“The character ought to be known of these bold pioneers…”
-Ephraim Cutler
That’s the opening quote to what will be a great summer-time read, my favorite historian’s (David McCullough) latest book: The Pioneers – The Heroic Story of The Settlers Who Brought The American Ideal West.
In the Fed and Trump, we certainly have bold. History will decide what kind of character they’re imposing on the former free-market American economy that so many of us romanticize about. For those of you who are more politically inclined, no worries, Bush, Bernanke, Obama, and Yellen all left their marks too.
I have to admit, it’s weird. Really weird. Working on intermediate-term economic cycles by day… and reading about 18th century American ideals by night… then waking up to Mnuchin saying we’re “90% done” on a short-term China “deal” that could span what duration with what details, I do not know…
Back to the Global Macro Grind…
Clearly, I’m thinking too much this morning, so I’ll stop that and just give you the wood. Here are my Top 3 Macro immediate-term TRADE thoughts (published to subscribers paying for it at 6AM EST daily):
- #OVERSOLD – always nice to get a headline for Macro Tourists to latch onto post 3 straight down days for US “stocks” because there were plenty of immediate-term #oversold signals @Hedgeye on red yesterday; I went from 1 LONG and 14 SHORTS (Friday) to 5 LONGS, 7 SHORTS yesterday without Mnuchin giving me a buzz
- CHINA – if the insiders in Asia have any info on said “deal”, you’d think their stock markets would go up overnight … nope, Taiwan led losers -0.5%, Shanghai was -0.2%, and the KOSPI was flat – whatever this deal is, what if #ChinaSlowing continues? Copper bounced on the “news”, watching its TREND resistance of $2.85 today
- OIL – big bounce this morning which is nice as Energy Stocks (XOP) signaled immediate-term #oversold alongside Tech (XLK) yesterday – these are the Top 2 Sector Shorts for Quad 4, so I’ll re-load on both at lower-highs, hopefully, in the final 3 trading days of the month; that Consumer #ConfidenceSlowing report was ugly yesterday
And here are our Top 3 Macro Themes for our intermediate-term @Hedgeye TREND duration that I’ll flush out in full during our 11AM EST presentation LIVE @HedgeyeTV:
- USA Quad 4, Then 3: If we’ve learned anything in May and December, it’s that you don’t need a “recession” to lose a lot of money in stocks and credit. #Quad4 = risk off, period. With the least amount of fund managers positioning for a summertime swoon, we’ll detail why we still think the right play was to have “sold in May and gone away”… with the intention of buying back #Quad3 exposures later in the year.
- #EarningsRecession: Q) What do you get when you combine peak deceleration with peak dollar and cycle-peak compares for SPX sales and EPS growth? A) Definitely not not an earnings recession. In the presentation we’ll detail why we believe investor consensus has been lulled to sleep by top-down catalysts and remains too high on the outlook for earnings over the next two quarters. The Fed can print money, but it can’t print earnings.
- #PeakUSD: With the US economy continuing to decelerate, the Fed behind the curve on easing, and the RoW setting up for a near synchronous recovery in the back half of the year, the dollar’s days of dominion over the global currency market are numbered. In the presentation, we’ll detail why we believe the USD is setting up for a big move lower in 2H19E and beyond.
In not a lot of words, across 2 of my Top 3 Risk Management durations (TRADE and TREND), that’s a lot to think about while your competition is getting whipped into chasing high (last Thursday) and selling lower 3 days later.
Since not that many of our clients want to talk about my long-term TAIL risk duration these days, I’ll just keep those thoughts to myself and do my best to make and save money in my family’s portfolios all the while.
Mnuchin might think they’re “90% done”, but this part of the economic and market cycle is just getting started.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.98-2.13% (bearish)
SPX 2 (bullish)
RUT 1 (bearish)
Utilities (XLU) 59.37-61.49 (bullish)
REITS (VNQ) 88.47-91.76 (bullish)
Shanghai Comp 2 (bearish)
Nikkei 201 (bearish)
DAX 12036-12450 (bullish)
VIX 14.20-18.35 (neutral)
USD 95.13-96.93 (neutral)
EUR/USD 1.11-1.14 (bearish)
Oil (WTI) 50.12-59.78 (bearish)
Nat Gas 2.14-2.40 (bearish)
Gold 1 (bullish)
Copper 2.62-2.76 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
