Look further out and the picture darkens. Positioning, sentiment, and liquidity are all stretched to levels that have rarely rewarded the crowd. Cash is near record lows, leverage near record highs, and everyone’s crowded into the same comfortable story.

So we play both horizons: long the trend until breadth breaks, while sizing for the reversion the intermediate evidence keeps pointing toward. Two surprises this week — financials gave a rare bullish signal, and our Market-Implied Regime indicator flipped to something we didn’t expect. More on both below.

***The MO port is currently up +42.5% ytd in 26’. The Collective is where we discuss the theory behind the positioning, publish the differentiated research, track the book in real time, and argue it out with a global group of serious investors. If that’s your kind of room, join us in Slack. ***

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio gave back 70 basis points last week, leaving us +42.5% on the year and below our high-water mark of +61%. We recently reset to mostly cash. From here we expect to rebuild exposure in biotech (XBI, ARKG, and select names), cybersecurity, energy and crude, and a narrow set of the Mag7 (META, NVDA).

2. Bonds are compressing. Bollinger width on the monthly is its narrowest since 2018. Compression regimes are reliable in exactly one respect: they precede large moves. They say nothing about direction. Our bias is that this one resolves lower.

3. The dollar is testing its own line. DXY is dancing on the level it recently broke, now acting as support. Whether it holds there or fails will set the tone for macro over the coming months. We’re watching for follow-through, or a bull trap.

4. The S&P continues to coil. Our base case remains an eventual break higher. Near term, renewed US–Iran tension and firmer oil argue for some potential downside first.

5. Breadth eased but held. Our Aggregate Breadth Indicator slipped to +2, still consistent with the prevailing uptrend. A move to +1 or below would, on our history, raise the odds of a 7%-plus correction materially.

6. Internals are deteriorating. The key market internals are moving the wrong way. If the picture doesn’t stabilize soon, our one-to-three-month outlook turns decidedly more cautious.

7. Liquidity keeps grinding lower. Our Liquidity Gauge continues to trend down, which adds weight to the intermediate-to-longer-term caution.

8. Positioning and sentiment are stretched, especially on longer horizons. Hedge-fund net leverage sits at 79%, just off four-year highs; gross leverage near 312%, close to a record. BofA’s Bull/Bear gauge is at 9.6, its highest in more than five years. Schwab’s STAX, which tracks actual retail flows and positioning, has jumped to 59, a four-year high. Our own Trend Fragility measure is at 71% and rising. None of these are a timing signal. But together they describe a market with little cushion.

9. The latest FMS tells the same story. BofA’s July Global Fund Manager Survey shows cash down to an “uber-low” 3.6%, managers their most overweight US equities since December 2024, the highest “boom” expectations since February 2022, and a record 54% now forecasting no landing. Consensus has rarely been this comfortable.

10. One model disagrees with us, and we’re listening. Nearly all of our work points to higher rates once the current one-to-two-month lull in inflation passes. One reading though cuts the other way. Last month our Market-Implied Macro Regime indicator flipped to a 100% Goldilocks signal, meaning low, positive growth alongside low and falling inflation. The indicator has a strong record predicting the regime six months out. It isn’t our base case. But a model with a good hit rate contradicting your priors is exactly the kind of evidence to sit with rather than wave off.

11. China is still deleveraging, and commodities don’t seem to care. State Street’s China Monetary Conditions Index keeps making new all-time lows, and it tends to lead macro momentum. What’s telling is how well commodities have held up regardless. Copper is near record highs through a long, deep Chinese deleveraging. The global growth and inflation picture changes materially the day China restarts its growth engine.

12. We still like precious metals, and we think we’re early. For now we’re waiting out the correction, which is a rates story. Until bonds find a durable floor, we stay on the sidelines here.

13. Central banks keep buying gold. The pace is accelerating, which puts a floor under how far the metals can fall.

14. The clearest positive is in the financials. Our new colleague Dean Christians (TPMR) flagged a rare breadth thrust in the sector. This week every financial sub-industry group registered a bullish short-term Dual Trend buy signal, something last seen in 2021.

The base rate is encouraging: when more than 95% of financial sub-industries are on buy signals, the sector has compounded at 19.6% annually, well above its average back to 1959. As Dean put it, “the ongoing rotation out of technology has fueled improving participation across several other sectors, with financials standing out as one of the primary beneficiaries.”

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

***The MO port is currently up +43.3% ytd in 26’. If you’d like to join the Collective, our premier service that offers discussions on high-level theory and performance, differentiated research, real-time portfolio tracking, and a global community of serious traders/investors dedicated to mastery, then click the below and sign up. We look forward to seeing you in our Slack!***

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week down -70bps, bringing year-to-date returns to +43.3%, below our YTD NAV high of +61%.

Current positioning: All cash as we recently did a portfolio reset but we’ll be repositioning back into biotech (XBI, ARKG and select names), cyber security, energy / crude oil, and select Mag7 (META, NVDA).

2. Bonds continue their compression on the monthly tape with BB width at its tightest range since 2018. Compression regimes precede big trends but are directionally agnostic, though our bias is for a breakout to the downside (more on this below).

3. Bonds are testing key levels of support. Yesterday’s weak CPI surprise provided only a temporary boost before reversing and closing the day unchanged. There’s no clear short entry yet, as it’s oversold against its 20dma. We’re continuing to keep a close eye on this as I expect things are setting up for a bearish breakdown come end of summer, once this short-term disinflationary impulse runs its course.

4. There is a tactical long in the front end, 3m SOFRs. Speculative positioning is record short. I’ve laid out why I’m bullish rates (bearish bonds) here, but I think we’re in a 1-2 month window where inflation and growth surprise to the downside, making this a tradeable setup. I’m considering putting in a buy stop above recent highs to see if the market can pull us in long.

5. But again, this is a short-term tactical trade at best. The best central banker (2yr yields) says the Fed’s next move will be a hike.

6. Our Leading Yield Indicator continues diverging higher.

7. DXY continues to hold its breakout / support level. Not much to say here. We’re willing to play it in either direction; long on a move above recent highs and short on a bull trap breakdown.

8. Our bias for risk assets continues to be bullish. SPX is still trading in a 2 month sideways range, within a Bull Quiet regime.

9. Breadth continues to expand putting the odds strongly in favor of a bullish breakout. Notice the opposing breadth picture that preceded the March selloff, where breadth diverged lower compared to today’s where its diverging higher.

10. However, one thing we’re closely monitoring is the negative divergence in a few key internals, such as credit (green line) and Qs vs SPY (tan line). I suspect we’ll see both bottom out and reverse soon. If not, I’d be hesitant to buy any breakout in SPX as it’d likely be a trap.

11. From Citadel Securities: “Despite the S&P 500 trading within 1% of all-time highs, S&P 500 Information Technology, the Nasdaq 100, and even the S&P 500 Semiconductor industry all trade below their respective 10-year average forward P/E multiples.

Some of the market’s highest-quality growth companies are entering earnings with valuation support rather than valuation headwinds.”

12. Semi’s forward PE is back below their 10yr average. Admittedly, this is on the back of elevated earnings expectations (chart via Citadel).

13. Speaking of semis, RenMacLLC recently pointed out that nearly 87% of semi names are oversold.

14. The memory ETF DRAM is bouncing off its lower band, offering a decent spot to play for a tactical long with a tight stop, which we might do in small size.

15. Semis should continue to perform well as long as actual CAPEX keeps pace with expectations. 3Fourteen Research shows that MAG 7 CAPEX estimates are approaching 3% of GDP. These are insanely large numbers.

16. META’s valuation recently dropped to its second lowest level ever — the all-time low marking the end of its 22’ bear trend. The key catalyst is monetizing its massive compute base: if Meta can rent out spare AI capacity without slowing its own roadmap, investors stop treating capex as vanished cash flow. That reframe alone could re-rate the multiple.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

Breadth continues to improve. Short-term sentiment and positioning are elevated and climbing, but not yet at levels that push us into defensive posturing. The longer-duration signals are a different story. The MO Liquidity Tool and BofA’s Bull/Bear indicator both point to a more volatile regime ahead.

Near-term, the path of least resistance is still up. The longer-term picture is another matter.

Crypto is coiled for a run. Global defense names look to have put in a bottom. Plus more.

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week up +140bps, bringing year-to-date returns to +44%, below our YTD NAV high of +61%.

Current positioning: elevated cash, long Nasdaq, long Russell2k, long biotech complex and cybersecurity names, long GBP.

2. Bonds continue their compression on the monthly tape with BB width at its tightest range since 2018. Compression regimes precede big trends but are directionally agnostic, though our bias is for a breakout to the downside.

3. 10-year TNotes continue trading in their range within a Blended Bear Quiet regime. The direction of breakout will likely determine the near-to-intermediate term direction for the broader equity market as well as the USD.

4. This is a make or break week for the DXY as it should decide whether this breakout holds or ends in a bear trap. The answer holds big implications for the rest of global markets.

5. Last week we highlighted the mean reversion setup in GBPUSD, supported by the record short positioning in Specs. The trade is working nicely so far (chart below is a weekly).

6. SPX continues consolidating its gains off its April lows. The weight of the evidence favors a coming breakout through the upside of its current range.

7. Our Aggregate Breadth Indicator strengthened last week to +3. Major corrections (10%+) occur when this measure falls to 1 or below. This improvement supports an eventual bullish breakout in equities.

8. However, our longer-term measure of liquidity is plumbing new lows. While this indicator can have a long lead of 3-6 months, the lower it goes the lower average forward returns for the market become.

9. This dichotomy in the setup between short and intermediate terms can be seen in the sentiment and positioning data as well. Our Trend Fragility indicator, a composite of short-term sentiment and positioning data points, is at 71% and rising. Still well below the 90%+ threshold for an official sell signal. While BofA’s longer-term measure, is giving a strong sell signal.

10. Our 6m oscillator for net Speculative positioning in the SPX is elevated at 81% but still below the 90th percentile that suggests caution.

11. Perhaps the catalyst for the next move up in risk assets will come from a softening (read: more dovish) tone from the Fed as the Narrative Pendulum swings in the doves favor?

12. We like crypto here. SOLUSD has put in a bear trap on the weekly, and sentiment is coming off the lows (see next chart).

13. From Sentix: “Last week, the sentiment barometer for Bitcoin stood at -34 percentage points. Consequently, we highlighted in our newsletter the counter-cyclical opportunity arising from this extreme in sentiment… The TD Index still stands at -15 percentage points and is ‘cushioning’ prices against a fall. The sharp improvement in sentiment, coupled with a simultaneous rise in bias, carries a second piece of information. This is a sentiment impulse which, according to conventional interpretation, points to the prospect of further price gains.”

14. Global Defense stocks have set up again after correcting over -25% ytd. We like both ITA and SHLD.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

The next two weeks are telling for DXY. It needs to hold its recent breakout. If it can’t, and this turns into a bull trap, GBP is the long — positioning there is the most crowded it’s been in history.

