That is the nature of pattern recognition, asking ‘What can I infer about this situation based on similarities to what I already know and trust that I understand?’ There is less emphasis on trying to reason out things on the basis that they are special because they are unique, which in a financial context is perhaps the definition of speculation… It creates an impulse always to connect new knowledge to old and to primarily be interested in new knowledge that genuinely builds on the old.
~ Alice Schroeder

Good morning!

In this week’s Dirty Dozen [CHART PACK] we walk through some relative global performance tables. Check out some strong technical charts in the clearance bin out of Latin America. Look at two actionable FX setups and end with some macro data showing a fuzzy picture, plus more…

Let’s dive in.

***click charts to enlarge***

1. Last week we saw the close of another trading month as well as another quarter. The fantastic and free Koyfin platform shows us which markets around the world performed best on the month. Chile took the top spot with an 8.8% return over the last 30-days.

2. Chile, along with a number of other EM countries, has put in solid-looking bottoms. The chart below is monthly and shows the country is rebounding from deeply oversold levels as well as 20+ year low valuations.

3. There are some very nice technical setups in select DM FX right now as well. CADUSD has put in a double bottom and is coiling in a bullish wedge following a strong upward thrust. This is a pair that I want to get long…

4. The same with the Mexican peso (MXNUSD) which we are long. But this looks like a good place to add to one’s position or enter a new one. I like the long-term potential for this trade.

5. BNP Paribas shows though that positioning is getting a bit crowded against the USD — though CAD is even more so.

6. Goldman Sachs wrote about how to think about the USD’s countercyclical behavior, writing “To gauge how currencies perform in different parts of the economic cycle, we divide monthly FX returns since 2000 into four buckets, depending on the level and 3-month change in the global PMI. While the Dollar outperforms all other currencies when global growth is low and falling, the worst part of the cycle for the Dollar comes when growth rebounds from a weak level. We think this helps explain why the Dollar outlook is so hotly debated right now. Investors are currently grappling with the durability of the recovery given negative virus news, and therefore the outlook for growth-sensitive assets, including the broad Dollar.”

7. UBS’s US Consumer Health Gauge is at levels similar to those hit during the GFC and hasn’t yet begun to turn down. This just shows the precariousness of our current economic situation. The economy and the market need the government to keep the stimulus and UI benefits flowing or else things will unravel rather quickly like…

8. The veteran technician Martin Pring shared this great chart on the twitters last week writing “The price oscillator comparing a 3-to-a-24-month moving average for part-time employment has likely peaked. Most previous reversals signaled an end to the recession. All but 2001 were great equity buying opportunities.”

9. Old man Buffett has started stepping into the energy space and scooping up assets at a steep discount. Will this be the signal needed to pull in others who’ve been sitting on the sidelines? There’s a LOT of value to be found in the space if one knows where to look.

10. A lot of people are pointing out the overbought technical levels of the Nasdaq. While it’s true the trend there is getting hot, it’s not one I’d want to step in front of. I’d much prefer to be long until a valid sell setup triggers. Right now, the tape is all strength.

11. Not many people expected this just a few months ago… But earnings revisions in the US are now the most positive they’ve been in 20-years.

12. People tend to make the mistake of overweighting the importance (in market terms) as to which political party is in power. This chart shows that the market does care though about a change in leadership, regardless of party. It prefers continuity over uncertainty.

Stay safe out there and keep your head on a swivel.