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.

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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.

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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.

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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.

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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. ***

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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

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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. ***

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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.

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Thanks for reading.

Your Macro Operator,
Alex

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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.

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Thanks for reading.

Your Macro Operator,

Alex

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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.

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Thanks for reading.

Your Macro Operator,

Alex

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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).

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Thanks for reading.

Your Macro Operator,
Alex

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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.”

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Thanks for reading.

Your Macro Operator,
Alex

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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.

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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

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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.

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Thanks for reading.

Your Macro Operator,

Alex

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​​​​​​​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. ​​​​​​​

​​​​​​​One more thing before you go.

The Collective is where we do the real work — live portfolio, full model access, the HUD, Mike G’s technical notes, Brandon’s deep value dives, my macro takes, a dashboard of our proprietary tools, and a community of serious investors and traders who are actually devoted to getting better. It’s not cheap, and it’s about to get less cheap. We’re raising prices to keep the community at a size where everyone gets real value out of it. If this resonates with you, now’s the time.​​​​​​​ Enrollment Is Open This Week.

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​​​​​​​Thanks for reading.

Your Macro Operator,

​​​​​​​Alex

​​​​​​​MO Portfolio & Trades ​​​​​​​

1. The MO portfolio gained +90bps last week, helped by our silver and miners longs. It’s now up +39.58% ytd. We’ll see where things open Monday, but I’d expect our long oil calls to be up nicely.
​​​​​​​
If you’d like to join our Collective and have access to our research, tools, Slack, and the team and me, just click here. ​​​​​​​

2. We’ve been stalking this multiple-compression setup in 2-yr T-Notes for months, and it looks like we’ve finally gotten a breakout. We’re already quite long, but we’ll look to add as long as this move holds and the tape stays firm. ​​​​​​​

​​​​​​​3. Last week I reiterated the Trifecta (macro + positioning + technicals) setup in crude, along with the likely positive catalyst of an attack on Iran (link here). We’re heavily long the futures and equities and think this trade has legs. Short-term positioning is shifting fast (26-week oscillator below), but it’s coming off a historically pessimistic base. Seasonality is very favorable, and crude’s relative valuation sits at the 0th %tile.

​​​​​​​Trifecta Charts

4. Our Aggregate Market Internals indicator is in nosedive mode. Not quite at official sell signal levels yet, but it could trip there this week — worth watching closely. ​​​​​​​

5. We still don’t see broad weakness in aggregate breadth, so we can’t turn outright bearish. The full Trifecta picture continues to suggest more chop and vol in the main indices, with risk skewed to the downside. SPX likely retests its Nov ‘25 lows — but this will probably be a grinding move rather than a cascade, as rotation flows and flush liquidity keep other pockets of the market bid. ​​​​​​​

6. Our Trend Fragility indicator has come down to the 68th %tile. BofA’s Bull-Bear climbed last week to a recent high of 9.2 — still well into Sell Signal territory. I expect a full reset in both over the next month or two. ​​​​​​​

​​​​​​​Macro ​​​​​​​

7. AI’s impact on labor, software, credit, and a host of other things continues to be a key market driver. I’m tracking the debate closely. Here’s @WarrenPies’ recent take:
“AI’s impact on the labor market is no longer theoretical. In the most AI-exposed industries, job losses are accelerating — especially relative to pre-AI trend growth. AI-resistant industries continue to add jobs. As the year progresses, expect that wedge to grow.”​​​​​​

8. On these debates, I try to keep an open mind — find the most cogent and honest thinkers on both sides, then track their arguments against the data and what the market is actually saying, while always keeping a pulse on where the Narrative Pendulum sits. Here’s Citadel Securities with a good counter:
​​​​​​​
“It seems more likely that AI will be a complement rather than a substitute for labor in many areas. Historically, technological revolutions have altered task composition rather than eliminated labor as an input. To produce a negative demand shock large enough to overwhelm output expansion, one must assume near-total automation of economically relevant labor combined with extremely weak redistributive responses. To frame this debate correctly, simply ask: was Microsoft Office a complement or substitute for office workers? Ex-ante, the concern skewed toward substitution. Ex-post, it appears a clear complement.”

