A Monday Dozen [CHART PACK]

Charting is a little like surfing. You don’t have to know a lot about the physics of the tides, resonance, and fluid dynamics in order to catch a good wave. You just have to be able to sense when it’s happening and then have the drive to act at the right time.   ~ Ed Seykota

Good morning!

In this week’s Monday Dozen we take a look at CROWDED trades, some of the worst earnings guidance in a decade, the US joining in on the manufacturing recession and more…

1) According to a recent study by BofAML and reported in the WSJ “The overlap in the top 50 stock holdings between mutual funds and hedge funds — two types of investors whose styles typically differ — now stands at near-record levels.”If you’re buying companies like Salesforce (CRM) at these valuations, this late in the game, you may find yourself eating like a bird and crapping like an elephant. Just saying…

2) Third-quarter EPS guidance is the worst it’s been since 2011 with 60% of companies revising guidance, revising lower (chart via Bloomberg).

3) Upward analyst revisions as a percentage of total revisions for the S&P 500 dropped to 41.3%. You want to see negative expectations being revised higher to sustain a bull run (see 1/16 – 12/17), not this (chart via Citi).

 

4) There are a LOT of people who are bullish on bonds, which may not be so bullish for, errr, bonds… (chart via Bianco Research and @MacroCharts)

5) Meanwhile, the market’s “implied probability of a large increase in inflation over the next five years” just hit a record low. Maybe the expectations pendulum has swung too far? (chart via @MacroCharts)

6) Shipping rates are trending up and nobody seems to care… The Baltic Dry Index (BDI) recently hit 6-year highs. Here’s a writeup I did earlier in the year laying out the reasons why I’m so bullish on shipping stocks.

7) And we’re seeing up-trending shipping rates even though global trade is contracting. Just wait until global growth bottoms… (chart via MS)

8) The US dollar (DXY) is being driven by 2y and 10y rate differentials. For the dollar to roll over, the Fed needs to get ahead of the market’s dovish pricing and do a surprise 50bps cut this week or strongly signal more willingness to aggressively cut into year end.

9) So keep an eye on this.

10) 2Q GDP came in at a 1.2% annualized rate and downward revisions reigned in near-term momentum. Morgan Stanley notes that “The slowdown in investment looks even more stark beginning in 1Q18. Net trade, inventories, and profits have also declined… we initiate our 3Q19 GDP tracking at 1.7%” (chart via MS).

11) Revisions versus previous (chart via MS).

12) The world is in a manufacturing recession and the US is about to join ‘em. Markit’s US manufacturing flash PMI shows the first negative manufacturing PMI print for the US since it clawed its way out of the 09’ recession (chart via MS).

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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.

AK

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.