“Kiss the fire and walk away whistling.”
- Matthew McConaughey
Sounds cool my Irish American brother, especially after some late night Kentucky Bourbon…
In real life and in markets, what I do is far less poetic. That said, there have been plenty of days in 2021 when I’ve wondered if I’ve been flying my family and firm’s hard earned capital too close to the #Quad2 sun.
Oh the wonder and worry of it all. It’s a good thing consensus hasn’t been Bullish Enough, the whole way up.
Back to the Global Macro Grind…
Today, as we say @Hedgeye HQ, is Game Day. This is the one day in every quarter of the calendar year that we review the Full Investing Cycle with a refresh of our Quarterly Global Macro Themes. You can get access to this LIVE 11AM ET @HedgeyeTV presentation.
Our Top 3 Macro Themes for Q2 of 2021 are as follows:
- USA Still #Quad2
- Macro Signals & Divergences
- Rates & Housing… Peak Cycle?
Yep, I’m pretty sure the #Quad2 thing in yesterday’s edition of #Quad2 in Q2 was clear. Crystal.
And, it’s crystal clear in Europe this morning with:
- Germany’s DAX up another +1.2% to +8.9% in the last month alone = new #Quad2 Cycle High
- Italy’s MIB Index up another +0.8% to +7.9% in the last month = new #Quad2 in Q2 Cycle High
- France’s CAC40 up another +0.9% to +6.0% in the last month = new #Quad 2 in Q2 Cycle High
Is the consensus hedge fund community (that’s found plenty of ways to get burnt by the #Quad2 sun in 2021) levered long of European Equities with a view of European Rates Rising? Nope.
Amidst the panic and storytelling that “Rates Rising” are bad for US stocks, European Stocks have loved rates ramping off their 2021 #Quad4 Global Deflation lows.
And yes, economically, China is diverging from both the USA and Europe right now. We have China in #Quad3 and I am short of China via FXI inasmuch as I remain long of Germany (EWG) and Switzerland (EWL), but less so as of yesterday’s close.
What happened at yesterday’s US close and on today’s European open?
A) Almost everything I own is signaling immediate-term TRADE #overbought within its Bullish #Quad2 TREND … and
B) I always sell-SOME at the top-end of my Risk Range, no matter what Quad or Pod that thing that’s ticking is in
That’s why today’s title of the Early Look could read #OVERBOUGHT inasmuch as Macro Themes Day.
It is what it is. Market prices eventually ramp back towards the top-end of my Risk Ranges during #Quad2. And all of the Old Wall’s prior talking points about “why” we used to be at the low-end of my Risk Ranges just go away.
With the “why” being such a rear-view focal point for Tourists, the ISM Services report yesterday was a sight to see:
A) As you can see in today’s Chart of The Day, ISM Services ripped to a new Cycle High of 63.7 in MAR
B) The low of The Cycle was back in April of 2020 at 41.6
As long-time Hedgeye Partner (and one of my Macro Research teammates), Dr. Drake wrote to subscribers yesterday:
It’s post-pandemic Macro Poetry.
A) Headline ISM rose +8.4 points to a New ATH at 63.7 while New Orders jumped a cartoonish +15.3 points sequentially to an ATH at 67.2
B) Current Activity surged +13.9 points to 69.4 while Employment and Prices also realized notable gains
ATH = All-time-high. And all-time, is a long time.
And, as McConaughey reminded me about living both my life and taking my market positions, “to appreciate the place fully, a man must know that he can live there.” #Greenlights
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.61-1.79% (bullish)
SPX 3 (bullish)
RUT 2123-2293 (bullish)
NASDAQ 13,032-13,855 (bullish)
Shanghai Comp 3 (bearish)
DAX 145 (bullish)
VIX 17.01-20.96 (bearish)
GBP/USD 1.370-1.393 (bullish)
Oil (WTI) 57.35-63.71 (bullish)
Gold 1 (bearish)
Copper 3.94-4.18 (bullish)
FB 287-312 (bullish)
TSLA 599-705 (bearish)
Bitcoin 53,983-61,995 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
