Getting Close To A Major Sell Signal… [Dirty Dozen]

“A constant in the history of money is that every remedy is reliably a source of new abuse.” ~ John & James Galbraith via the book “Money” 

In this week’s Dirty Dozen [CHART PACK] we look at shifting momentum in cyclical sectors (miners, energy, financials), we then update the risk/reward in stocks, cover a potential sell signal triggering in our Nervous & Numb indicator, and walk through some fade trades in Ags, plus more… 

1. Primary technical signals of consequence over the past three months are all bullish and place the odds strongly in favor of a continued bull trend throughout the year — that’s of course with expected pullbacks and consolidations along the way. 

2. Here’s the latest market returns and regime heatmap for the globe. Gold miners, energy, and financials all saw strong performance last week.

3. The Qs are coiling again and are seeing waning momentum. We’re still long but have jammed up our stops as we expect continued volatility in the index while the short-term risk/reward is more of a mixed bag than it was just a few weeks ago. 

4. Our aggregate market internals oscillator shows that while internals are in neutral territory, they’re starting to roll over and trend down a bit. Not yet a reason to be bearish but something worth keeping a close eye on. 

 
5. We’ve been in an elevated Trend Fragility (green line) environment for the past two months, but these environments can persist longer than many expect. So that is never reason enough to sell. But, one thing we need to closely watch is our weekly Nervous & Numb indicator (yellow line), which is getting very close to triggering a sell signal. 

6. BofA’s Bull & Bear indicator remains in neutral territory, unchanged from last week. 

7. The main argument from the bears over the past 6 months has been that this bull market was being completely driven by only a handful of stocks in the Mag-7. Well, we just saw the SPX equal-weighted index hit a new all-time high, so looks like the zero hedge crowd is going to have to look for something else to whine about. 

8. Here’s the latest CoT positioning for the major markets. We have the most crowded positioning in Brent crude, cotton, and GBPUSD. While speculators are most short the soybean complex, platinum, and corn (note: this positioning is based on a 6-month oscillator).  

9. We highlighted the bullish setup in soybean meal in last week’s Dirty Dozen (link here). Soymeal saw a strong move following Friday’s WASDE report which was fairly neutral. Speculators remain crowded short and it just entered its strongest period of seasonality. 

10. Cotton looks to have potentially put in a double-top. Speculative positioning is crowded long. We saw a large bearish reversal Friday following a fairly bullish WASDE report, giving us a news failure. Friday’s bar gives us a good technical inflection point to get short in size with relatively low risk. 

11. Here’s the latest positioning and overbought levels in cotton from our HUD. 

 
12.  We last talked about CVR Partners (UAN) in these pages back in late January (link here). The company is a fertilizer producer with a high beta to the corn and wheat markets, both of which might be starting to bottom. The stock trades for 3x FCF and has a tiny float of just 7mn shares. The current setup gives us a good technical entry point to take a swing with low risk (chart below is a weekly). 

Thanks for reading.