“We can’t control the variance… but we can control our attention and how to we choose to deploy it.”
- Maria Konnikova
Feeling lucky this morning? After preserving and protecting our hard earned capital (i.e. avoiding a -12% NASDAQ drawdown and a big USD Dollar Up day), I don’t feel much of anything at all. It’s just another day to be paying attention to the #process.
As Konnikova goes on to remind us in an excellent #behavioral book on decision making, The Biggest Bluff: “You’re not lucky because more good things are actually happening; you’re lucky because you are alert to them when they do.” (pg 148)
After signaling a series of higher-lows, now the US Dollar is signaling immediate-term TRADE overbought while #NazVol is signaling its 1st lower-high and the beloved Apple (AAPL) is saying take another bite!
Back to the Global Macro Grind…
Who knew you’d have a chance to make what I call “the turn” yesterday? That’s when you go from net SHORT to net LONG and start pressing the table for the pot. There be some Gold in that pot too, eh!
We’re not playing poker at the Golden Nugget. Our odds of saving & making money are much higher using a volatility adjusted risk management overlay to our Full Investing Cycle #process. And “the table” is ye Olde Wall.
BREAKING: Mike at Morgan Stanley says NASDAQ could drop 20% towards 200-day Moving Monkey
AFTER a -12% drawdown (where he was writing about V-Shaped recoveries)? Thanks for coming out, bud. No offense, Mike (you’ve had some great calls) but I think the last time I used a simple single-factor 200-day was, like, 20 years ago.
On the NASDAQ in particular, here’s how someone using fractal dimensions read the panic at the table yesterday:
A) FLOP: At #NazVol 40-41, big whales were puking and folding on their gross long exposure
B) TURN: capitulation by those who didn’t proactively prepare gave us the low-end of my QQQ Risk Range
C) RIVER: USD signals immediate-term TRADE #Overbought as Gold signals #Oversold
It’s one thing to be texting at the table and/or not paying attention to what matters (i.e. Similar Sets like #NazVol and USD signals). It’s entirely another playing style to be hoping it was all about a Supreme Court change and/or moving monkeys!
Are we all getting better at playing The Game together, at the highest level, with multi-factor and multi-duration data?
I certainly hope so. Why we’ve been winning for the last 3-4 weeks isn’t luck. It’s process. And, while hope still isn’t a risk management process, I do hope that you have found a better way as we continue to build our relationship.
Pay it forward. Share the love. Let’s move along here and put some more chips on the table. Here are my Top 3 cards this morning (email goes out to premium subscribers by 6AM EDT):
Covered most shorts intraday yesterday at the low-end of their Risk Ranges… and will get net longer here this morning…
- USD (short) – main reason to go from net short to net long = immediate-term TRADE #overbought signal here this morning in USD vs. Euros and Swiss Francs; it’s still Bearish @Hedgeye TREND, don’t forget (Dr. Copper didn’t – it’s already inflating +0.7% this AM) and the jury is still out on #Quad3 vs #Quad4 in Q4! If it’s #Quad3, you short USD here and buy Tech, don’t forget…
- GOLD (long) – easy one to add to on the long side both yesterday and this morning as Gold Volatility (GVZ) wouldn’t breakout like #NazVol did; immediate-term upside to $1985/oz with a #PowellTools and Mnuch on deck to talk Dollar Devaluation for the next 2 days – “believe them”, its election time, and they are committed to the messaging!
- VIX (pay attention) – vol of vol goes from signaling the NASDAQ drawdown to now signaling the worst of the panic selling is probably in the rear-view – I registered lower-highs in both my VIX and #NazVole (VXN) Risk Ranges yesterday and can barely get the VIX back above 31 with a probable VIX correction back below 26, which would be exciting
Exciting, eh! Are you feeling it now? I hope not. There are no feelings in fractals.
Remember our risk management signals from 3-4 weeks ago on AAPL? Here’s how that hand played out:
A) FLOP: Apple Volatility broke out to Bullish @Hedgeye TREND and Levered Long Bulls got slaughtered
B) TURN: capitulation selling by whales yesterday – they sold their APPL at the low-end of the Risk Range with Hoodies
C) RIVER: the textbook bounce off those immediate-term #oversold lows with immediate-term upside to $120/share
That was a -22% AAPL drawdown that, right on the screws, bounced off the low-end of my @Hedgeye Risk Range (published daily in that product) of $105 that could/should have a +10-15% payout within 72 hours from there.
Or would you rather roll the bones on “Battery Day” and/or read some after-the-move notes from the Old Wall while a major hedge fund slaps on a Put Fly on SPY at the lows of the day yesterday (betting on more downside, from the low-end of my range!)?
As my man Mike McDermott reminded us in Rounders: “Listen, here’s the thing. If you can’t spot the sucker in the 1st half hour at the table, then you are the sucker.”
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.63-0.71% (bearish)
SPX 3 (bearish)
RUT 1 (bearish)
Tech (XLK) 110.44-117.27 (neutral)
REITS (XLRE) 34.25-37.29 (bullish)
Financials (XLF) 23.75-24.90 (bearish)
Shanghai Comp 3211-3351 (bullish)
VIX 24.22-30.75 (bullish)
USD 92.71-93.98 (bearish)
EUR/USD 1.17-1.19 (bullish)
USD/CHF 0.90-0.92 (bearish)
Gold 1 (bullish)
Copper 2.99-3.12 (bullish)
AAPL 105-120 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
