The Macro Show [FREE EDITION] | November 18, 2025

Key Concepts

• Quad 4: A market regime characterized by rising dollar and rising treasuries, typically occurring in the fourth quarter.
• Risk Management: A systematic approach to identifying, assessing, and controlling threats to an organization's capital and earnings.
• Trend Signal: A technical indicator used to identify the direction of a market trend.
• Risk Range: The expected price range for an asset.
• Fractal Math: The study of self-similarity and repeatability of patterns at different scales.
• Material Non-Public Information (MNPI): Non-public information that, if disclosed, would likely affect the market price of a security.
• Volatility Regimes: Different states of market volatility, categorized by the VIX index (chop bucket, investable bucket, etc.).
• Implied Volatility (Implied Vol): The market's forecast of likely future volatility for an asset.
• Mean Reversion: The theory that asset prices will eventually revert to their historical average.

Macro Show - November 18th, 2025

This episode of the Macro Show, hosted by Daryl Jones, director of research at HedgeI, addresses market conditions amidst internet outages, focusing on risk management and strategic asset allocation. The discussion highlights the importance of traditional assets like cash, dollars, and treasuries in a Quad 4 environment, while cautioning against speculative investments.

The Dollar and Traditional Assets in Quad 4

• Preference for Cash: In a hypothetical scenario of internet outage, the preference is for US cash over Bitcoin, underscoring the enduring value of fiat currency.
• Dollar Strength: The US dollar is expected to rise due to multiple factors, including geopolitical meetings (Takayichi and "Skeletor") and broader global economic trends.
• Quad 4 Characteristics: The market is increasingly exhibiting Quad 4 characteristics, where the dollar and treasuries tend to perform well.
• Contrarian Position: Being long the dollar is presented as a contrarian macro long position, especially after a year of shifting market regimes.
• Portfolio Diversification: Long dollars, long treasuries, and long gold are recommended as core portfolio components for diversification and balance in Quad 4.

Bitcoin and Speculative Assets Under Pressure

• Bitcoin Drawdown: Bitcoin has experienced a significant drawdown, exceeding 27%, prompting criticism of its proponents.
• Shorting Storytellers and Liars: The strategy includes shorting "storytellers and liars," exemplified by Michael Sailor's MSTR and Bitcoin miners like BMR, which are being "crushed."
• Consequences of Speculative Bets: Individuals who bet heavily on short-term call options and assets like Bitcoin, expecting them to "go to the moon," are facing significant losses.
• Broken Quad 4 Baskets: Momentum-driven baskets and speculative assets have broken down in the current Quad 4 environment.
• Capital Rotation: Capital has been moved out of momentum trades and into healthcare stocks (XLV), treasuries, gold, and dollars.
• Hope vs. Risk Management: The speaker emphasizes that "hope" is not a risk management process, contrasting it with disciplined execution.
• Retail Sentiment Basket: A basket of widely held stocks, including crypto, has seen an 18% decline, with leveraged investors facing even greater losses.
• Underperforming Sectors: Recent IPOs and profitless tech stocks have significantly underperformed, with recent IPOs down 3.6% on the day.

Nvidia and the Importance of Trade Analysis

• Focus on Trade, Trend, and Risk Range: When analyzing assets like Nvidia, the focus is on identifying the trade, the trend, and the risk range, rather than personal relationships with the company or its CEO.
• Material Non-Public Information (MNPI): The speaker explicitly avoids buying stocks where a personal relationship exists, as this could constitute MNPI.
• Fractal Math and Consistency: The principles of fractal math, emphasizing self-similarity and repeatability, are applied to maintain consistency in decision-making, avoiding emotional biases.
• Nvidia's Trend Signal: The trend signal for Nvidia is crucial, with a support level at 22208 for the NASDAQ Composite, which is above the low end of its range.
• Nvidia's Market Cap: Nvidia constitutes 7.5% of the S&P 500, making its performance significant.
• Risk Management Strategy for Nvidia: The recommended strategy for Nvidia is to do nothing if action was taken in the previous week or October to sell at the top of the range. Overweighting Nvidia is discouraged due to potential immediate-term trade breakdowns.
• Nvidia's Risk Range: The risk range for Nvidia is estimated between 180 and 202. A break below 177 is considered a significant market event.
• Complacent Option Setup: The current option setup for Nvidia is described as "somewhat complacent," with implied volatility at 15%, a slight increase from the previous day.

