Summary: Stocks down, bonds down, gold down…plenty of headline risk and no clean setups — best move right now is hold cash and go fishing until the tape gives us something to work with.
We’re getting closer to conditional bottom indicators triggering, but there’s still more work needed. Key word: conditional. The tape and internals still need to confirm. And I’m starting to entertain the idea that we’re forming a cyclical top here. Worth remembering — tops are processes, not events. Base case is we sell off some more, put in a low, then chop sideways in a big range until inflation forces the Fed’s hand and we enter a proper cyclical bear. That’s just a possibility we’re entertaining. As always, the data leads.
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