Here’s the link to the full piece. ​​​​​​​

9. Whichever side ends up being right will have profound implications for markets. The AI-eats-most-jobs scenario is obviously deeply deflationary. The other is potentially quite inflationary. Our models continue to point to falling inflation over the next three months or so, with a potential hockey-stick turn somewhere in the second half of the year. This chart from BBG’s Simon White seems to corroborate that — Truflation (blue) collapsing while his inflation lead (yellow) trends up. ​​​​​​​

​​​​​​​Trade Setups / Topical Charts

10. Honestly, the rally in the long end over the past month has surprised me. Last week, 10s punched through 4% for the first time since October. The AI narrative has been driving it — but in my opinion, the move looks overdone, and the long end looks expensive. Small Spec positioning in long bonds is at its highest level in history, while Commercials hold record shorts. The vertical red lines mark past instances where Commercials moved to large net short positions — it tends to be followed by a significant move lower. ​​​​​​​

11. I’m looking for a potential short here against our long on the front end. The weekly ZB chart shows price reversing off its upper weekly band and downward trendline — a technical ceiling that’s held many times over the past few years.
The long end is also in a major compression regime (pull up a monthly Bollinger Band width chart). Like the front end, this tells us a big move is coming. My bet is that move is lower.​​​​​​​

12. Check out this weekly chart of Moderna (MRNA). It broke out from a 12-month rectangle in mid-January and cleared its recent consolidation last week. Our resident systematic chartist, Mike ,G first flagged the setup on January 17th (link) — also, here’s the link to Mike’s latest. It’s definitely worth a read.

I continue to like biotech. It’s showing solid relative strength. We added JAZZ last week and will likely add MRNA in the coming days.​​​​​​​

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Thanks for reading.

Your Macro Operator,

​​​​​​​Alex

​​​​​​​MO Portfolio & Trades ​​​​​​​

1. The MO portfolio gained +120bps last week, helped by our longs in silver and miners. It’s now up +36.9% ytd, still below its ytd NAV high of +38.6%.

If you’d like to join our Collective, click here.

​​​​​​​2. We will keep covering this one until there’s movement. The 2yr Notes remain the most compelling setup in markets. We have compression regimes within compression regimes. Translation: a big move is coming. We don’t know which direction yet — so we stay ready for both. ​​​​​​​

​​​​​​​3. We are also quite long oil and E&P stocks. This is a Trifecta setup — bearish sentiment and positioning, accelerating global growth, and a potential double bottom bear trap in the chart — and an event trade, as we expect a major Iran strike at some point in the weeks ahead. This event risk can cut both ways, so we need to be nimble on this one.

​​​​​​​Trifecta Charts

4. Breadth tells two different stories depending on which part of the market you’re looking at. Here we have the NYSE A-D Line making a new all-time high, diverging higher from price. And the NYSE New High-Lows Index showing underlying action that’s typical of a strong bull. ​​​​​​​

​​​​​​​5. But tech continues to trade heavy, as shown below with the % of Nasdaq stocks trading above their 200 and 50 day moving averages as just 50% and 49% respectively. Any further deterioration here, and the Qs start rolling over. ​​​​​​​

6. Obviously, the worst of this weakness has been concentrated in the Software sub-industry. The chart below shows the S&P 1500 Software sub-industry group vs. the SPX. As you can see, the past few months have been one of the most dramatic periods of relative underperformance on record, with the daily RSI hitting its lowest level ever and the weekly its second (97’ being the worst).

Your instinct says mean reversion — big underperformance like this should snap back. But history disagrees. Average forward 3-month returns after setups like this: essentially flat.

I know a LOT of money — mostly retail and HFs — has piled into the software space, trying to catch a bottom. Data shows institutions are selling to them, and my belief is that the knife catchers will get bloodied hands. But we’ll see…
​​​​​​​

​​​​​​​Macro ​​​​​​​

7. We’ve been writing since last winter about the pickup in global growth, and that trend continues to be borne out. Last week, I saw this great chart from a piece by BBG’s Simon White showing what he terms the “Druckenmiller Indicator”. I’ve long used something similar, but the idea is that Druck looks at leading cyclical industry groups, in this case (banks, retail, homebuilders, autos, small caps versus the SPX) as a lead on broader markets and the economy. It works because markets are mostly smart — there’s wisdom in the crowd.

