“Though frothy tickle-brained hedge-pig.”
- William Shakespeare
Oh the insults, William!
As my Jonesy Buds reminds me, I’m like Mr. Gravitas and would never, ever, insult anyone in this business or its media. Everyone is so above board, transparent, and accountable. Only the odd hedge-pig like me earns the names he is called on Twitter, daily.
Whatever you do, don’t call me arrogant or cocky. I’m neither. I’m Irish.
Back to the Global Macro Grind…
And how about you? You must be tickle-brained to be buying every damn dip in core #Quad2 Asset Allocations, eh? PE Powell himself said our market positioning is “a bit frothy” yesterday.
Shall thou run for thy exits?
Uh, no thanks. On yesterday’s epic -0.1% decline in the SP500, we were right back in there buying the damn dips in things that were on sale. Unfortunately 3 of our 4 Horsemen (Sector Styles) were not.
But, but, Mikey no likey… and some dude’s got a theory about milkshakes…
Shall thou run from thy process?
And lose “intellectual debate” sleep having a civil dialogue about things that do not back-test as relevant in #Quad2? Nope. Those are only worth a couple of ole school hockey chirps of my time.
What is worth my time this morning is reminding you that if there was froth at last week’s US Equity lows (which were just higher-lows within Bullish @Hedgeye TRENDs), it was the Consensus Bears frothing at their Small Cap mouth:
A) The net SHORT position in the Russell 2000 ramped to -25,132 contracts which scores -1.95x on a 1-yr z-score… and
B) The consensus net SHORT positions in the SP500, Dow, and NASDAQ remained intact as well
But, but, “when rates go up, I can’t own Tech” or Facebook (FB)… or something like that…
In my back-tested KM discounted-narrative-model, nothing could be further from either that #Quad2 economic truth or what’s happening in the pre-market this morning with the UST 10yr Yield up +6bps and FB, AAPL, GOOGL, etc. ripping.
As I have said, multiple-times (but only when the Buy Signals say belly up to the bar on corrections), throughout #Quad2 in Q2, the back-test (i.e. the history of market returns) says you buy both organic GROWTH and cyclical VALUE in #Quad2.
Shall thou remind them of thy frothy #Quad2 and Company Pod 1 &2 definitions?
A) #Quad2 is when the ROC (rate of y/y change) of GROWTH and INFLATION are #accelerating at the same time
B) Pod 1 = Revenues, Pod 2 = EBITDA or EPS – both have a central tendency to #accelerate during #Quad2
If the SP500 and 1 of our 4 Horsemen (the Financials, XLF) were companies, their Pod 2’s would look like this:
A) 224 of the SP500’s companies have reported an aggregate EPS #acceleration of +57.3% year-over-year growth
B) 48 of 65 Financials (in the SP500) have reported an aggregate EPS #acceleration of +183.1% year-over-year
And thou valuation expert is going to SELL Financials, SPY, etc. and buy Utilities (XLU) ahead of that? lol
Cmon man. Obviously we’re coming off the LOWS of both the INVENTORY and EMPLOYMENT Cycles. As obviously, we’re breaking out to NEW CYCLE HIGHS for the Pod 2 (EARNINGS) Cycle.
Shall thy taper derail thy froth?
Nope. The much more market important thing PE Powell said yesterday was that:
A) There will be no taper anytime soon … and
B) There will be #cowbell
Central market planning #cowbell, that is. And this kind of #cowbell says nothing of my tickle-brained Hedgeyes. It is designed to combine the most epic fiscal spending of all-time with the CTRL+Print function of The Fed.
Milkshakes are melting down alongside US Dollars. Commodities continue to froth to new Cycle Highs. And, while I take great insult to thy haters using F instead of M in my nickname, thou shall clear thy snowflakes from thy eyes in time for The Macro Show!
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.56-1.74% (bullish)
SPX 4128-4221 (bullish)
RUT 2 (bullish)
NASDAQ 13,764-14,218 (bullish)
Tech (XLK) 140.30-144.74 (bullish)
Energy (XLE) 46.68-50.81 (bullish)
Financials (XLF) 34.80-36.38 (bullish)
Utilities (XLU) 65.10-67.91 (neutral)
VIX 15.67-18.98 (bearish)
USD 90.38-91.52 (bearish)
EUR/USD 1.197-1.216 (bullish)
Oil (WTI) 61.48-65.23 (bullish)
Copper 4.20-4.58 (bullish)
AAPL 132-139 (bullish)
FB 301-328 (bullish)
GOOGL 2 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
