Natural Gas In A Major Compression…  [Dirty Dozen]

“All of us began as research people. And we have a saying, the micro drives the macro. And we never thought we were better at constructing what our nonfarm payrolls is going to be, is core PCE going to round up, or round down… We spoke to a lot of companies in the real economy, observed what was going on, and then constructed a mental model of the macro environment. ” ~ Scott Bessent

In this week’s Dirty Dozen [CHART PACK] we talk about a likely bottom in risk assets, along with a potential bottom in bonds, followed by an even more intriguing bottom in natural gas, plus more…

1. We saw a good-sized bullish reversal bar last week. I’d like to see a weekly close above the 18,350 level for confirmation but it’s odds on now that this pullback is over.

    2. Last week gave us the potential double bottom that we were looking for (chart is a daily). We’ll likely see a rip to new highs soon, as long as bonds continue to cooperate.

    3. The bond chart is looking increasingly bullish to me (chart below is a monthly). The 10yr is down at its lower monthly Bollinger Band, putting in a potential double bottom. The narrative pendulum has swung completely to the side of the hawkish consensus. So it’s not going to take much of a shift in the data to send this chart ripping (at least temporarily) in the other direction.

    4. They reversed off their lower weekly Bollinger Band last week as well. This chart looks set up for some mean reversion.

    5. Our aggregate market internals charts is shifting up from its neutral reading which is a good sign for the bulls.

    6. Here’s last week’s returns and regimes. One notable market is natural gas where price is starting to perk up some after a brutal year.

    7. Natty’s futures curve is at levels which have tended to mark or precede major bottoms.

    8. It’s also trading in the 0th percentile historically, which is a precondition for a major bottom to form.

    9. Positioning and sentiment have been completely washed out. Seasonality is favorable. And price is coming off of deeply long-term oversold levels.

    10. The July contract is in a major squeeze and major squeezes often lead to major trends (chart is a daily). We’re putting in buy stops to see if the market can pull us in long.

    11. I shared Antero Resources (AR) in the pages just a few weeks ago. It’s since broken out from its 18-month sideways range. We may play this name through DOTMs.

    12. On an unrelated note, I was flipping through some charts over the weekend and came across Total Known Gold ETF holdings (orange line). In the past, this line tends to essentially track the price of gold. But we can see that this relationship has not held up this time around.

    I think this says a few things (1) this rally in precious metals has been driven almost entirely by foreign central banks derisking some of their USD exposure due to concerns around future potential sanctioning (they’ve watched what’s happened to Russia following their invasion of Ukraine).

    And the gold market is a tiny fraction of the total USD market, so just a little bit of this action can drive a big move. This is why we’ve seen traditional correlations breakdown, such as gold and real yields. And (2) this shows that we’re far from any euphoria or anything that would indicate a major top to this move, quite the opposite. The lack of gold buying through ETFs shows your average investor is still largely uninterested in the yellow metal. This is bullish PMs, which we continue to be very long.

    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.


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    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.

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    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.

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