“Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.” ~ Stanley Druckenmiller
In this week’s Dirty Dozen, we look at falling German IP contrasted with rising German DAX, market concentration stuff, Call vs. Puts in the 98th %tile, supportive internals, weak labor data, a long Ag trade, and a pitch for cheap protection.
1. Germany’s industrial production hasn’t been this weak outside of COVID since the early days of 2010.
2. But… The German DAX is spitting distance from all-time highs. Why is that, you may ask? Read the quote from Druck at the top.
3. I know, I know, the concentration charts are lame and have been getting passed around for the last few years. But, still… This is pretty incredible. I mean, we’re about to take out Great Depression levels. That’s something. This doesn’t stop me from riding the trend higher, but man… the ride down, when it does come, will be *chef’s kiss*.
4. Total Call/Put ratios are elevated no matter how you slice them. Our 3yr oscillator has them printing in the 98th percentile. This means speculators are starting to aggressively speculate and short-term Trend Fragility is elevated. However, more intermediate-term measures, such as the BofA Bull&Bear, are neutral and remain supportive of the bull trend.
5. And our trusty market internals are supportive (outside of semis), which means buy the dips and buy the rips, for now.
6. Pulling back, the MO Growth Indicator just flipped from its Recovery regime into a Contractionary one. We’ll have to wait and see if this is noise or if it sticks. Liquidity bounced back up and remains highly supportive. Our CPI lead has leveled off, suggesting that 2.5% is the new floor until something breaks. Lastly, our Rates & Energy Shock indicator shows both remain a tailwind to stocks.
7. BBG’s Anna Wong noted on X last week, “Not understanding why I keep hearing ‘solid’ as the adjective for today’s jobs report. Implied hiring rate plunged in the last two jobs reports”. At the same time, “median duration of unemployment has increased meaningfully. We are in a very different macro landscape than the first Trump term.”
I concur, Anna.
8. There’s some interesting setups in markets at the moment. A big move is brewing in USD pairs, with a number of major compression regimes completing (see USDCAD, AUDUSD, EURUSD). Oil is dancing on a cliff’s edge. And BTCUSD is en fuego… But since we’ve talked about these for months, here’s a more tactical play—long corn. Sentiment relatively bearish; valuation 0th %tile, and seasonality about to hockey stick. Plus, its chart is compressing in a wedge.
9. From @boazweinstein “As my good friend @AlonRosin put it, ‘the cost to have just in case protection’ is at generational lows.”
Time for some 50 Cent strategy? Collective members know what I’m talking about.
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Thanks for reading.
