Has The Market Entered An Expansion Regime? [Dirty Dozen]

If I had to reduce all the components of my methods to a single phrase, it would be thinking in essentials. ~  Victor Sperandeo

In this week’s Dirty Dozen [CHART PACK], we talk bullish monthly moves, even more bullish volatility compression breakouts, tempered by short-term pullback expectations, then discuss the outperforming Greeks, some big moves in Bitcoin, and a big discount to NAV play, plus more…

**Note: Enrollment to the Macro Ops Collective is NOW OPEN.

The Collective is our premium service that offers institutional-level research, proprietary quant tools, actionable investment strategies, and a killer community of dedicated investors and fund managers from around the world. 

If you want to win as a contrarian in this macro regime, make sure you become a member.

**Enrollment will stay open until Sunday, July 2nd at midnight CST.

You can learn more about the Collective and what it can do for your investing here.

  1. There are only five trading days left in the month of June. If the SPX can hold these levels into the monthly close, we’ll get a confirmed bull bar breakout from a tight 12-month trading range. This would make it odds on we see a positive return in July.


  1. Over the past two weeks we’ve been pointing out the short-term overbought levels, noting that it was increasingly likely we’d see a pullback/retrace in the very near term. That pullback started last week.

I was asked by a number of readers over the past week whether I thought this would be a significant top. My answer is no. The evidence still strongly supports a continuation of this trend, albeit after some short-term mean reversion. Part of this evidence is the continued positive confirmation from market internals, such as Cyclical vs Defensive, Semis vs SPY, Discretionary vs Staples, and credit as pictured below.


  1. One of the major setups we like to look out for is compression regimes as these tend to precede large expansion regimes (trends). Well the SPX is transitioning from a compression to an expansionary regime right now as SentimenTrader pointed out over the weekend.


  1. Similar instances in the past have preceded reliably strong returns. SentimenTrader writes with emphasis by me “The S&P never showed a loss over the next six months, and losses across any time frame were rare and limited in scope. Even up to a year later, the largest drawdown was a modest 7.3% while the maximum gain averaged more than 21%.

Note this study is with the additional filter of including the first set of 52-week highs within the past three months.


  1. SPX seasonality is a useful input but also not one we put a whole lot of weight on. With that said, we’re in the smack-dab middle of Summer trading. And seasonally speaking, action tends to be quite sideways and choppy this time of year.


  1. I’ve been messing around on Koyfin recently, which I hadn’t used in a while. And I got to say, I’m super impressed with all of their updates and new features since I used them last. I’ve been trying to find solutions to spend less and less time on my BBG and Koyfin is the best solution I’ve found yet (note: no affiliation, I just like the product).

Here’s a chart showing Factor performance over the past 3 months. Unsurprisingly, it’s mostly Growth driving this bus, though it is getting an assist from IPOs which is a bit surprising.


  1. Remember Greece? I know it was nearly 10 years ago but it seems like just yesterday that everyone was talking about Yanis Varoufakis and Greek profligacy. You don’t hear so much talk about the country now. Which, I suppose is no wonder, as Greece (GREK ETF) is the second best-performing country this past quarter, behind only Brazil. And the strongest trends tend to start when no one is looking…


  1. The other week we pointed out the favorable mixture in BTCUSD of both solid technicals and dour sentiment, noting the recent buy signal given by Sentix’s TD Index (a composite measure of sentiment). 

The bullish breakout came last week with BTCUSD seeing a strong thrust out of its wedge. It’s now bumping up against its upper Bollinger Band so we likely see some profit-taking here but odds favor a continued move higher following a brief pullback (note: we’re long).


  1. Here’s a recent update from Sentix on BTCUSD’s current sentiment read.

“In both the short and medium term, more and more investors are indicating a neutral stance on cryptocurrencies… The Super Neutrality Index for Bitcoins reaches an exceptionally high level of +89 percentage points… We know from historical research that a high level of neutral investors is often a harbinger of an upcoming volatility impulse…The summer months should therefore provide a new impulse.”

Our bet is that impulse is up… 


  1. This breakout is also being confirmed in the crypto-mining space. Here’s a weekly chart of HUT with a strong breakout from a long basing pattern. I prefer to play the underlying but if this breakout persists, then these miners provide a lot of leverage to ride the trend.


  1. Even COIN is looking increasingly constructive.


  1. Tip of the hat to the acid man Hugh Hendry for this idea, but the Grayscale Bitcoin Trust (GBTC) is trading at a 31% discount to NAV. And with Blackrock’s recent approval for a BTC ETF and GBTC’s lawsuit against the SEC for the seemingly arbitrary blocking of its ETF. It’s becoming increasingly probable they get greenlighted and this gap to NAV gets closed.

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.