“Most surfers, of course, would never be ready.”
- William Finnegan
When it comes to doing what I do at the top of every risk management morning, that quote by William Finnegan about surfing Waimea on Hawaii’s North Shore settled me.
I read it while spending some much needed vaca time with the people I love most this week. It came from a book that a former all-star Hedgeye teammate and good friend of mine, Kevin Kaiser, sent me called Barbarian Days.
The book has nothing to do with investing. It has to do with living. As Kais said, it has to do with “self-reflection, relationships, and family.” Amen, brother. Without those things, I’d never be ready to keep doing what I’m doing.
Back to the Global Macro Grind…
Welcome to another #Quad2 in Q2 Macro Monday @Hedgeye! For those of you who are new to #HedgeyeNation, welcome aboard. I’ve been writing about the #process and the #grind for going on 14 years now. And I still love it!
As a matter of #process, on the 1st day of every week we review what happened, across Global Macro Asset Classes, in the week prior and contextualize those macro market moves within the context of @Hedgeye TRADE and TREND Signals.
I usually start with the Global Currency market – it’s riding a big #Quad2 wave, again, this morning:
- US Dollar Index was down for the 2nd week in a row, down -0.7% week-over-week to Bearish TRADE and TREND
- EUR/USD was +0.7% last week, breaking out on my TRADE duration and remaining Bullish @Hedgeye TREND too
- Japanese Yen was +0.8% vs. USD last week, breaking out on my TRADE duration but still signaling Bearish TREND
- GBP/USD was up another +0.9% last week and remains Bullish TRADE and TREND @Hedgeye
- Canadian Dollar was +0.2% vs. USD last week and remains Bullish on both my TRADE and TREND durations too
- South Korean Won was up another +0.4% vs. USD last week and is also back to Bullish TRADE and TREND
If you weren’t ready for another Similar Set in South Korea (the Won breaking out alongside the KOSPI, which is +5.2% in the last month alone), that’s ok. Most professional macro surfers need a LOT of reps (i.e. Cycles) to get ready for change.
What most Macro Tourists do is get sucked into most headfakes (i.e. TRADEs that don’t change TRENDs).
Whereas Full Cycle Investors are ready for that (because they sell-SOME at the top-end of Risk Ranges)… so that they are proactively prepared to buy-MORE during Consolidation Signals like we saw in Commodities in March:
- Commodities (CRB) Index loved Dollar Down last week, posting a +3.5% inflation to +10.2% in the last 3 months
- Oil (WTI) led the #InflationAccelerating charge, inflating +6.4% last week to +20.9% in the last 3 months
- Copper inflated +3.1% last week to +15.6% in the last 3 months
- Corn inflated another +2.0% last week to +7.3% in the last 3 months
- Lumber inflated an epic +15.0% last week to an even more epic +113.8% in the last 3 months
Yeah dude, there’s “no inflation” … unless you have it in your Full Investing Cycle accounts!
Oh, but KM, that move in the 10yr was a bomb, bro… you gotta bail out-ah that one unless you wanna ride some bond barrels, eh… Uh, no. last week’s moves in both Rates & Gold are what we call Counter @Hedgeye TREND moves:
A) UST 10yr Yield corrected/consolidated by 8 basis points to up +50 basis points in the last 3 months
B) Gold bounced +2.0% to lower-Cycle-highs and is still down -3.1% in the last 3 months
What signaled against those very short-term TRADE and technical moves within The Machine were things like:
A) US 5-year, 5yr Forward Break-Evens were actually UP +4 basis points on the week to +18bps in the last 3 months
B) Germany’s 10yr Bund Yield was UP +4 basis points on the week alongside Swiss 10s +3 basis points
Surf’s up dude. With Oil Volatility getting pounded until the low-30s and #NazVol (NASDAQ Volatility) getting blown out to a new #Quad2 Cycle Low of 26, that sweet VIX 16 helped clock 8 all-time SPY highs already here in April!
It’s great to be back. Getting ready for potentially new Cycle Highs in both Commodities & Bond Yields should be fun.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.55-1.75% (bullish)
SPX 4101-4212 (bullish)
RUT 2 (bullish)
NASDAQ 13,628-14,139 (bullish)
Tech (XLK) 137.40-145.18 (bullish)
Energy (XLE) 47.41-51.09 (bullish)
Financials (XLF) 34.55-35.72 (bullish)
DAX 15096-15502 (bullish)
VIX 15.13-17.99 (bearish)
USD 91.16-92.21 (bearish)
EUR/USD 1.181-1.204 (bullish)
USD/YEN 108.01-110.13 (bullish)
GBP/USD 1.367-1.391 (bullish)
CAD/USD 0.79-0.81 (bullish)
USD/CHF 0.91-0.94 (bullish)
Oil (WTI) 59.86-64.42 (bullish)
Gold 1 (bearish)
Copper 4.01-4.32 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