This, along with all our other indicators, tells us recession risk and the risk of a broader bear market are very low.
​​​​​​​

8. I’ve been spending a decent bit of time sifting through charts to see if I can get more of a feel for which direction this compression regime in rates will resolve itself. The chart below shows CESI - Citi’s Economic Surprise Index (orange line) and the 10yr yield (white). A few weeks ago, CESI hit its highest reading since mid 23’. It’s since come off a bit following last week’s disappointing GDP print, but those numbers were distorted by November’s government shutdown — strip that out and the read was strong. We expect more positive growth surprises ahead, which should act as upward pressure on rates. ​​​​​​​

9. Fellow MO teammate resident vol expert, Tony (@vixedsignals), shared this great chart in his latest Vol Street Journal (you can watch here) showing the weekly chart of the 10yr yield, the BofA MOVE index, and the 10-week correlation at the bottom. Tony points out that:

“The correlation is very low due to the MOVE index climbing since late Jan while rates have dropped. Extreme correlations like this have historically preceded a spike in rates. With the MOVE index already so low, it’s reasonable to think that the correlation normalizing will happen with rates turning higher.”

And one more follow-up bonus chart that’s also suggestive of rates breaking higher (chart via Simon White). ​​​​​​​

​​​​​​​Trade Setups / Topical Charts

10. While a number of cyclical industries have been on a tear these past few months, and are arguably overbought over the very short-term. The two charts below from BofA show that, from a repositioning standpoint, this trend is very early days. Imagine AI continues to rerate software lower, but strong growth and flush liquidity keep this from becoming a broader cyclical bear. That money has to go somewhere. And that somewhere is international equities, commodities, hard assets, and cyclicals. And the relative difference in market caps is so large that, well, we can see some wild moves. ​​​​​​​

11. As I said, we’re quite long the energy sector. And it is one of the cyclical sectors that is short-term overbought, by any measure. So we should expect a pullback and some consolidation at some point.

But… I don’t believe we are anywhere near even an intermediate top, let alone a cyclical one. Again, the total relative market cap of energy versus, say, software has become so tiny that it doesn’t much of the way to a reversal in flows to rerate the sector massively higher. What’s interesting is that most of these flows are unhedged, as indicated by the low put/call scores, suggesting that institutions are likely allocating here with more patient capital.

12. This is a monthly chart of Jazz Pharmaceuticals (JAZZ). It’s near the upper-range of its 12-year rectangle. It’s in the lower decile of its relative performance to the biotech sector. Earnings are on Tuesday. If earnings surprise, this one could move fast. ​​​​​​​

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Thanks for reading.

Your Macro Operator,

​​​​​​​Alex

​​​​​​​MO Portfolio & Trades ​​​​​​​

​​​​​​​1. The MO portfolio is up +35.8% ytd. This is a strong start to the year, and historically, our worst drawdowns follow our biggest gains. To prevent this tendency and protect our profits, we’ve dramatically reduced net exposure in our book over the past two weeks, and we’ll continue to run light until we see either a reset in Trend Fragility, an improvement in the Trifecta setup, or ideally both. If you’d like to join our Collective, click here.

2. Our two most compelling positions are currently long Swiss Franc (CHF) and long 2-year US Treasuries. The Swissie is coiling above a seven-month rectangular base while large speculators remain heavily short; we intend to increase our position once it breaks out from this wedge.

​​​​​​​3. We’ve been writing about this setup for nearly a year now. The chart has nested compression regimes. This means a BIG move is coming. Our bias is long (perhaps on the narrative of an AI productivity boom = low inflation), and we hold a small starter long position. But we’re willing to play this in either direction. Pay close attention, a breakout is coming soon… ​​​​​​​

​​​​​​​Trifecta Charts

​​​​​​​4. Our Aggregate Market Internals are trending lower, with most components showing an increasingly bearish divergence. To avoid a deeper correction, we need to see an immediate reversal in these indicators; the longer these negative divergences persist, the higher the probability—and potential severity—of a market selloff.

5. Our Aggregate Breadth + Thrusts chart remains strong at +4, indicating that weakness is concentrated rather than broad-based. Most of the selling is in tech and software, with the Mag7 in particular starting to weigh on the index.