Breadth is broadening and diverging higher. That’s not a bearish signal. But there are early signs that volatility is building under the surface, and the next leg up in equities will be a rougher ride than the last.

We close with a full Trifecta setup in the insurance sector, and crypto remains a great short.

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week up +230bps, bringing year-to-date returns to +42.6%, below our YTD NAV high of +61%.

Current positioning: elevated cash, long Nasdaq, long Russell2k, long biotech complex and cybersecurity names.

2. Bonds continue their compression on the monthly tape with BB width at its tightest range since 2018. Compression regimes precede big trends but are directionally agnostic, though our bias is for a breakout to the downside (more on this below).

3. Last week we made the case for higher rates, eventually… I say eventually because bonds are both short-term oversold, up against major support, and positioning has flipped decidedly bearish (see chart below).

4. I’m watching to see what 10s can do here. I’m willing to play a tactical long on a breakout above this range.

5. The DXY has so far held its breakout (chart below is a weekly).

6. It’s now around 2std overbought across all-three timeframes, while short-term positioning is elevated. The next two weeks will be the tell in whether DXY can hold and consolidate these gains, or this turns into a major bull trap. The answer will have significant implications across assets (ie, commodities, EM, growth, etc…). We are long.

7. If you’re of the mind that DXY is setting up a bull trap, then long GBP offers a nice trade It’s at the bottom of its 15-month+ sideways range/compression regime.

8. Our Spec oscillators on both a 6m and 3y basis are in the 4th and 1st percentiles, respectively.

9. In fact, Commercials are holding their most crowded long positioning in history. The last two times Commercials were even remotely this long it marked a significant bottom in the pound.

10. Our HUD multi-chart page shows that GBP is basically the inverse of DXY right now. It’s roughly 2std oversold across all three timeframes. Seasonality flips positive one week from now. But… yield spread momentum remains low and we’d want to see that flip in order for long GBP to have prospects of more than just a small mean reversion positioning fade.

11. This is a pretty incredible relative flows chart from SG.

12. NYSE A/D Line (in amber) hit a new all-time high last Friday, positively diverging from the index, which typically is not a bearish development.

13. And our friend Dean Christian’s over at TPMR shared this study last week showing that over 75% of cyclical subindustries are in bullish trends on both short and long-term measures. Going all the way back to the 60s, this has occurred only 3.8% of the time, and the SPX has historically seen annualized returns of +10.8%.

14. The path of least resistance remains up. That’s what the weight of the evidence (breadth, internals, technicals) tell us. However, we expect the trend to be more volatile going forward, with frequent positioning induced air pockets. Our resident vol trader, Tony, shared some great stuff on this very topic in this week’s Vol Street Journal. I highly recommend giving it a watch. Here’s some of his summary notes:

This week’s episode examines a series of shifting conditions across my proprietary market models, volatility complex, currency, and credit markets that point to growing market vulnerability. I break down the developments and explain why the risk environment has changed.

• Proprietary Models: Both models have been flashing warning signs for weeks, and Friday sent the EWS model to its highest, most cautionary level since the early days of the Iran conflict.

• VIX Futures: The front of the futures curve is flattening as spot VIX tightens its gap to the July contract and the July-August spread compresses.

• Chronic Undervixing: Realized volatility continues to climb while implied volatility lags, squeezing the variance risk premium as individual stock volatilities rise.

• Positioning Dynamics: Speculators are heavily long the Dow and strongly bought the S&P dip, alongside crowded long positions in the US Dollar and short positions in major cross currencies.

• Credit Market Stress: High-yield and investment-grade spreads are beginning to widen from very tight levels as capital rotates toward Treasuries and equities start to follow high yield bonds lower.

15. Been tracking this one for a while now and it looks like it’s finally tee’d up. The SPDR Insurance ETF (KIE) has put in a bear trap reversal within a major compression regime on the monthly. Its relative performance versus the SPX is coming off all-time lows, even below levels hit during the 09’ bottom. We will likely be getting long this ETF along with some select names.

16. Here’s the Koyfin holdings breakdown for it. The top 1-month performing names are BWIN, OSCR, SKWD, and RYAN. OSCR is my current favorite.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week down 230bps, bringing year-to-date returns to +40.3%, below our YTD NAV high of +61%.

Current positioning: elevated cash, long Nasdaq, long Russell2k, long select biotech, and cybersecurity names.

2. Bonds continue their compression on the monthly tape with BB width at its tightest range since 2018. Compression regimes precede big trends but are directionally agnostic, though our bias is for a breakout to the downside (more on this below).

3. The DXY finally broke out from its 12m+ rectangle last week. I think this breakout will hold, but one thing that makes me a bit uncomfortable about the trade is that it’s being widely acknowledged and most prime desk reports I read through over the weekend are bullish. We have orders to get long but the current sentiment has me waiting for more technical confirmation before pressing.

4. Rising yield spread momentum is what’s driving the dollar out from its range, similar to the setup in early 21’.

5. What makes me think this breakout will hold is that I expect the positive relative momentum in US yields to continue. Below is our leading yield indicator in red positively diverging from UST 10yr yields.

6. Our market internals derived economic cycle regime indicator (ECRI in blue) is also strongly diverging higher after breaking out of its multi-year sideways range, indicating that we’re entering a new economic regime. One that will necessitate higher yields.

7. The best central banker is the 2yr yield (in red). It’s telling us that the Fed is going to need to hike…

8. Both Real Retail Sales (top chart) and the Dallas Fed’s Weekly Economic Index (bottom chart) have jumped to multi-year highs. Similar to our ECRI, the economic data is increasingly pointing to a new regime marked by accelerating growth and sticky inflation.

9. This is all largely driven by the massive AI CAPEX cycle in the US, which is why relative growth, rates, and the DXY should continue to move higher over the coming quarters (charts from BBG’s Simon White).

10. The other week I shared two charts showing China’s tightening financial conditions and negative credit impulse. So I was surprised to see in my study over the weekend that China’s Citi Economic Surprise Index (blue line) is near its highest levels since 21’. Has the bearish China narrative pendulum swung too far? If so, this will have big implications on global inflation and rates.

11. In the meantime, it’s starting to look like the labor market is turning a corner… Below on the top chart is the BLS’s Labor Breadth Diffusion on a 1m (amber) and 1y (tan) basis. And the second chart is from Citadel Securities which writes:

“From a markets perspective, we think this outlook is validated by our macro framework, in which we decompose moves in broad macro markets into their macro drivers (Growth and Policy). The framework implies that the performance of risk assets is largely offsetting the sell off in front end rates and policy pricing sits at just +0.48 st deviations, in the 58th percentile of its 5y history, implying there is plenty of room to price a more hawkish policy pathway.”

12. Again from Citadel: “We see a growing risk that the US inflation process is shifting toward a hysteretic equilibrium, in which more sustained price pressures may persist even after the initial energy shock fades. We think the near-term boost to headline inflation from higher energy prices, together with renewed supply-chain disruption, is likely to catalyze second-round effects at a particularly vulnerable point in the cycle, as a temporary price shock collides with our expectation of a positive output gap, easy financial conditions, a generational AI capex cycle ($0.75tn in 2026, $1.25tn in 2027), and a reaccelerating labor market. In that context, an unwind in oil prices may not be sufficient to offset the broader chain of events driving the inflation process.”

13. If you’re looking for evidence that the floor on inflation is shifting structurally higher, look no further than the chart below showing the Fed’s Acyclical Inflation index (amber) above their Cyclical Inflation (grey) for the first time since 2021.

Real yields have flipped negative again, meaning that the Fed is effectively easing by keeping rates steady. With growth accelerating, the labor market turning a corner, China starting to positively surprise, and the floor on inflation now higher, interest rates are going to have to rise.

14. This week we enter the seasonal weak period of “June Swoon” that ends at the start of July. I don’t have strong conviction on the short-term path, though my bias is higher and if we get a swoon, I expect it to be short-lived. This market looks to me like it wants to trade up and we likely see it punch through 8k in a Summer rush — though watch rates, as they could end the party early.

15. Aggregate Breadth remains at +2. Not incredibly strong, nor terribly weak. But enough to confirm the current bull trend (sell signals trigger at readings of +1 and below.

16. Internals continue to support the primary trend higher.

17. I’m in the process of training an AI to create a summary positioning & sentiment report off the dozen or so IB reports I read each week. Below is a snapshot of this week’s summary. The current sentiment backdrop is this: long term it’s stretched and indicative of what we typically see in the runup to a cyclical top, intermediate term its stretched as indicated by the BofA Sell Signal and retail flows, but short-term 0-2 months is where the market still has some room to turn up the heat a bit more.

Our Trend Fragility Indicator is at 63%, which is neutral. Small traders loaded up on puts these past two weeks making it one of the highest proportions of hedging in 25yrs. And while HFs are starting to finally crowd in, they’re doing it mainly by closing out shorts.

All in all, the sentiment and positioning backdrop is pretty bearish and we’re setting up for what will likely be a significant corrective period. But my low conviction base case is that we go parabolic first.

18. On that note, AAII Retail Cash Allocation has fallen to the bottom decline. File this under our longer-term positioning data points. Historically forward market returns 3-6 months out tend to be pretty poor.

19. So I’m thinking we climb a bit further here, maybe take out 8k in the SPX before rolling over into a correction for the rest of Summer inline with the seasonal midterm tendencies, setting things up for an Autumn rally maybe?

20. Our team is turning increasingly bullish on biotech. It’s at the bottom of its Capital Cycle. Sentiment and positioning are very low while industry wide fundamentals are starting to shift upwards — not to mention we expect the sector to be major beneficiaries of AI tech, specifically in the discovery process.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week down 330bps, bringing year-to-date returns to +42.3%, below our YTD NAV high of +61%.

Current positioning: elevated cash, select beaten-down software, healthcare, and cybersecurity names; short ETH; long gold miners; long the Bloomberg Commodity ETF; a handful of idiosyncratic equity positions.

2. Will keep posting this one weekly as it’s one of the most important setups in macro right now and is gearing up for a big move.

3. Our 26 week positioning oscillator is climbing up from below the 10th %tile, showing crowded bearish positioning and giving us a long setup to play for reversion back to the middle of its compression regime.

4. Similar to long bonds, the DXY chart is one I’ll keep showing each week until we get a breakout. Last week I pointed out that yield spread momentum and positioning were similar to the conditions that preceded the 21’ rally in USD. We’ll see if a budding speculative frenzy in the US can catalyze a bullish breakout from this range.

5. If even half the points in this Iran-US draft deal circulating on Iranian state media are real, it amounts to total US surrender. Trump wants out. Midterms are the focus now(link here).

6. Crude getting smoked on the news. And no surprise, the specs who we faded at the lows around the turn of the year find themselves completely offsides once again. It’s almost like there’s something to this positioning thing.

7. What’s going on in China? China’s Financial Conditions Index is falling to levels not seen outside of COVID.

8. Credit impulse is back in negative territory and trending lower. Historically, this has been a strong lead indicator for commodities, particularly industrial metals. The AI buildout may make that relationship more spurious going forward. We’ll see.

