🗞 I'm Pulling the Plug

WHILE YOU POUR THE JOE… ☕️
K Bye

That might have been the text Xi sent Trump in response to new trade tariffs, and we all know how bad that text feels. 🥹 

Looks like Australia has been chosen as a new trading partner to satisfy China’s incoming demand as their domestic stimulus measures start to trickle through the economy.

This has given the AUD/USD pair an entire quarter of positive trending performance, which caught our eye. 📈 

Speaking of catching our eye, let’s get on with today’s email 📧…

SHIFTING TIDES
Noise Complaint

The overvaluations that we broke down in our previous newsletter have begun to shift the entire market.

Specific to the S&P 500, but more on that later.

Remember how we mentioned that China and Brazil might be the ones to benefit from these rotations into cheaper and more attractive markets from here? 👀 

We just got another such signal. The chart above is the Gold / Copper ratio, and this is what you need to know about it:

• A rising ratio (Gold outperforms Copper) is bearish for the economy, ignored by the S&P 500.

• A falling ratio (Copper outperforms Gold) is bullish for the economy.

So if the S&P 500 has ignored this rising ratio, then the copper and gold flows might now be ruled by another nation, therefore following another regime.

Data shows that China imported and consumed 3-4x as much copper and gold as the United States for 2024 and so far into 2025. ✅ 

Bingo.

Correlations are tighter to the $MCHI China ETF than the S&P 500 index when it comes to this Gold / Copper ratio.

Makes complete sense, and it speaks to a bigger rotation of capital being led by China rather than the US markets today.

Now this new deal with Australia is another point to keep in mind as the rotation starts to head into China’s economy.

But, here’s another point I want you to keep in mind: ⬇️ 

This is the ratio between Brent Crude and WTI Crude.

Now I wanted to keep track of this one (as I want you to as well) because of a couple of reasons:

• Most Brent goes to China through the Strait Hormuz and Malacca 

• Whatever energy needs China spurs, these shocks will show up in Brent first

• When this spread shoots higher, you can assume China is on the move

But, statistically, what levels are significant on this spread? 👀 

Well, the standard deviation here would be for 1.12 to 0.97. Keep these written somewhere or in your charts.

When this ratio gets to the upper level, load up on China names, and unload in exchange for US names when the ratio goes to the lower level.

The beauty of this rationale is born off the very global macro strategies and indicators we lay out in this primer newsletter.

It’s the one thing that still works in today’s market, so make sure you get your edge on point before time runs out. ⌛️ 

TRADE OF THE WEEK
China’s New Friends

Sociedad Quimica y Minera de Chile.

This is one of the leading copper producers in the world (based in Chile), and therefore it’s one of the leading customers for China to buy its copper needs from.

We pitched this stock in a previous newsletter when it was only $37 per share, but we think that this new momentum in China could let it reach an even higher ceiling. 📈 

Let’s see, this stock is not a clear outlier as we always love in the forward P/E and earnings growth rate measures.

But

It does stand out in a P/B and P/S ratio, which tells me that some investors and traders are willing to pay up for this company. We like that willingness given the fundamental thesis right now. 🔥 

While this name is not a straight copper play, more so focused on lithium, it is part of that Chile-China trade that is about to be set on fire, as the Australia theme shows.

More than that, this is a part of the swing out of big technology names in the United States into materials and energy stocks, such as the Ternium trade that’s already up over 10% since our pitch. 🎯 

Understanding that the US is overvalued and rising volatility will send capital to these emerging markets will be key, so make sure you don’t miss out. 🫰 

GO AND MAKE IT HAPPEN
Only the Best

I would never tell you to do something I wouldn’t do myself.

And I would never do anything if it didn’t make money or made sense. Which is why I am so big on order flow and global macro as a strategy to help you survive the financial markets.

In fact, I made a whole 24 minute YouTube video to break down one of our best performing newsletters covering the strategy.

The bonus? You get the editor’s cut version, with added information and examples to go along.

Make it a part of your weekend “reading”, as today’s book recommendation 📖 comes in video form, and let me know what you think.

To your success,

G. 🥃