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Below is a chart and brief excerpt from today's Early Look written by Hedgeye CEO Keith McCullough.

Actually, there are red, yellow, and greenlights in the Abelian Sandpile model. “Also known as the Bak-Tang-Wiesenfield model” it was the 1st “discovered example of a dynamical system displaying self-organized criticality.”

That epic learning was pre A Time To Kill via a 1987 white paper. All of my studying and reading about chaos and complexity theory came post my graduation from Linear Econ school in 1999.

Then came Fractal Signals, Pods, and Quads. #Greenlights

And this morning, I do it all over again. Some of last week’s Yellow Lights turned green. Some former Yellow Lights have turned red. That’s the thing about lower-highs – sometimes they particularly matter; other times they don’t.

As I tried to explain last week, lower-highs (Yellow Lights) are either:

A) A simple signal of consolidation (which both SPY and IWM proved to be last week)… or
B) The beginning of the end of a @Hedgeye TRADE or TREND

Or, as I call them, @Hedgeye Phase Transitions (i.e. when something changes from Bullish to Bearish TREND or vice versa) which are similar to the physical processes of transition in nature. At first they happen slowly, then all at once.

CHART OF THE DAY: Use The Quads To Manage Exposure - 9