If You’re Not A Little Long, You’re Wrong… [Dirty Dozen]

I think the dominant note of our time is unreality. The thin air of the music we all heard has died away. It lasted a long time, certainly several decades, but the best rule is: When the music stops, forget the old music…In good times it’s not hard to make money, but in times of unreality the market is saying, ‘You don’t understand me anymore; don’t trust me until you understand me.’ ~ Mister Johnson in Adam Smith’s “The Money Game”

In this week’s Dirty Dozen [CHART PACK], we go over more reasons why US equity markets are headed higher (over the next few months), we then look at the setup in crude, and go through a number of technical reversion trades in beaten-down names, plus more…

  1. BofA’s Flow Show summary from last week with highlights by me. “US money market fund assets hit an all-time high.”



  1. I don’t so much care about trendline breaks or trendlines in general, but the market does. So here’s a chart with our expected target price on this move of 4,600ish for the SPX or roughly +12% above current levels.


  1. One interesting development is the large improvement in longer-term breadth indicators. Many are starting to look as if the cyclical bear is already over. We don’t believe that, for a number of reasons, but we do think that the market is about to see a nice run over the next couple of months.

As always, stay flexible and open-minded.


  1. One of the big reasons for this change in market tone is that financial conditions have eased considerably since the June low. The OFR Financial Stress Index is back below zero, indicating easy conditions.


  1. According to BBG, “refining behemoth Sinopec reported a surge in gasoline sales; a local market watcher said Chinese state refiners may raise run rates by 1%-2% next month; jet fuel trends look positive; and the widely followed folk at RBC said ‘crude has probably already seen its year-low and China’s reopening is ‘far from priced.”

I find myself in agreement with the “folk” at RBC.

Crude has an interesting setup right now (chart below is a daily).


  1. Net spec positioning is in the bottom 5yr percentile. Open interest is near the bottom percentile. Commercials are bullishly positioned relative to their history (green line). And we’ve entered its strongest period of seasonality for the year.

So basically it’s a dead speculative market with zero interest. But producers are coming off their most bullish positioning in five years. China’s reopening has not been priced in. Peeps are still too bearish on US econ activity in the first quarter. And seasonal tailwinds are strong <shrug emoji>.


  1. Our portfolio has been dominated by uranium, oil and gas, precious metals, and a few other miners for a good while now. U names have been showing increasing relative strength over the past few months. A breakout is looking imminent. The Australian miner Paladin (PDN.ASX) is one of our favorites in this theme.


  1. A number of beaten-down growth names have been on a tear over the past month. SHOP is one of these names. It recently completed a large inverse H&S bottom. The measured move target is $62 or 25% above current levels.


  1. Some of the biggest moves are concentrated in the highly shorted names. The most heavily shorted sector of the SPX right now is consumer cyclicals.


  1. WW is another potential technical turn around play. Short interest is a bit high at 11%. It’s broken out from a technical base and insiders are buying the stock.


  1. WW’s stats…


  1. The oil and gas producer Comstock Resources (CRK) is another interesting setup. Short float of 15%. Strong insider buying. Trades at 3x next year’s earnings. And the stock is down at a significant long-term technical level.

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.