Stocks Are Setting Up For A January Selloff [DIRTY DOZEN]

“Soros saw no point in knowing everything about a few stocks in the hope of anticipating small moves; the game was to know a little about a lot of things, so that you could spot the places where the big wave might be coming.” ~ Sebastian Mallaby, “More Money Than God”

Good morning!In this week’s Dirty Dozen [CHART PACK] we look at ALL the signs that stocks are setting up for a sell-off in January, talk about why it might be a good time to start buying bonds, and then cover the new bull leg that precious metals are embarking on, plus more…Let’s dive in.

***click charts to enlarge***

1. BofA’s latest Global Fund Manager Survey came out last week. The takeaways with highlights by me are below.

 

2. Fund managers are holding their lowest cash positions since early 13’, triggering BofA’s Cash Rule “sell signal”.

 

3. They also love equities here… Investor optimism is at its highest level since Jan 18’.

 

4. And a “record net 76% of investors expect a steeper yield curve; higher than 2008 Lehman bankruptcy, 2013 Fed Taper Tantrum & 2016 US Election..” @MacroCharts shows how past YC expectations have lined up with bottoms in gold.

 

5. BofA’s Bull & Bear indicator rose to 6.7 last week, its highest reading since Jan 20’.

 

6. SentimenTrader notes that Dumb Money Confidence is at its highest level ever.

 

7. Total ETF Fund Flows shows people are piling into stocks...

 

8. While Foreigners are backing up the truck on US equities.

 

9. Positioning and flows into small-caps has become particularly extended. Its chart has formed a rising wedge, it’s in a Bull Volatile regime, and is about to enter a period of weak seasonality once December ends.

 

10. With high trend fragility in risk assets, it might be time to buy some riskless assets. UST 10-year yields have a tendency to fall (bonds up) when yield-curve steepening expectations are this high. We’re at the point where the Good News has all been baked in.

 

11. There are only 8-trading days left in the year. Here are the YTD total returns by market.

 

12. Precious metals are breaking out on what will likely be another major bull leg higher. Silver is showing relative strength out of the two and there a LOT of good-looking charts in the miners. Here’s the technical setup on EXK. Like a Russian Doll, there are wedge breakouts within wedge breakouts on various timeframes.

 Stay safe out there and keep your head on a swivel.