risks (to the upside and downside) in context. 

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

UST 10yr Yield 2.87-2.98% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 7 (bullish)
Energy (XLE) 73.96-77.40 (bullish)
REITS (VNQ) 78.09-80.00 (bullish)
Industrials (XLI) 73.03-74.88 (bearish)
Nikkei 226 (neutral)
DAX 126 (neutral)
VIX 11.50-14.98 (bearish)
USD 93.60-95.11 (bullish)
EUR/USD 1.14-1.17 (bearish)
YEN 109.10-110.92 (bearish)
GBP/USD 1.31-1.34 (bearish)
Oil (WTI) 64.60-67.13 (bullish)
Nat Gas 2.89-3.03 (bullish)
Gold 1 (bearish)
Copper 3.03-3.15 (bearish)
Corn 3.50-3.80 (bearish)
Bitcoin 5 (bearish)

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer