Investors Don’t Like Their Corn…  [Dirty Dozen]

“You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on suboptimal trades. ” ~ Richard Dennis

In this week’s Dirty Dozen [CHART PACK] we talk about key levels in Qs and crypto, discuss the start of some negative divergences in internals, look at a breakout in corn, and pitch a potash producer as a way to play a bottom in softs, plus more…

1. We continue to be long NQ and looking for areas to add. The next level of major resistance is the key level of 18,500 around the upper Bollinger Band. 

2. Our Market Internals oscillator turned over last week. We can see below on the sub-charts why, as many of them are starting to diverge lower from the market. The aggregator is still in neutral territory and negative divergences tend to precede major market tops by weeks, at the very least. So no cause for alarm yet but something worth keeping a close eye on. 

3. And we need to remind ourselves that we’re still firmly in a primary bull trend. So while we should expect average corrections, our focus should be on buying dips and buying rips until the backdrop says to start doing otherwise. Here our liquidity index shows that financial conditions remain solidly in the green. 

4. The RoC on 10yr yields has dipped some but we have CPI this week and with this indicator still near the sell signal zone (red line), we’ll have to stay abreast on how yields trade later in the week.  

5. Our Trend Fragility indicator which is an aggregate of positioning, sentiment, and flows, is back down in neutral territory with a reading of 72%. So the sell signal it triggered back in April has reset.

6. The German DAX made a new all-time high last week. Major global indices making new all-time highs is not bearish, just FYI (chart is a weekly). 

7. Last month we pointed out the technical bottom in Chinese equities (FXI) along with the consensus bearish sentiment (link here). After a strong run over the past few weeks, China is now the leader in YTD returns amongst major markets (chart below from Koyfin platform). 

8. We’re long BTCUSD and looking for technical setups to add. We have major support at the 60k level. A weekly close below would signal a likely trend change. I think this thing breaks out to the upside though, we’ll see. 

9. Large specs are back to being net short BTCUSD and small specs are holding their smallest long positioning in months. At the same time, Sentix’s Strategic Bias index (a measure of long-term patient hands) remains quite bullish. So all in all this continues to be a good sentiment backdrop for long BTC. 

10. We got long July corn the other week on its breakout from its compression regime. We’ll be adding to this position if we see followthrough to the upside. 

11. Our Sentiment oscillator shows there’s a strong bearish consensus in corn. Green highlights mark past instances where sentiment was this low. This is what major bottoms are made of. 

12. Intrepid Potash (IPI) is a smallcap ($330mn) producer of potash, so it has a high correlation to corn and wheat (which also looks to be reversing). The chart below is a weekly and shows the stock is breaking out to the upside from a major compression regime. 

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.