​​​​​​​Given this backdrop, any market selloff is likely to be contained to under 7%. For the market to regain its footing, we need to see tech and the Mag7 resume leadership. At the moment, energy is the leading sector, and historically, broad forward market returns tend to be weak when that’s the case.​​​​​

6. ES is stuck in a broad trading range that’s likely to frustrate both bulls and bears. Aside from maintaining small QQQ shorts as a portfolio hedge, I’m not interested in trading this range until we see a decisive shift in direction.

​​​​​​​My base case—albeit a weakly held one—is that SPX trades down toward its November lows before it can mount a more sustainable move higher.​​​​​​​

​​​​​​​Macro ​​​​​​​

7. The other week, I shared our Market Implied Regime Indicator, which is pricing in an 80%+ chance of a Stagflation regime (high inflation, low growth) over the next 12 months.

​​​​​​​Michael Ashton, writing on his E-piphany blog, makes the reflationary side of the case in a recent post:​​​​​​​

“The story in January 2026 is that the waters remain muddied by the government - shutdown - induced gap. The current y/y figures are all flattered by that event and exaggerate how good the inflation picture is. That’s how the Administration can trumpet victory while the reality on the ground is that inflation is not converging to trend…. So when you read that today’s figure resulted in the ‘smallest y/y change in core inflation since 2021, and consistent with the Fed reaching its target’ – that’s just wrong. The true core y/y number is roughly 0.25%–0.3% higher than what printed today.”​​​​​​

8. Recent labor data showed an upside surprise, though revisions to last year’s figures were weaker than expected. We view the labor market as neutral—neither exceptionally strong nor weak—a stance supported by our Cyclical Jobs Index and Residential Construction Payrolls. While year-over-year construction payrolls have turned negative following revisions, the nominal data is merely moving sideways.

These figures don’t reflect the sharp downward shifts that typically precede a recession; in fact, our Cyclical Jobs measure has actually ticked up after trailing off in late 2025. Ultimately, the labor market remains stable, and recession concerns should be dismissed.​​​​​​​

9. If Stagflation is in the cards for ’26, it likely won’t show up until the back half of the year, as many of our growth leads remain strong. Below is the Dallas Fed Weekly Economic Index, which printed at +2.7% last week.

​​​​​​​Trade Setups / Topical Charts

10. This is an interesting — and bullish — signal for the broader growth backdrop from Dean Christian, who notes that “a long-term chart (monthly data) shows the railroad sub-industry is currently experiencing the second-longest consolidation on record. Notably, its prior breakout from an extended base in 2003 marked the start of a value-led equity cycle.” You can read his full piece here. ​​​​​​​

11. I pulled up a list of rail and rail-adjacent stocks and spent some time going through the charts. Below are my five favorites—NSC, UNP, LNN, WAB, and STEL—shown on monthly timeframes. There are some great-looking setups in this space.

​​​​​​​For other classical chart patterns we’re tracking this week, give our Lead Technical Analyst Mike G’s latest a read here.

12. I believe the bottom is in for the Japanese Yen (JPY). Our multi-charts show JPY breadth (the percentage of pairs above the 200-day moving average) recovering after an extended period at the floor, while short-term breadth is signaling a bullish thrust.

Additionally, yield spread momentum is in the 90th percentile, and both the FRBNY and Japan’s Ministry of Finance are signaling an increased readiness to intervene. We are looking to short GBPJPY or EURJPY (effectively going long JPY), as both pairs have broken down from significant topping patterns.

​​​​​​​​​​​

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Thanks for reading.


Your Macro Operator,
​​​​​​​Alex​​

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1. Our Trifecta Lens Score (a composite of macro, liquidity, technicals, and sentiment) fell to -2 last week, which is bearish. It was driven lower by a big drop in liquidity, which has flipped negative for the first time since Nov of last year.

