Big Opp In Barbarous Relic…  [Dirty Dozen]

But barbarians at the gate are not the real cause of imperial collapse. They are a consequence of the failure to sustain social cooperation. As the British historian Arnold Toynbee said, great civilizations are not murdered—they die by suicide. ~ Peter Turchin “Ultrasociety”

In this week’s Dirty Dozen [CHART PACK] we cover the new record by the Mag 7, discuss why short-term odds favor higher stocks — at least large-cap ones — but then caveat that with worrying signs of long-term breadth and an inbound recession, plus more… 

1. Here’s last week’s Flow Show summary with highlights by me.

2. BofA’s Bull & Bear indicator moved within a hair’s breadth of triggering a Buy Signal last week. This is in line with our other measures of sentiment and positioning which continue to suggest the intermediate-term path of least resistance is up. 

3. The Magnificent Seven surpassed their market cap as a % of SPX all-time high (reached in 21’) this past week, climbing to 29.6%. 

4. We will very soon enter the strongest seasonal period of the year for the SPX (chart via SentimenTrader). 

5. Small-caps are on the ropes and may be about to fall out of the ring… As long as they were in this sideways range one was able to argue (as we did) for the bull case. If RTY starts a new cyclical down leg, then it will almost certainly be a signal that it’s just a matter of time before the broader market follows suit. 

6. Our indicators of long-term breadth suggest the same. All are rolling over in what looks like a resumption of the cyclical bear. 

7. But… but… soft landing? 

8. BBG Economics nonlinearity model shows the distribution of risks around probable paths for unemployment is skewed heavily to the upside. 

9. Since late 22’ we’ve been writing that a US recession is unlikely to start until the end of 23’ at the earliest. It’s increasingly looking like the economy will tip into one not long after the turn of the year. 

10. Specs are bearish CHF, Dow, and Gold.

11. Last Monday we wrote about the oversold buy setup in gold which has so far played out nicely. And there’s good reason to believe that this move is just getting underway. Our sentiment indicator for Large spec and Money Managers has fallen below the sub-20th percentile. Historically, similar readings have marked major bottoms.

12. A monthly close above the key 2,000 level in gold would give the green light for a new cyclical advance. You can read more about how we analyze the market gold here. 

Thanks for reading.

Subscribe To Our Newsletter

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.