“Sometimes you have etc., sometimes etc. has you.”
- Matthew McConaughey
That’s another great quote from a book I’ve had far too much fun with this year: #Greenlights.
It comes from a chapter McConaughey called “The Art of Running Downhill.” I don’t know about you, but at 46 years old, I love running downhill! On our long treks, my dog, Boomer, and I walk uphill, 100% of the time… and like it.
How about you? Next time we’re heading into an obvious Global #Quad2, do it like the great Stan Druckenmiller and “spread your wings.” Embrace the sun on your face and the tailwind at your back. Your hard earned capital will do better that way.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where I think the sunny weekend here on the East Coast has me less grumpy than I’d ordinarily be, writing at the top of the risk management morn.
As a matter of process, we start every week with a week-over-week review of what moved in Global Macro markets in the week prior, contextualizing it within The Cycle’s @Hedgeye TRADEs, TRENDs, and TAILs.
As usual, I like to start with the Global Currency market:
- US Dollar Index had another Counter @Hedgeye TREND bounce week of +0.3% to lower-highs for The Cycle
- EUR/USD corrected another -0.4% last week but held @Hedgeye TREND support
- Yen was +0.1% vs. USD last week and remains Bearish from both a TRADE and TREND perspective
- GBP/USD corrected -0.4% last week and remains Bullish TRADE and TREND vs. USD
- Canadian Dollar was -0.2% vs. USD last week and also remains Bullish TRADE and TREND @Hedgeye
- Indian Rupee was up another +0.2% vs. USD last week and remains Bullish TRADE and TREND as well
So we’re still seeing the “Safety Currency” @Hedgeye TRENDs in big ones like the Japanese Yen and Swiss Franc #diverge, bearishly, vs. more Cyclical Currencies like the Canadian Loonie and the Indian Rupee.
And, alongside the Rates Up (UST 10yr Yield ramped +10 basis points last week to a new #Quad2 Cycle High of 1.72%) Dollar Up, we finally had a real correction in Commodities last week:
- CRB Commodities Index (19 Commodities) corrected -2.6% to +13.4% in the last 3 months
- Oil (WTI) corrected -6.4% last week to +24.3% in the last 3 months
- Copper corrected -0.7% last week to +13.1% in the last 3 months
But, all was not lost for Full Cycle Investors who remain long of INFLATION (since JUN of 2020):
- Corn inflated another +3.5% last week to +27.0% in the last 3 months
- Lumber inflated another +2.2% last week to +31.7% in the last 3 months
- Lean Hogs inflated another +1.6% last week to +24.5% in the last 3 months
It’s a good thing that other big Cost of Living line-items like US Rent aren’t ramping into the Spring season and the Housing market is of no inflationary concern, until we “hit the Fed’s inflation target”… lol
As long as we don’t have any more of these calamitous -0.8% corrections in SPY (to -1.5% from its all-time high) every week, the “wealth affect” should be able to offset the falling purchasing power of The People, no?
Leading last week’s US stock market “correction” (on the downside) were 2 major Asset Allocations that you should be buying the damn dip in again this morning:
A) Energy Stocks (XLE) corrected -7.5% last week to +25.7% in the last 3 months
B) SMALL CAPs (Russell 2000) corrected -2.8% last week to +16.1% in the last 3 months
Unless you’re long some or all of the aforementioned Commodities, you aren’t going to find TRENDING (i.e. 3-months or more in duration) returns of +16.1-25.7% in many places other than in Bitcoin (which is +155% in the last 3 months).
So you’re either “there” and selling-SOME on rips towards the top-end of my Risk Ranges, or you aren’t. It’s harder to buy-MORE at the low-end of my Risk Ranges, if you don’t sell-some higher, eh…
The other big callout in Global Equities last week was the divergence between Chinese Stocks (down another -1.4% to -7.9% in the last month) and German Stocks (up another +0.8% to +4.5% in the last month).
That made complete fundamental sense given China is in #Quad3 now and signaling Bearish @Hedgeye TREND whereas both Germany’s 10yr Bund Yield and the DAX are signaling Bullish @Hedgeye TREND in #Quad2.
Keep moving out there. If you’re on the right side of these @Hedgeye TRENDs, you’re still running downhill.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.49-1.75% (bullish)
SPX 3 (bullish)
RUT 2 (bullish)
NASDAQ 12,903-13,654 (bullish)
Energy (XLE) 48.81-54.98 (bullish)
Shanghai Comp 3 (bearish)
DAX 140 (bullish)
VIX 18.16-24.13 (bearish)
USD 91.21-92.24 (bearish)
EUR/USD 1.185-1.204 (bullish)
USD/YEN 108.09-109.41 (bullish)
GBP/USD 1.382-1.402 (bullish)
CAD/USD 0.79-0.81 (bullish)
USD/CHF 0.92-0.94 (bullish)
Oil (WTI) 60.08-67.91 (bullish)
Copper 4.00-4.20 (bullish)
Bitcoin 52,712-59,196 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
