Reports of the USD’s Death Are Greatly Exaggerated…  [Dirty Dozen]

The gutters of Wall Street are strewn with the bodies of people who looked good for five years. ~  Marty Whitman

In this week’s Dirty Dozen [CHART PACK] we go through the latest monthly charts and cover the strongest macro asset (USD to the moon), the leading country ETF, and the top-performing sectors, along with some trade picks, plus more… 

1. The SPX dipped in the month of August and that dip was bought as can be seen on the monthly candle chart below showing a large lower wick. This means that the bulls are still in control and the path of least resistance remains up.

2. Internals have been keeping us long since the Oct 22’ low and they continue to confirm — even lead in the case of cyc vs. def — the trend is higher.

3. BofA Flow Show summary with highlights from me… Chart points out that never in the history of the US republic have US Treasuries seen negative returns for three consecutive years in a row. I think bonds will be a great long towards the end of the year but the setup isn’t quite there yet so we need to be patient.

4. We’ve been in a regime of fiscal dominance for the past three years. The next three will look quite different.

5. The US dollar has one of the most bullish monthly charts out of all the macro assets at the moment. DXY is going to trade significantly higher by year’s end. 

Here’s why (1) Technically it’s a great setup. DXY saw an incredibly strong bull thrust out from a 6+ year sideways congestion zone. This type of thrust from this long of a sideways range does not just die after a single leg. It leads to follow-through and new highs (2) A Fed pause doesn’t mean a Fed pivot. The current popular narrative on this is about as lame as the one from the recessionistas over the past 18 months (3) positioning is offsides. The market is very long euros and pounds. There are a lot of repositioning flows to drive DXY once it gets going again.

6. Our 2s and 10s DXY aggregate yield spread oscillator is back to trending up and is now north of 60%. We saw similar action in 21’ that led to a bottom and a large subsequent rally. I think we’re seeing something similar happen now. 

7. Our latest Returns Heatmap shows the market regimes and returns for all the major markets/assets. It’s hard to go wrong if you just stick to the Bull Quiet and Neutral regimes with the most consistently positive returns (green) across timeframes.

I’ve highlighted the strongest standouts below (energy, oil services, and tech).

8.  Turkey, a market I noted for its strength here back in Dec 22’ continues to be a relative leader.

9. iShares MSCI Turkey (TUR) is about to break out to new multi-year highs soon. The country has been a big winner from the geopol shakeup that’s going on as it leverages its geographical position and its Nato membership to play all sides for its gain.

10. No surprise here… The strongest returning sectors also have the strongest breadth. At some point, this will become a contrarian input and Utes will be a buy and Energy + Tech will be a sell. But the trend is your friend until it bends… 

11. Within the Oil Services ETF (OIH), WHD has one of the stronger momentum profiles as well as long-term charts. At least outside of TDW which we’ve been in for a while now. 

I pointed out the likely bottom in crude last week which has played out nicely since. However, while I believe crude will head higher in the interim. At some point the stronger dollar, fading fiscal impulse, and tightening liquidity will start to work against it. So while I continue to like energy names here the time to back up the truck on them has passed and we should be mindful of where the exit is in the coming weeks. 

12. If you’re looking for tech value then NRDY should be on your radar. The company is founder-led, said founder has been gobbling up stock (see table below), and they recently completed a major business transition from single-use product sales to subscriptions. This has gone better than expected and management has been raising guidance the last few quarters. 

The long-term chart is solid with a completed 18-month Cup-N-Handle pattern. 

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.