A Stealth Bear is Bull

“People do not get what they want or what they expect from markets, they get what they deserve.” ~ Bill Bonner (h/t Morgan Housel)

Good morning!  

In this week’s Dirty Dozen [CHART PACK] we again lay out the bull case for risk assets over the near-term. We look at stealth bear markets, oversold breadth relative to indices near highs. We talk inflation and tech, look at the statistical returns per market and current regime. And end with a look at some great chart setups in semis, lumber, corn, and two Ag related equity names, plus more… 

Oh, and before I forget, a number of you have asked recently so we’ve decided to open the doors to our Collective this week. For those of you who don’t know, the Collective is our premium service which provides differentiated macro, micro, and quantitative research. High level training on markets and investing. And a community comprised of die hard traders and investors, both seasoned fund managers and serious retailers. If you’re interested just click the link below to learn more. Cheers!

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***click charts to enlarge*** 

  1. Large swaths of this market have gone through a stealth bear market of sorts over the last few months. Many of the popular growth names were bulldozed while the indices were kept aloft by the megacaps that continue to act as cash-sweep vehicles for every new dollar added to ETF heavy portfolios.

We can see this in the chart below which shows the Nasdaq new highs – lows versus how far the market is off its top. 

Relative lows hit, well, their lows earlier this month. Close to levels that have marked bottoms of past major selloffs. Yet, the Qs only came as far as 7% off their all-time highs before rebounding.

This is most likely a short-term bullish thing as we should see the beaten down group continue to revert upwards, giving a tailwind to breadth and the overall market. 


  1. The R3K is just off its highs but % of stocks > 50dma are coming off deeply oversold levels that typically mark bottoms. Again, I read this as bullish. The path of least resistance is up, my friends…



  1. What can kill this juggernaut of a rally? Inflation, or at least the belief that inflation will stay well above current expectations. Fidelity put out a decent report analyzing various sector returns in historical inflationary regimes. You can find the link here.



  1. We like to start our week with a quick glance at what Market Regimes various markets are in. Collective members can find this tab in our Heads Up Display (HUD). The most profitable regimes for position trading are the Bull Quiet and Blended Bull regimes, which are highlighted in red below. You can read up more on market regimes and SQN here



  1. Semis continue to lead this market. Our SQN Statistics tab analyzes the average forward returns of each market according to where each is in its current regime. The top table shows oil, home builders, semis, and Qs have the best projected 20-day returns out of all markets analyzed.


The below chart shows that the current BullQ regime (blue line) in Semis is progressing along its typical path (green line) and tends to stay in this regime for another 24 days on average before transitioning to BullV or Neutral. Again, you can find this tab in the HUD.


  1. Speaking of semis, DRAM/NAND producer Micron Technologies (MU) is back nearing all-time highs. I wrote up the secular bull case for MU back in Sep 20’ when it was trading sub $50 a share. You can read that report here

MU spent most of the year in corrective mode following its large bull run in the 2nd half of 20’. Bearish sentiment hit ridiculous extremes over the last few months, helping to cement the bottom on this move. 

The monthly chart below shows the stock is in an accelerating parabola, helped along by improving DRAM pricing. The next measured move target is $124 a share. I expect MU will get there quite fast, which is great for our 2023 DOTM calls.


  1. Lumber’s deep correction following 2020’s monster bull run is officially over. Random length wood is back in a BullQ regime and just pulled back to its midline. Positioning is neutral, seasonality is positive, and the macro fundies remain strong.



  1. I think one of the main macro themse in 22’ will be a big reversal in the USD. I’ve laid out bearish dollar take here. Most pairs still look weak against USD right now but that may soon change. 


One interesting thing I noticed is that if EURUSD closes negative on the month, it’ll have put in 5 consecutive monthly bear bars, which is unusual. Now, there are plenty of reasons to be bearish the euro over the short-term (exploding natty prices, Russia amassing troops on Ukraine’s border, Eurovision, etc…). But these deeply oversold levels show a strong bullish bais over the following year. Just something to keep in mind… 


  1. GBPUSD is one USD cross that does look actionable on the long-side. GPBUSD has broken up and out of a three wave down wedge. Speculators are crowded short, our yield spread oscillator has turned up in GBP’s favor, and momentum is lifting up off the basement floor (charts can be found in FX tab in HUD). 



  1. Corn is in a blended bull regime. We got long the other week. The trend is accelerating to the upside. We’ll look to add on pullbacks.



  1. Ags in general are starting to show renewed strength. This should help drive a bid under a few of our portfolio holdings. The Argentinian based Agtech firm Bioceres Crop Solutions, being one of them. 


I first wrote up the bull case for BIOX back in January when the stock was trading for $6.50. It’s run 150ish% since then and the stock has traded sideways in a tight and healthy sideways consolidation for the last 6-months or so. But it’s now teeing off its 200dma and looks geared up for another run higher. 


  1. The potash producer / stealth oil play (through its large water rights) Intrepid Potash (IPI) also looks set for another leg up. The stock is breaking out from a multi-month coiling wedge. It’s still very cheap and expecting high growth. 

We’ll be adding to our position this week. 

And, again, if you’re interested in joining our team then click the link below to learn more. Looking forward to seeing you in the slack. Cheers!

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Thanks for reading.

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.