Water Off A SPX’s Back… [Dirty Dozen]

In times of change, learners inherit the earth; while the learned find themselves beautifully equipped to deal with a world that no longer exists. ~ Eric Hoffer

In this week’s Dirty Dozen [CHART PACK], we again make the case to not fight the upside trend in equity markets, we then talk bearish CoT positioning in SPX mixed with rising speculative frenzy in “AI stocks” and what that may mean for forward returns in the space… we then cover market cap concentration, seasonality, USDCNH devaluation, and precious metals, plus more…

  1. Dull markets that act as a duck’s back to the incessant flow of bad news, tend to keep going up… 


  1. This is especially true when CoT spec positioning in the SPX is still close to 2std bearish relative to its 2-year average (chart via BBG). 


  1. But the narrative pendulum is starting to turn and with that speculative interest (and money) is beginning to chase into speculative names. This post by Verdad Cap looks at the historical returns for thematic baskets like “AI stocks” (hint: they’re not good).


  1. AAPL’s market cap as a percentage of the SPX is over 7%, which I believe is a record for any company in the index’s history (chart via BBG).

It’s also trading at historically rich multiples which is a bit of a headscratcher since the $2.7trn market cap company has significant revenue and operational exposure to China, which the US is now in a cold war with.


  1. @SethCL shared this Cycle Composite chart for the S&P via NDR which suggests the idea of “sell in May and go away” likely doesn’t apply this year. The chart is a composite of a one-year seasonal cycle, a four-year presidential cycle, and a 10-year decennial cycle.


  1. Some key points from BofA’s Flow Show report last week with highlights by me.


  1. Downward revisions to payrolls are what you see at turning points… BBG’s Cameron Crise writes that “underneath the surface, there are some signs of weakness. Past data is starting to get revised lower; net revisions for the past couple of months were -149k. That tendency is often serially-correlated, meaning that at this point in the cycle, the initial releases are over-estimating the strength of the labor market.”


  1. Interesting data point from Yardeni via @SethCL. The question is do we see earnings revision breadth continue to rise from here? Our work suggests not… 


  1. We continue to watch and look for spots to probe USD pairs to the long side. We got knocked out of a starter in USDCNH last week but we’ll look for another opportunity to take a swing.


  1. Michael Kao wrote up a good post laying out the long USDCNH thesis here. Kao writes: 

“The third chart on the right is key and makes me think that CNY is even closer to its Minsky Moment that I previously thought.

“Cembalest: ‘China’s money supply is very high; if China fully opened its capital account, possible outflows could crush the RMB and cause a collapse in Chinese equity/real estate markets.”


  1. This chart is also from that post. You can pair it with this report titled “Could China Become Like Japan In The Early 1990s?” via the The International Economy.


  1. I think bonds (TLT) continue to be the most important chart to watch in macro right now. They’re coiling tight suggesting a BIG move is coming. One of the many markets that will be directly affected by which way bonds break out is precious metals. 

As of now, the long-term charts for gold and silver remain extremely constructive. The chart shown below is a silver on a weekly basis. 

We’re long and will add on a breakout from its current sideways consolidation zone.

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.

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