For Whom The Buy Signals Toll

“It was the moon and the sun
And though I roam all over the world
The spending of it’s never done.”
- Ernest Hemingway

That’s from Hemingway’s For Whom The Bell Tolls. Ever since my first English Lit professor @Yale deemed my first writing “un-grade-able”, I’ve studied Hemingway’s writing style. If you’re wondering where I learned the objective and terse style of prose, he’s it.

It’s also the quote that Wright Thompson used to introduce Pappyland – A Story of Family, Fine Bourbon, and Things That Last. I’ve always wanted to build something that lasts. Whether it’s a family or firm, the spending of time on that is never done.

While I used to spend too much time reading Old Wall talking points (because my bosses paid me to discuss and debate them), now my family and “work” time is far more productive. I fail faster and I learn faster from my mistakes as a result.

Back to the Global Macro Grind…

Did you buy the damn dip on Friday? It’s Macro Monday here @Hedgeye and I am sure glad I did! Thankfully, the world didn’t end over the weekend. It’s still Global #Quad2 out there.

Let’s start with what happened in the Global Currency market last week:

1. US Dollar Index had a Counter @Hedgeye TREND bounce of +0.6% to -1.2% in the last 3 months
2. EUR/USD corrected -0.4% last week and remains Bullish @Hedgeye TREND, +1.4% in the last 3 months
3. Japanese Yen continued to break-down, -1.1% vs. USD and remains Bearish @Hedgeye TREND  
4. GBP/USD corrected -0.6% last week and remains Bullish @Hedgeye TREND, +4.3% in the last 3 months
5. Taiwanese Dollar was +0.2% vs. USD last week and is Bullish TREND too, +2.3% in the last 3 months
6. Icelandic Krona was up another +0.9% vs. USD and has appreciated +5.9% in the last 3 months

For those of you who didn’t know why I use “3-months or more” as my definitive duration for @Hedgeye TRENDs, now you know. If you didn’t know that The People of Iceland are happy about their rising purchasing power, now you know that too.

In America, with the passage of another $1.9 TRILLION in “stimulus” spending this weekend, we’re committed to Burning The Buck. Since the US Dollar goes down in Global #Quad2 anyway, this is only going to continue to perpetuate US #InflationAccelerating.

In real-life cost of living terms, here’s how that core Asset Allocation to Commodities did for you last week:

1. CRB Commodities Index (19 Commodities) inflated another +1.0% last week to +18.7% in the last 3 months
2. Oil (WTI) inflated another +3.8% last week to +33.4% in the last 3 months
3. Corn inflated another +1.1% last week to +27.3% in the last 3 months
4. Coffee inflated another +6.5% last week to +15.5% in the last 3 months
5. Lean Hogs inflated another +3.1% last week to +23.3% in the last 3 months

Per ye Olde Wall’s Econs and The Fed, “there’s no inflation… until we achieve our 2% target”… or something like that. If you wrote that to my family or firm, I would deem your mathematical skills as un-grade-able.

The Bond Market obviously got an A+ on its #Quad2 Test:

A) UST 10yr Yield was up another +7 basis points last week to +52 basis points in the last 3 months
B) The Yield Curve (10s/2s) steepened another +5 basis points to +55 basis points in the last 3 months

And US Equity Sectors scored an A+ on that same #Quad2 Test as well:

A) Energy Stocks (XLE) were up another +4.3% last week to +22.3% in the last 3 months
B) Utilities (XLU) were down another -5.0% last week to -9.4% in the last 3 months

Yeah, if you thought being Long Gold prior to a proactively predictable breakout in Interest Rates was failing you out of HedgeEDU (Gold was down another -2.8% last week to -4.5% in the last 3 months), being long Utes (XLU) was even worse!

All that said, like my learnings about writing in New Haven, CT in 1995, isn’t this thing called The Cycle and its ROC (rate of change) providing former Macro Tourists with a wonderful learning opportunity?

Trusting other people’s talking points AFTER macro markets move like rates just did is not the way forward. Like believing in The Gravity and the sun and the moon, there is a better way.

Immediate-term @Hedgeye Risk Range with TREND signal in brackets:

UST 10yr Yield 1.24-1.53% (bullish)
SPX 3 (bullish)
RUT 2185-2303 (bullish)
NASDAQ 12,990-14,260 (bullish)
Tech (XLK) 128.97-139.72 (bullish)
Energy (XLE) 46.55-51.10 (bullish)
Utilities (XLU) 58.11-61.07 (bearish)
VIX 18.11-29.01 (bearish)
USD 89.76-91.16 (bearish)
EUR/USD 1.202-1.222 (bullish)
USD/YEN 104.99-106.86 (bullish)
GBP/USD 1.383-1.420 (bullish)
Oil (WTI) 58.90-64.11 (bullish)
Gold 1 (bearish)
Bitcoin 43,395-54,612 (bullish)

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer