“It would be nonsensical to say I just read a great book about bicycle riding – I’ve now learned that.”
- Peter Senge
If you’re still learning how to time economic cycles using the data deriving both The Signals & Quads, I’m right there with you, every day. Every part of every cycle provides plenty of learning opportunities.
“Real learning gets to the heart of what it means to be human. Through learning we re-create ourselves. Through learning we become able to do something we were never able to do.” -The Fifth Discipline
That’s how Peter Senge describes being part of a Learning Organization. I’m both humbled and proud to be leading one alongside my teammates. There’s much more learning and work to be done.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye! For those of you who are new to our #process, on the 1st day of every week we measure and map everything that moved in macro last week to put it in the context of The Cycle.
As usual, let’s start with the Global Currency market:
- US Dollar Index had a Counter @Hedgeye TREND bounce of +0.3% that we faded last week
- EUR/USD barely corrected -0.1% on the week and remains Bullish on both our TRADE and TREND durations
- Yen was actually UP +0.2% vs. USD last week and also remains Bullish TRADE and TREND @Hedgeye
- GBP/USD had a nice big -1.6% buying opportunity last week and remains Bullish TRADE and TREND
- Canadian Dollar was up another +0.1% vs. USD last week to +2.3% in the last month = Bullish TREND
- Russian Ruble appreciated another +1.5% vs. USD last week to +5.5% in the last month = Bullish TREND
Why is it that, on a “Dollar Down” week, Natural Resource Country Currencies like Canada, Russia, and Brazil (The Real was +1.8% last week and is +6.4% in the last month) saw their currencies appreciate vs. USD?
A: Global #Quad2
Yep, despite the “bounce” in the US Dollar Index, plenty of Commodities inflated, again, last week too:
- CRB Commodities Index (19 Commodities) inflated another +0.8% to a new Cycle High for inflation
- Oil (WTI) inflated another +0.7% last week to +11.6% in the last month and remains Bullish TREND
- Copper inflated another +0.1% last week to +12.3% in the last month and remains Bullish TREND
- Coffee inflated another +3.4% last week to +8.6% in the last month and remains Bullish TREND
- Lumber inflated another +17.2% last week to +38.9% in the last month and remains Bullish TREND
No, +38.9% Lumber/Housing inflating, in a month, is not a typo. But no worries, per the US government’s CPI report, US Shelter only inflated +0.1%, sequentially, last month. Haha
In other Cross-Asset-Class #InflationAccelerating Signal news:
A) US Energy Stocks (XLE) were up another +1.2% last week to +21.7% in the last month
B) Russian Stocks (RTS Index) were up another +4.1% last week to +14.5% in the last month
No likey the cherry picking on stuff like Russia and Energy Longs? How about how well you’ve done broadening your Emerging Markets exposure since June?
A) Emerging Markets Equities (MSCI) were up another 0.5% last week to +6.7% in the last month
B) India’s Stock market was particularly strong, up another +1.9% last week to +6.2% in the last month
That’s particularly important diversification in your Global #Quad2 Asset Allocation model because both the NASDAQ and Chinese Stocks corrected -0.7% and -2.8% last week. China no longer looks as strong as Russia and India do, fyi.
When I say “looks”, that’s not a qualitative and touristy touchy/feely type observation. That’s simply what The Signal says it looks like. In macro, relative 1-month price momentum in particular matters.
On that score, Germany in particular, continued to look relatively weak with the DAX down -1.4% last week and down -0.8% in the last month vs. plenty of Global Equity alternatives that have pounded that.
What’s also been lagging on both and absolute and relative basis in US Equity Sector Styles are:
A) Utilities (XLU) down another -0.3% last week to -6.4% in the last month = Bearish TREND @Hedgeye … and
B) REITS (XLRE) down another -2.8% last week to -2.1% in the last month = Bearish TREND @Hedgeye
Why are Utes and REITS signaling Bearish @Hedgeye TREND and US Small Caps (Russell 2000 up another +1.0% last week to a new all-time high) Bullish TREND? A: #Quad2.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.89-0.99% (bullish)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 12,218-12,599 (bullish)
Tech (XLK) 123.19-127.10 (bullish)
Energy (XLE) 37.15-42.78 (bullish)
Utilities (XLU) 61.66-63.81 (bearish)
Shanghai Comp 3 (bullish)
DAX 13110-13423 (bullish)
VIX 19.80-24.30 (bearish)
USD 90.23-91.52 (bearish)
EUR/USD 1.203-1.221 (bullish)
USD/YEN 103.50-104.68 (bearish)
GBP/USD 1.321-1.351 (bullish)
CAD/USD 0.77-0.79 (bullish)
Oil (WTI) 44.58-47.26 (bullish)
Gold 1 (bearish)
Copper 3.47-3.58 (bullish)
Bitcoin 17,790-19,992 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
