“We must find time to stop and thank the people who make a difference in our lives.”
-John F. Kennedy
Since moving to America in the mid-1990s, I’ve tried to teach myself everything I can learn about American History. While I’m constantly learning what I did not know, it was always clear to me that the best American cultural tradition is Thanksgiving.
Thanksgiving isn’t about people’s politics or their religions. It’s not about casually tweeting thanks to people either. It’s about being genuinely grateful for all of the blessings in our lives. It’s a time to sincerely remind people why they’ve made a difference.
On behalf of my entire family @Hedgeye, I wanted to thank you for both your business and support this year. We couldn’t have built this growing company without you having an open mind and appreciation for our independent research process.
Back to the Global Macro Grind…
And thank you, Mr. Market! Gotta love getting some big oversold signals yesterday. Big? Yep. Big, not huge. Those immediate-term #oversold signals in Bearish @Hedgeye TREND views like Italian Stocks and Oil were big.
There was also an immediate-term #oversold signal in a Bullish @Hedgeye TREND view yesterday: Consumer Staples (XLP).
That’s the thing about having patience in your #process. If you wait for “Huge Selling Opportunities” (Early Look title on November 8th, 2018 with the SP500 having bounced back to 2813 and NASDAQ up at 7570), you’ll eventually get them.
At the following draw-down levels, you’ll get some immediate-term #oversold signals too:
- SP500 closing price of 2641 = -10.0% draw-down from its all-time SEP high
- NASDAQ closing price of 6908 = -14.8% draw-down from its all-time AUG high
- RUSSELL 2000 closing price of 1469 = -15.6% draw-down from its all-time AUG high
Obviously if you have friends who chased charts at those AUG-SEP highs, they’ll have to be up +11% (SPY) to +18% (IWM) from yesterday’s immediate-term #oversold signal to get back to break-even.
Instead of giving thanks, you’ll have to give them a “best of luck” with that…
Making calls at major market turns obviously isn’t easy. I’m genuinely grateful to my God for giving my team both the independence of mind and diligent process to have had the confidence to make the Quad 4 in Q4 call when we made it.
What’s less easy to understand is why those who missed it, chased charts at lower-highs again in early November?
No matter what you did and when, the most important question for a Risk Manager of one’s own (or other people’s) money this morning is where does the crowd chase the next bounce to?
As importantly, what if the #oversold bounce doesn’t really bounce?
Most people who actually hedge and/or use stop losses do so because either they or the firm they work for know that there’s a low probability of coming back from a 11-18% draw-down. Hence why people keep selling on bounces to lower-highs.
Now, if I was signaling immediate-term #oversold within a Bullish @Hedgeye TREND, you’d simply buy the damn dip.
But, the fundamental problem now is that mostly everything we bought the damn dips in from Q4 of 2016 to SEP of 2018 (Momentum, Tech, Consumer Discretionary, etc.) are now Bearish @Hedgeye TRENDs.
Q: What are the odds of something that’s down -15% being down -18-22% in the coming months if the 3 causal factors driving the draw-downs towards crashes (GROWTH, INFLATION, and PROFITS #slowing) don’t change?
A: high and rising
Q: What are the odds of coming back from down -22% (where you have to be up +28% from there) back to break-even?
A: low and falling
Therefore, on market corrections (i.e. they haven’t been dips), the best strategy to improve your portfolio’s position is to add to what we call Bullish @Hedgeye TRENDs while covering-some short exposure in Bearish @Hedgeye TRENDs when they’re oversold.
I publish all of these in our daily @Hedgeye Risk Ranges product so you can get all of this dispassionate and data driven information there in one place. I’ll list all of them for you this morning with their respective ranges and Bullish/Bearish TREND view in brackets.
Again, thank you for your business and ongoing support. Best of health and happiness to you and your family for Thanksgiving.
KM
UST 10yr Yield 3.01-3.14% (neutral)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 6 (bearish)
Utilities (XLU) 54.05-55.60 (bullish)
Consumer Staples (XLP) 54.88-57.11 (bullish)
REITS (VNQ) 78.96-81.36 (bullish)
Industrials (XLI) 68.41-73.50 (bearish)
Shanghai Comp 2 (bearish)
Nikkei 219 (bearish)
DAX 11045-11488 (bearish)
VIX 16.05-25.12 (bullish)
USD 95.75-97.60 (bullish)
EUR/USD 1.11-1.15 (bearish)
YEN 112.25-114.53 (bearish)
GBP/USD 1.26-1.30 (bearish)
Oil (WTI) 52.88-61.03 (bearish)
Nat Gas 3.72-5.03 (bullish)
Gold 1196-1234 (neutral)
Copper 2.65-2.83 (bearish)
AAPL 173.75-192.86 (bearish)
AMZN 1 (bearish)
FB 128-141 (bearish)
GOOGL 1006-1081 (bearish)
NFLX 259-297 (bearish)
TSLA 313-361 (bearish)
Bitcoin 4 (bearish)
Keith R. McCullough
Chief Executive Officer
