Summary: Bear traps and lockout bull rallies, incredibly strong earnings revisions, incredibly narrow breadth. Historic price thrusts, zero breadth thrusts. Signs of FOMO speculation matched with weak liquidity. Strange market — but a fun one to trade, with big moves and big dispersion. Qs likely headed higher after a temporary pause. Crypto setting up for a big advance. Ags on the move, and an impending energy crunch.
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).
Thanks for reading.
Your Macro Operator,
Alex