Don’t Fade The Credit Bleed…

“Expansions don’t die of old age; they are murdered by the Federal Reserve”
~ Rudi Dornbusch

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Good morning!  

In this week’s Dirty Dozen [CHART PACK] we look at the latest Flow Show summary, aggregate sentiment/positioning indicators not showing bearish extremes, credit spreads portending bad stuff ahead, Chinese money supply data, more oil stuff, gold in compression, and a big defense contractor coiled for a run, plus more…


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

  1. There are a few measures of short-term sentiment that are at consensus bearish levels. But, when the broader postioning/sentiment picture is looked at holistically, it shows there’s still ways to go before we hit a major “Buy” signal from these indicators. Below are two examples via Credit Suisse (top) and BofA (bottom). 


  1. Credit leads so don’t fight the bleed is the current mantra here at MOThe RoC in high yield spreads just hit a post COVID high. Historically, acceleration such as this precedes greater vol and poor forward returns over the near-term.


  1. China’s credit impulse looks to have bottomed out.


  1. And Total Social Financing also hit a record high last month. However, China’s M1 (my preferred measure of Chinese money supply) growth remains quite low. But all-in-all this is a positive development.



  1. Speaking of China, I’m not a buyer of their equities but there are some developing charts of interest there. Here’s BABA’s monthly, which has so far held its significant support level.


  1. Gold triggered a major “Compression Buy” signal late last month, which happened to coincide with the recent low. Red shaded areas mark past signals (Collective members can find this tool under the Compression tab in the HUD). It made an attempt at a major breakout on Friday but reversed going into the close. I’m looking for a move above Nov’s high to confirm a restart of the bull trend (see precious metal framework and Compression/Expansion regimes). 


  1. A number of miners are looking constructive as well. Barrick (GOLD) just closed above its 200-day. I might put a tiny bit towards some DOTM’s on this name (see DOTM strategy guide).


  1. I’m just going to keep posting the incredibly bullish energy charts/graphs each week (since there are so many of them). This one from BofA shows energy profits are up 4x while CAPEX is down 30% since 2017.


  1. Energy has been the sole runner in the market race year-to-date.But there are some other areas that are showing some potentially positive developments under the hood. Tech, healthcare, and consumer discretionary all saw MACD Buy Signals above 50% last week (chart is from the “Sectors” tab in the HUD). 


  1. News dropped over the weekend about LMT terminating their plan to buy Aerojet Rocketdyne after the FTC sued to block the deal. It’s been a while since I dug into the company but its long-term charts are coiling for a big move… 


  1. The company is trading cheap on a historical PE basis. It’s also raised its dividend to nearly 8% and has been going on a share buyback spree. The board has approved $6bn in future share repurchases, which is roughly 5% of the market cap.

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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.