A Buy Climax is Coming…

“In the United States problems of economic understanding have been compounded by the effect of economic prosperity. The Japanese in World War II spike ruefully of shoribyo or “victory disease.” The Greeks called it hubris, and thought that it always ended in the intervention of the goddess Nemesis. That lady makes her appearance when wave-riders begin to believe that they are wave-makers, at the moment when the great wave breaks and begins to gather its energy again.” ~ David Fischer, “The Great Wave”

Good morning!

In this week’s Dirty Dozen [CHART PACK]  we look at some more signs of budding inflationary pressures, make the case for a coming bottom in gold, talk about the positioning reset in the dollar, discuss the possibility that maybe too much good has been priced in, and then pitch a swing trade on a liquidation play, plus more…

Let’s dive in.

***click charts to enlarge***

  1. Credit Suisse published a chartbook this past week making the case for increasing and enduring inflationary pressures. CS writes “CPI expectations & oil prices are closely correlated; Commodities are in total (directly and indirectly 7% of CPI) and are in a bull market. Much of the shock from the price discovery process of disruptive technology has been seen.”


  1. Meanwhile, other deflationary pressures are reversing… CS points out that “80% of global trade is in industrial goods and we now have global trade being 100% of global IP”. Also, Chinese labor costs are no longer as cheap, reversing a tailwind for DMs offshoring production. CS notes that the “BIS claim globalization has taken 1% off CPI each year… and trade has lowered prices of household goods by a quarter to two thirds – ‘huge effect’.


  1. While these charts from BofA show rocketing global food prices and a slight turn up in union membership, which could be the start of a broader trend.


  1. Earlier this month, I wrote about the incredibly weak breadth in gold miners (fewer than 15% were trading above their 200-days) and how this type of action typically precedes bottoms.

Sentiment and positioning have now reset. Real yields are starting to stabilize. The conditions are now set for the next leg up in PMs. I think we’re probably still a few weeks out from that happening though (I’m looking for one more dip).

We want to see GLD ETF  holdings stabilize, if not turn up.


  1. We’re back to watching for a turn in the dollar and a resumption of the secular bearish USD trend. Sentiment and positioning have fully reset are no longer headwinds. And a falling dollar can have long-tailed pass-throughs on inflation.


  1. BofA thinks markets have overdone themselves and we’re now in for the “3Ps of peak Positioning, Profits, Policy in H1 & 3Rs of rising Rates, Regulation, Redistribution.”


  1. The narrative pendulum has swung clearly to the other side over the last 6-months. And, as Bernard Baruch, used to say “something that everyone knows isn’t worth anything.”

Watch the SF Fed’s News Sentiment Index to see if things begin disappointing expectations.


  1. Nasdaq’s short-term breadth held and rebounded off critical levels last week. The Qs now look coiled for another run higher. We’re likely entering an accelerated Buy Climax.


  1. Bullish sentiment remains stretched but it’s likely this coming bull move will get the market over its skis and give us an official “Sell Signal”.


  1. Here are the returns so far this year. How do you think this looks by year’s end?


  1. And for no particular reason, here’s a 120-year annotated chart of the Dow Jones (h/e @NeckarValue).


  1. I practiced my knife catching and bought some Discovery (DISCA) on Friday. It got caught up in the widespread forced liquidation that started last week, sending it 50%+ lower in just a few days — its largest weekly drop in the stock’s history.


Stay safe out there and keep your head on a swivel.

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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.