“Subtlety #3: Whether you realize it or not, you are always choosing what to give a ---- about”
- Mark Manson
As the Irish like to say, a good word never broke a tooth. So, on this Saint Paddy’s Day, I decided to use a good quote from a good #behavioral book that a subscriber sent me – The Subtle Art Of Not Giving A (compliance violation)!
Manson calls his book a “counterintuitive approach to living a good life.” And maybe it’s just me, but he outlines plenty of things that seemed intuitive. Maybe that’s because I’m an Irish Catholic Canadian? (please don’t cancel).
“This book will not teach you how to gain or achieve, but rather how to lose and let go” (pg 22). Whether that’s in your portfolio positioning, game scores, or family life, letting go is liberating. “Sleep is the first sign of recovery.” (another Irish saying)
Back to the Global Macro Grind…
While other things will be on my mind as I try to execute both my business and #process today, the most important part of my day will be taking an American Irish Catholic girl by the name of Lucy Taylor McCullough to her first hockey “tryout” this afternoon.
She’s nervous, excited… and a little scared. But, as the Irish like to say, a companion shortens the road. And I’ll be there for her. In building Hedgeye, we always envisioned building a family friendly firm where we can all take the time to be with our kids.
In the meantime, I have to risk manage this bloody macro market setup and get prepped for Day 2 of The Hedgeye Investing Summit. My sincere thanks to all of you who tuned in yesterday – the feedback was phenomenal. Our team appreciates that.
On the Macro Market Setup, there isn’t much of a point of veering from my Top 3 Things (Institutional Research note):
- ASIA – another series of Yellow Lights (lower-highs) for Asian Equities which clearly do not like my recent Consolidation Signal in the US Dollar; China’s 1-day bounce was met with selling; KOSPI down -0.6% made another lower-high (LH), and EM Asia continues to signal a series of lower-highs with India -1.0% giving us her first LH today
- OIL – unlike plenty of EM Equity markets, Oil continues to signal a series of higher-Cycle-highs (top-end of my Risk Range = $66.88/barrel (WTI) and Energy Stocks (XLE) gave me a nice BUY-more Signal yesterday on red too; you should obviously broaden that to single small/mid cap stocks given XLE’s concentration to a few names
- 10YR – yield waiving off yesterday’s “disappointing economic data” like a boss this morning … because its all about the MAR-MAY #accelerating growth and inflation data that is pending. UST 10yr Yield up another +2bps to 1.64% with The Curve steepening to a new Cycle High of +149bps wide on 10s/2s pre Powell’s chat (Long XLF)
In other words, on the US side of the decision making #process:
A) Long Energy (XLE) and Financials (XLF) are the Top 2 of my Top 4 Sector Signals right here, right now, in #Quad2
B) Short Duration (TLT) and Utilities (XLU) are the Top 2 Shorts on my sheets, from yesterday’s time and price
From a Global Equity market perspective:
A) Short China (FXI) just moved to the top of my Signal List
B) Less Aggressive on Long India (INDA) is the play, until I get more time and space
C) Not Buying South Korea (EWY) and/or Asian Semis, for now
D) More Aggressive on Long German (EWG) and Dutch (EWN) stocks than most things Emerging Markets, for now
As Manson reminds us in “Subtlety #1” of his book, “not giving a (damn) does not mean being indifferent; it means being comfortable with being different.”
In a profession that begs for “certainty” in making “calls” and delivering “high conviction ideas”, I am much more comfortable being uncomfortable and embracing the implied uncertainty of every market day.
Will some of these Yellow Lights in Asia go back to green? I don’t know. My Long SPY Signal was yellow (signaling lower-highs) for literally 2-days, then it went back to green. I didn’t care why. I just accepted it and moved on.
There was nothing to let go of.
On the greenest of Irish Greenlights today, the most important OODA Loop observation in my notebook is this: BIG HIGHER-LOWS and new HIGHER-Cycle-HIGHS for Oil, UST 10yr Yield, and the Russell 2000 (IWM).
Why? A: #Quad2. Mr. Market is exceptionally good at discounting the future. Yesterday’s “disappointing economic data” sets the table for way “better than expected” data in March (reported in April).
Why? A: Base Effects. US Retail Sales was just reported at +6.3% year-over-year growth for FEB vs. a +4.7% comp in FEB of 2020. The comps (base effects) for March and April of 2020 collapse to -5.6% and -19.9%, year-over-year, respectively.
Whether it’s the “why” and/or The Signal that you choose to care about, that’s completely up to you. Or, as the Irish like to say, “never scald your lips with another man’s porridge.”
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.49-1.68% (bullish)
UST 2yr Yield 0.13-0.18% (bullish)
SPX 3 (bullish)
RUT 2 (bullish)
NASDAQ 12,503-13,721 (bullish)
Tech (XLK) 124.88-135.13 (neutral)
Energy (XLE) 50.14-54.91 (bullish)
Financials (XLF) 33.13-35.33 (bullish)
Utilities (XLU) 58.18-64.01 (bearish)
Shanghai Comp 3 (bearish)
DAX 14148-14829 (bullish)
VIX 17.73-28.72 (bearish)
USD 91.01-92.43 (bearish)
Oil (WTI) 62.47-66.88 (bullish)
Gold 1 (bearish)
Bitcoin 48,924-59,693 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