2. Our Liquidity Indicator plunged to 49% last week, marking its first negative reading since it briefly touched these levels in Nov of last year. I’d expect to see this rebound given the fiscal backdrop, but it’s possible that it leads lower level and we see a flushout in risk first. Regardless, this bears close watch. ​​​​​​​

3. Our Aggregate Breadth and Breadth+Thrust composite, however, remains supportive of the broader uptrend. This suggests any near-term downside should be contained (sub -7%). ​​​​​​​

4. Our Trend Fragility score (a composite of sentiment and positioning indicators) is elevated at 87%. But, this is below the >95% threshold for a conditional sell signal. While BofA’s Bull-Bear indicator is at its highest since March of 06’, triggering a sell signal, where forward 3m returns are historically poor. ​​​​​​​

5. Global CTA positioning is in the 90th %tile according to GS. If the SPX takes out last week’s lows, we’ll have a substantial headwind from trend followers. ​​​​​​​

6. GS’s shorter-term measure of panic hit “9.22 based on 1-month S&P implied volatility, VIX volatility, S&P 1m put-call skew, and the S&P term structure slope (1m vs. 3m). These vol metrics indicate that investors are not far off from max fear.” We also have software and crypto at deeply oversold levels where historically, mean reversion comes into play. This market has fuel for another leg higher before rolling over into a larger correction sometime in March. ​​​​​​​

7. I’ve been highlighting the positive inflections in US growth metrics for the past month. Well, here’s another one… Heavy Truck Sales have put in their strongest 3-month swing since the COVID lows. And there are people out there seriously talking about a recession this year, smh. ​​​​​​​

8. 2-year UST Notes continue to be one of the more interesting long-term setups I’m tracking. They’re in a major compression regime. Have put in a multi-year inverted H&S bottom. And are now consolidating right below the neckline in another compression regime. A big move is coming... My bias is up. We are long and will add aggressively on a breakout.

9. The Swissie is wedging after a breakout from a large 9-month rectangle / compression regime. We bought on the breakout, took partial profit on the quick move, and are looking to add on a move above last week’s high. Also, Large Specs remain very short. ​​​​​​​

10. The Nikkei broke out last week from a compression/wedge within a Bull Quiet regime. We had buy stops triggered on Friday’s move to add to our existing long position. The market gapped up on Sunday’s open (as I write this) on the results of Takaichi’s LDP victory in the snap elections, where they secured 316 seats, giving them a comfortable supermajority, and the political capital to pursue their full fiscal agenda. It appears to be reversing, and we’ll have to see how it closes, but if it closes red on the day, that’d be a notable news failure. ​​​​​​​

11. For the past month, our focus has been on industrials and energy, and that hasn’t changed. Last week, I shared the chart of CVX, which has broken out. Here’s another one we’ll be adding to our book. Coterra Energy (CTRA) is breaking out of a 3-year channel within a larger 14-year channel. That’s a lot of pent-up energy for a run higher. ​​​​​​​

12. Here’s another… Tidewater (TDW), a name we’ve traded in and out of for the past few years, completed a 12m+ inverted H&S last week. We like this name for a number of reasons; my partner, Brandon, may revisit them in an upcoming Long Pull report. We’ll add this to the book soon.

Our resident Classical Chartist, Mike G, shared some great charts (including a few energy names) in his latest This Infinite Game report. I highly recommend giving it a read. ​​​​​​​

13. Bonus chart: Fade GS Clients… (h/t @JS for the chart)

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Thanks for reading.


Your Macro Operator,
Alex

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1. ES continues to compress after a bullish breakout failure last week in the March contract. This failure, coupled with the high Trend Fragility / BofA Bull-Bear Sell signal, and slightly negative Warsh Fed announcement, put it odds on that the market is headed for a positioning/sentiment rinse during this seasonally weak month of Feb.

2. Some interesting points from GS over the weekend (emphasis by me)… sentiment is unwavering… I’m not actively hedging.

3. February tends to be the second-worst-performing month for the SPX (chart via @RenMacLLC.

4. However, as we pointed out last week, the strong aggregate breadth and supportive internals suggest any selloff should remain relatively contained (sub -7%).

​​​​​​​We shorted Qs and ETHUSD last week to hedge our remaining long exposure.

5. This is interesting… Our Market Implied Regime Indicator has risen to 80% for a Stagflation Regime—a reading over 90% has a 100% hit rate in forecasting a Stagflation Regime within 6-12 months. Stagflation is defined by an ISM of 53 or lower and a Sticky Price CPI exceeding 5%.

6. Now, as we’ve pointed out, we expect CPI to fall over the next 3-6 months due to the pure mechanics of falling shelter costs. But it’s interesting that we’re starting to see some of our inflation leads turn up, lending weight to what our regime indicator is projecting (click on charts to enlarge).

