“Nature has shown, over and over again, that truth transcends the most powerful minds.”
- David Robson
You didn’t think markets stop going up (or down) on “valuation”, did you? Valuation isn’t a catalyst. The Quads are.
While some of the most powerful minds of ye Olde Wall were “calling” for “rotations” (out of Tech and into “value”) and “corrections” of 10% in SPY, or something like that, the fractal nature of macro markets got it right, again.
Why do the “smartest” people on Zero Edge or CNBC get these moves wrong? In The Intelligence Trap, Robson says they have Earned Dogmatism. “These people have great insights… but science doesn’t permit them” to beat nature. (pg 72)
Back to the Global Macro Grind…
Imagine waking up on the East Coast of America this morning with a dogmatic belief-system that A) the disc in your back isn’t herniated and B) it didn’t snow last night…
Personally, I’d be dead wrong on both counts… and I’d be in for one heck of a wakeup call if I assumed otherwise.
‘Oh, Mucker, just give it time and you’ll be right. Eventually the white stuff in your yard will go away and the SP500 will collapse alongside the Mega Cap Tech Bubble.’
Yeah, got it.
In all seriousness, how could I be so cocky to call something a bubble, multiple times, and buy it with both hands? Or is that being humble and knowing that a bubble isn’t a bubble unless it remains a bubble…
That’s the thing about bubbles – they go up.
Then they pop. But when do they pop? Yes, timing matters. And yes, we have a risk management #process for that. My non-Nobel-Prize educated guess is that the GROWTH Bubble peaks when… wait on it… growth slows into a #Quad4 again.
On our Quad Map, that could happen come Q3 of 2021, from higher prices.
In the meantime, I’m going to:
A) Buy every damn dip in #Quad2 Asset Allocations when they correct to the low-end of their Risk Ranges… and
B) Sell every rip that signals immediate-term TRADE #overbought within those Bullish @Hedgeye TRENDs
Sell ALL on those rips? No, no, no silly goose. Sell SOME… so that you have ammo to re-load on corrections.
‘Oh, now Mucker is calling for a correction, eh? Yeah, he’s using a round “target” number for the SP500 like 3600… and it’s XX multiple of his 2021 S&P500 earnings estimate’… bahaha!
Uh, no. If the SP500 gets to the top-end of my @Hedgeye Risk Range this morning, I expect the probability to rise that SPY could correct -2.1% in the immediate-term from there. I couldn’t care less what the “multiple” on that is.
Does that statement trigger the dogmatic? Probably. But who cares about that either?
If you have friends in this profession who have legit Earned Dogmatism on these matters, send them a subscription of my writings for Christmas (I’m Catholic, please don’t cancel) and call it Triggering, As A Service.
Need more “why” on why macro markets are finally signaling immediate-term TRADE #overbought this morning? Here are my Top 3 Things from this morning’s premium subscription email:
Finally, with NASDAQ at all-time highs, some immediate-term TRADE #overbought signals in #Quad2 Longs!
- USD (crashing to #oversold) – to get #overbought signals in things inversely correlated with USD is to get an immediate-term TRADE #oversold signal in USD vs. Euro, Pound, Swissy, Bitcoin, Oil, SPY, etc. all in the same day
- TECH (bullish, overbought) – with Tech (XLK) now +3.4% in DEC (vs. Short Utes $XLU -0.7%), today isn’t the day to start getting long of it! Obviously the only “rotation” you should have done was out of #Quad2 Rate Sensitivity (XLU, XLRE) but that’s yesterday’s news
- COPPER (bullish, overbought) – inflates another +0.8% to a new Cycle High this morning so that works vs. Gold Short (which is up about the same), but both Doctors (Copper and KOSPI) are signaling immediate-term TRADE #overbought here (as is GLD) as well – example of expressing that in stocks is selling some of my FCX and adding to my GDX short
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.88-0.98% (bullish)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 12,280-12,698 (bullish)
Tech (XLK) 123.40-128.36 (bullish)
Energy (XLE) 39.08-42.02 (bullish)
Financials (XLF) 28.02-29.20 (bullish)
Utilities (XLU) 61.68-63.37 (bearish)
Gold Miners (GDX) 33.78-36.82 (bearish)
VIX 19.81-24.85 (bearish)
USD 90.08-91.20 (bearish)
EUR/USD 1.207-1.222 (bullish)
GBP/USD 1.329-1.362 (bullish)
USD/CHF 0.87-0.89 (bearish)
Oil (WTI) 44.98-48.23 (bullish)
Gold 1811-1882 (bearish)
Copper 3.49-3.60 (bullish)
MSFT 210-220 (bullish)
AAPL 122-129 (bullish)
Bitcoin 18,905-23,053 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