9. I flagged this chart at the start of the year: NYSE FINRA Margin Debt was elevated at 35% YoY but still shy of concern territory. It’s now approaching that threshold. On a margin balance-to-currency basis, it’s at dot-com highs. On a YoY basis, it’s risen to 53%. An official sell signal triggers above 60% then reversing below 50%. How fast we get there depends on the market path — but with midterms in November, I’d expect the administration to pull out all the stops.

10. Nomura’s Charlie McElligott on the MAG7 becoming funding sources for the next leg of the AI trade:

As somebody who is “medium horizon” (next two-three quarters) constructive on AI Capex trickle-down and US Equities (Earnings Growth Tailwind broadening out from the Capex boom uplift i.e. Manu mini-renaissance), the LOCAL issue I see for US Equities Index now is that we almost certainly CANNOT resume making new highs without the Mag7 Hyperscalers doing the heavy lifting, as they’re simply “too big” and matter too much, particularly with regard to 2^nd order impacts on both “Real and Synthetic” Negative Gamma forces in the market (i.e. the recent pro-cyclical “Spot Up, Vol Up, Crash Up” regime via Options Upside Call demand and Leveraged ETFs) which HAD propelled us higher in what HAD been a 3 Sharpe 3m move

• So how is it that now Hyperscalers have tilted into what I believe to be a broad Equities market HEADWIND? It’s really two-fold:

• In some ways, the Hyperscalers and big Semis / GPU -plays are now closer to acting like the FUNDING SHORTS in the maturation in this “AI Trade” phase-shift…as the opportunistic Longs have moved OUT OF the “Perpetual Capex Spend Arms Race” and first-order “Winners”…and instead, down the stack into the “Bottlenecks” of Memory, Silicon, Infra, Servers, Networks, Robotics etc…in other words, Hyperscalers and Semis are increasingly looking like “Source of Funds” in the trade

• But in addition to this aforementioned phase-shift / maturation of the AI Trade…I have to pound the table on the point I made Sunday night in the email, which is this idea too that the Hyperscalers are at the core of this potential paradigm shift in “Supply > Demand” in Stocks, AWAY FROM what had been the virtuous 15+ year “De-Equitization” -period for US Stocks, where the Float had been shrunk and Vol was suppressed as a massive tailwind for Stocks on account of the unprecedented “Demand > Supply” flow realities this created via “Buybacks + Cash M&A > Issuance”

• But now into this new world order of what feels like as “Exponential” Capex funding needs, Cash is being burned through at “known unknown” rates of speed vs Spend plans, which is then not only endangering the “Flow” of the Stock Buyback “Demand”...

• …While at the same time, we have this “Supply Overload” issue: Not just the overall Equities issuance “Cannibalization” risk of more need for “Funding” via the sheer $size of the tectonic Mega Tech / AI -linked IPO calendar coming in a tight window, which is why there’ all eyes on how SPCX takes Friday and thereafter…but critically too, the Hyperscalers’ OWN SUPPLY from issuance now acts like de facto “Overwriting” of themselves (as if they were selling Long-Dated Calls), with the risk of “Issuance Overhead” helping to further “Kill Off” the “Spot Up, Vol Up” residuals, after last week’s massive GOOGL $85B ATM offering, and the ensuing reports that META would be looking at potentially doing the same

11. One of the structural tailwinds for US equities has been net share cannibalization — US companies have been buying back more shares than they issue, creating persistent demand against a shrinking float (more on that here). That dynamic just flipped positive for the first time since 2021, and with the coming wave of mega IPOs and megacap issuance, it’s likely to stay that way for the next 12 months. A structural tailwind is now a headwind. (Chart via BBG’s Simon White.)

12. Expected operating margin growth is running well ahead of revenue expectations — the market is front-loading a lot of AI-induced productivity. That’s a crowded bet.

13. Simon White shows how elevated earnings expectations tend to mean-revert as we move through time.

14. Again from Simon, this is a great chart…

15. This is an interesting study from our friend Dean at TPMR (link here). He writes “The S&P 500’s three-year rate of change recently peaked above 84% and currently stands at 72%. Readings in this range have historically been associated with below-average annualized returns, as shown in the table below. However, I would note that shorter-term readings continue to reflect positive momentum, which is generally bullish.”

16. So things are getting frothy, sure. But interestingly one of our favorite intermediate term indicators of retail speculation, the STAXX index which measures millions of actual retail positioning and flows, while elevated, is still below the 60% threshold that tends to mark speculative peaks. Like margin data, we’ll likely see this signal trigger in the coming six months.

17. The Qs held their breakout level last week. We are long.

18. SII is a geared play on a structural bull market in precious metals and critical materials. AUM is already compounding off gold, silver, uranium, copper, and energy transition themes. If you believe in currency debasement, central bank gold buying, and capex-light green/AI infrastructure buildout, Sprott’s platform gives you a clean way to express that view — with growing fee streams and dividends. It’s teeing off its lower weekly band and 200dma.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

Near-term path: low conviction in either direction. A new BofA Sell Signal just triggered, and our Liquidity indicator remains well below 50%, which has historically weighed on forward 3-month returns. We’ll let the tape lead. Separately, our crypto shorts saved the book last week. We took partial profits near Friday’s close. BTC and ETH are sitting at significant support and deeply oversold — how they react here matters. We also pitch two equity names on our target list.

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week up +80bps, bringing year-to-date returns to +45.6%, which is below our YTD NAV high of +61%.

Current positioning: elevated cash, select beaten-down software, healthcare, and cybersecurity names; short ETH, BTC, SOL; long the Bloomberg Commodity ETF; long solar; a handful of idiosyncratic equity positions.

2. The short crypto trade that we’ve been writing about — and participating in — for the past month, saved our book last week with our short ETH, BTC, and SOL trades making up for our losses in equities. We took partial profits near the close on Friday and now have some tough trade management decisions to make. ETH is at its lower weekly band as well as multi-year support along the significant 15k level.

3. RSI on both weekly and daily timeframes has dropped to historically significant oversold readings.

4. There have been seven instances (including last week) when the daily RSI fell below 20. In four of them, ETH was trading higher 50 days later, with an average gain of +25%. .

5. We’ll see how the crowded long CoT positioning shifted when Friday’s updated report drops. Sentix’s BTC Sentiment index is near its lowest reading in two years.

6. If you’re not reading Mike G’s weeklies, you’re missing out. His latest covers the chart below alongside a study on gambling and neuropsychology — a real banger (link here).

On the chart: we closed our NQ long last week out of respect for risk management. I don’t think the trend is over — strong momentum tends to beget more momentum — but my conviction is low. What I do have increasing conviction on is that we’re late cycle. I’m seeing it in our long-term positioning metrics, in the technicals, and now in macro data flagging a late-cycle Overheating regime.

This isn’t immediately actionable. Late cycles can persist for months, even years, which makes them among the hardest regimes for our style to navigate. The good news: there are better opportunities outside the crowded AI trade. We’ll continue to play the trend with tight risk, but most of our focus is shifting elsewhere.

7. From @sunchartist, a technician I respect:

“Semi’s have all the hallmarks of exhaustion throwover. The exponential rally is more pronounced on the Weekly charts. Last week formed a bearish inverted hammer reversal on higher volume, with the highest RSI reading on record. If this is indeed a trend reversal or establishing a higher trend channel, we are about to find out.”

8. Historically, when weekly RSI on semis climbed above 80%, it preceded higher prices over the subsequent 13 weeks on average — before rolling over. In 5 of 5 instances, semis traded lower over the following 35 weeks, with an average forward 50-week return of -12.76%.

9. Here’s @spotgamma on Friday’s action:

“When someone answers “What do you think triggered the big stock market selloff Friday?”

They will come up with a large list of narratives, none of which mention positioning: People were choking on calls on Thursday, and purging all those calls on Friday.

ex: $SMH (pink) went from top right on this chart on Thursday (calls priced higher than puts in the +90% %’ile), to puts and calls being equally valued (i.e. center of chart).

Then look at how expensive QQQ options were INTO the Friday vs SPY (Y axis). Tech heavy Qs were massively overvalued related to SPY as everyone over-FOMO’d tech.

Positioning needed a reset.”

10. A few weeks ago we wrote about the coming tidal wave of new equity supply from mega IPOs and its historically bearish implications for equities over the following 12-24 months (link here).

Alphabet’s recent $84.7 billion equity raise adds a new data point. Cash-rich giants don’t sell stock — they buy it back. When Alphabet reversed a two-decade pattern to externally finance an AI build-out, it echoed a familiar sequence: a serial cash-returner pivoting to fund a demand-boom capex cycle. History has not been kind to that pattern. Telecom/fiber in 2000: -18% twelve months later. Energy in 2008: -31%. Four of five analogs since 1929 saw the S&P lower a year out, with mean forward returns of -17% at 12 months and -25% at 24.

The caveats are real: these tops took time to form (returns were flat-to-positive at 1-3 months), the sample is small (N=5, judgmentally dated, with 2014 shale a clean outlier), and capex itself has been priced for two years. Read this as weight-of-evidence, not a tradeable signal. The tell isn’t the surge in capex. It’s how it’s now being financed.

11. Another BofA Bull/Bear Sell Signal fired last week while our Trend Fragility indicator climbed to 76%, unphased by Friday’s selloff. Again, my bias is that markets trade a bit higher in the short-term (low conviction on this one) but I think we’re setting up for a larger Summer selloff.

12. We’ll keep updating this weekly DXY chart until we get a breakout. Likely putting on a small starter long this week.

13. The constructive action in DXY is being driven by rising yields. 5-year Notes broke their triangle compression last week. Our positioning measure shows speculators near max crowded long levels.

14. We’ve been flagging the healthcare setup for several weeks and have been slowly adding exposure. ISRG is a name we’re doing DD on.

The bull case: ISRG is the entrenched leader in robotic surgery with a dominant installed base and high switching costs. Revenue is increasingly driven by recurring instruments, accessories, and service — now over 80% of sales. Da Vinci 5 and SP are driving higher revenue per procedure. International expansion (including new Japanese reimbursement starting June 2026) and continued double-digit procedure growth underpin a 10-15% revenue CAGR with expanding margins and strong FCF. The buyback program is active: $2.3B repurchased in 2025, a $9.08B multi-year program completed in Q1 2026, and a new $5B authorization approved in May 2026.

The monthly chart: if ISRG holds its lower band — a level that has marked significant lows multiple times over the past decade — and closes the month strong, that’s technical validation for the bull thesis.

15. Over the weekend I drove past a Texas Roadhouse outside San Antonio. Packed parking lot on a Saturday. A family member said it’s always that way.

The bull case for TXRH: one of the few scaled casual-dining chains with consistently positive traffic, strong value perception, and best-in-class unit economics. They’ve put up 60+ consecutive quarters of comp growth and continue to take share in the steakhouse category, supported by resilient mid-income dining demand, easing beef costs, and improving throughput. Dividend recently hiked to $0.75/quarter. The board approved a new $500M buyback in February 2025; they’ve deployed roughly $150M of it through 2025 and continued buying in Q1 2026.

The monthly chart is compressing nicely. This looks like it’s setting up for a significant move.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

One thing worth stating plainly: we are in one of the most consequential technology revolutions in history. That is not an earnings forecast or a valuation argument — it is an observation about the secular backdrop. From a Narrative Pendulum standpoint, the “singularity” narrative carries some of the most powerful trend-extension properties we’ve seen. Extended markets can get much more extended. That’s the regime we’re in.

Crypto continues to lag the equity rally. Large specs have pushed long positioning in BTC and ETH to or near all-time highs, yet price isn’t catching bids with the market. That combination — crowded positioning, max downside beta — makes it a functional hedge against our long book, which is exactly how we’re using it. Bonds and DXY remain compressed and appear to be on the cusp of significant directional moves.

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week down -172 bps, bringing year-to-date returns to +44.83%. We are now 15.7% below our YTD NAV high of +61%.

Current positioning: elevated cash, long NQ and select beaten-down software, healthcare, and cybersecurity names; short ETHUSD; long the Bloomberg Commodity ETF; long solar; a handful of idiosyncratic equity positions.

2. Large spec longs in BTC and ETH are at or near all-time highs. The crowd is fully loaded. Price isn’t keeping pace with the equity rally. It is, however, showing maximum beta to the downside — which makes it a useful hedge against the long book. That is how we’re treating it.

3. ETH daily chart below. Multiple long-term bearish setups across the crypto complex. We are short.

Trifecta Charts

4. CoT sector positioning dashboard below.

• Most crowded longs: Nikkei, UST 5yr, UST 10yr, 6L, Aluminum, Copper, Rough Rice, Soybean Meal, Oats, BTC, ETH, XRP

• Most crowded shorts: NQ, Ultras, 6J, 6M, Natural Gas, Gold, Palladium, GF, HE

5. Two data points worth holding together: Momentum vs. Minimum Vol is running 5 standard deviations above its long-term trend, while Goldman’s US Equity Speculative Trading Indicator sits at neutral. The GS indicator tracks relative trading volumes across penny stocks, unprofitable companies, and high-EV/sales names — a composite measure of retail froth. Elevated factor spread, subdued speculative activity. That combination is worth monitoring.

Charts via AlpineMacro & GS.

6. Last week’s Trifecta Lens Score drop to -3 warranted attention but not action — the signal needed to hold at that level consistently before it carried weight. It reversed quickly to -2. Neutral. No change to posture.

7. Bloomberg’s Simon White recently described the underlying risk structure in US equities: a gamma squeeze driven by single-stock options is holding individual vol elevated while VIX stays suppressed. It’s a rare configuration historically, and it’s sowing the conditions for a disorderly unwind when the squeeze exhausts.

Macro

8. Real personal income less transfers, measured on a 6-month annualized basis, has turned negative at -1.8%. Historically, that inflection has preceded a ~1.3 percentage point softening in 12-month payroll growth, and roughly doubles recession odds over the following year (25% to 57%).

We don’t think a recession is imminent. AI capex and fiscal deficits remain large enough to offset the signal — though the fiscal impulse is decelerating. But this is another data point confirming how unusual the current environment is. Reliable signals are misfiring. That tells you something about the regime, even if it doesn’t change the near-term outlook.

9. Alyosha’s bearish oil thesis rests on a simple premise: scarcity fears are overstated. With roughly 8 billion barrels of petroleum in global storage (~5.25B crude) and meaningful non-GCC spare capacity still available, the market has more than a year of runway even under a severe supply deficit. In his framing, squeeze attempts remain self-limiting — and crude can’t hold a rally because the cushion is larger than the bulls believe.

The bull case argues the opposite: that much of that storage is functionally unusable (tank bottoms, line-fill), that SPR depletion has removed a real buffer, and that the live Iran/Hormuz risk compounds the tightness. Alyosha’s counter is that unusable-barrel claims are overstated, the SPR release is largely term-lending already priced on the curve, and scarcity is a function of time rather than a hard wall.

Note: this summarizes his view, not an endorsement. The assumptions are stylized. Recent price action, however, appears to be voting in his direction. Below is a chart we made to illustrate his point.

10. Bonds remain the fulcrum for everything else in macro right now. Our bias is that long bonds break lower. However, the May bar is shaping up as a failed breakdown — which doesn’t change the bias, but does demand patience and flexibility. Nothing to do here except stay attentive and let the tape tell us what’s next.

Trade Setups / Topical Charts

11. DXY continues to coil in a 12-month-plus range. The long-term bias is lower — a 3-to-5-year secular move driven by the reversal of capital flows out of Core and back toward the Periphery as US exceptionalism gets re-rated.

12. That said, a number of conditions are aligning that mirror the setup preceding the early ‘21 DXY breakout. Our Large Spec 3-Year Oscillator is coming off a bearish consensus hit — same as early ‘21. DXY yield spread momentum is accelerating in the dollar’s favor — same as early ‘21. Relative US equity outperformance is positive. Relative USvsRoW growth is accelerating, driven by the AI trade. And the US is meaningfully insulated from rising energy costs via Strait of Hormuz (SoH) closure risk in ways that most of the world is not.

13. Defense appears to have finished correcting. PLTR sits at the intersection of AI and defense — two of the most durable secular themes in the current environment. The weekly chart looks constructive. New highs look to be on the horizon.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

Against that, three developments warrant attention: our Trifecta Lens Score deteriorated last week; fund manager sentiment surveys show signs of euphoria; and BofA’s Bull-Bear Indicator triggered a sell signal. We are not calling a top. But the distribution of outcomes has widened. The appropriate response is to trail stops, size down on risk and tactically ride the momentum.

Separately, we examine Healthcare Equipment, which is registering its most oversold reading in recorded data and merits a closer look as a mean-reversion candidate.

***Quick housekeeping note: Enrollment into our Collective is open until the end of this week. The Collective includes all of our research, a full library of reports and videos on theory and strategy, our proprietary market dashboard, plus our internal slack where the team and I, plus fund managers and die-hards from around the world talk shop, exchange ideas, and shoot the shit. We will be raising our prices by over 25% within the next few months. So if you’ve been on the fence, now’s a good time to jump so you can lock in current pricing. Looking forward to seeing you in the group. ***

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. The portfolio ended last week down 344 bps, bringing year-to-date returns to +46.56%. We are now 14% below our YTD NAV high of +61%.

Current positioning: elevated cash, select beaten-down software, healthcare, and cybersecurity names; short ETH/USD; long the Bloomberg Commodity ETF; short duration; long solar; a handful of idiosyncratic equity positions.

2. We are structurally bearish the long end of the curve but acknowledge it is technically oversold at a meaningful support level. Front-end positioning has grown crowded on the short side, and ceasefire speculation has begun unwinding that trade. A tactical long entry in the front end is worth considering. Any strength in the long end we will use to re-up our short.

3. We significantly reduced long energy exposure last week. The tape was heavy, and ceasefire chatter introduced enough headline risk to justify trimming ahead of a positioning flush — regardless of where fundamentals stand. Our base case remains that any ceasefire will be short-lived, measured in weeks rather than months. However, we have no interest in stepping in front of a narrative-driven unwind, even when the fundies increasingly favor being long.

From Warren Pies: “The last month recorded the largest cumulative draw of total U.S. petroleum inventories on record. Gasoline inventories on a seasonally adjusted basis are at their lowest since 2014. Distillate inventories are at their lowest since 2003. The next few weeks represent a crucial window for oil fundamentals.”

We will look to re-engage on any washout.

Trifecta Charts

4. Trifecta Lens Score dropped to -3 last week. This reading is not yet confirmed — it could reverse quickly. But historically, a reading at or below -3 that persists has preceded elevated volatility regimes with high reliability. We are watching closely.

5. Aggregate Breadth Indicator remains at +2, which is supportive of the broader trend. Historically, larger corrections have not been preceded by readings above 1. No deterioration here yet.

6. My friend Dean has built a really deep sub-industry dataset back to the 1960s, and one of his favorite tells is what defensive groups are doing versus the S&P over a rolling 63-day window. In his latest work (link here), that indicator went from 100% of defensive sub-industries outperforming during the Iran conflict pullback to literally 0% afterward—something his history has never recorded before.

As Dean notes, when fewer than 10% of defensive groups are outperforming, the S&P has historically posted about a +21.5% annualized return, which is a pretty powerful bull-market signal.

7. BofA’s latest Global Fund Manager Survey shows record equity allocation, a sharp drop in cash holdings, record expectations for earnings growth, and a second consecutive Bull & Bear Indicator sell signal. The prior signal triggered February 26 — just ahead of the Iran-conflict selloff.

Sentiment at these levels does not predict the direction of the next move. It does reduce the margin for error.

Macro

8. The “Issuance Signal” study tests whether surges in equity supply — IPO proceeds normalized to GDP, combined with Baker-Wurgler’s classic equity share of new issuance — predict weaker forward S&P 500 returns. Across 50 years (1975-2024), the composite signal fires in just 9 instances (1991-96 cluster, 1999-2000, and 2021), and in those years subsequent 12-month returns averaged just +4.7% versus the +13.3% baseline, with maximum drawdowns averaging -21% over the following 24 months versus -16% otherwise.

Critically, the 2026 projection of ~$160B in IPO proceeds plus ~$440B in follow-on issuance would produce a composite z-score of +2.11 — the highest reading in the entire 50-year sample, exceeding even 1999-2000 and 2021 — though this is contingent on the projection materializing rather than coming in like the muted 2023-24 cycle.

The signal should be read as a late-cycle regime warning rather than a market-timing trigger: it can fire 2+ years before the actual peak, but every prior reading above +1.8 was followed within three years by a peak-to-trough drawdown of at least -20%.

9. Nomura’s Charlie Mcelligott’s latest on the inevitable “shock down”.

10. The AI CAPEX spend is driving a massive surge in US vs RoW economic outperformance. This growth divergence has driven a breakout in US vs RoW equities. Yet, what’s interesting is that DXY — which typically tracks relative growth and equity performance — remains firmly in its 12m+ range. A sign of USD oversaturation? I think so.

Trade Setups / Topical Charts

11. BofA GFS relative allocation to cyclicals (tech + industrials) versus defensives (healthcare + staples) has climbed to its highest level since Jan 18’. Time for some mean reversion in this trend?

12. Healthcare Equipment — Dean’s relative performance data shows Healthcare sitting at or near all-time lows relative to the S&P. The sector is at a historically extreme oversold reading.

13. We have begun building a basket using three filters: (1) technical leadership off the lows, (2) meaningful share repurchase activity underway or authorized, and (3) insider buying at significant scale.

14. UNH is one name we are evaluating for inclusion. The monthly chart, including relative performance, is shown below

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,
Alex

***Quick housekeeping note: Enrollment into our Collective is open until the end of this week. The Collective includes all of our research, a full library of reports and videos on theory and strategy, our proprietary market dashboard, plus our internal slack where the team and I, plus fund managers and die-hards from around the world talk shop, exchange ideas, and shoot the shit. We will be raising our prices by over 25% within the next few months. So if you’ve been on the fence, now’s a good time to jump so you can lock in current pricing. Looking forward to seeing you in the group. ***

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. Last week was a painful one for the MO port. Mid-week it hit a YTD high of +61%, only to give back all the weekly gains and then some. The port ended Friday down -210bps, sitting at +50.7% YTD.

