This Market Is a Bag Of Snakes… [Dirty Dozen]

“Those whom the gods would destroy they first make proud.” ~ Sophocles

In this week’s Dirty Dozen [CHART PACK], we look at what fund managers are doing, go over the extremes in bearish sentiment and positioning, run through the multiple signals of an inbound bullish run over the short-term. We then look at housing, labor markets, inflation leads, record low positioning in crude, and further bullish evidence for the BTCUSD long, plus more…  

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  1. According to the latest Global Fund Manager Survey out of BofA, “investor sentiment close to levels of pessimism seen at lows of past 20 years…” Summary of the report below, with highlights by me.


  1. And here are the top charts from that report. Markets are never easy but sometimes they’re just a flaming bag of snakes. This is one of those times… so many conflicting signals, it’s enough to make one’s head hurt. 

My base case is we’re in a primary bear market and we should enter a recession in the latter half of this year, though odds say we should see a continued bullish counter-trend move over the coming weeks. With that said, looking at charts like those below, makes me uneasy about my bearish bent.


  1. In support of our short-term bullish view here’s a chart of the Russell 3k and the percentage of stocks above their 10 and 50-day moving averages.

Red dots mark instances where both the 10 and 50-day indicators dip below the 20% level, indicating deeply oversold breadth. 


  1. And I’ve been pointing to this one for the last month as we should see these charts roll over before the broader market does. But, right now, they continue to either rip higher, in the case of semis vs SPX. Or, at the very least, confirm the bullish advance in the broader market. 

Not bearish… 


  1. Our Trend Fragility indicator (a composite measure of positioning and sentiment) dropped last week to its 14th percentile. A move below 10% has a strong track record of marking durable bottoms. 

In addition, these charts from GS show CTA positioning in stocks is near its all-time lows. 


  1. This is a chart showing US home sales volume during Fed tightening cycles. The blue line marks the current cycle and shows how much this tightening cycle has put a hard freeze over this housing market.


  1. I’m currently trialing a sub to MacroBond, hence the shiny new charts you’re seeing. Here’s a breakdown of labor market gains/losses by industry. This measure has been steadily deteriorating over the last couple of months but remains far from levels indicating a recession is nigh.


  1. Here’s a chart that aims to forecast CPI using a number of leading indicators. According to MB, this indicator “leads the specified component by 5 to 13 months” and “based on the historic correlation… our model predicts inflation will moderate — posting a 4.2% YoY increase in May 2023. This would be consistent with a recession and weaker oil prices.” 


  1. The Treasury’s General Account (TGA), which essentially is the Federal Government’s checking account, has been drawing down its cash pile in order to cover the govie’s expenses. This is because the Treasury is unable to issue new debt until the ceiling is raised. 

This has been a positive offset to QT but the Treasury will run down its cash sometime in June. While all past debt ceiling crises have been resolved, the market doesn’t like the drama. This chart shows the market’s decline over the preceding 10 weeks up until the eventual resolution and lifting of the ceiling.


  1. Here’s a chart I shared in my weekly note to Collective members. It shows BofA’s MOVE index, which is a measure of bond volatility (orange line). And the VIX, which is a measure of equity vol in white, along with the spread between the two in the lower chart.

The spread is at its widest levels since the GFC. Historically, this wide of a spread resolves with a spike in the VIX. 


  1. Positioning in crude, both commercials and managed money, are at levels that drive long-term bottoms. @AndurandPierreUpdate tweeted this along with the following chart last week “on oil spec positioning with today’s COT data. Wti, Brent, gasoil, gasoline, heating oil, futures, and options delta. Lowest since that data is available (2011)”

Still need the tape to confirm but this is something to watch.


  1. I pointed out the completed inverted H&S bottom in BTCUSD last week (link here). Now it looks like sentiment is a tailwind as well. Here’s the latest from Sentix with highlights by me:

“Investors are rediscovering the crypto market as an escape vehicle from the traditional monetary system. The Strategic Bias for Bitcoins climbs to its highest level since 01.04.2022. This reflects a newly awakened willingness to buy Bitcoins, which could further fuel the price trend. A 12-week bias increase of more than 38 percentage points has occurred a full 6 times in data history. As a result, the Bitcoin price rose by an average of 30 (!) percent after 8 weeks (hit rate 67%).

Thanks for reading.

Stay frosty 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.