Getting Close To A Major Sell Signal…  [Dirty Dozen]

“A constant in the history of money is that every remedy is reliably a source of new abuse.” ~ John & James Galbraith via the book “Money” 

In this week’s Dirty Dozen [CHART PACK] we look at shifting momentum in cyclical sectors (miners, energy, financials), we then update the risk/reward in stocks, cover a potential sell signal triggering in our Nervous & Numb indicator, and walk through some fade trades in Ags, plus more… 

1. Primary technical signals of consequence over the past three months are all bullish and place the odds strongly in favor of a continued bull trend throughout the year — that’s of course with expected pullbacks and consolidations along the way. 

2. Here’s the latest market returns and regime heatmap for the globe. Gold miners, energy, and financials all saw strong performance last week.

3. The Qs are coiling again and are seeing waning momentum. We’re still long but have jammed up our stops as we expect continued volatility in the index while the short-term risk/reward is more of a mixed bag than it was just a few weeks ago. 

4. Our aggregate market internals oscillator shows that while internals are in neutral territory, they’re starting to roll over and trend down a bit. Not yet a reason to be bearish but something worth keeping a close eye on. 

5. We’ve been in an elevated Trend Fragility (green line) environment for the past two months, but these environments can persist longer than many expect. So that is never reason enough to sell. But, one thing we need to closely watch is our weekly Nervous & Numb indicator (yellow line), which is getting very close to triggering a sell signal. 

6. BofA’s Bull & Bear indicator remains in neutral territory, unchanged from last week. 

7. The main argument from the bears over the past 6 months has been that this bull market was being completely driven by only a handful of stocks in the Mag-7. Well, we just saw the SPX equal-weighted index hit a new all-time high, so looks like the zero hedge crowd is going to have to look for something else to whine about. 

8. Here’s the latest CoT positioning for the major markets. We have the most crowded positioning in Brent crude, cotton, and GBPUSD. While speculators are most short the soybean complex, platinum, and corn (note: this positioning is based on a 6-month oscillator).  

9. We highlighted the bullish setup in soybean meal in last week’s Dirty Dozen (link here). Soymeal saw a strong move following Friday’s WASDE report which was fairly neutral. Speculators remain crowded short and it just entered its strongest period of seasonality. 

10. Cotton looks to have potentially put in a double-top. Speculative positioning is crowded long. We saw a large bearish reversal Friday following a fairly bullish WASDE report, giving us a news failure. Friday’s bar gives us a good technical inflection point to get short in size with relatively low risk. 

11. Here’s the latest positioning and overbought levels in cotton from our HUD. 

12.  We last talked about CVR Partners (UAN) in these pages back in late January (link here). The company is a fertilizer producer with a high beta to the corn and wheat markets, both of which might be starting to bottom. The stock trades for 3x FCF and has a tiny float of just 7mn shares. The current setup gives us a good technical entry point to take a swing with low risk (chart below is a weekly). 

Thanks for reading.

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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.