Market Headed To New All-time Highs?  [Dirty Dozen]

That warm sense of everything going well is usually the body temperature at the center of the herd. ~  John Masters

In this week’s Dirty Dozen [CHART PACK] we look at monthly charts for the SPX, bonds, gold, DXY, and more…

1. The market saw a strong close for November. It’s now within 5% of its ATH and the current odds favor an eventual breakthrough to new highs in the months ahead.

2. We pointed out the high probability of a reversal in bonds back in October as they had climaxed in a parabolic selloff down to their lower monthly Bollinger Band. At the same time, our yield leads had been signaling a reversal.

The current odds favor more upside follow-through in the short term. But we often see double bottoms following moves like the one we’ve seen this year, so be on the lookout for renewed weakness in the tape.

3. Gold has finally got a monthly close above its key 2k level. This is a strong breakout signal following a multi-year sideways range. In plain speak, this means gold is going much higher in 24’.

We’ve been long for a few weeks but will be building our position on pullbacks (same with silver though the silver market tends to be somewhat tougher to trade).

4. The macro fundamental outlook for gold is about as good as it gets. You can read more on how we analyze PM fundies here.

5. And while gold’s long-term prospects are great, it’s very extended over the short term and therefore increasingly susceptible to a retrace soon.

Our multichart view below shows that gold is 2std overbought from its 20, 50, and 200-day moving averages. At the same time, we’ve seen a big jump in large spec positioning over the past couple of weeks. So likely we get a bit of a shakeout soon.

6. The DXY closed near its lows for the month and now finds itself at a key level. A close below its most recent breakout level would invalidate the move and raise the odds of downside continuation.

7. According to BofA EM equities relative to the US have fallen to 50-year lows. When this trend begins to reverse it’ll have big (negative) implications for USD.

8. And that’s because there’s a high correlation between the two (chart via BofA). To read more about why that is, you can read my piece on Soros’ Currency Framework here.

9. We’ve been pointing out the bullish setup in the Dow for the past month. Very crowded short positioning combined with increasingly strong technicals, made for a nice setup.

Well, November didn’t disappoint as we saw the Dow complete an inverted H&S continuation chart. The measured move target for this breakout is 40,000’ish.

10. While the market is stretched a bit in the short-term we still like the bull side as liquidity continues to ease and market internals continue to support the broader trend up. 

11. Sentiment/positioning is getting more bullish but remains below levels that signal one should turn cautious.

12. We still like Japan’s Nikkei here (first chart is a monthly, second is a daily). November saw a strong bullish thrust out of its 3-month pullback consolidation.

One could put a buy stop above the recent daily consolidation area to let the market pull you in on confirmation of technical follow-through.

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.