Monday Dirty Dozen [CHART PACK]

That is the nature of pattern recognition, asking ‘What can I infer about this situation based on similarities to what I already know and trust that I understand?’ There is less emphasis on trying to reason out things on the basis that they are special because they are unique, which in a financial context is perhaps the definition of a speculation… It creates an impulse always to connect new knowledge to old and to primarily be interested in new knowledge that genuinely builds on the old.
~ Alice Schroeder

Good morning!

In this week’s Dirty Dozen [CHART PACK] we walk through some relative global performance tables. Check out some strong technical charts in the clearance bin out of Latin America. Look at two actionable FX setups and end with some macro data showing a fuzzy picture, plus more…

Let’s dive in.

***click charts to enlarge***

  1. Last week we saw the close of another trading month as well as another quarter. The fantastic and FREE Koyfin platform shows us which markets around the world performed best on the month. Chile took the top spot with an 8.8% return over the last 30-days.

 

  1. Chile, along with a number of other EM countries, has put in solid-looking bottoms. The chart below is a monthly and shows the country is rebounding from deeply oversold levels as well as 20+ year low valuations.

 

  1. There are some very nice technical setups in select DM FX right now as well. CADUSD has put in a double bottom and is coiling in a bullish wedge following a strong upward thrust. This is a pair that I want to get long…

 

  1. The same with the Mexican peso (MXNUSD) which we are long. But this looks like a good place to add to one’s position or enter a new one. I like the long-term potential for this trade.

 

  1. BNP Paribas shows though that positioning is getting a bit crowded against the USD — though CAD is even more so.

 

  1. Goldman Sachs wrote about how to think about the USD’s countercyclical behavior, writing “To gauge how currencies perform in different parts of the economic cycle, we divide monthly FX returns since 2000 into four buckets, depending on the level and 3-month change in the global PMI. While the Dollar outperforms all other currencies when global growth is low and falling, the worst part of the cycle for the Dollar comes when growth rebounds from a weak level. We think this helps explain why the Dollar outlook is so hotly debated right now. Investors are currently grappling with the durability of the recovery given negative virus news, and therefore the outlook for growth-sensitive assets, including the broad Dollar.”

 

  1. UBS’s US Consumer Health Gauge is at levels similar to those hit during the GFC and hasn’t yet begun to turn down. This just shows the precariousness of our current economic situation. The economy and the market need the government to keep the stimulus and UI benefits flowing or else things will unravel rather quick like…

 

  1. The veteran technician Martin Pring shared this great chart on the twitters last week writing “The price oscillator comparing a 3-to-a-24-month moving average for part-time employment has likely peaked. Most previous reversals signaled an end to the recession. All but 2001 were great equity buying opportunities.”

 

  1. Old man Buffett has started stepping into the energy space and scooping up assets at a steep discount. Will this be the signal needed to pull in others who’ve been sitting on the sidelines? There’s a LOT of value to be found in the space if one knows where to look.

 

  1. A lot of people are pointing out the overbought technical levels of the Nasdaq. While it’s true the trend there is getting hot, it’s not one I’d want to step in front of. I’d much prefer to be long until a valid sell setup triggers. Right now, the tape is all strength.

 

  1. Not many people expected this just a few months ago… But earnings revisions in the US are now the most positive they’ve been in 20-years.

 

  1. People tend to make the mistake of overweighting the importance (in market terms) as to which political party is in power. This chart shows that the market does care though about a change in leadership, regardless of party. It prefers continuity over uncertainty.

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.

AK

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.