I don’t think you can consistently be a winning trader if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money being right only 20 to 30 percent of the time.~ Bill Lipschutz via The New Market Wizards by Schwager
In this week’s Dirty Dozen [CHART PACK], we look at a broken housing market, more recessionary signals but constructive price action and sentiment tailwinds. We then dive into global steel demand and take a look at a producer that has broken out from a large base, plus more…
Q4 2022 hedge fund letters, conferences and more
- Scores on the Doors… from BofA with highlights by me.
- This is good, but it’s also bad… The reversal in DM real estate is good because housing prices got too juiced too fast over the last two years and some air needed to be let out. It’s bad because lower home equity and frozen RE markets due to higher rates are going to put the squeeze on the consumer soon (chart via BofA).
- Earnings recession… BofA’s leading indicators suggest we should see earnings continue to follow in housing’s footsteps.
- This would be a first… Philly Fed’s Mfg Outlook Diffusion Index is at levels that have shortly preceded or coincided with a recession every single time over the last 60+ years.
- IG says so too… This chart shows that when the IG yield – CB Policy Rate has gotten this tight (or inverted) in the past, the economy tends to contract shortly thereafter (chart by Jim Reid via @boazweinstein).
- Excess no more… The primary reason we were bullish on US economic growth for the past year while the market was whining about an imminent recession, was excess consumer savings.
This was a considerable amount thanks to fiscal stimmies, which has kept the US econ resilient. Too bad this well will run dry by Fall (charts by Jim Reid via @boazweinstein).
- Too soon, Bears… This chart is from Jason Shapiro who’s a good follow on the twitters (@Crowded_Mkt_Rpt). It shows the 52w rolling average of Bulls vs Bears.
- Tape tells another tale… The tape continues to see great-looking sell setups fail and hold/reverse at key levels. This is not bearish action. So while there are plenty of fundamental reasons to be bearish, King Price is saying something else.
- AI by the numbers… charts via BofA.
- Picks and semis… I still stand by my secular semi-bull thesis which I outlined back in October of 2020 here.
- Steely-eyed… steel stocks have been surprising to the upside these past few months (check out ZEUS). One reason why is that infrastructure spending is coming back to many DM markets in a big way (charts via BBG).
- Cleveland Cliffs (CLF)… has broken out of a 6-year base and most recently a large bull pennant. The chart below is a monthly.
Article by Alex Barrow, Macro-Ops.
