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.


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


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


  1. 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.


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


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


  1. Total ETF Fund Flows shows people are piling into stocks…


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


  1. 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.


  1. 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.


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


  1. 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.

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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.

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