Below is a brief excerpt transcribed from today's edition of The Macro Show hosted by CEO Keith McCullough
Keith McCullough: The U.S. equity market rally started on a Chinese "non-retaliation" headline that the Macro tourists love because they do not have a process or any other choice. But then that was compounded by a very interesting, but not so shocking move in Italian risk. So one way to look at that is through the lens of Italian bond yields that you can see here.
McCullough: This is a real big move not only relative to itself, but relative to everything else as you can see here. This is what we call divergence.
When Germany was up 2 basis points and Italy was down 11, people read that there is less political risk as outgoing Italian Prime Minister Guiseppe Conte now has a mandate to form a new Italian government. That put free money or the FOMO back on the table due to Italian stocks racing to the upside, up 1.5% to 2% on the day.
That's why I'm looking to reshort certain European equities as they approach the top-end of the Hedgeye Risk Ranges this morning. Europe has been and remains in a bearish trend. So we are not going to chase that FOMO-fueled rabbit, but it does provide us an opportunity.
McCullough: We did not come into the day short SPYs, or anything in Europe for that matter including the currency. That provides us with yet another selling opportunity. Where else on the earth are you going to hear the words "selling opportunity"? Everybody on Wall Street loves talking about "buying opportunities," because they’re biased and only go one way.
What could possibly go wrong?
Inclusive of yesterday’s rally the Russell 2000 is still down -15.5% from where it was at last year's August peak.
What did the stocks actually do on their up day yesterday versus the prior day? Now you can see that it was an up day for stocks. Look at the volume though.
McCullough: The volume is down! Oh the FOMO! Clearly with volume down significantly versus the prior day, one month, three month and one year average, many investors don't believe this rally to lower highs.
So everyone on CNBC is saying "Buy stocks!" If you define stocks by the S&P 500, you'd know that in the last year, the S&P 500 has done nothing. But if you define stocks as the Russell, its down -15.5% in the past year. That's a disaster for stocks there!
Meanwhile, nobody wants to talk about Gold. Gold is up +25% in the past year. But nobody talks about that because we're the only ones that got the whole move right. We call this process #FullCycleInvesting. We’re different and we are proud of that.