Below is a brief excerpt transcribed from Tuesday's edition of The Macro Show hosted by Hedgeye CEO Keith McCullough.

McCullough: #Quad3 Stagflation = Long Tech - 8 4 2020 11 23 03 AM

The Nasdaq is something to be long of in Quad 3 because that is when you have economic #stagflation.

Stagflation is when you have cyclical sectors like hotels, restaurants, and all these crappy stocks you could have chased higher in June continue to go lower in the face of the Nasdaq making new all-time highs.

Timestamp that.

The Nasdaq hit a new all-time closing high yesterday. The interesting thing about that is the Volatility of the Nasdaq (which matters more than anything else) continues to be below its trend.

Nasdaq Volatility (VXN) below 33 is bullish for the Nasdaq.

And if you look at implied volatility in the Nasdaq today there is still an implied volatility premium of 12%.

Last week you had one at 25%.

McCullough: #Quad3 Stagflation = Long Tech - 8 4 2020 11 26 52 AM

That means investors were hedging. They were buying protection ahead of Apple’s (AAPL) earnings.

That was not smart. You could have got long Apple ahead of earnings while Wall Street was fearful. The long side was perpetuated by people being scared into that earnings event.

These things happen in very short-term OODA loops. The concept of OODA loops was developed by United States Air Force Colonel John Boyd to maximize agility in combat. It stands for...

  • Observe
  • Orient
  • Decide
  • Act

The concept of OODA loops applies to markets too. Don’t make up narratives that fit your pre-existing bias. Observe market conditions. Orient yourself to that new information. Make a decision based on a repeatable decision-making process. And act. Don't just sit there and say "I don't know, blah, blah, blah."

That’s embarrassing to yourself, your family, and your portfolio.