Issue #53: The Last Hawk Standing
Every other central bank is cutting. The Fed is alone in the corner.. and inflation just walked back into the room.
Executive Summary & Important Highlights
Quiet week on the tape, loud week under the hood.
The Macro Regime Engine is still firmly risk-on in a reflation regime.. 32 bullish votes to 15 bearish, and the bullish count actually ticked higher this week. SPX and QQQ stay 100% long. Bitcoin and gold remain at 50%. Ethereum, however, got cut loose Monday morning when its signal from Sunday got confirmed & flipped flat.
The bigger story is sitting upstream of price:
Inflation is back. Core CPI and CPI YoY both came in hot. PPI and Core PPI came in way hotter than forecast.
The Fed is now the only major central bank in the world without rate cuts priced in. Every other major CB is pricing 2–4 hikes. FedWatch shows hike odds creeping into the back half of the year.. 4.2% in July, 17% in September, with December even showing a 10% chance of a 50bp hike.
Kevin Warsh was confirmed as the new Fed Chair this week. Powell’s tenure is officially over.
Old put spread sleeve closed, new bull put spread sleeve is being rolled.. one contract a day until I’m back to five.
The signals haven’t changed direction. But the wind around them has.
Macro Weather Tailwinds
Across the Macro Weather Dashboard:
Stocks & Bitcoin: Moved from weak tailwinds → tailwinds. Marginal improvement, but improvement.
Fiscal policy and growth: Still the main positive drivers.
Inflation: Strongly deteriorating. Consumer prices, import prices.. anything downstream that hits the gas station and the grocery store is increasing.
Global Liquidity: Still easing. 5 of 7 metrics expanding. M2 rate-of-change is in no-man’s-land, but most M2 prints are still moving higher.
Financial Stress: Live snapshot.. DXY ripped today but is still technically in a bearish trend, bond vol low (positive), VIX spiked to 18.5 on some profit taking.
Bitcoin Trend: Holding the 50% Sleeve
Bitcoin’s signal is unchanged.. sitting above its long-running moving average and holding a 50% position. If CI Trend flips bullish, the engine rotates us into a 100% long position. Until then, half a sleeve, eyes open.
Across the rest of the book:
S&P 500 / QQQ: Still 100% long. SPX has been running like a meme stock.. borderline absurd, so the small profit-taking we’re seeing today actually makes sense.
Gold: 50% position, no change. Still the worst trade since I opened the sleeve. Range-bound between roughly 390 and 450 on the ETF. It is what it is.
Ethereum: Flat. Signal flipped Sunday morning. The price action just hasn’t been as constructive as Bitcoin’s over the last few weeks, and the engine called it before the chart did.
The portfolio is down about ~$1,500 today thanks to the broader profit-taking, but mercifully no longer holding Ethereum into the slide.
Options sleeve update: Closed the old put spread sleeve yesterday and started rolling a new bull put spread sleeve. One contract a day until I’m back to five. The mechanics, for anyone new:
Choose a strike 40–45 DTE
Pick a delta between 25–35 (I’m running closer to 25–30 here given how stretched the run has been.. lower delta, less risk)
Sell a vertical: e.g., sell the 716 put, buy the 706 put ($10 wide), collect the credit
Hold to 23–21 DTE, then roll
As long as the regime stays risk-on, this sleeve just keeps printing.
The Last Hawk Standing: Warsh, Hikes, and Hot CPI
Three things to flag from the macro side of the room.
1. Kevin Warsh confirmed as the new Fed Chair. Powell’s tenure is officially over. Thanks for the service.. and thanks to the Fed broadly for being late on essentially every pivot that mattered. We move on.
2. The Fed is now alone in the corner. Every other major central bank has 2–4 rate hikes priced in. FedWatch shows the U.S. drifting in the same direction:
July: 4.2% chance of a hike
September: 17% chance of a hike
December: quarter-point hike odds climbing, even a 10% chance of a 50bp hike
No cuts on the table at all. If the Fed actually begins to reprice hikes into the curve to catch up with the rest of the world, that’s a meaningful downside risk vector for equities.
3. Inflation prints came in hot.
Core CPI and CPI YoY: a little hotter than forecast
PPI and Core PPI: way hotter than forecast
Retail sales, core retail sales, unemployment claims: in line
This is the receipt for why every other central bank is repositioning hawkish. The data is downstream of the regime, not the other way around.
Next week is a quiet one on the calendar.. just unemployment claims and a couple of PMI prints for May 17–23. Outside of any noise from the Xi/U.S. meeting headlines, not much scheduled to move the tape.
Final Thoughts
The honest read on this week: not much to do.
The signals didn’t change for equities, BTC, or gold. The only real action was getting flushed out of Ethereum on Sunday and starting to rebuild the bull put spread sleeve. Everything else is sit-on-your-hands work.
But the texture of the regime is shifting. Inflation is back on the board. The rest of the world is pricing hikes. The Fed is the lone holdout with zero hikes priced in.. and that gap is exactly the kind of thing that closes violently when it closes. We stay long while the engine says long, but we don’t fall asleep on the wheel.
Survival is alpha. The system keeps us in until it tells us to step out. That’s the entire job.
Have a great weekend. Get off the screen. The signals will be here Monday.
For this week’s full video breakdown:
— Durden out.
✊🧼
Disclaimer: This content is for educational and informational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any asset. Trading equities and futures involves substantial risk of loss, including the potential for loss exceeding your initial investment.
Past performance, whether backtested or live, does not guarantee future results. Backtested performance has inherent limitations: it is designed with the benefit of hindsight, does not reflect actual trading, and does not account for all factors that may affect real-world execution.
The author is not a licensed financial advisor. Always do your own research and consult a qualified financial professional before making investment decisions. You are solely responsible for your own trading decisions.