A Monday Dozen [CHART PACK] #7

The nature of investing is that a very small percentage of the people take money, essentially, in that poker game, away from other people who don’t know when prices go up whether that means it’s a good investment or if it’s a more expensive investment.  Too many investors are reactive decision-makers. If something has gone up, they say, ‘Ah, that’s a good investment.’ They don’t say, ‘That’s more expensive. ~ Ray Dalio

Good morning!

In this week’s Monday Dozen we take a look collapsing manufacturing around the world, yield curves signaling higher volatility in equities ahead, the makings of a currency war, and a popped parabolic top in a major EM market along with much much more…

1) Global PMI and New Orders are both in contractionary territory for the first time this cycle (chart via MS).

2) Manufacturing is a small part of the US economy but it’s the making of physical goods that drives the business cycle. If the manufacturing ISM keeps trending lower at this pace, it’ll end up in negative territory before the year is out and consumer confidence will then likely follow suit.

3) Keep an eye on this one. The S&P 500 may be forming a textbook Broadening Top. My baseline is increased volatility and sideways action with a downside bias over the next month.

4) Is the yield curve signaling higher equity volatility ahead? Again, my money is yes… (chart via MS)

5) This 20-year seasonality chart of the S&P 500 shows that August and September have a tendency to be rough months for the market.

6) Asset manager’s equity exposure through S&P e-minis hit post-crisis highs recently (chart via BoAML).

7) First trade wars now currency wars? The USDCNY is moving above the critical spot 7-level. The Chinese yuan is now trading at its lowest point against the dollar in over a decade. Expect many a tweets about the dollar from the White House in the coming weeks.

8) EURUSD is also at a significant level. The euro came down and bounced off its downward sloping support line last week (chart is a weekly).

9) The EUR-short-funded carry trade is at risk of unwinding should volatility pick up. Positioning and risk-reversals are still pointing to a move higher in EURUSD.

10) NDR’s Recession Watch Indicator is ticking up but still well below levels that have indicated an impending recession in the past.

11) And despite the contraction in global growth and rising geopolitical uncertainty, credit conditions in the US remain very loose (chart via NDR).

12) “Three reasons why #Nifty 50 $Nifty could enter bear market phase #India

  1. Mkt. challenging 16-year parabolic advance – potential targets 9120 & 6420
  2. Possible 19-mo. right-angled broadening pattern
  3. Mar-Jun ’19 surge now completely reversed” ~ Chart and text via @PeterLBrandt.

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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.