Core book: high levels of cash, long AI and semi plays, long RTY, long BTC, long BBG Commodities ETF, short bonds, long VIX, long Ags, long RBOB and Brent, short KC Coffee, long solar, long lithium and RE miners, plus a couple idiosyncratic equity names.

2. Back in September of last year I began writing about the increasingly tight compression regime that bonds were entering, suggesting a large trend was cooking (link here). Then in early March I noted the record long positioning in bonds, tilting the odds in favor of a bearish breakout (link here). The long end is now down at its lower monthly band and looks ready to punch through, while its monthly Bollinger Band has hit its tightest compression for which we have data. If this bearish breakdown holds, it’ll have significant repercussions across all major assets. This is the most important chart in macro at the moment.

3. We got short last week on the completion of this H&S continuation pattern (chart is a daily).

4. What’s interesting is that the recent rise in yields has been primarily driven by real yields, not inflation — despite one of the largest energy shocks since the 1970s, notes BBG’s Simon White. He writes “Real yields are rising as the market prices in a higher terminal rate for the Federal Reserve, with the peak implied rate from SOFR futures rising from under 3% on the eve of the Iran war to 3.85% now. Ten-year inflation breakevens have risen only about 20 basis points… That leaves a glaring risk if the market decides to take inflation risks from rising energy prices more seriously.”

The most obvious (to me, at least) and underpriced risk to this market is that we not only don’t get a ceasefire but things intensify, significantly.

5. And it’s probably a good time to start taking inflation risk seriously… Chart on the left shows BCOM Index in white, leading CPI (in orange) higher. While the chart on the right shows our Leading Inflation indicator hockeysticking higher.

6. Dec 27’ SOFT rate has traded above the Fed Funds target rate for the first time this cycle, putting the rate cutting cycle on notice.

Trifecta Charts

7. Long bond positioning has quickly flipped bearish, but it’s doing so from all-time record long positioning on a nominal basis. There are many events that could reverse this breakout (Hantavirus narrative, US-Iran deal, etc..) but with our indicators pointing to 6%+ NGDP and rising inflation volatility, bonds seem to be grossly overpriced.

8. Someone sent me this interesting chart from @MacroCharts showing MSCI Momentum / Minimum Volatility spread’s % distance above the 200dma is at an all-time record high, surpassing the previous extreme reading in 2000.

This isn’t an immediately actionable chart. But it does point to the late cycle characteristics of the current rally.

9. I’m increasingly split on this market. The “Whaley Price Thrusts” off the April lows, was significant. It also followed a -10% correction and when you get a 10% correction followed by a significant V price thrust to new highs, it’s highly unusual to see another significant (5%+) correction over the following six months. However, this is also just a highly unusual environment and the v-bottom wasn’t accompanied by any other classic breadth thrusts.

What does all this tell us? Not much, other than to keep humble and stay nimble, as we’re not in your typical bull market anymore. Give this thread from OG Walter Deemer a read where he shares his thoughts on the subject.

10. Speaking of unusual… our friend Dean Christians at TPMR makes a similar point in a recent note writing “in all but one case—1994—when fewer than 70% of stocks were above their 200-day moving averages for 358 consecutive sessions, the S&P 500 was in a bear market.”

Macro

11. And “A component of the TCTM Risk-Off composite issued a new alert when more than 7.75% of S&P 500 constituents fell to 52-week lows as the index hovered near a multi-year high. Historically, this kind of breadth deterioration has often preceded periods of increased market stress.

What makes this latest signal unusual is that it occurred while the S&P 500 was at a record high and still exhibiting strong upside price momentum.”

12. Our preferred short-term breadth gauges, the McClellan Summation Index and Oscillator have both firmly rolled over. This raises the likelihood that the market has started a technical correction. Whether that correction is sideways (through time) or down (through space) will depend on how quickly yields reprice, imo.

Trade Setups / Topical Charts

13. Increasing inflation volatility and rising yields should start to bring some action back into the FX majors soon. The dollar index (DXY) continues to compress within its 15m+ sideways range. A BIG move is coming. Our bias is for a break lower but we’ll happily play a trend in either direction.

14. Our Lead Technical Analyst, Mike G, pointed out EURAUD’s potential double bottom in his always excellent weekly, This Infinite Game. I like this trade as positioning is crowded long AUD while it’s quite short EUR. And price is reversing off a mutli-year significant level.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,
Alex

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. Portfolio rose +288bps last week, sitting at +53.8% YTD.

Core book: long AI and semi plays, long RTY, long BTC, short SOLUSD, short DAX, long silver, long BBG Commodities ETF, long KC HR Wheat, long Dec Brent, long RBOB Dec gas, long 2y USTs, long lithium and RE miners, plus a couple idiosyncratic equity names.

2. Back at the start of April (link here) we flagged the long setup in Intel Corp (INTC):

“Adding a small starter long in INTC here. INTC’s value as an indispensable strategic asset is going to become more self-evident as markets wake up to the fact that the global order is dead and Taiwan is not in our sphere of influence…”

3. INTC has shot up 165% since. We’ve taken partial profits on the way up and are trailing a tight stop on the remainder.

Trifecta Charts

4. Our base case for the past month was that Qs would run quickly to the upper level of their broadening top in a lockout rally. Not only did that play out — they punched through the upper bound entirely last week. Six consecutive weekly bull bars. That kind of price action signals a large demand/supply imbalance and historically leads to further trend continuation.

5. Our friend Dean at TPMR made a similar point recently: “On Thursday, we noted a sharp expansion in 252-day highs among technology sector stocks — the strongest reading since 2024. Historically, when similar signals have emerged near market highs like today, subsequent returns and win rates for the sector have been exceptionally strong.”

6. The rally is also bringing a marked acceleration in sentiment and retail flows. From Citadel: “Net buying on our platform last week alone was in the 98th percentile of weekly flows since 2019. Monthly net flows for April clocked in at the 87th percentile of monthly activity since 2019.”

7. Equity allocation just hit its highest level in five years. April marked the biggest monthly shift since November 2020, per StateStreet.

Macro

8. Last week we flagged the negative divergence in LQD/IEF — one of our preferred market internals. It’s still diverging. Lead times tend to be long and we haven’t hit danger levels yet. A complementary view comes from Jim Carroll’s High Yield Bond Cumulative A-D line (link here). If this divergence continues, the odds of a cyclical top rise dramatically.

9. Tony, our resident vol expert, digs into the Nasdaq-VXN correlation hitting an extreme (market up, vol up) — and much more — in his latest Vol Street Journal.

Trade Setups / Topical Charts

10. Our lead Technical Analyst Mike G highlighted Coffee’s recent completion of a H&S continuation pattern in his must read weekly (link here).

11. Zooming out to the weekly, you can see the larger breakdown at work. If this holds, it marks a significant change of trend — and a clean entry to get short.

12. Positioning and sentiment are neutral. Coffee enters its most bearish seasonal window in two weeks.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. Portfolio rose +597bps last week, sitting at +50.9% YTD.

Our core book: long AI and semi plays, long RTY, long BTC, short SOLUSD, short DAX, long silver, long BBG Commodities ETF, long KC HR Wheat, long Dec Brent, long RBOB Dec gas, long 2y USTs, long lithium and RE miners, plus a couple idiosyncratic equity names.

2. We wrote about the budding mean reversion set up in cocoa last month, and while the tape hasn’t kicked off on a bull leg yet, price continues to compress and the Trifecta setup (positioning, technicals, macro/fundamentals) is there.

3. We have a tight compression regime following deep Bull Volatile SQN readings, which tend to mark significant lows. We’re long and have orders to add on a volatility breakout.

Trifecta Charts

4. Last week I wrote that Qs will run quickly to the top of their broadening top pattern. They’re now 2.25% away and we think they close the rest of the gap fast.

5. We’re bullish and think the tape continues to run over the next 1-2 weeks, but concentration is narrowing and we’re starting to see some concerning divergence in measures of credit, one of our favorite internals (tan line).

6. Here’s another way of looking at the same chart, but on a divergence oscillator basis. Credit is not confirming the recent bull trend in the stocks. This doesn’t mean anything over the very short-term. But if it continues, it will significantly raise the odds that NQ is setting up for a larger corrective period..

Macro

7. What will be the thing that turns this market cycle over? The same thing as always: rising rates and tightening liquidity.

Here’s a weekly chart of UST 2yr yields. It’s broken out from a MAJOR compression regime. Compression regimes precede expansionary regimes (BIG trends). A big trend is coming and that trend looks more and more like it’ll be up.

8. From StateStreet: “Hard to find a reason to be dovish… Although uncertainty is high, justifications for Fed dovishness are fading. Even ahead of the FOMC meeting, the media began to interpret Fed speak as net hawkish. And while US GDP came in weaker than expected, there are few signs of outright weakness in the economy, especially as services consumption is growing at a pace still above pre-Covid averages… Inflation pressures, the potential for rising term premium and uncertainty over economic impacts have added two-way risks to the Fed’s next move, whenever that may come.”

9. U.S. Capital goods orders (nondefense ex-aircraft) just posted its largest MoM increase since 2020, signaling a significant pickup in business investment activity (chart via StateStreet).

10. Concentration risks are mounting… From StateStreet “As recently as a few quarters ago, equity investors were lamenting concentration and its associated risks. This concentration has returned in force, yet market participants are not fretting to the same degree.

“There are only 3 sectors globally where institutional investors are net buyers – Energy, IT and Financials. All three sectors are crowded and expensive but seeing robust earnings.

“The rest of the market is seeing net outflow pressure from institutions.”

Trade Setups / Topical Charts

11. Dean Christian’s shared shared some great research last week (link here), showing the increasingly bullish development in both the broad commodities complex as well as Ags, specifically.

He points out that “The Bloomberg Spot Commodity Index surged to a new high this week, marking the 38th instance over the past year in which it registered a new 252-day high.

“That has happened only 11 other times in history.

“As the chart below illustrates, when the rolling count reaches 38, the index has historically generated an annualized return of 14.3%, more than double its long-term average return.”

Last week we added our fourth leg to our BCI long.

12. He specifically highlights Ags as looking bullish, with wheat, corn, and soybeans all simultaneously reaching a 100% trend composite reading for the first time since early 2022. Dean points out that “when at least two of the three grain trend composites (wheat, corn, soybeans) register 100%, the S&P GSCI Spot Agriculture Index has historically generated a 30.3% annualized return. This meaningfully outperforms environments where only a single commodity reaches 100% and across all observations since 1969.”

Last week we pitched the Ag ETF DBA. We also like MOO.

13. And we still like the Adeocagro (AGRO) to play this theme. For those of you who remember, we first pitched this name back in early March (link here). It’s since broken out of its massive consolidation pattern and is already trading over +40% higher. We think this name is a 3-5x bagger over the next few years.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. Portfolio rose +210bps last week, sitting at +45% YTD. Two weeks ago, following the bear trap reversal in the major indices, we began aggressively adding risk — reducing cash holdings from 65% to 35%.

Our core book: long AI and semi plays, long RTY, long silver, long gold miners, long BBG Commodities ETF, long Dec Brent, long RBOB Dec gas, long 2y USTs, plus a couple idiosyncratic equity names.

2. We still hold a large Bcom index (BCI) long we’ve been sitting in since last summer. The chart is overextended, but overextension can persist. It’s been consolidating its gains and looks like it’s gearing up for another leg highe (Weekly chart.)

3. The NQ100 weekly is a great-looking chart. Tight 7-month sideways compression, textbook bear trap reversal, lockout bull market rally. We flipped long a bunch of AI/semi names on the reversal over the past two weeks — respect for the tape, plus the technical setups were there. Anthropic’s Mythos announcement — likely the most significant step-function model improvement in a while — is adding serious juice to the AGI narrative.

When this trend ends is anybody’s guess. My read: the Qs probably run fairly quickly to the top of the broadening megaphone, around 28,500. (Daily chart.)

Trifecta Charts

4. Dean Christians at Turning Point Market Research (link here) flagged last week that his long-term Dual-Trend system flipped bullish on S&P 500 information technology — annualized returns at this signal are strong.

5. I’ll admit — it’s a strange market. Historic price thrust, but no confirming breadth thrusts. Breadth remains incredibly narrow (see next chart). And our Liquidity Gauge still sits sub-40%. That could change — Warsh is coming in soon, and maybe he starts jawboning rates down before taking the Fed’s helm. Anything can happen. We’ll keep a close watch on this one.

6. High dispersion, narrow breadth. That’s the story right now.

Macro

7. Via GS: The world’s oil buffers are being rapidly depleted — crude inventories poised to hit record lows even if the Strait of Hormuz fully reopens by month end.

8. JPM's recent Oil Flash Note, "Simple Math," is worth a read. Here's the meat of it. Collective members can find the full report in our research channel.

9. Via @WarrenPies: “A historic earnings boom is developing. Estimates growing faster than they did in the mid-90s or the late internet bubble years. Only the COVID recovery saw a greater inflection. And this boom is unique — it’s not coming off an EPS drawdown.”

10. But like breadth, the strong earnings revisions are concentrated in tech and commodities. (Charts via State Street.)

Trade Setups / Topical Charts

11. Sentix’s Strategic Bias continues to positively diverge from the underlying. Solid sign and high odds of a coming bull leg in bitcoin.

12. We have starter longs in both BTC and ETH. IF we get a breakout from this channel, we’ll look to add to our positions.

13. Invesco’s Agriculture fund (DBA) has broken out from its 12m compression regime. The macro backdrop remains highly supportive of Ags. We may initiate a starter long in DBA this week (chart is a weekly).

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,
Alex

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. Portfolio rose 10bps on the week, sitting at +37.5% YTD. This is a wait-and-see market — and we need to do more of nothing.

Still running high cash. Core book: long RTY, long silver, long gold miners, long BBG Commodities ETF, long Dec Brent, long 2y USTs, plus a couple idiosyncratic equity names.

2. We have a starter long in cocoa. It’s setting up in a tight compression following a deep Bear Volatility regime SQN reading — which tends to mark bottoms.

3. Positioning and sentiment are crowded short, while the tape is deeply oversold. We’ll be adding to this long on a confirmed volatility breakout (VBO).

Trifecta Charts

4. Our Trifecta Lens fell back to -2 last week. Combined with severely depressed liquidity readings, the message is clear: best case, we chop sideways from here. A move to -3 or lower signals a likely cyclical top is in.

5. Durable bottoms need breadth thrust confirmation — a big, fast reversal in investor behavior. That may still come. But we haven’t seen any thrusts yet.

Tony — our resident vol expert — breaks down why this rally was hedge-unwind driven: a collapse in implied correlation, not individual stock vol. That trade is largely done. Implied correlation is back to normal, the next leg lower needs individual stock vol to drop, and with earnings ahead and the war still live, that’s unlikely. VIX stalls in the high-teens, VX curve stays flat, equities lose a key fuel source. Full weekly vol rundown here.

6. Our combined Aggregate Breadth + Thrust indicator is now at +2 and falling. Lowest reading since last April’s Liberation Day selloff. If this number doesn’t materially improve, odds are rising that we’re putting in a cyclical top.

Macro

7. Our Leading Inflation Indicator (amber line) is starting to hockey stick higher — now at its highest level since 2023.

8. BBG’s Simon White shows China’s input prices PMI, advanced 6 months, has also risen to multi-year highs and is still climbing.

9. Despite this, longer-term inflation expectations remain anchored.

A few reasons for that: (1) labor markets remain weak, wage growth keeps falling; (2) the market is looking through the supply shock and pricing the coming demand shock of higher energy/food prices hitting an already anemic consumer; and (3) the market may still be too optimistic on a near-term resolution to this war.

10. From GS: “Since the start of the conflict, 5y5y traded inflation has declined slightly despite the large repricing in the near-term inflation path. While it’s reasonable that markets would price a supply shock as a one-off boost to inflation, we think that has been reinforced by the comparative stability in longer-dated oil futures, which have meaningfully lagged their typical beta to the front-end of the oil curve.”

11. Last week we talked about the DXY and its 12-month sideways range. Still watching for a setup — breakout above or below. My bias is lower. I’m willing to take small swings short at the top of this range. State Street shows the USD’s domestic bid losing steam.

12. Paulsen put out a great post last week (link here) making the case for slowing US growth. His geo-weighted index of 10yr USTs and real USD, inverted and advanced 3 months, is pointing to negative economic surprises ahead.

13. Same picture when you add oil. Paulsen’s not calling for growth falling through the floor — just that already-slow growth continues coming in lower.

14. Atlanta Fed’s GDPNow is at its lowest level since the Liberation Day selloff, and falling fast.

Trade Setups / Topical Charts

15. The AI trade is nowhere near over. @WarrenPies:

“As the Iran War has ebbed and flowed, GPU availability for B200s has collapsed to zero...H100s close behind. Whatever happens with the war, the AI complex is likely to lead any true sustainable bull market. Unsurprising to see SMH less than 1% from a new ATH.”

16. Semis (SMH) continue to lead the charge.

17. I’m turning more bearish on crypto — but I think we likely see a counter-trend rally first. Sentix noted this past week that Strategic Bias is signaling a likely intermediate bottom in BTC:

“Against a backdrop of bearish sentiment, Bitcoin managed to defend its price level just below US$70,000. So far, so good. However, this negative sentiment has now subsided. At the same time, nothing has been achieved in technical terms. The oscillating movement that has persisted for weeks is, so far, consistent with a consolidation within a downtrend, and neutral sentiment often marks the end of such a consolidation phase. However, something noteworthy is happening on another level. Medium-term underlying confidence is rising significantly, and more sharply than the recovery in sentiment. This therefore reflects a new willingness to build positions that goes beyond simply covering short positions. The $76,000 mark could therefore be tested. But only once prices move above this resistance level would the chart picture be viewed more constructively.”

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,
Alex

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. Portfolio fell -136bps on the week, sitting at +37.39% YTD. Getting chopped around more than we should be. This is a wait-and-see market — and we need to do more of nothing.

Still running high cash. Core book: long silver, long gold miners, long BBG Commodities ETF, long 2y USTs, short cotton, plus a couple idiosyncratic equity names.

2. We took profits on CENX last month, but decided to take another swing at the aluminum trade — adding Alcoa (AA) to the book last week following its recent breakout. An Iran/Hormuz closure starves bauxite and alumina shipping lanes, spikes global energy costs, and crushes smelting capacity for energy - import-dependent competitors. AA, powered by cheaper domestic grid power, takes share. Meanwhile, the defense and aerospace procurement surge that follows any Gulf escalation is aluminum-intensive — front-loading demand exactly when supply is most constrained.

3. This is one of the more important macro charts to keep an eye on. DXY continues to coil near the upper bound of its 12 month sideways compression/rectangle pattern. Short-term positioning got ahead of itself, and is a near-term headwind, but longer-term positioning is still muted. We’re agnostic on direction and will play a move in either direction.

Trifecta Charts

4. Ding ding ding. Our Trend Fragility indicator — a composite of sentiment, positioning, and flows — fell to 19% last week, triggering a conditional buy signal. Past signals marked by green vertical shading.

5. Our friend Dean Christians flagged this in a recent note: the 7-week Bull-Bear spread in the Investors Intelligence survey has “fallen dramatically to -43.5% — the largest decline since the COVID crash, occurring in fewer than 1% of observations since 1971.” Historically, extreme readings like this have preceded sharp reflex rallies, with SPX generating annualized gains near 30% when the spread falls below -43%. Classic contrarian setup.

6. Our Aggregate Breadth Indicator continues to chug along at +3 — a solid reading. Points to recent market weakness being more about rotation than broad distribution. At least for now.

7. The Liquidity gauge, however, hit the floor last week — 0% reading, now sitting at 7%. Red dots mark past instances when this gauge first crossed below 5%.

All of the above keeps telling me: at best, we’re in a larger sideways volatile regime — and likely a cyclical topping process — that plays out until we start seeing cracks in the labor market.

8. We have conditional buy signals from TF and sentiment surveys, but we never saw true capitulation. The kind that marks an enduring low and gets followed by breadth thrusts.

That said, we’ve probably seen enough for a short-to-intermediate bottom. My working assumption: SPX chops in a ~700-point range between the recent 6,300 low and the 7k high.

9. If you haven’t read Mike G’s latest note yet, do it — the full piece is on the Collective site, excerpt on Substack here. He’s watching the Russell closely: “More interesting to me in the equity world is the Russell, which has held its tight price compression right at the convergence of its 200EMA and multi-point trendline.”

Macro

10. Who leads matters. Dean Christians again — this time on why energy leading the charge isn’t a great sign: since 1950, the S&P 500 has returned just 1.12% annually during periods when energy led, versus an all-period average of 8% (link here).

11. Short-term, flows into energy are large and positioning looks a bit overcooked — sector is likely due for a breather. But as State Street recently noted, positioning relative to historical averages is still far from crowded. It’s coming off a very low base.

12. Updated US Price Stats YoY% from State Street. Inflation is about to rip. The question is how much the Fed chooses to look through supply-disruption-induced inflation — watch the upcoming minutes for any signal.

13. Earnings estimates have held up, but the longer the Strait stays partially closed, the more it squeezes an already stretched consumer through higher energy costs.

