“That same God gave me a mind that is my own.”
- Thomas Meagher
… “a mind that has not been mortgaged to the opinions of any man or set of men. A mind that I was to use and not surrender.”
Back to the Global Macro Grind…
You don’t have to be Irish Canadian to be inspired by that quote. You obviously don’t have to be a man either. To all of the men and women of #HedgeyeNation who seek the truth through data-driven and apolitical Independent Research, I salute you!
Are you still short the US Dollar and Long of Commodities?
Full Cycle Investors should be, especially after the US Dollar Index bounced to another lower-high within its Bearish @Hedgeye TREND (since JUN of 2020) and failed.
Are your Full Cycle Returns in Commodities and Inflation Beneficiaries (INFL) “transitory”?
That’s a silly word that someone with a theory on how it ultimately plays out might use. In terms of your portfolio positioning (i.e. being long of #InflationAccelerating for almost 1 year now), it shouldn’t have deterred you from buying every damn dip.
Ok. Nice call. Where do Commodities, in Devalued Dollars, go from here?
A) Higher… and
B) A lot higher, faster, the faster the USD Dollar breaks down
Obviously our Full Cycle Investing position is considering the longest of “long-term” durations when considering the big Asset Allocation pivots (like going from #Quad4 Deflation to #Quad2 Inflation Accelerating) of the long-term Cycle.
But even the longest-term investors want to know something about the immediate-term…
On my immediate-term TRADE duration:
A) US Dollar Index has an inverse correlation to Commodities (CRB Index) of -0.86
B) US Dollar Index has an inverse correlation to the SP500 of -0.94
In other words, get the Dollar right, and you’ll keep getting stocks and commodities right (especially Commodity Stocks!).
While there are always interesting mathematical callouts during US Equity market “corrections” (SPY is currently down a whopping -1.04% from its ALL-TIME HIGH), I think some of the most interesting #Quad2 Observations this week have been:
A) The 4 Horsemen (Top 4 Sector Style Longs: XLF, XLE, XLI, XLB) were UP during both “correction” days
B) Total US Equity Volume #decelerated -19% (yesterday) vs. its 1-month average
C) Volatility Signals failed, across the board, @Hedgeye TREND resistance
In US Equity Vol terms, “across the board” means:
A) Front-month VIX failed @Hedgeye TREND resistance and has immediate-term downside to 15.63
B) Front-month VXN failed @Hedgeye TREND resistance and has immediate-term downside to 20.45
C) Front-month RVX failed @Hedgeye TREND resistance and has immediate-term downside to 23.18
*VXN = NASDAQ Volatility and RVX = Russell 2000 Volatility
Where could I be wrong? That’s an easy answer: anywhere on anything, anytime. But, if USD continues to weaken, my math is suggesting that I am not likely to be wrong.
So I’ll just stay short USD and keep riding the right side of The #Quad2 Cycle.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.55-1.72% (bullish)
SPX 4147-4219 (bullish)
RUT 2 (bullish)
NASDAQ 13,459-14,305 (bullish)
Energy (XLE) 47.24-52.99 (bullish)
Financials (XLF) 35.46-37.45 (bullish)
VIX 15.57-20.65 (bearish)
USD 90.21-91.44 (bearish)
EUR/USD 1.198-1.218 (bullish)
CAD/USD 0.79-0.82 (bullish)
Oil (WTI) 62.79-66.67 (bullish)
Nat Gas 2.80-3.04 (bullish)
Copper 4.32-4.62 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
