“I was beginning to wonder if self-delusion was such a bad thing.”
- Lulu Miller
“On Delusion” was my favorite chapter of Lulu’s recent #behavioral history/science/life hit, Why Fish Don’t Exist.
“Oh there it was. As David swept up the glass in his lab, as he began to try to piece his life back together, the thing he was whispering to himself was a lie: it is the will of man that shapes the fates.” (pg 97)
You can read up on your own about the inconvenient truth about Stanford University’s founding President, David Starr Jordan… or just read the book about him and the fish. Self-delusion is a live and present danger in every market move you make.
Back to the Global Macro Grind…
Obviously anyone who didn’t think #InflationAccelerating was going to be one of the major Macro market themes in the 1st half of 2021 was A) not positioned for it and/or B) delusional.
Since we went long of Inflation back in June of 2020, we have no apologies to make this morning.
Instead, we’ll issue yet another Buy Signal in most things we’ve already owned for the Full Investing Cycle, including Commodities (i.e. that are inflating) and US Equity Sector Styles that are linked to #InflationAccelerating:
- Financials (XLF)
- Basic Materials (XLB)
- Energy Stocks (XLE)
Industrials (XLI) are also in my Top 4 Sector Signals but, as of this morning’s time and prices, it’s ranked 4th. Depending on where Energy (XLE) opens, it may or may not be #1. Into the close last night, Financials (XLF) were.
No. I don’t re-rank core Asset Allocations and Sector Exposures using “valuation”…
I constantly refresh and re-rank what I want to buy-MORE of using my primary PRICE, VOLUME, and VOLATILITY Signal. That way I am not “willing” things into my portfolios.
Instead, I’m dispassionately buying the damn dips when the market offers me opportunities.
How about you? What are you doing this morning? Are you excited to buy what I am buying? Or worried that buying on red this time might not result in selling-SOME higher in the future?
On the worry front, if that’s how you roll, what is it in particular that you’re worried about?
A) That inflation is done going up?
B) That the UST 10yr Yield is done going up?
C) That #Quad2 (which is a function of A & B) is done going up?
If those are your worries, you should sell everything we’ve been long since November and short it. And I mean all of it. Short Commodities, Financials, and Energy Stocks. And go long the US Dollar and the Long Bond (TLT).
Then tell me how you “feel.”
This is quite the #behavioral exercise I have you in all of a sudden this morning, eh? Worries and “feels” are not what I do. I’m a ROC (rate of change) math guy who simply executes on his risk management process.
What do I see this morning that puts an infrequently used title (Buy Inflation) in my headline:
- US Dollar Index is signaling a BIG lower-high within its Bearish @Hedgeye TREND
- USD consensus net SHORT position is gonzo – it’s a net LONG position now, scoring +0.9x on a 1yr z-score
- EUR/USD, GBP/USD, and CAD/USD are all signaling a series of higher-lows within their Bullish TRENDs
- Bitcoin is signaling a BIG higher-low of 53,176 within its Bullish #Quad2 (it loves that Quad) TREND
- CRB Commodities Index, Copper, and Corn are all signaling higher-lows within their Bullish TRENDs
- Oil Volatility (OVX) is signaling a BIG lower-high after failing @Hedgeye TREND resistance (like it did in DEC)
- Oil (WTI) is signaling a series of higher-lows and higher-highs within its $59.60-67.89 Risk Range
- Gold is signaling a BIG lower-high at $1751/oz within its Bearish @Hedgeye TREND and -17% drawdown
- Russian Stocks (RSX) are approaching the low-end of their Risk Range and remain Bullish @Hedgeye TREND
- XLF, XLB, and XLE are all approaching the low-ends of their Ranges and also remain Bullish @Hedgeye TREND
The day a Top 10 reasons on “why” list like that is published in the Old Wall Journal is the day I’ll retire to fishing.
In the meantime (and most importantly) as a Fractal Function of 1-10, the UST 10yr Yield just signaled a BIG higher-low for The Cycle at 1.51% … and a higher-high of 1.78% on the top-end of my @Hedgeye Risk Range.
Why the fish don’t exist in this man’s boat this morning is simple. I’m not fishing. I’m grinding.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.51-1.78% (bullish)
SPX 3 (bullish)
RUT 2 (bullish)
NASDAQ 12,956-13,672 (bullish)
Energy (XLE) 47.33-54.68 (bullish)
Financials (XLF) 33.18-35.00 (bullish)
DAX 145 (bullish)
VIX 17.27-23.64 (bearish)
USD 91.22-92.19 (bearish)
EUR/USD 1.186-1.203 (bullish)
USD/YEN 108.17-109.42 (bullish)
GBP/USD 1.378-1.401 (bullish)
CAD/USD 0.79-0.81 (bullish)
Oil (WTI) 59.60-67.89 (bullish)
Gold 1 (bearish)
Copper 4.03-4.20 (bullish)
Bitcoin 53,176-59,261 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
