Gold is Starting its Next Bull Leg...

“Remember, in life, time rather than money is the most important currency, and we all have only a finite amount of time (at least until they figure out life extension). You can win money, lose money, and earn it back again. But time is something that you can never get back, so making good decisions with the odds on your side is the best way we can give ourselves more time, or said another way—freedom.” ~ Larry Hite, “The Rule”

Good morning!In this week’s Dirty Dozen [CHART PACK]  we look at Fund Manager Survey highlights, technical overextension in US markets, signs of the US dollar rolling over and a contrarian Buy Signal in precious metals, plus more…Let’s dive in.

***click charts to enlarge***

1. The takeaways from BofAML’s latest Global Fund Manager Survey.

 

2. The SPX has risen 76% YoY from its March 20 lows, making it the 3rd largest jump in 100 years (via BofAML).

 

3. The bank is predicting a rotation out of Low Quality ahead of peak stimulus coming in the second half.

 

4. Strong breadth means the current Buy Climax is likely to keep playing out, for now. But… my base case is that we’re nearer to the end than the beginning of this move and US stocks are headed for a few months of sideways chop — as I outlined in this thread here.

Stimulus and easy Fed policy has cut off the downside risk though so I’m looking more for sidewaysish US underperformance, while Europe and EMs outperform as the USD resumes its cyclical bear. 

5. Bespoke Research points out that “this is the longest streak of 'extreme' overbought readings since January 2018.”

 

6. Here’s the trade-weighted dollar (DXY) chart I’m watching. It’s retraced up to kiss its longer-term trendline and is now rolling back over. Chart is a weekly.

 

7. Which is great for precious metals where the crowded positioning and sentiment that I pointed out back in early August has been fully worked off. RenMac’s Small-Traders CoT indicator just gave a contrarian Buy Signal.

We’re already long at MO and like I’ve said last week, it’s time to start loading up on miners.  

8. Here’s the breakdown of Biden’s proposed $2.3trn infrastructure package from JPM.

 

9. If you believe all this stimulus is going to bring lasting inflation then JPM suggests the best assets to hide out in going forward are oil, energy equities, and EMFX.

 

10. And here’s their historical performance per various inflationary levels.
11. JMP makes the case for higher oil prices ahead, writing “Oil prices have declined about 10% from their highs on three supply developments (Texas output has normalized post-freeze, OPEC+ output increase, higher Iranian exports to China), none of which should be large enough this year to reverse the imbalance driving an ongoing decline in inventories. And since prices tend to follow inventory trends we still think that roughly $70 Brent and WTI will be reached in H2.”

 

12. There’s plenty of strong looking tapes in the energy space. I particularly like international names here. One of the many charts I like is Canadian producer Arc Resources (ARX. TSX).

The stock is about to complete a 24-month inverted H&S bottom. It’s very cheap by historical standards. The company has cleaned up its balance sheet and pays out a 3% divvy yield (chart is a weekly). Stay safe out there and keep your head on a swivel.