“Where has this Promethean revolution been hiding? Beyond the pale is a big part of the answer.”
- Steven Kotler
Given all of the newfound experts in Macro Proctology (picking bottoms), you’d think more people on ye Olde Wall would have nailed these higher-return ramps in Gold, Mining Stocks, Bitcoin, etc., eh?
Why did they miss it?
Kingdoms, establishments, etc. have been missing it for centuries. For those of you who haven’t yet empathized with my Irish attitude, recall all the baggage I bear: “In 1172, the English invaded Ireland, planted their flag, and built a great big fence…”
“That barrier, known as the English Pale – from pale meaning a stake or picket – defined the world for those invaders. Within their pale, all was safe, true, and good – a civilized land ruled by English law and institutions…”
“Beyond the pale, on the other hand, lay bad news. That’s where mayhem, murder, and madness resided” (Stealing Fire, pg 51)…
Or so they said it did. Beyond their beloved Fed printing and Fiscal spending, they say we’re going to get to the “other side” too…
Back to the Global Macro Grind…
Waking up to a $2,000 Gold price (yesterday) and almost $11,000 Bitcoin (all in devalued US Dollars, of course) will get the Irish blood flowing at the top of the risk management morning. May your coffee be strong and your Monday be short!
Being short the establishment’s currency (USD) and financial institutions (XLF) was a great position to have on against a Long Tech (XLK) and Gold Mining portfolio of #Quad3 Stahks! yesterday too:
A) Tech (XLK) was +1.6% on the day after signaling immediate-term TRADE #oversold on Friday
B) Financials (XLF) were down another -0.8% after signaling yet another lower-Cycle-high on Friday
Why did my long NASDAQ (QQQ) buy signal from Friday (on red) work?
A) NASDAQ Volatility (VXN) failed @Hedgeye TREND resistance of 33
B) QQQ’s almost always bounce off the low-end of their Risk Range
If you’re lucky enough to be Irish (and have an A/B Test like that in your #process), then you’re lucky enough!
And why did Gold and Silver correct overnight, laddie?
A) Both Gold and Silver corrected from the top-end of their respective @Hedgeye Risk Ranges
B) Because the 15-day inverse-correlation between USD and Gold got to -0.97 yesterday… and
… the USD Index is up a whopping +0.1% this morning. That A/B Test is plenty enough of a short-term explanation for me.
But, if the establishment says we’re in V-Shaped “recovery” for both the US economy and US Corporate profits, then why does the Bond Market (UST 10yr Yield = 0.60%), Gold, etc. not live within the asset allocations of their pales?
That’s easy. Especially with the ROC (rate of change) economic and profit data, there is no recovery in either:
A) The US Durable Goods #recession “bounced” to down -12.7% year-over-year in June (reported yesterday)
B) 38 of 66 Financials have reported an aggregate year-over-year EPS #recession of -38.1%
Oh, you cocky little Mucker, may the Good Lord take a liking to your Irish narrative, but not too soon!
You see, multiple establishment econs and strategists call the aforementioned economic and profitless recovery data points “better than expected” because they’re either:
A) Using sequential instead of year-over-year numbers (sequentials off the April lows mostly peaked in June)… and/or
B) “Better than” Old Wall Street’s backwards looking “forecasts” of what “earnings” were going to be in Q2
Recall, as an example, IBM has had “better than expected” EPS numbers in 20 of the last 20 quarters.
What matters most in all of our back-tests against both the big economic Quads (Growth & Inflation) and Micro Quads (i.e. The Profit Cycle) is the TRENDING rate of change in the year-over-year. That’s why we tell jokes about these Old Wall cats.
Or, as we Irish Troglodytes who are long Gold, living beyond their pale like to say, “may the cat eat you, and the devil eat the cat.”
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.57-0.65% (bearish)
SPX 3172-3278 (bullish)
RUT 1 (bearish)
NASDAQ 10,301-10,818 (bullish)
Tech (XLK) 104.56-110.26 (bullish)
Financials (XLF) 22.57-24.55 (bearish)
Shanghai Comp 3150-3411 (bullish)
VIX 23.08-31.01 (bearish)
USD 93.41-96.10 (bearish)
Oil (WTI) 39.84-42.12 (bullish)
Gold 1 (bullish)
Copper 2.86-2.97 (bullish)
Bitcoin 9429-10,901 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
