Specs Short Soybeans…  [Dirty Dozen]

“If only one lesson is to be chosen from a package of lessons involving Social-Proof Tendency, and used in self-improvement, my favorite would be: Learn how to ignore the examples from others when they are wrong because few skills are more worth having” ~ Charlie Munger

In this week’s Dirty Dozen [CHART PACK] we cover recent major technical signals, walk through the latest returns heatmap, look at the breakout in Qs, update evidence on why it’s headed higher, and end with a look at a contrarian long in soybeans, plus more…

1. It’s good to revisit the major technical signals that have fired in the recent past and which we’re still seeing their impact play out in markets. Many pundits are astonished about the resiliency of this bull leg but if you’ve been tracking the major technical signals over the past few months then you know this type of action is to be expected.

2. Here’s the latest market returns and regime heatmap for the globe. As you can see, most of the world is trending in a bull regime.

Some notable developments in US sectors are an improving trend and relative performance in real estate (XLRE) which has dramatically underperformed the market ytd but might be starting to turn around. And we’re also seeing improving trend strength in miners following an extended period of underperformance.

3. Last week I noted that we were expecting a breakout in Qs which we got on Friday and which triggered our fourth add to our long position.

4. Our aggregate market internals oscillator pictured below shows that internals remain relatively supportive of the broader uptrend and are nowhere near levels that have preceded major tops/selloffs in the past (red dots).

5. We still see a lot of mopey bears ridiculing those who are buying or adding to their positions with the market at all-time highs. While buying new highs is cognitively difficult because of the way we’re wired, the fact is that it pays as new highs tend to cluster and lead to more new highs.

6. And while sentiment/positioning remain elevated they are not yet giving sell signals and have actually moved closer to neutral over the past week.

7. Not to mention speculators continue to sell into this rally. Large specs in NQ (red bars) have been paring down their long positioning for five straight weeks. They’re also net short in both the Russell and SPX. This is not exactly positioning you see in the lead up to blowoff tops.

8. Speaking of CoT positioning, speculators are very short the entire soybean complex.

9. Here’s soybean meal’s multichart view from our HUD. Positioning and sentiment are in the 0th percentile. Vaulations is in the 0th percentile. And soybean meal enters its strongest multi-month period of seasonality this week.

10. Here’s its chart on the daily. We’re probing long positioning here in small size with tight stops. You have to really manage risk when trying to pick bottoms like this as you’re fighting momentum. It’s best to keep tight stops that allows you to get decent size on with very little risk.

11. From Brandon Beylo, Macro Ops Value: Asset-Heavy Business Set To Outperform.

According to Goldman Sachs, asset-heavy businesses now trade at the largest valuation discount to asset-light peers. However, earnings growth expectations are actually higher in asset-heavy businesses. This means that, on paper, asset-heavy (read: old economy) businesses offer better earnings growth for a cheaper price.

This is good for our equity book as it’s mostly asset-heavy stocks exposed to critical minerals.

12.  From Brandon Beylo, Macro Ops Value:  Building Materials Dominates New Highs.

Building materials stocks are making new highs. 116 Building Materials stocks made new highs last week. This coincides with the chart above suggesting that old-economy, asset-heavy stocks are cheaper and faster-growing than their asset-light peers. In other words, building materials probably have a lot of room to run higher.

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.