7. So we’ll continue to track things and see if our regime indicator passes above the 90% mark, ensuring an inbound stagflation regime starting sometime in the second half. Historically, precious metals have been the best-performing asset in a stagflationary regime, so PMs could become highly attractive again, especially if they spend the next 6+ months weeding out the weak hands.

Citi’s Inflation Surprise Index continues to come in deeply negative, however, giving weight to our first-half disinflationary bent.

8. BBG’s Simon White put out a great note last week highlighting that dealers are becoming “reservoirs of risk” by carrying record equity leverage alongside nearly $500 billion in unsold Treasuries. And this balance sheet congestion is currently hidden by low bond volatility, but it leaves dealers at maximum capacity and highly vulnerable to any sudden market shock.

9. His concern is that if bond volatility spikes, these overextended dealers would likely pivot from providing liquidity to aggressively shedding risk. Which could trigger a forced, cross-asset deleveraging event where the rapid dumping of stocks, bonds, and metals leads to a cascading collapse in global liquidity.

10. Speaking of bonds, Hedge Fund exposure to them is at record highs, according to SentimenTrader.

11. Last week, we highlighted the major compression regime in bonds on the monthly chart. We’ve been trading in and out of this one on the short side. Ultras have completed a large H&S pattern and have been consolidating in a 2-month rectangle below the neckline. My bet is that we see this one break lower soon.

12. Over the past two months, we’ve steadily accumulated long energy positions, capitalizing on historic bearish extremes in crude sentiment and mounting sector relative strength. Chevron (CVX) has just broken out from a five-year compression rectangle with a decisive monthly bar. We’ll likely be adding this one to our port soon.

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Thanks for reading.


Your Macro Operator,
Alex

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1. The SPX continues to coil near the upper band of its four-month sideways range (March contract below). All indications point to a big move coming. The weight of the evidence favors a coming breakout to the upside, driven by a rebound in the lagging Mag7.

​​​​​​​​​​​​​​2. We agree with BofA’s summary takes below (highlights by me):

3. Our Market Internals remain largely supportive of the primary uptrend in risk assets, with the only real weak spot coming from Consumer Discretionary vs. Staples, now that LQD/IEF is recovering.

4. Aggregate Breadth is at +3, and Breadth+Thrusts is at +4. These are strong readings, which suggest any market dips will be contained. ​​​​​​​

5. Trifecta Lens, our composite measure of technicals, breadth, internals, liquidity, sentiment, and macro, is at +1, which is supportive of the primary uptrend in risk assets.

6. However, Trend Fragility is high and climbing. It hit 88% on Friday, which is still below the 95% level that triggers a formal sell signal. This is a conditional signal, so it’s not a reason to be bearish by itself (i.e., stay long but tighten stops).

7. Crypto probably offers the best risk-off hedge here. ETH has broken below its wedge, while net spec positioning remains crowded long.

8. Is SOLUSD about to complete a massive 2-year H&S top? It looks likely… We’ll go short on a sustained move below 120.

9. We were one of the first shops to start pounding the table on the coming breakout in broad commodities, pointing to the MAJOR compression regime in the Bloomberg commodities index in the early Summer of last year. We also noted the major compression in the long end of the curve, with 30yr bonds (chart below) in their tightest squeeze since Aug 2018, which happened to precede a major multi-year bull run.

10. Now compression regimes are directionally agnostic. They don’t foretell whether the coming trend will be a bull or bear. But commodities tend to lead yields, as shown below with the BCOM Index in orange and 30yr yields in white. This tells me we’re likely in for a major steepener, with the front end staying pinned and the long end getting clobbered.

11. Our reflation hypothesis that we’ve held since last Summer continues to be validated. Here we have the Conference Board’s US LEI 6m diffusion index putting in its highest reading since Jan 22’.

12. We’re quite short the dollar via long MXN & CHF, but we’re also interested in adding long JPY and NZD to that mix. They’re overbought in the near term, but the long-term setup is solid. Both have fairly crowded short positioning, strong yield-spread differentials/momentum, and expanding breadth from bombed-out levels. Charts from our multi-chart view in our HUD.

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Thanks for reading.

Your Macro Operator,
Alex