Again, Buy ‘Em… [DIRTY DOZEN]

“[Value traps happen’] when you get down toward the lower end of these valuations, value people find them attractive. The trap comes in when there’s a secular change, where the fundamental economics of the business are changing or the industry is changing, and the market is slowly incorporating that into the stock price. So that would be the case over the last several years with newspapers. They are a good example of where historical valuation metrics aren’t working.” ~ Bill Miller

Good morning! 

In this week’s Dirty Dozen [CHART PACK]  we explain again why it’s time to start adding back risk… we cover the major breadth thrusts that fired, a so bearish it’s bullish sentiment/positioning backdrop, some great monthly charts, and more… 

  1. In last week’s Dozen I explained why it was a good time to “Buy ‘em… and start adding back risk. I argued that we were at a tradeable bottom within a larger sideways vol regime, and we should see a couple of weeks (at least) of upside from here. It was not a popular post, and neither was this tweet the following day. As Walter Deemer likes to say “when it’s time to buy, you won’t want to”. Luckily we don’t go off feelings at MO but rather contextualized data that gives us odds to operate off of within a broader framework — process trumps emotions…


  1. BofA’s latest Flow Show summary with highlights by me.


  1. And a new low in the BofA Bull & Bear Indicator… 


  1. Coupled with a major bullish thrust in the McClellan Oscillator index while the Summation is coming off deeply oversold lows. Time will tell but this is looking a lot like the last three major market bottoms.


  1. And we saw a round of positive confirming breadth thrusts last week (something we’ve been patiently waiting for). We got three consecutive 80%+ up volume days, > 90% of stocks above their 10dma via NDR (@EdClissold), and we were two days shy from seeing an official Zweig Breadth Thrust fire as well. 


  1. And this additional color. Not something I typically look at but interesting.


  1. Smallcap valuations are at their GFC lows… (h/t @WallStJesus)


  1. And China is opening up again, which will bring an additional bid (not like it’s needed) to oil and energy stocks, which continue to be where most of our book is concentrated.


  1. Biotech has been in one of its worst bear markets in history. This recent selloff has brought XBI down to its 18’ and 20’ bear market lows. May put in a small reversal bar which puts the odds in favor that this support level holds.


  1. ClearPoint Neuro Inc, (CLPT) is one of our favorite names in the space. You can find some info on them here. Chart below is a monthly.


  1. I wrote the other week about the long-term bottom in the EURUSD and it looks like we got lucky in our bottom picking as the EURUSD strongly reversed higher the next day. Looking at the monthly USD pairs, it seems like shorting the greenback will be the trade to make over the next few months. 

Here’s USDBRL on a monthly basis. Clear breakdown from a rectangle. Brazilian equities are historically cheap and the country exports pretty much everything the world is short of.


  1. Diana Shipping (DSX) has broken out of a 7-year base (chart is a monthly). The company has been buying back shares, it has a strong balance sheet, is seeing solid topline growth, and trades for 5x next year’s earnings. 

Thanks for reading.

Stay frosty 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.