Your Monday Dirty Dozen [CHART PACK] #24

When any causes beget a particular inclination or passion, at a certain time and among a certain people, though many individuals may escape the contagion, and be ruled by passions peculiar to themselves; yet the multitude will certainly be seized by the common affection, and be governed by it in all their actions. ~ David Hume

Good morning!

In this week’s Dirty Dozen [CHART PACK] we take stock of the technical damage done to the market, look at the historical signs of panic selling and capitulation, before jumping over to China’s latest economic numbers, and analyzing copper’s technical setup, plus more. Let’s dive in…


***click charts to enlarge***

  1. It’s a new month and with a new month, we get new monthly bars! And dear Zeus… was a LOT of technical damage done to many-a charts last week. February formed a bearish engulfing reversal candle on the SPX. This means it’s odds we see 1-3 months of sideways to downwards action. Expect a ton of chop; face-ripping rallies tempting you to believe the bottom is in, followed by gut-wrenching sell-offs. Welcome to the new Bull Volatile regime.


  1. SentimenTrader noted in a post “how this is one of the fastest times the S&P has ever cycled from a new high to at least a 4-month low… Of the 14 times, the S&P has erased so many late buyers’ gains so quickly, they stepped back in 13 times. The 1998 signal suffered some large losses over the next month, but those were subsequently made up over the next couple of months. Several of these ended up morphing into bear markets, but not until 6-12 months later.”


  1. @MacroCharts published a post pointing out the extreme oversold conditions we found ourselves in late last week, showing the Stock/Bond ratio as an example. He wrote “The Stock/Bond ratio hit an 18 RSI in the overnight session. This is an extremely powerful and historic signal.”


  1. Panic selling led to the largest monthly outflow from the SPY ETF in history. A record $27bn in cash was pulled from the ETF…


  1. Bank of America’s Global Financial Stress Index, an indicator which is comprised of 23 measures of financial risk, shot up to its highest level in over a year. If this index stays elevated it will mean bad news for equities going forward.


  1. Jesse Stine sent out a note over the weekend — his letters are always worth a read, here’s the link. One of the many charts he shares is this one of the small caps index (IWC). Jesse writes “This is the MACK-DADDY line in the sand that I’m watching. Small caps are now lower than they were 2 years ago. This chart leads me to believe that we may rebound immediately and may NOT see a 2nd down week.”


  1. SentimenTrader’s Smart/Dumb Money Confidence spread is reverting from extreme levels of complacency.


  1. China’s manufacturing sector contracted sharply last month, plunging to 35.7, its lowest level ever. Bloomberg writes that the poor print was “largely due to virus control measures that have made it hard for workers to travel back after the Lunar New Year, and left factories owners with limited raw materials to restart production.”


  1. Bloomberg Economic’s team downgraded its China’s GDP forecast over the weekend. Their base case is now calling for China’s 1Q GDP growth to fall to 1.2%. It’s slowest growth on record and 3% below their previous estimates.


  1. A fellow Collective member who’s based out of Shanghai wrote in our internal chatroom last week that traffic there had mostly returned to normal after the city had been at a crawl just a week prior. I’ve seen a slight tick up in the traffic and pollution data, but not enough to suggest things are back in full-swing though that could quickly change once the latest data is released.


  1. Copper (HG_F) is still my favorite market to watch for a tell when we’ll get a risk-on bounce. As of right now, the charts look good. The weekly chart is at long-term support and it looks like it wants to put in a complex double bottom off its lower Bollinger Band on the daily.


  1. And finally, here’s a great coronavirus timeline chart from Bloomberg.

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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.


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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

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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.

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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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