“I grew up in East Tennessee, and everybody knew everybody’s business.”
- Kenney Chesney
I spent the last week in the Smoky Mountains of Tennessee where nobody knew my business. It was a much needed break with my beautiful wife and four kids, who aren’t all little kids anymore!
Back to the Global Macro Grind…
As Laura was driving the final leg home yesterday (I was in the passenger seat for the first time all week, sending out Real-Time Alerts), we chatted briefly about the irony of it all – only 1-week ago (today), macro markets had quite a different look and “feel” to them.
I have plenty of passion for my family, firm, and #process… but I don’t risk manage my family’s hard earned money on feel. I do math.
The title of this morning’s Early Look is a fractal equation that I think a Moving Monkey would struggle with (because it’s not about chasing the surface area of a market’s price – it’s about the trending volatility of the price).
I’ll keep it short and sweet this morning mainly because I’m chill and not in the mood to rant. Here are my Top 3 Things this AM:
- VIX – my vol of vol TREND signal proved to be prescient again – on its short-term breakdown through TREND = 26.01, equity beta went to the moon… and on its breakout through 26.01, well, we saw how the new bull market hoodies were “feeling” at VIX 40; yesterday was a buy/cover day for US Equity Beta with SPX testing what was the low-end of my Risk Range (2995)
- RUSSELL – it was only 1-week ago that I said the risk of Phase 2 of a US stock market crash went straight up – 4 trading days later, my favorite US Equity Index Short (IWM) is right back in #crash mode, down -22.1% from its Cycle Peak – Financials (XLF) remain my fav Sector Short and I bought Utilities (XLU) on sale yesterday = #Quad3 in Q3 Long
- 10YR – after the mother of all-lower-highs for the UST 10yr Yield 1-week ago today, and failing @Hedgeye TRADE resistance of 0.92%, UST 10yr Yield took a look at 0.65% yesterday as Treasury Bond Vol (MOVE Index) came all the way back to 56 (vs. 62 last week); this is still bullish for Gold obviously, which was a layup buy 1-week ago today alongside Junk Bonds (JNK) Short
Reese Witherspoon grew up in Tennessee too. She said “I didn’t know what Louis Vuitton was. I had to order my prom outfit out of a catalog.” Love that. And love her name too – Reese McCullough is our youngest (she’s still little).
She’s growing up in Connecticut. She doesn’t know who Daddy’s Old Wall Twitter trolls are, yet. But she knows Tik Tok!
She also knows that today her Dad was up with our dog Boomer, at the top of the risk management morn. She doesn’t know about #Quad3 in Q3, yet. But it was nice to have Wells Fargo (WFC) remind Full Cycle Investors of that pending EPS Season reality yesterday too.
We did see bears in Tennessee. And I’ve lived through plenty of bear market bounces. But there’s never been a broad-based and trending (3 months or more) “bull market” in US stocks with the VIX in a trending Risk Range of 26-86. Never is a long time.
The 1-yr and 9-mth old bull markets in Treasuries and Gold, though? As John Muir might have said about Smoky Mountain tops, raising a family and firm, and being Full Cycle Investors, “doubly happy, however, is the man to whom lofty mountain tops are within reach.”
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.58-0.98% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
Healthcare (XLV) 96.67-102.12 (bullish)
Tech (XLK) 96.16-104.47 (bullish)
Utilities (XLU) 58.22-63.03 (bullish)
Financials (XLF) 22.34-25.11 (bearish)
VIX 28.03-44.44 (bullish)
USD 95.70-98.13 (bearish)
Oil (WTI) 33.07-40.56 (bearish)
Gold 1 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
