The Bullish Case For US Stocks

Sentiment, positioning, and technicals ALL say that we’re getting close to the bottom of this move. And the market is setting up for a monster rally (at least in US stocks).

Let’s start with sentiment.

We’re still waiting for the capitulation spike in bearish sentiment via the Investors Intelligence report, but we should get that this week.

Other indicators and signs of sentiment suggest that bearish sentiment is finally becoming near consensus.

BofAML’s Bull & Bear Indicator is near “Extreme Bearishness” levels and should give a buy signal in the week(s) ahead.

UBS’s composite positioning amongst fund managers in US stocks show that fund manager holdings of US equities are near extremely oversold levels relative to history.

The mainstream non-financial news is now predicting a market crash in 2019. The above is from the NYT’s Lifestyle section of all places. This is NOT what you see at market tops.

Ron Paul is back to making headlines pitching doom and gloom.

AAII bearishness is at its highest levels since February 2016.

The State Street Investor Confidence Index for North America is at its most bearish level since 2012.

The percent of stocks trading above their 200-day moving averages is now at 19%. This is DEEPLY oversold territory. The last three times the indicator was this low, it marked major bottoms in the market.

The RoC in rates has reversed and is now back in neutral territory and is no longer a headwind for stocks. We should see this come down even further on dovish guidance from the Fed.

Now look at the giant gap between the ISM in the US and YoY change in the SPX. They typically track each other as the ISM is an indicator of economic growth in the US and therefore company earnings. This type of divergence is extremely rare and should be closed by the SPX doing most of the work by moving higher.

I’m looking for the SPX to dump below the trendline in the coming day and perhaps sell off to the 2,500 level before reversing. Odds are that this is setting up to be a major bear trap.

Same thing with small-caps (IWM). They’re getting close to the 200wma and long-term trendline. We should see a dump below followed by a quick reversal to regain the trendline.

I believe US stocks are setting up for an extraordinary buying opportunity in the next 1-3 weeks. I see a LOT of amazing deals in stocks and I’ll be putting out our Macro Ops shopping list later this week.

 

 

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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.

AK

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.