14. From BBG’s Simon White…

Trade Setups / Topical Charts

15. Aerospace & Defense names are oversold within a broad uptrend (chart via @RenMacLLC.

16. Rheinmetall (RHM) was one of our big equity winners in ‘24. It’s been consolidating those gains in a sleepy sideways channel — and just reversed off the lower bound on the weekly. RHM is the purest expression of European rearmament at the exact moment a Gulf escalation makes NATO’s 2% GDP floor look politically untenable as a ceiling. Germany and Poland are tracking toward 3-4% trajectories, and RHM is the primary domestic prime contractor for both. The FX tailwind is underappreciated: Euro fiscal expansion strengthens EUR while RHM’s DM revenue base drives simultaneous earnings and multiple re-rating.

17. Mr. X and I are doing another interview soon — updating on Iran, but also covering China and Taiwan. Conviction is building that China moves on the island within the next 18 months.

One pair trade I’m considering: long INTC / short TSM. Relative performance looks to be turning after a mostly one-way trade for the past decade. More on this for the Collective soon.

18. INTC on the weekly and daily. Likely adding a small starter long. INTC’s value as an indispensable strategic asset is going to become more self-evident as markets wake up to the fact that the global order is dead and Taiwan is not in our sphear-of-influence…

19. Crypto is nearing a make-or-break point. All major pairs compressing in a tight bear flag. The weekly SOLUSD chart shows a large completed multi-year H&S top. My bet is this resolves lower and crypto enters a devastating bear. But we’ll see — as always, we’ll let the tape tip its hand.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

QOTW: “The market’s consensus seems to be that 30-50% of Gulf energy infrastructure getting wiped out will have zero lasting consequences. No plastics shortages, no fertilizer crunch, no chip supply issues from helium depletion. The tail risk is so catastrophically bad it can’t really be priced — so the default is just buy the dip and pray everything goes back to normal.” ~ anon

JOIN THE COLLECTIVE

MO Portfolio & Trades

1. Portfolio fell -234 bps on the week, sitting at +38.76% on the year.

Still running high cash. Core book: long HRW Wheat, long sugar, long corn, long silver, long BBG Commodities ETF, plus a couple of idiosyncratic equity names.

2. BBG Commodities Index ETF (BCI) is flagging and setting up for another add.

3. SolarEdge Technologies (SEDG) is a new addition to our book. It recently completed a 12m+ Cup-n-Handle. Solar remains a deeply unloved sector of the market, while the Iran conflict is highlighting the growing importance of energy security. Brandon did a great write-up on solar in his latest report, which Collective members can find hung up in Slack.

4. A few weeks ago, I pointed out how the massive March 20th quarter OPEX ($1.3trn in delta notional), along with the equally large JPM collar trade on the SPX that expires March 31st, had been keeping the market pinned in a tight trading range (one of its narrowest year-start ranges in over 20yrs).

My teammate and MO resident Vol expert, Tony, discusses this idea in length in his latest Vol-Street Journal video (link here). He flags two things worth highlighting: SPX and NDX are both breaking out of their compression regimes on the daily and weekly — and doing it with real momentum. He’s also been watching VIX futures track spot VIX much more closely than they did at the start of the war, which he reads as vol traders not pricing in a quick reversion.

SpotGamma recently made a similar point, writing: “The role of dealer positioning sits at the core of the market’s regime shift. To put it simply, the stabilizing force of positive gamma is now absent.

“We remain firmly in a negative gamma environment, where dealers hedge with price action—selling into weakness and buying into strength. This flips the market’s behavior from mean-reverting to momentum-driven, increasing the likelihood of any sharp directional movement.”

This is important. Expect larger moves going forward.

Trifecta Charts

5. Getting closer… Trend Fragility fell to a reading of 22% last week. Need a cross below 20% to give a conditional capitulation signal.

6. And still no signs of a washout from our Capitulation tab.

7. One bright spot in an otherwise bleak backdrop is our Aggregate Breadth Score actually rose one point last week. This is because this indicator also includes various divergent measures of breadth, as well as nominal.

My base case is that we’re forming what will become a larger, volatile sideways range, which may become a much larger cyclical top depending on how things progress on the geopolitical front.

Macro

8. State Street’s PriceStats MoM% index shows that inflation is going to become a real problem if the Strait isn’t reopened soon.

9. More importantly, if we don’t see resolution soon, recession risk starts getting priced in. Central banks are laser-focused on wages becoming the next inflation problem — but the labor market may not even be strong enough to get there. Meanwhile, unemployment has appeared stable on the surface, but household sentiment tells a very different story. The latest Michigan survey shows unemployment fears at recession-level readings (chart via State Street).

10. From BBG’s Simon White: “A splintering in increasingly fragile sentiment has the capacity to rapidly induce a recession, forcing an abrupt repricing of US rates. Recessions are born on negative feedback loops developing between hard and soft data. Hard data is rising; if soft data also deteriorates past a certain point, then recession risk will rapidly increase.”

Trade Setups / Topical Charts

11. The DXY is consolidating near the upper-bound of its 15-month rectangle pattern, as it caught a geopolitical risk premium bid this past month, which hit when bearish USD sentiment had reached a consensus. With US yields breaking out, we may see DXY follow. We’ll get long on a confirmed breakout (chart via Fidelity).

12. Earlier this month I pointed out the record long Spec positioning in long bonds, along with the bearish technicals giving us a solid short setup. This trade has played out nicely. Now, we have record-short positioning on the front end, along with deeply oversold levels across all timeframes. This move looks overdone to me, as the longer energy prices stay high, the greater the odds of a reflexive recession kicking off.

13. 2s have put in a double bottom on the daily. We’re taking a swing at getting long.

14. Last week, we started dipping our toes in on long spot silver and gold miners. This is a small tactical trade as we test the waters. But there is evidence that we’re getting nearer to a bottom.

SentimenTrader’s Optix crossed below 20 last week. Gold was higher 12m later 89% of the time.

15. Idaho Strategic Resources (IDR) continues to be one of our favorite plays in this space, as it’s one of the few junior gold producers actually making money — strong cash flows, with a clear production ramp ahead. The stock’s cheap on gold alone, but the market is completely sleeping on what could be a massive rare earths + thorium play at Lemhi Pass. Collective members can find Brandon’s write-ups on IDR going back to 23, when he first started pitching it.

JOIN THE COLLECTIVE

Thanks for reading.

Your Macro Operator,

Alex

JOIN THE COLLECTIVE

​​​​​​​MO Portfolio & Trades ​​​​​​​

1. Portfolio fell -150bps on the week, sitting at +41.3% on the year.

Still running high cash. Core book: long crude, short EM, long HRW Wheat, long sugar, long corn, long BBG Commodities ETF, plus a couple idiosyncratic equity names.​​​​​​​

​​​​​​​2. Two weeks ago I flagged the developing double-bottom in sugar — Trifecta setup with sentiment, macro, and technicals all lining up. Last week confirmed the bottom and it’s off to a nice start. We’re long. ​​​​​​​

3. Back in early March we wrote about record Small Spec longs in UST bonds syncing up with a bearish technical picture — good short setup. We took profits too early and it kept running. It’s nearing larger support now, so we’ll see how it reacts. Still in a larger compression regime and increasingly looks like this could just be the beginning of a much bigger move lower.​​​​​​​

​​​​​​​Trifecta Charts

4. Trend Fragility getting closer to a conditional bottom signal, but we’re not there yet. As we saw in ‘22, this condition can persist. Patience. ​​​​​​​

5. Worth keeping an eye on internals — they should lead or at least confirm any real bottom. Starting to see some potentially constructive action in Discretionary vs. Staples, Cyc vs. Def, High vs. Low Beta, and SMH vs. SPX. Too early to call anything, but worth watching.

6. Aggregate Breadth Indicator fell to +2 last week — first time since the Mar/Apr 2025 selloff. Not great. If breadth can’t hold here, we’re probably in the early stages of a larger move lower.. ​​​​​​​

7. Russell 3k % of stocks above their 50 and 200dma are still well above washout levels (sub-20%). Bottom line: equities selling off, bonds dumping, credit spreads widening, and we still haven’t hit washout conditions. Hold cash, trade little. ​​​​​​​

​​​​​​​Macro ​​​​​​​

​​​​​​​8. From BofA…. ​​​​​​​

9. From @SubuTrade: “Cash allocations at 14.19% — investors holding the least cash in 4 years. This happened 3 times in the past 20 years: late-2017, Jan 2020, late-2021. Each preceded significant volatility and losses.” This checks with the FINRA Margin Debt data we shared last week.​​​​​​​

10. From BBG’s Simon White: “The commodity market’s view on the financial impact of the Iran war errs more bearishly than equity and rates markets. Commodity traders need only be half right on their current outlook for stock and bond pricing to be very wrong.” Worth sitting with. ​​​​​​​

​​​​​​​Trade Setups / Topical Charts

​​​​​​​11. Not seeing anything I love right now, but keeping a close eye on precious metals. Still one of our favorite multi-year trades — we haven’t even entered a classic PM bull market yet. ​​​​​​​

12. Silver is off nearly 50% from highs and approaching support. How it reacts here will be telling. ​​​​​​​

​​​​​​​Thanks for reading.

Your Macro Operator,

​​​​​​​Alex

​​​​​​​MO Portfolio & Trades ​​​​​​​

1. The MO portfolio gained +280bps on the week and sits at +42.88% on the year.

​​​​​​​We continue to hold elevated cash. Our core positions: long crude, short USTs, short NQ, long HRW Wheat, and long the BBG Commodities ETF.

2. Two weeks ago we flagged the bearish setup in the long end of the curve (link here) — that continues to play out. Last week we went short 2s on their bearish breakdown from a tight compression regime, following a bull trap the week prior.

​​​​​​​Fed meeting this week. We’ll adjust fire as needed.

3. We started last week short the Qs and added to the position as the week progressed. They’ve since closed below key levels on the daily and are now trading under their 200dma — the tape is confirming the thesis.

Nomura’s Charlie McElligott framed the broader dynamic well:

“The ‘Lazy Leverage’ that accumulated during sustained low vol is now being mechanically risk-managed lower as Commodity/Inflation/Rate-Vol risks simultaneously reprice... because the dirty secret is that every asset class is short interest rate volatility.”

Hard to say it better than that.

​​​​​​​Trifecta Charts

​​​​​​​4. The MO Liquidity Gauge fell again last week to 25% — its lowest reading in three years — and historically, that combination of level and trend bodes ill for forward 3-month equity returns.

