McCullough: Why We're Not Out of The Russell (Yet)

Key Concepts

• Hedgei Signals: Indicators suggesting potential shifts in market trends, specifically lower highs and breaks in immediate term trades or overall trends.
• Russell Volatility (RVX): The volatility index equivalent for the Russell index.
• VIX: The volatility index for the S&P 500.
• Monthly Quad 3: A specific market regime characterized by certain economic data releases and their likely impact.
• Inflation Data: Economic indicators measuring the rate at which prices for goods and services are rising.
• Bond Market Volatility: Fluctuations in interest rates.
• Currency Market Volatility: Fluctuations in exchange rates.

Market Analysis and Signals

The discussion begins by analyzing "Hedgei" signals, which are described as indicators of a market potentially getting out of a current trend. Specifically, the presence of a "lower high" and a break in the "immediate term trade" or the overall "trend" are highlighted as key signals. The speaker emphasizes that these specific signals have not yet materialized, advising against premature panic ("don't light your hair on fire").

Key Point: The absence of definitive "lower high" and trend-breaking signals suggests that the market currently has "less signal strength" for a significant downturn.

Gold Market Observation

Gold is presented as an example of an asset exhibiting a "lower high," a pattern that has been ongoing for "weeks" and is not a new development as of the current discussion.

Connection: This observation about gold's lower high is contrasted with the broader market's lack of such definitive signals.

Volatility and Index Performance

The speaker differentiates between the volatility of the Russell index and the S&P 500. The "Russell volatility RVX" is described as being in a "chop bucket" (implying choppy, indecisive movement), while the "VIX" is not.

Argument: This difference in volatility leads to a preference for being "long of Q's more so than IWM." This suggests a strategic reallocation of investments towards the Nasdaq 100 (represented by Q's) over the Russell 2000 index (represented by IWM) due to their respective volatility profiles.

Action: The speaker states, "So if if I could be long of Q's more so than IWM I would be and that's why I am," indicating a current investment strategy based on this analysis.

Economic Data and Market Regimes

The current market environment is identified as being in a "monthly quad 3" for November. This regime is characterized by the expectation that most government data not yet reported will likely indicate "growth slowing data," particularly in labor statistics.

Prediction: It is also anticipated that inflation will "go back up" in November, following a potential reported decrease in October inflation data (which has not yet been released).

Critique of Macro Analysts: The speaker criticizes "macro newsletter type writers" who focus solely on economic data releases and predict significant volatility. The argument is that these individuals "don't run money" and are therefore less attuned to practical market realities.

Counterpoint: In contrast to the predicted volatility, the speaker notes that the market is actually experiencing "the lowest levels of volatility in both the bond market from a rate perspective and the currency market that we've seen."

Emphasis: The core message is to "keep it practical. Let's keep it clean out there."

Conclusion and Call to Action

The summary concludes by reiterating the importance of practical market observation over speculative predictions. The speaker encourages viewers to subscribe to the Hedgei YouTube channel and visit their website for more investing content.

Main Takeaway: The current market, despite some concerning signals in individual assets like gold, does not yet exhibit the definitive bearish indicators for the broader market. Volatility in key markets remains low, suggesting a need for a pragmatic investment approach rather than reacting to speculative forecasts.