Lots of Longs!

“From a modern perspective, there are two sides to calculus.”
- Steven Strogatz

I’ve been getting up at 4:35AM EDT on most days this summer. I had room in my morning grind #process to add the extra 5 minutes, so I did. Now I don’t. There are too many things to measure and map that I’m either long (personally) or could be!

In rate of change terms, there are two ways to measure & map – differential calculus and integral calculus. “Differential calculus cuts complicated problems into infinitely many simpler pieces. Integral calculus puts the pieces back together again to solve the original problem.” -Infinite Powers, pg 89

A LOT of Old Wall folks don’t do it this way. That’s our competitive advantage. But that also means there’s more math to do every morning if I’m interested in being long anything in big asset classes like Commodities, Emerging Markets, and FX.

Back to the Global Macro Grind…

That’s why I’m going to keep this tight and to the point this morning. I have to run our newest product, The Call @Hedgeye (allows you to listen in on my Independent Research team’s morning meeting). That starts at 745AM. I’m running out of time!

Top 3 things in my Global Macro notebook this morning:

1. NASDAQ (long) – a freshly squeezed all-time closing high of 10,902 for the Composite Index yesterday post Nasdaq Volatility (VXN) failing @Hedgeye TREND resistance of 33 last week when the implied volatility PREMIUM on QQQ got bid up to +25% vs. 30-day realized (instead of getting long AAPL, consensus hedged the event, perpetuating the next leg higher for a core #Quad3 Long exposure)
2. US DOLLAR (short) – resumes its decline this morning, devalued another -0.3-0.4% vs. Euros and Swiss Francs and neither Spanish nor Italian Stahks! like that down -7.8% IBEX and -3.2% MIB Index, respectively, in the last month with plenty of our EM Long Exposures ripping to the upside – Taiwanese and Indonesian Stocks +1.6% and +1.4% overnight – we like both equity markets
3. 10YR (long bonds) – yields in Europe continues to collapse (France’s 10yr down to -0.23% this AM) and USA’s 1-day bounce in UST 10yr Yield pulls back to 0.54% after giving us another wonderful buying opportunity in rate sensitive #Quad3 Asset Allocations like REITS (XLRE) and Utes (XLU) yesterday – buy the damn dips in those alongside Tech (XLK)

How many minutes do you think it takes me to write that to our premium Institutional Research subscribers every morning? A: 9-12 minutes. It takes me 12-15 hours to do all the work that gets me to summarize particular points, however.

That’s the most important thing in fractal math too…

It’s not the Old Wall “average” of things … or the “valuation” of the thing. It’s the particular rate-of-change thing at a particular time in The Cycle that matters most.

That means that if:

A) You saw the particular USD SELL signal I got loud about in May … or
B) You saw the particular BUY Commodities, EM, FX, etc. signals in June … that
C) You’re probably to busy to read this every morning because you’re measuring and mapping all of that too!

There are particular things that moved within the aforementioned Top 3 Things. There are also particular things that moved away from those things that are impacting the flows of those things…

In no particular order, here’s a list of other particular observations from the last 24 hours of my notes:

1. SPY continues to signal Bullish @Hedgeye TREND with upside in my Risk Range to 3311 with VIX < 26
2. VIX < 26 means the vol of vol is bearish (Bullish for SPY), but its Risk Range has a higher cycle low of 23.50
3. On yesterday’s all-time QQQ highs, Total US Equity Volume #slowed -4% vs. its 1-month avg
4. US Equity Sector breadth continued to deteriorate (5 of top 11 sectors down on a +0.7% SPY day)
5. Implied Volatility DISCOUNT of -6% (vs. 30-day realized) for Financials (XLF) says stay short those
6. Treasury Bond Vol of 43 (MOVE Index) signaled buy more SHY, TLT, etc. on red yesterday
7. High Yield OAS Spread of +471bps over is < 500 over and still signaling stay away from JNK short, for now
8. Nikkei +1.7% recaptures @Hedgeye TREND support overnight (means volatility broke support)
9. KOSPI +1.3% continues to signal Bullish @Hedgeye TREND since late June
10. Long China positions (KWEB and KBA) signaled immediate-term TRADE #overbought yesterday (sold some)
11. Long Indonesia (IDX) signaled immediate-term TRADE #oversold yesterday (i.e. buy more)
12. Long Taiwan (EWT) at +6.7% in the last month vs. Short Singapore (EWS) at -5.2% in the last month
13. Short FTSE (down -4.3% in the last month) looks as good as Short US Financials (i.e. tasty good)
14. Short Spain, Italy, and Greece (Equity Markets) still confirmed by Bearish @Hedgeye TREND signals too
15. Long Russia (RSX), Norway (NORW), and Finland (EFNL) all up +0.8% this AM (vs. Spain down -0.8%)
16. Long Natural Gas (UNG) continues to rip higher, broadening our Long Commodities Inflation view
17. Short Corn (CORN) working at -0.8% this morning after signaling get out of Long position last week
18. Long Gold (GLD) continues to work alongside Long Silver (SLV) with Gold Vol (GVZ) breaking down again
19. Long Copper (CPER) and Rare Earths (REMX) continue to signal big time Bullish @Hedgeye TRENDs 
20. Long Bitcoin gets immediate-term upside upgraded to $12,096 in my Risk Range

So there are another 20 rate-of-change things (in 26 minutes) to think about instead of reading Old Wall headlines and talking points.

I do not care what they say or think about USD, “inflation”, or stahks! I only have so much time in my day to preserve, then compound (in that order), my money.

Immediate-term @Hedgeye Risk Range with TREND signal in brackets:

UST 10yr Yield 0.52-0.62% (bearish)
SPX 3 (bullish)
NASDAQ 10,410-11,002 (bullish)
Tech (XLK) 106.50-113.81 (bullish)
REITS (XLRE) 34.21-37.12 (bullish)
Utilities (XLU) 59.24-61.41 (bullish)
Financials (XLF) 23.15-24.58 (bearish)
Shanghai Comp 3170-3398 (bullish)
VIX 23.50-30.25 (bearish)
USD 92.51-95.05 (bearish)
Oil (WTI) 39.78-42.30 (bullish)
Nat Gas 1.80-2.17 (bullish)
Gold 1 (bullish)
Silver 22.40-25.28 (bullish)
Copper 2.86-2.96 (bullish)
Bitcoin 10,519-12,096 (bullish)

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer