The US Dollar Holding At MAJOR Support [DIRTY DOZEN]

The dynamic of our society, and particularly our new economy, will increasingly obey the logic of networks. Understanding how networks work will be the key to understanding how the economy works. ~ Kevin Kelly, “New Rules  for the New Economy”

Good morning!

In this week’s Dirty Dozen [CHART PACK] we look at relative breakouts, large breadth thrusts, and a new bullish consensus amongst global fund managers. We then dive into record-high valuations, broad-based indicators of positioning, and recent repositioning… And end with a wall of money, data indicating a momo run into year’s end, and a cheap offshore driller trading on the cheap, plus more…

Let’s dive in.

***click charts to enlarge***

  1. High Beta stocks are breaking out versus Value. This is not bearish…


  1. @AriWald writing on the large breadth thrust we’ve seen over the last few weeks (h/t @allstarcharts). Again, not bearish…


  1. The November BofA Fund Manager Survey is out and is showing a big shift in sentiment. The key takeaways are highlighted below. If you want to know what to make of narrative shifts like this, read my thread here.


  1. NDR points out that this increasingly bullish sentiment is showing itself in much higher valuations. NDR’s Multi-Cap Median P/E is now over 3std above its long-term average. It’s highest reading ever.


  1. With sentiment boiling it’s important to remember that sentiment leads positioning, and really it’s positioning that matters when analyzing the market. And on this front, the picture is more supportive of further upside. BofA’s Bull & Bear Indicator shows flows and positioning across a number or markets. And the broad positioning picture is still neutral.


  1. And it looks like there remains some skepticism of the current rally. @MacroCharts notes that “Equity Futures traders have cut exposure aggressively – even as $SPX broke to new highs.

“The 3-week positioning change is one of the most negative in history – only seen at bottoms, and once when the market was at a high (2017).”


  1. Pulling out and looking at things from a 30,000ft view we see a trend that you just don’t want to fight.


  1. Putting the rotation trade in perspective. According to BofA, “For every $100 of outflows in funds dedicated to EM, Europe, small-cap, financial sector between Jan & Nov, there have been only $20 of inflows in recent weeks”.


  1. The US housing market is on fire. The Homebuilders Index just hit a new all-time high.


  1. Mark Hulbert thinks the momentum trade will have a strong run into year’s end. He wrote in MarketWatch last week, “The next six weeks are shaping up to be especially good for momentum strategies in the stock market. Such strategies lead investors to typically buy the winning stocks over the trailing year and sell (or sell short) the losers. This year the pattern is likely to be particularly strong…” (h/t @macrocharts).


  1. With bullish emerging markets now a consensus theme along with global growth and profit expectations at 20-year highs, I can’t help but think we’re setting up for an ugly start to 2021. And the one thing I keep coming back to is the dollar and its crowded short positioning. There’s a lot of popular correlated trades that are dependent on the US dollar staying weak — the DXY is the fulcrum of the global order. We’ll see, but I think that bottom of the 5-year sideways range may hold a bit longer…


  1. But since nobody knows how things will shake out it’s good to have a diversified book. We’re looking to add some reflation plays and W&T Offshore (WTI) is one of the names we’re looking at.


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.

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.