“We hadn’t dealt with the pressure and knew that something needed to change.”
- Richie McCaw
Imagine Richie McCaw was a big time hedgie. The former captain of the All Blacks is 40 years old now – unless The Gravity really got him, he’s still 6’2 and probably a little heavier than his former 236 pound fighting weight. If he decided to run after you, you’d probably be afraid.
Are you afraid this morning? How do you “feel” after the biggest American long/short (hedge fund) de-grossing and drawdown day since 2016? Do you remember what happened after those Zero Edge apocalypse pending days of 2016?
McCaw’s quote should humble anyone who has competed at the highest level of their profession and failed. In a leadership book I just finished titled Perform Under Pressure, he reminds us that his success in 2015 was born out of learning from his team’s 2007 failure.
Back to the Global Macro Grind…
But, but … was yesterday’s US Equity Volatility spike episodic and non-TRENDING? Is it #Quad4? Is the end of the world finally here?
Since my wife, Laura, is my best coach, I will take her advice today… and take a few deep breaths before answering this morning’s queue on The Macro Show @HedgeyeTV. Ex-the-end-of-the-world one, those look like the questions with the most “up votes” right now…
Look on the bright side, if I’m wrong… and the end of the world is now, I don’t have to write Early Looks anymore anyway.
Interestingly, but not surprisingly (since it’s still Global #Quad2), the panic and fear I see in both the queue and in implied volatility (SPY’s implied vol ramped to a triple-digit +109% PREMIUM vs 30-day realized yesterday!), looks nothing like cross asset class volatility this AM:
A) USD is down an epic 0.01%
B) Crude Oil is down an apocalyptic -0.13%
C) UST 10yr Yield crashed 1 basis point
In other words, ex some US hedge fund implosions, the fractal macro market gods sound like crickets this morning…
If you want me to explain with more words what I think about what happened yesterday, there’s really not much to say. My Top 3 Things note to Institutional Subscribers this morning was one of the shortest (in words) I have ever written:
- USD (bearish) – epic move for EUR/USD of +0.03% changes nothing in both our Signal & Quad models this morning; cross asset class volatility is doing nothing with the CRB Commodities Index barely budging yesterday and Oil down a whopping -0.13%
- RATES – not moving either this morning – Japanese Gov Bond Yields are actually up a beep to +0.03% on the 10yr (WSB not going after my UST or Gold shorts yet) – UST 10yr Yield has immediate-term upside to 1.17%
- VIX – episodic and non-TRENDING? I don’t know. Do you? I’ll just wait 2-3 days and let the market vote. Day 4 of epic de-grossing of hedge fund crowded longs and concentrated shorts is what it is; implied vol on SPY just ramped to +109% vs. 30 day realized, lol
And, again, I don’t know if I am going to be right or wrong on my macro market read-through. I do know that, yesterday, I was buying back some of the things I sold at last week’s all-time SPY highs (see “Sell Signals” Early Look note from way back when for details)…
But beyond that and the singularity of my risk management #process, what do I really know this morning?
For those of you who aren’t invested in consensus hedge fund longs and crowded shorts, you know that there’s always something new to learn about The Game. God knows we knew not to short HIGH SHORT INTEREST or US Retail (XRT), as a Factor Exposure, in #Quad2.
And, God willing, the apocalypse isn’t pending. That would suck more than being short @Hedgeye Investing Ideas Long GME.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.00-1.17% (bullish)
SPX 3 (bullish)
RUT 2086-2178 (bullish)
NASDAQ 12,931-13,820 (bullish)
Tech (XLK) 126.99-136.05 (bullish)
Energy (XLE) 39.42-45.17 (bullish)
Financials (XLF) 27.89-31.81 (bullish)
Utilities (XLU) 61.17-64.01 (bearish)
Gold Miners (GDX) 33.11-36.10 (bearish)
VIX 18.01-40.11 (bearish)
USD 89.76-90.80 (bearish)
Oil (WTI) 51.99-53.97 (bullish)
Gold 1 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