Market Dynamics and Risk Management Principles

• Degrossing Strategy: The speaker details a strategy of degrossing or selling positions, starting with Qs on a Tuesday, to manage risk.
• Rules-Based Execution: The importance of executing trades based on a rules-based system is repeatedly stressed as the only way to stay on the right side of market movements.
• VIX in the Chop Bucket: The VIX is in the "chop bucket" (above 19) for the third consecutive day, indicating elevated volatility.
• Cross-Asset Volatility: Volatility in the Russell and NASDAQ is approaching the "chop bucket" (high 20s), potentially reaching the 30s.
• NASDAQ Composite Trend Support: The trend signal support for the NASDAQ Composite Index is 22208, which is currently above the low end of its range.
• Risk Management Rule #1: "Don't lose money." Rule #2 is to "sell some at the top end of the range."
• Comfortable Being Uncomfortable: Traders must be comfortable with uncertainty and adapt to changing market conditions, much like skilled athletes.
• Probabilities vs. Certainty: Risk management is about managing probabilities and changing conditions, not about certainty.

Sector Performance and Asset Allocation

• Healthcare Outperformance: Healthcare stocks (XLV) have shown resilience, down only 0.09% yesterday and up 5.16% this month, outperforming the S&P 500.
• Move Index and Bond Yields: The Move Index is at a critical juncture (around 82.5-83), suggesting a potential for bonds to perform well if yields remain at the top end of their range.
• High-Yield Avoidance: In Quad 4, high-yield bonds are to be avoided, with a preference for higher-quality assets like treasuries and investment-grade credit (LQD, BBN).
• Tier One Alpha Data: This options data shows a negative "flipline" and a short-term calendar volatility of 21, which can increase to the high 20s.
• Japanese Market Correction: Japan's Nikkei has signaled lower highs for two consecutive days and is experiencing a material and broadening correction.
• Chinese Shorts Developing: There is a shift from bullish to bearish sentiment on Tencent (TCHY), with developing short opportunities in Chinese equities.
• Australian Market Decline: Australia has seen a significant decline, down almost 6% since being advised to exit.
• European Weakness: Germany is making new cycle lows, indicating significant downside potential.
• Quad 4 Metals: Gold is bouncing, while copper is correcting. Silver and palladium are showing strength, with a short position in lumber.
• Bond Yield Risk Range: The risk range for bond yields is tight (405 to 416). Bonds should be bought when yields are at the top end of the range.

Nvidia's Upcoming Report and Market Expectations

• Nvidia's Reporting Date: Nvidia is scheduled to report earnings tomorrow.
• Short-Term Calendar Volatility: The short-term calendar volatility is currently at 21 and could reach 28-29, potentially leading to a significant market event.
• Nvidia's Immediate Term Trade Resistance: The immediate term trade resistance for Nvidia is 193, which, if broken, would become support.
• Potential for All-Time Highs: If Nvidia breaks above 193 and holds, the top end of its range could extend to 207, potentially reaching all-time highs.
• Market Reaction to Nvidia: The market is anticipating Nvidia's report, with implied volatility suggesting a belief that the trend will hold. A break in Nvidia's trend at 177 or a move to the low end of its range would be a significant negative event.

Conclusion and Takeaways

The Macro Show emphasizes a disciplined, rules-based approach to investing, particularly in the current Quad 4 environment. The internet outage serves as a stark reminder of the importance of tangible assets like cash and the dollar. Speculative assets are facing significant headwinds, and capital is being reallocated to more defensive sectors and traditional safe havens. The analysis of Nvidia highlights the need to focus on trade, trend, and risk range, rather than emotional attachments or narratives. The overarching message is to remain adaptable, manage risk proactively, and avoid panic when market volatility increases. The show also touches upon the entrepreneurial journey of Jensen Huang, founder of Nvidia, as an example of the American capitalist dream, while reiterating the importance of objective market analysis.