A Big Breadth Thrust In Financials  [Dirty Dozen]

By doubting, we come to examine, and by examining, so we perceive the truth.~  Peter Abelard

In this week’s Dirty Dozen [CHART PACK] we look at seasonality, internals, financial breadth thrusts, weakening US labor data, and a bullish setup in corn, plus more…

1. The SPX has a seasonal tendency to dip over the next eight trading days before a bottom followed by a runup into year’s end.

2. Sentiment and positioning are turning more bullish but aren’t at levels that typically mark larger pullbacks. Breadth is strong though nearing overextension and market internals remain supportive of the broader trend up.

3. The Qs have completed a large 24-month cup-n-handle pattern. This is a bullish pattern.

4. We’re long and will be adding to our position on a daily close above its current sideways range.

5. Last week the financial sector saw a surge in breadth. SentimenTrader writes “a breadth composite containing six indicators with various duration lengths exploded to the highest level in more than two years, triggering a buy signal for the group. The previous signal generated an alert in November 2020, leading to an almost 16% gain over the following three months.”

6. And “whenever the S&P 500 Financials breadth composite surges above 67%, returns, win rates, and z-scores for the financials sector are excellent across all time horizons. The signal showed a gain at some point over the subsequent three months in 38 out of 39 precedents.”

7. Here’s a snapshot of the 3m returns from the KRE Regional Banking Trust ETF (KRE) via the excellent analytics platform, Koyfin. CUBI, GBCI, BOH, EWBC, and CADE have the best 3m performance of the group.

8. A favorite leading labor market indicator of mine is Temporary Help on a YoY basis. The US economy is certainly not in a recession at the moment, but this chart bears watching to see if keeps trending lower.

9. “What flips today’s ‘soft’ narrative to ‘hard”… via BofA.

10. China’s FDI has turned negative for the first time. Long USDCNH is giving us another setup with the pair reversing off its lower weekly Bollinger Band.

11. Corn recently hit over 2std oversold from its 20 and 50-day moving averages, and nearly 1.5std below its 200dma. Large and small specs are short. Our sentiment gauge is coming off the 0th percentile, as well as its valuation score. And it’s about to enter its strongest period of seasonality.

12. The chart has formed a nice falling wedge. We’ll look to get long on a confirmed breakout.

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.