Google is Dangerously Overextended…

“Good traders liquidate their positions when they believe they are wrong; great traders reverse their positions when they believe they are wrong.” ~ Jack Schwager

Good morning!

In this week’s Dirty Dozen [CHART PACK]  we look at the Nikkei coiling, GBTC trading at its largest ever discount to NAV, broader market breadth, hedge funds finally starting to join the party, median income across generations, and pitch a food tech company that’s making frankenfish, plus more…

Let’s dive in.

***click charts to enlarge***

  1. I went long Nikkei futures (NKD) in my World Trading Championship account on Wednesday’s reversal. The index bounced off its Bollinger Band and sideways consolidation low. I think it breaks out to the upside soon and buying at current levels with a tight stop right below the range, gives a pretty good risk/reward entry.


  1. The Nikkei has had a good run since we last pitched the bull case for the index in these pages back in november (link here). Its subsequent vertical run sucked in plenty of longs and made for some pretty crowded positioning. But this has all been wrung out over the last few months of sideways chop.


  1. Last week the Grayscale Bitcoin Trust traded at a 20-ish% (18.89% to be exact) discount to its NAV. Its largest discount in history.


  1. I think crypto at large is nearing a top that will lead to a considerable and enduring correction. With that said, BTCUSD is holding critical support for now and it’s likely to go on at least one more run before it rolls over. We still prefer Ethereum (ETH) since it has the better chart and stronger relative performance.


  1. Trend Fragility is high in the broader equity market and we’ll likely enter a corrective phase sometime within the next month or so. But, markets are still in a Buy Climax and these tend to end with FOMO induced vertical climbs where the market runs 5-10% over the span of 2 to 4 weeks. We’re likely entering one of these periods now. The underlying breadth remains supportive of such a move.


  1. Hedge Funds have been sitting on the sidelines for most of this rally. Though this has started to change over the last few weeks with funds beginning to pile into risk assets. This is telling as they have a history of buying into tops…


  1. JPM published a report recently warning about the dangers of buying into stocks with high growth assumptions embedded into them. Their “20-year analysis shows that: 1) Close to 75% of those companies in the top quintile of consensus Yr+1 EPS Grw expectations missed estimates and underperformed; 2) While >50% of the companies the bottom quintile beat and outperformed!;”


  1. There’s some incredibly extended charts in the growth/tech space. Alphabet (GOOGL) being a prime example. The stock is currently trading over 30% above its 200-day moving average.


  1. In past instances where the stock has traded this wide from its 200-day, its follow on performance has been dismal.


10.This recent FT article about the pervasive insecurity of millennials around the globe is an important read.


  1. All of our yield indicators started diverging higher from yields last week. Below is copper/gold in red. If we’re about to enter an accelerated Buy Climax then I’d expect to see yields pop a bit here (bonds selloff).


  1. I recently finished reading “Moo’s Law: An Investor’s Guide to the New Agrarian Revolution” written by the talented investor, Jim Mellon. He’s incredibly bullish on the future market for lab grown meats and makes a compelling case for being so. AQB is not that. They grow and sell real fish, salmon to be exact, but salmon that’s been genetically modified. The company has been working on its tech for years, recently got approval to bring its product to market and is finally starting to do so.

I’m not pitching this company (still looking into it) but I’m bullish on the entire Ag/food complex in general and intrigued by some of the tech advances that are going on in the space. Brandon and I are looking through a list of names at the moment.


Stay safe out there and keep your head on a swivel.

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.