“The skill to mold the material into what we want must be learned and attentively cultivated.”
- Johan Wolfgang von Goethe
Now that is a great #process quote. It’s the one Robin Sharma uses to introduce chapter 5 of The 5AM Club titled “A Bizarre Adventure Into The Morning Mastery.”
What’s your morning routine?
Without going through mine again, it’s the only thing that is going to get me closer to the only answer many people seem to want from me these days: “when does #Quad2 end?”
Back to the Global Macro Grind…
After grinding through my pre-bedtime and post wake-up measuring and mapping process, here’s the 2 part answer:
A) #Quad2 didn’t end yesterday … and
B) It didn’t end this morning either
When the Singularity of The Signaling Process thinks it’s ending, I’ll be the first (that early morning) to let you know.
Thanks to all you who tuned into our Mid Quarter Update Macro Themes Call yesterday. We had a record Hedgeye #GrowthAccelerating audience and I wanted to thank my tireless teammates for helping me put the content together.
Why didn’t #Quad2 end yesterday or this morning?
A) The US Dollar was down again yesterday and is down hard this morning, re-testing new #Quad2 Cycle Lows
B) Commodities were inflating again yesterday and Oil is re-testing new Cycle Highs this morning at $67/barrel
Obviously there are many more parts to answering The #1 Question in the Hedgeye Queue… but to get #Quad2 and Rates right from here, you definitely need to get The Signals on USD, WTI, XLE, etc. right.
What is The XLE?
A) It’s the ETF for The Energy Stocks …
B) It was up another +2.3% in a down tape to +44.4% YTD yesterday
It’s also 1 of the 4 Horsemen (2 of the other 3 horsies were running during yesterday’s epic -0.25% SPY correction too):
A) Financials (XLF) were up another +0.2% yesterday to +4.7% for May alone and +28.7% YTD
B) Materials (XLB) inflated another +0.9% yesterday to +6.8% for May alone and +22.5% YTD
Are these “mid cycle” signals? C’mon man. We’re coming off the CYCLE LOWS for both the INVENTORY and EMPLOYMENT Cycles and the Yield Curve is steepening back towards CYCLE HIGHS at +150bps on 10s minus 2s.
If you’re asking me when The Cycle peaks, that’s reasonable. There’s nothing mid about anything today other than me being in my mid-forties and getting fatter.
“But, but, China is slowing into #Quad3 Stagflation, so why would you keep buying Commodities?”
A: because the Dollar is down and we’re going to electrify America with trillions in infrastructure deficit spending, bro.
Yep, the China question I often get is a good one because:
A) It’s based on our #Quad3 Stagflation nowcast for China … and
B) If you’re using the 2011 Supply/Demand (post China entering the WTO) model, that was The Question back then
After learning how linear the assumptions in my Yale Econ 101 class were, I never start with supply and demand models (please don’t cancel). The fractal PRICE, VOLUME, and VOLATILITY models I use are non-linear!
What’s also interesting about the relative Bear Nowcast for China is that:
A) It’s not getting you paid right now (China’s Shanghai Comp is +3% in the last month)
B) That’s because the Shanghai Comp broke out to Bullish @Hedgeye TRADE last week
Imagine all I was using was my Quads and no TRADE or TREND Signals? Haha
Like Gold, Chinese Stocks (FXI) signaled immediate-term TRADE oversold prior to their recent short-term pop. That’s where I covered-SOME … so that I can re-short more of both once they get to the top-end of my Risk Ranges.
That’s right. When two of the worst places to have had your hard earned capital in 2021 are signaling Bullish TRADE (but still Bearish TREND), that’s not the EOW (end of world) Signal for #Quad2 Asset Allocations either.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.57-1.72% (bullish)
SPX 4057-4257 (bullish)
RUT 2135-2287 (bullish)
Tech (XLK) 131.01-139.96 (neutral)
Energy (XLE) 51.43-55.19 (bullish)
Financials (XLF) 36.60-38.48 (bullish)
DAX 15171-15531 (bullish)
VIX 14.40-24.28 (bearish)
USD 89.63-90.96 (bearish)
EUR/USD 1.201-1.223 (bullish)
Oil (WTI) 63.91-66.93 (bullish)
Nat Gas 2.88-3.18 (bullish)
Gold 1 (bearish)
Copper 4.56-4.85 (bullish)
Silver 26.60-28.75 (bullish)
Bitcoin 42,102-54,408 (neutral)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
