🗞 It's Just Money

WHILE YOU POUR THE JOE… ☕️
Feeling Lucky Today, Punk?

It’s not every day that you get to call the S&P 500 moves moments before they start, and this is by no means a boast of greatness.

Rather, a show of the importance of having a systematic process to trade the financial markets, and no I’m not talking about charting. ✅ 

We booked profits on a 30+ point swing in S&P 500 futures using the same systematic view that earned us a 400+ point collective profit last week. 📈 

The system?

• Global Macro for direction

• Market profiles & order flow for timing

That’s it. This is not in conjunction with stock-specific ideas, but rather what professional traders monitor every single day when trading in a global macro theme.

Here’s a primer newsletter for you to take some notes away for yourself.

Speaking of direction, let’s get on with today’s email 📧…

CLOSE THE TAB
When to Fold ‘Em

Credit Default Swaps. ⬇️ 

This is an instrument that acts as insurance, in case that an underlying borrower defaults on outstanding credit balances.

Now what you see above is the level of CDS for five-year timeframes in the United States economy, which conveniently covers the average business cycle.

When these products increase as they have now, it means that demand for insurance is high. Just like put options, a rise in interest for this vehicle potentially means traders think someone is going to be defaulting on their debts.

Psst.. We’re back at 2008 levels. 😨 

There are some investors calling for a massive housing crisis, which we agree with.

Let’s just look at the facts:

• Buffett is selling Berkshire’s real estate brokerage arm.

• Freddie Mac had its CEO, CFO, and head of HR quit on the same day recently.

• Rumors fo FHA fraud is on the rise.

We have our own views that reiterate some really high dangers in the housing market, which we lay out in this post right here.

However I don’t think this might be the real source of the crisis.

Been a while since we covered it, but here’s the commitment of traders report (CoT).

Specifically for the S&P 500 futures, and here are the two things I want you to keep in mind:

• Red Line: Covers the commercial dealers, think of banks and prime brokers who hold most of the inventory.

• Green Line: Covers the institutional money managers, think hedge funds and pension funds.

Knowing that the mag 7 trade is now the biggest bet in the market, then it makes sense that all of this long inventory being held in the green line is riding along with this bet. 📉 

You can see recent unwinding of that bet, and of the market as a whole as fears of a crash arise.

Then there are the commercial dealers being as short as they have been since 2008, maybe these masters of the universe are aware of the crisis that’s looming and causing the CDS spike recently. 💥 

TRADE OF THE WEEK
Just Pump It

Can you believe that shares of Nike are now as low as they’ve been since COVID-19?

Whatever you want to say about this brand, it is still undefeated on a global reach and scale basis. Sure we can see Hoka and other Asian names popping up, but there is just a culture that tends to be sticky with Nike. ✅ 

Like Starbucks, any global business slowdown and even the spiking coffee prices worldwide couldn’t keep that price down.

As you can see on that market / volume profile above, we are now sitting on a low-volume node for the year, testing levels not even seen in 2024. 👀 

If you are inside our Sovereign Trader Program: 5 No-Sweat Tools Taken From Goldman Sachs, then you know this chart.

By the way, you can apply for it right here in this link.

This is the range volatility for Nike stock, and if you have enough liquid cash, here’s what that might mean for you:

• Sell cash secured puts 💵 for a couple of months out, as volatility contracts to normalized levels, you are nearly guaranteed to keep collecting that premium.

Now this proprietary indicator is one that we’ve developed and tested for medium-term trading horizons, so we can’t divulge what it really is, since it is part of the program’s perks.

All we can tell you is that Nike is now close to triggering a new wave of algorithmic buying activity, and that’s a queue for you to start acting now. 🫰 

GO AND MAKE IT HAPPEN
Lest We Repeat It

There’s a way to collect the lessons from some of the world’s best investors, but it’ll take a lot of pages.

If that doesn’t turn you off, then today’s book recommendation 📖 is going to fit right into your list of must-reads, just make sure you have enough room to take notes, as I’m sure there will be many.

To your success,

G. 🥃