Is the US Dollar Bottoming? [DIRTY DOZEN]

“Bullishness is born as hope in the midst of despair. Hope swells to confidence and confidence swells to euphoria, and the process contains the seed of its own destruction and the birth of its opposite, fear. Fear is nurtured by falling prices and the two feed on themselves until they swell to despair. And so the cycle is completed -and ready to begin again with the birth of hope. This is both the way things are and the way they have to be.” ~ John Percival “The Way of the Dollar”

Good morning!

In this week’s Dirty Dozen [CHART PACK] we look at investor flows, bitcoin extension, USD positioning, EMFX sentiment, inflation indicators, and an Ag-tech play, plus more…

Let’s dive in.

***click charts to enlarge***

  1. BofA’s latest “Flow Show” noted that investors piled into gold at their quickest pace in months last week. Other highlights are below.


  1. Their Bull & Bear Indicator is at 7.1 showing sentiment is strongly bullish… this is still below levels that trigger a sell signal though. More upside is likely over the next few weeks.


  1. The run in bitcoin is something to behold.


  1. Top calling is a costly endeavor in a trend such as this (I know, I thought myself smart taking half-profits 50%ish ago). The near-term chart shows bitcoin is incredibly extended from its 200-day moving average.


But overbought can become *really* overbought.


  1. The US dollar is down at its 2018 lows, an area where it may finally find some support. Citi’s FX Pain Index shows FX Funds haven’t been this short US dollars since the DXY 2011 bottom.


  1. JP Morgan writes “our top-down EM FX positioning indicators imply that EM FX positioning is comfortably above historical averages. Our EM FX risk appetite index combines several key technical indicators into a headline measure using a PCA approach, including local EM bond and equity fund flows, direct foreign investor EM local bond and equity purchases, Commitment of Traders positioning data, FX implied volatility, and RSI indicators(Exhibit 4). Traditionally the indicator has served as a good mean reversion indicator at its extremes of +/-2 score.”

We’re keeping an eye on US real yields as they should lead any reversal in this reflation trade.


  1. Speaking of EMs, the MSCI Emerging Market Index just hit an all-time high.


  1. While we’re due for a washout in the short USD/long reflation/EM trade sometime in the near-term, the long-term capital concentration dynamics still strongly support an enduring bull market in EM.


  1. Higher inflation is coming… ISM Prices Paid are a good leading indicator of CPI (h/t Gavin Baker).


  1. The rally in stocks combined with the fall in bonds has driven the SPX earnings yield – UST yield 200-day rate-of-change to a recent low. A period of volatility has shortly followed past instances (h/t @bullmarketsco).


  1. The SPX’s Equity Risk Premium is at cycle lows. The last time we were here was in September 2018, which happened to precede a large market selloff. There is a case to be made though that with the paradigm shifts in Fed and government fiscal policy we’ve seen, the ERP is going to compress further closer to historical averages.


  1. Ags are in the early-innings of a bull market. We’ve been going through a list of names, looking for opportunties. BIOX is a company we’re digging into this week. It’s an Argentinian based Ag-tech company that operates through three segments: Seed and Integrated Products, Crop Protection, and Crop Nutrition.

The weekly chart is forming a multi-year base and is on breakout watch.


Stay safe out there 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

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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.

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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.

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