Things Are Not Looking Good

In this week’s Dirty Dozen [CHART PACK]  we cover Russia’s vulnerability to being cut off from key imports. We then dive into the deteriorating macro data in the US, talk about how investors are still buying the dip, the risk of further downside in risk-assets, some setups in some big names, and some continued opportunities in the commodity space, plus more… 

  1. There’s been a LOT of talk about the West’s dependency on key materials from Russia so here’s a terrific thread outlining Russia’s dependency on critical imports (link here)

  1. The talented Mr.Blonde_Macro published a macro update over the weekend titled “From Bad To Worse”. You can probably guess what it’s about. I largely agree with his sentiment. Here’s the link and a chart from the post. 

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  1. While survey data of sentiment shows consensus bearishness (AAII and II etc..). We’re still not at all seeing it show up in the hard data. This chart of aggregate US Equity Index flows shows investors continue to buy the dip in risk-assets. This is not what capitulation or durable bottoms look like. 

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  1. We’ve been short small-caps (RTY) since the initial break. And we’re looking to add to this position on a confirmed break below the current bear wedge. 

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  1. Taiwan Semiconductor Manufacturing Company (TSM) has put in a major double-top with a confirmed breakdown last week. Semis in general are looking vulnerable. And TSM comes with the added geopol risks (real or perceived) of being an important strategic asset that China would love to control, along with the rest of the country it’s domiciled in. 

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  1. We just saw the largest commodity shock in over 60-years last week (chart via BBG). 

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  1. A record 21 out of 28 commodities are now in backwardation (chart via BBG). 

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  1. The MO portfolio is having a great start to the year, as we’ve been net short equities, holding high amounts of cash, and long just about every commodity that’s currently in an uptrend.

One market we’re not long but are looking to be is sugar. The chart below is a daily. 

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  1. Crude has been on an incredible run and it’s now extremely stretched on a short-term technical basis, though for obviously good reasons. But one interesting thing to point out is how low spec positioning remains considering the run and all the attention it’s been getting. 

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  1. We are long a basket of energy names as well as futures, but we’re looking to add to our considerable position in energy names by taking tactical swings at opportune setups in the space. Below is Newpark Resources (NR) a smallcap oil and gas services company. 

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  1. And then the Tidewater (TDW) chart, which I discussed a few weeks back, continues to develop quite nicely. 

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  1. Donate, pray, write/call your political leaders, etc… Make sure to do your part to support the people of Ukraine and their right to exist as a nation and the freedom to choose their own path. 

Stay frosty and keep your head on a swivel.

Disclaimer: All statements are solely opinions and are for educational purposes only.

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