Ominous…  [Dirty Dozen]

“When traders think about money management, they think about stops and trade management. But a big part of the equation is knowing when to go all in, increase the leverage and press your trading to the hilt. Load the boat. These opportunities have an increase in volume and volatility. There is no point in actively trading in a dull market. Let the market tip its hand and come to life first. And then if you are fortunate to be in the groove and know you’ve got a tiger by the tail, milk it for all it is worth. This is where the real money is made.” ~ Linda Raschke

In this week’s Dirty Dozen [CHART PACK] we argue why we should expect continued chop and vol in equities. We then look at USD trades, a correction coming in PMs, and a long natural gas setup. 

1. The Qs closed below their 1 ½ month sideways range. And like we said last week, it’s a good time to respect this break below key support and not be too eager to buy the dip.

    2. Our weekly Nervous & Numb indicator (yellow line) triggered an official sell signal two weeks ago. And with elevated Trend Fragility (green line) it’s likely we see more vol and chop with risks to the downside over the near term. 

    3. Our market internals aggregator remains in neutral territory. We haven’t seen the large negative divergences that tend to precede more significant tops, which tells us this is likely a run-of-the-mill correction within a broader uptrend. 

    4. BofA’s Bull & Bear indicator (which offers a longer-term look at positioning /sentiment) remains squarely in neutral territory. 

    5. The SPX Cycle composite from NDR feels about right for what we should expect over the next month or so.

    6.  Here are the highlights from the latest BofA Global Fund Manager Survey.

    7. The market is moving off of rates which are moving off of a resetting of expectations around growth and inflation. And with a forward PE of around 25x, the market is more susceptible to large swings around revisions to expectations. 

    8. This chart from BBG’s Simon White shows the number of Hindenburg Omens (on an annual basis) is more elevated than those seen at the peak of the dot-com bubble. 

    9. We’ve been long precious metals since the start of the year. But as we pointed out last week, the short-term picture looks rocky with high sentiment/positioning and stretched technicals. Expect a corrective period to begin soon.

    10. We’re long USD through a number of pairs but positioning is at extremes in some of the crosses. One of these is AUDUSD which we’re considering playing for a tactical long if its most recent breakdown proves to be a bear trap.

    11. Natural gas is coiling in a tight bottoming wedge. Compression regimes like these tend to lead to expansion regimes (big trends). 

    12. Natty producer Antero Resources (AR) is trading within an 18-month sideways range (chart is a monthly). This is solid price action considering Natty has done nothing but trended lower over the same period. We’d consider getting long on a confirmed bullish breakout above the $30 level.

    Thanks for reading.

    Subscribe To Our Newsletter

    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.