“Accuracy lives at the intersection between the inside view and the outside view.”
- Annie Duke
As Annie goes on to remind us in How To Decide, “the things that are particular to your situation matter, but those particulars should be married with the things that are true of the world in general (like #Quad2).” (pg 144)
Obviously Annie Duke doesn’t do Global #Quad2, but she does do discipline in decision making. I’m looking forward to hosting her for a Real Conversation LIVE @HedgeyeTV in Q2.
What’s true of the world in general? The US stock market (SP500) closed at another all-time high on Friday. All-time, as I like to say, is a long-time. Since it’s also true that consensus is net SHORT SPY (CFCT futures contracts), they missed that move.
Back to the Global Macro Grind…
Welcome back to another Macro Monday @Hedgeye where it’s both my pleasure and privilege to deliver you the truth about what macro markets did last week. Numbers beat and lead narratives, don’t forget.
Let’s start with the Global Currency market:
- USD Dollar Index had another Counter @Hedgeye TREND week of +0.9%, failing at 93.46 TREND resistance
- EUR/USD corrected another -0.9% last week and remains Bearish TRADE, Bullish TREND @Hedgeye
- Yen was down another -0.7% vs. USD last week and remains Bearish on both my TRADE and TREND durations
- GBP/USD corrected -0.6% last week and remains Bullish on both my TRADE and TREND durations
- Brazil’s Real got smoked for a -4.7% loss vs. USD last week to -9.4% in the last month with its economy in #Quad3
- India’s Rupee was up +0.9% vs. USD last week to +2.0% in the last month with its economy in #Quad2
Yep, both India’s currency and equity market (up +5.3% in the last 3 months) are outperforming Brazil’s. That’s partly true because of the Quad Differential. Alongside China, Brazil is in #Quad3 here in Q2.
Fortunately we got out of China when The Signal suggested we do so. Since China is the heaviest weight in the MSCI Emerging Markets Index, that’s helped us avoid being long both EEM and hedge fund gross long exposures to consensus names like BABA and JD (our China Research product, led by Felix Wang, had us bearish on both names fyi).
In sharp contrast to Emerging Markets (MSCI) correcting -2.2% last week with USD strength:
A) DAX: Germany Stocks were up another +0.9% last week to +7.8% in the last 3 months
B) MIB Index: Italian Stocks were up another +0.8% last week to +10.2% in the last 3 months
Why? Unlike some of these uniquely American money manager consensus long positions in both widely held US Mega Cap stocks and Chinese ADRs, the crowd is neither long of European Stocks nor forced to panic-sell them during corrections.
Oh, and Europe, broadly, is in #Quad2 for Q2… and signaling #Quad3 in Q3 (not #Quad4 like the USA is).
How about them US stocks? Our 4 horsemen (XLF, XLI, XLE, and XLB) were running again last week with:
A) Basic Materials (XLB) up another +2.2% to +11.3% in the last 3 months
B) Energy Stocks (XLE) up another +1.8% to +32.3% in the last 3 months
Why do we care about 3-month, or TRENDING, returns? Because that’s what longer-term Full Cycle Investors ride, like horses! And yes, the best of the best long-term investors are able to contextualize the short-term better than Tourists.
What other short-term corrections within Bullish @Hedgeye TRENDs were observable inside your OODA Loops last week?
- UST 10yr Yield corrected -4 basis points to 1.68% (that’s to up +75 basis points in the last 3 months)
- CRB Commodities Index corrected -0.6% last week to +13.4% in the last 3 months
- Oil (WTI) corrected -0.8% last week to +25.8% in the last 3 months
- Bitcoin corrected -7.6% last week to +121% in the last 3 months
Unlike being Macro Unaware and, say, long Gold, which was down another -0.5% last week to -8.2% in the last 3-months, Full Cycle Investors buy the damn dips in #Quad2 Sector Styles & Factor Exposures during short-term corrections.
I’m not long of US Equity Beta in SPY terms (I like my 4 US Equity Sector ETF horses better than being long the index), but if you bought the mid-week SPY panic last week, well done capturing Friday’s all-time closing high.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.58-1.76% (bullish)
SPX 3 (bullish)
RUT 2114-2361 (bullish)
NASDAQ 12,814-13,612 (bullish)
Energy (XLE) 46.96-53.01 (bullish)
Financials (XLF) 33.25-35.06 (bullish)
Shanghai Comp 3 (bearish)
DAX 144 (bullish)
VIX 18.07-22.07 (bearish)
USD 91.20-93.09 (bearish)
EUR/USD 1.173-1.202 (bullish)
USD/YEN 108.40-109.75 (bullish)
GBP/USD 1.365-1.404 (bullish)
Oil (WTI) 56.75-66.69 (bullish)
Gold 1711-1746 (bearish)
Copper 3.98-4.19 (bullish)
Bitcoin 51,158-60,530 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