​​​​​​​
​​​​​​​5. Our Head Technical Analyst Mike Gyulai’s Quantitative Trend Stability Model recently flipped bearish. In his latest note, Mike walks through what that signal means and how he adjusts his strategy in bearish regimes (link here

6. Still a ways to go until we get to a proper positioning and sentiment reset. ​​​​​​​

7. Retail flows have been the primary force sustaining this market for the past six-plus months. Schwab’s STAX index — which tracks actual retail activity — recently climbed to its highest reading since early ‘22.​​​​​​

8. Meanwhile, FINRA Margin Balance/Currency in Circulation is at an all-time high and straight margin is accelerating on a YoY basis. In any other environment, that would be noteworthy. Given current valuations — and the general state of the world — it’s a striking level of complacency. ​​​​​​​

9. On valuations — HF manager Colm O’Shea recently launched a Substack (link here) and his latest post is worth your time:
​​​​​​​
“Current valuations show the same level of optimism about future earnings growth as the 2000 dot-com bubble — except today’s earnings base is far higher. It is that combination that makes the current setup so extreme. What would earnings growth need to look like over the next decade for your stock market investment to simply keep pace with GDP growth? The chart below shows.”​​​​​​​

​​​​​​​Macro ​​​​​​​

​​​​​​​10. The Institute for the Study of War recently published maps tracking the conflict’s progression. The takeaway: the US is methodically degrading Iran’s drone and missile arsenal — the backbone of its war strategy. Iran is still throwing punches, but they’re not landing with the force an existential conflict requires. There’s more work to do, but writing this campaign off now is jumping the gun.Worth noting — ISW is writing primarily to US military objectives, which aren’t necessarily the same as strategic ones. An important distinction. ​​​​​​​

11. Oil’s impact on CPI via BBG. ​​​​​​​

12. Inflation swaps are starting to hockey stick higher. We were already expecting rising inflation in the back half of the year, but it’s looking less like a forecast and more like a foregone conclusion. ​​​​​​​

​​​​​​​Trade Setups / Topical Charts

13. Coal stocks are the obvious beneficiary if Hormuz stays choked and oil holds an elevated floor. The Global Coal Index ETF (COAL) monthly is worth pulling up — it’s showing a completed large inverted H&S nested inside a broader cup-and-handle. That’s a lot of constructive structure in one frame. The tape is telling a story here.​​​​​​​

​​​​​​​14. I ran through the index to find my favorites. Below are their monthly charts. TGA in particular is intriguing. ​​​​​​​

15. We’re short-term bearish on risk assets broadly, but crypto majors are worth watching. ETHUSD is holding a bid and diverging from general risk — running its own race, essentially. It’s also coiling in a tight compression regime, which means a move is coming. Direction TBD, but this one’s on the radar. ​​​​​​​

​​​​​​​Thanks for reading.

Your Macro Operator,

​​​​​​​Alex

QOTW via @Jesse_Livermore: “Best analogue I can think of for today’s market vibe is the period in mid Feb 2020 bf Covid when the news flow was uniformly negative but people weren’t selling bc they were bulled up on other themes and were scared of missing the uptrend that was set to resume once Covid faded.”

Jesse is spot on. We’re living through a major paradigm shift — multiple, actually — and the market remains deeply anchored to the recent past (as it has a tendency to do, see my AI Micron bull these from back in 2020 to learn why). The vol suppression, BTD mentality isn’t going away quietly. The next 6-12 months could be a very rude awakening.

MO Portfolio & Trades

1. The MO portfolio gained +280bps on the week and sits at +42.88% on the year.

We continue to hold elevated cash. Our core positions: long crude, short USTs, short NQ, long HRW Wheat, and long the BBG Commodities ETF.

2. Two weeks ago we flagged the bearish setup in the long end of the curve (link here) — that continues to play out. Last week we went short 2s on their bearish breakdown from a tight compression regime, following a bull trap the week prior.

Fed meeting this week. We’ll adjust fire as needed.

3. We started last week short the Qs and added to the position as the week progressed. They’ve since closed below key levels on the daily and are now trading under their 200dma — the tape is confirming the thesis.

Nomura’s Charlie McElligott framed the broader dynamic well:

“The ‘Lazy Leverage’ that accumulated during sustained low vol is now being mechanically risk-managed lower as Commodity/Inflation/Rate-Vol risks simultaneously reprice… because the dirty secret is that every asset class is short interest rate volatility.”

Hard to say it better than that.

Trifecta Charts

4. The MO Liquidity Gauge fell again last week to 25% — its lowest reading in three years — and historically, that combination of level and trend bodes ill for forward 3-month equity returns.

5. Our Head Technical Analyst Mike Gyulai’s Quantitative Trend Stability Model recently flipped bearish. In his latest note, Mike walks through what that signal means and how he adjusts his strategy in bearish regimes (link here).

6. Still a ways to go until we get to a proper positioning and sentiment reset.

7. Retail flows have been the primary force sustaining this market for the past six-plus months. Schwab’s STAX index — which tracks actual retail activity — recently climbed to its highest reading since early ’22.

8. Meanwhile, FINRA Margin Balance/Currency in Circulation is at an all-time high and straight margin is accelerating on a YoY basis. In any other environment, that would be noteworthy. Given current valuations — and the general state of the world — it’s a striking level of complacency.

9. On valuations — HF manager Colm O’Shea recently launched a Substack (link here) and his latest post is worth your time:

“Current valuations show the same level of optimism about future earnings growth as the 2000 dot-com bubble — except today’s earnings base is far higher. It is that combination that makes the current setup so extreme. What would earnings growth need to look like over the next decade for your stock market investment to simply keep pace with GDP growth? The chart below shows.”

Macro

10. The Institute for the Study of War recently published maps tracking the conflict’s progression. The takeaway: the US is methodically degrading Iran’s drone and missile arsenal — the backbone of its war strategy. Iran is still throwing punches, but they’re not landing with the force an existential conflict requires. There’s more work to do, but writing this campaign off now is jumping the gun.Worth noting — ISW is writing primarily to US military objectives, which aren’t necessarily the same as strategic ones. An important distinction.

11. Oil’s impact on CPI via BBG.

12. Inflation swaps are starting to hockey stick higher. We were already expecting rising inflation in the back half of the year, but it’s looking less like a forecast and more like a foregone conclusion.

Trade Setups / Topical Charts

13. Coal stocks are the obvious beneficiary if Hormuz stays choked and oil holds an elevated floor. The Global Coal Index ETF (COAL) monthly is worth pulling up — it’s showing a completed large inverted H&S nested inside a broader cup-and-handle. That’s a lot of constructive structure in one frame. The tape is telling a story here.

14. I ran through the index to find my favorites. Below are their monthly charts. TGA in particular is intriguing.

15. We’re short-term bearish on risk assets broadly, but crypto majors are worth watching. ETHUSD is holding a bid and diverging from general risk — running its own race, essentially. It’s also coiling in a tight compression regime, which means a move is coming. Direction TBD, but this one’s on the radar.

Thanks for reading.

Join The Collective

​​​​​​​MO Portfolio & Trades ​​​​​​​

1. The MO portfolio gained +40bps on the week — though that number flatters the experience. We climbed to +41.6% on Tuesday, gave back to +36.3% by Thursday, and settled back at +40% YTD. Plenty of vol in between.

We cut the entire equity book last week. Waiting for clarity, starting fresh. Current positions: long oil futures and calls, long BBG commodity index, long KC HRW Wheat, short T-Bonds, short NQ futures.​​​​​​​

2. Last week we highlighted two Treasury trades — a bullish breakout in the front end and a short setup in the long end. The 2s were a bull trap; we stopped out. Still tracking it closely though, as it remains in a major compression regime. The short in the long end has played out well. It’s short-term oversold and sitting at its lower daily band. We’ll assess on Monday whether to take partials or let it run.​​​​​​

3. Our Lead Technical Analyst Mike Gyulai published a sharp note over the weekend covering the evolution of our long oil trade, among other things worth your time. [Read it here.] We’ve taken partials and continue to trail stops — but we’re still long futures and calls. ​​​​​​​

​​​​​​​4. WTI is in extreme backwardation. Historically, that’s a signature you see at or near oil tops and it tends to bode poorly for forward returns. That said, we’re operating in an unusual, event-driven environment — basic historical comparisons need a helping of salt here (chart via @jaykaeppel).

We’ll be watching to see whether long-dated futures catch up to the front end (bullish) or if the front end catches down (bearish). ​​​​​​​

​​​​​​​Trifecta Charts

5. Some notable action in our core models last week, working counterclockwise from the top left:
​​​​​​​

Aggregate Market Internals saw a big jump WoW — still at a weak level though, but worth watching. Trend Fragility (our sentiment/positioning composite) dropped to 51% — a buy signal triggers on a cross below 20%. Our Trifecta Lens Score fell to -2, a level that historically precedes chop and downside vol in the indices. And our Liquidity Gauge collapsed to 39%, a level that historically points to poor forward 1-3 month returns.

6. Last week, I shared the double-channel chart on ES-mini, suggesting a likely breakdown from its 2-month sideways range and a selloff toward November lows before a proper washout bottom. Mike G echoed this with NQ — a break below recent congestion gives it a measured-move target of -9%, or roughly 2,200. ​​​​​​​

7. Our base case is not a cyclical top. The primary trend models remain supportive. That said, I think a larger extended sideways range — 6 months or more, volatile — is a real possibility. Either way, we’ll be tracking the Capitulation tab in our HUD to help identify a bottom. ​​​​​​​

​​​​​​​Macro ​​​​​​​

8. PTJ once said every recession since 1970 has been preceded by a 100% YoY rise in the price of oil. Sans COVID, he’s right. Our Energy & Credit Shock Indicator illustrates this cleanly. We’re fine right now — but this thing can move fast. ​​​​​​​

9. LB Macro put out a great post this week on AI’s economic impact so far. Their take: AI isn’t destroying the labor market — at least not yet. What it’s actually doing is something subtler and probably more consequential: reshaping it faster than any prior technology wave. Entry-level cognitive jobs are getting hit. The composition of employment is shifting at a pace that dwarfs previous tech cycles. The destruction is contained for now, but the reallocation is very much underway.​​​​​​​

10. I mostly agree — for now. But we have to maintain real cognitive flexibility here. This isn’t a normal environment, and AI is not your average technological revolution. Charts like the one from JPM below need to be watched and respected. Don’t get complacent. ​​​​​​​

11. Research has shown it’s not the level of inflation that hurts risk assets — it’s the volatility of inflation. This chart from Nomura is a useful reminder: when inflation runs hot, it also tends to run wild. ​​​​​​​

​​​​​​​Trade Setups / Topical Charts

12. We’re in a cyclical commodity bull, and it’s following the standard playbook to a T: Precious Metals → Industrial Metals → Energy → Agriculture. We’re long Kansas City Hard Wheat, missed an entry on corn last week, and are now tracking a setup in Sugar.
​​​​​​​
Speculator short positioning recently hit its most bearish reading on record. Our sentiment indicators are sitting at the 0th percentile. Relative valuation is nailed to the floor. ​​​​​​​

13. I’ve been patient with Sugar — watching the one-sided positioning, waiting for a technical setup and some news failures to confirm. Now we have both.

The October chart shows a double bottom on both weekly and daily timeframes. We’ve had a series of bearish news failures over the past week. And Sugar is heavily influenced by ethanol prices, which jumped last week. We’re looking to get long this week.​​​​​​​

14. On the equity side, Adecoagro (AGRO) surfaced as an interesting way to play this. They operate primarily in Argentina and Brazil — low-cost producer of sugar and ethanol, with significant corn and soybean exposure. Highly sensitive to the No. 11 sugar contract. The stock has traded in an $8 sideways channel for its entire life as a public company. It jumped last week. No trade yet — but I’d be interested on a clean breakout above $11.50. ​​​​​​​