In this week’s Dirty Dozen [CHART PACK] we look at the monthly charts for SPX and silver, dig into the historical momentum tendencies and positioning of the latter, before taking a look at some USD pairs, crude, an engine maker, and a small potash producer ready to rip, plus more…

1. September formed an outside bear bar with the SPX closing on its lows. This comes after seven consecutive monthly bull bars, marking an extreme buy climax. There have only been six other instances in the SPX’s history. The strong buying pressure tends to lead to a continuation of the bull trend in the year ahead following a brief 1-3 month correction on average.  

2. Silver put in another bearish print last month, closing right at the low of its year-long sideways range. 

3. This marks its fourth consecutive monthly bear bar. Past instances show that forward returns show a strong downside bias in the following months.

4. Also, spec positioning remains somewhat elevated relative to the weak price action. And silver is in its weakest seasonal month of the year (SLV).

5. According to Rabobank, the current rise in European gas prices is a much bigger price shock than the energy shock experienced in the 70s.

6. EURUSD closed below its 12-month sideways range last month. 80% of breakouts from trading ranges fail, so we’ll have to see if this one holds. But as of now, momentum clearly favors further downside follow-through (FXE).

7. BCA Research is looking for a rise in USDCNY, writing “The widening of the China-US yield differential in the second half of last year coincided with a sharp appreciation in the CNY vis-à-vis the USD. However, this differential has since narrowed. The policy outlook is shifting: The Fed is moving towards normalizing monetary policy, while Chinese authorities are likely to ease in response to domestic concerns. Meanwhile, USD/CNY is broadly unchanged near where it stood at the start of the year… Our China Investment strategists expect the PBoC to favor a weaker currency.”

8. @RenMacLLC pointed out last week that commercials are very short $DXY, noting that “historically, it’s a good contrarian signal and suggests continued $ strength.”

9. We’re long-term oil bulls but it should be kept in mind that oil is entering its weakest period of seasonality over the following 2-months (OIL).

10. And its time spread has started to diverge lower… So just a heads up for potential coming weakness, especially if we see USD pick up to the upside here. Any pullback should be viewed as an opportunity to buy/add to long positions.

11. Rolls Royce (RYCEY) is involved in a multi-year turnaround effort, guided by new management who’s making some good moves. These changes are starting to payout with the company’s recent big surprise win of the USAF’s contract to supply engines for its aging fleet of B-52 bombers. I like this stock as a play on a return to normal as well as the optionality it gives with its work in nuclear SMR technology. The stock just completed an 18-month inverted H&S bottom.

12. Intrepid Potash (IPI) is a $500mn market cap, tiny float (8mn shares), potash producer with water royalty rights that benefits from a recovery in fracking. It trades for 7x FCF with growing revenues and net cash on its balance sheet. Its larger rival Mosaic (MOS) closed at 6-year highs last week. I expect IPI to soon follow…

Thanks for reading.