“Jealousy is all the fun you think they had.”
- Erica Jong
I don’t know about you, but I am having a blast this year!
The aforementioned quote introduces chapter 3 of Fear Of Missing Out. It’s a chapter titled “More Than A Meme” and it really taps into what continues to make this year #NotFun for people who chase charts high and then, freak-out, selling lower.
“Given its high meme value, FOMO has become a favorite trope of social media influence, talk show hosts, and hashtag marketers. As such, it’s typically regarded as something that’s trivial…” (pg 29). You don’t want to be long “trivial”, AFTER the move.
Back to the Global Macro Grind…
As you can see in either Joey Journo’s Twitter stream and/or CFTC Futures & Options positioning, AFTER this move in both Rates and Momentum Stocks, the crowd is net SHORT both stocks and Treasury Bonds:
A) 10yr UST Bond has a net SHORT position of -112,364 contracts
B) NASDAQ has a net SHORT position of -20,261 contracts
Those numbers mean nothing, of course, unless contextualized in ROC (rate of change) terms from where they came from. On a 1yr z-score, that’s a -2.24x standard deviation move in the Long Bond - by any historical measure that’s both trivial and big.
Depending on what Index your local hedge fund is short (local because the recent blood bath in Momentum, as a Factor Exposure, is a uniquely American Fund Manager phenomenon - Global Equity markets like Germany and Singapore made new Cycle Highs this AM) against their US stock picks:
A) NASDAQ’s net SHORT position has a -0.78x z-score on a 1yr look back … and
B) Russell 2000’s net SHORT position has a -1.25x z-score on the same duration
These are backward looking realities (CFTC positioning as of last Tuesday’s close) that reflect something trivial in the era of an oversupply of underperforming hedge funds – they chase and crowd on the way up and hedge on the way down…
Overlay this positioning reality with the ongoing Macro Tourist Meme that “this is a bubble” and that the US stock market “HAS TO IMPLODE like-yesterday” and you have quite a #behavioral cocktail to capitalize on as contrarians.
And to be clear, plenty of data-driven long only and hedge fund managers are doing just that, having a lot of fun doing it too!
In other news, their US Equity Benchmark is -2.4% from its all-time closing highs (in the case of SPY) and Small Cap, High Short Interest Factor Exposures (i.e. #Quad2 Longs) were up another +1.1% and +1.5% on the day, respectively, yesterday…
Really? Yep. Really. Not everyone is chasing Cathie, NFLX, and cat videos.
While Momentum’s Crowding (MTUM) and Gold (GLD) got pounded to new Cycle Lows yesterday, something funny happened on the way to the US Equity Sector Style Alpha Forum:
- Financials (XLF) were up another +1.3% on the day to +15.8% YTD
- Industrials (XLI) were up another +1.1% on the day to +6.6% YTD
- Basic Materials (XLB) were up another +1.3% on the day to +5.4% YTD
Since those 3 Sector Styles + Energy (XLE) are currently my Top 4 Signal “picks” (see replay of our Mid-Quarter Update Macro Themes call last week, where Tech (XLK) was clearly cut out), now you know more about the party you might be missing…
Obviously it’s not a party out there for all. And I empathize with those who have been capitalizing on the “digital era” of biased and Factor Exposed, marketing Asset Management products, but only to a degree.
My Canadian buddy Chamath has some splainin’ to do about the profitless SPAC stories he’s been tellin’, eh!
My non-fictional story and risk management #process remains boring, data-driven, and basically the same, however. Get The Signal & The Quad right, and you got the pace of this Rates Move right. You also just got the top-end of my 10yr Yield range right.
As for everything else that’s ticking higher for Full Cycle Investors this morning on the US Dollar failing (for the umpteenth time @Hedgeye TREND resistance since JUN 2020) keep on keepin’ on brothers and sisters.
Buying the damn dips in Rare Earths (REMX and MP) and Cannabis (MSOS) was where we were focused yesterday, while covering-some AAPL, TSLA, and CLOV (don’t be jealous, Chamath, bud) shorts for taxable hedge fund gains.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.36-1.62% (bullish)
SPX 3 (bullish)
RUT 2133-2303 (bullish)
NASDAQ 12,441-13,349 (neutral)
Tech (XLK) 124.14-131.99 (neutral)
Energy (XLE) 49.25-53.96 (bullish)
Financials (XLF) 32.30-34.57 (bullish)
Shanghai Comp 3 (bearish)
Nikkei 285 (bullish)
DAX 138 (bullish)
VIX 20.63-30.70 (bearish)
USD 89.66-92.52 (bearish)
GBP/USD 1.375-1.414 (bullish)
Oil (WTI) 61.77-66.94 (bullish)
Gold 1 (bearish)
AAPL 115-127 (bearish)
TSLA 550-682 (bearish)
Bitcoin 47,077-54,983 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
