🗞 Wake Up Neo...

WHILE YOU POUR THE JOE… ☕️
Art Of The Deal

Love him or hate him, President Trump has given us a few things:

• A crazy S&P 500 to trade and expedite the time it takes to make money through higher volatility.

• A more powerful stance in the global landscape as a nation.

• An endless stream of fire JD Vance memes.

Last night, both Ukraine and Canada folded on their threats to the United States. Respectively, a war threat has been de-escalated (maybe this gold trade will work out after all), and then tariff fears from Canada. 📈 

We were telling you a half hour before it happened in our Twitter, as the global macro started shifting bullish on S&P 500. What happened next? A whole 100-point rally.

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

RED PILL TIME
AI is Live, Don’t Fall Behind

I highly recommend you watch this YouTube documentary, because these are the type of guys you compete against when you trade anything in short timeframes. 🤖 

The alchemists of Wall Street, the quants who develop AI bots to squeeze all the liquidity out of short-term opportunities, and yet there are traders who still think they can make money using charts and indicators. 🤷‍♂️ 

Look.

AI killed technical analysis, and we will repeat that over and over until you get it. The game has changed, and I saw it firsthand when I was at Goldman Sachs.

The sales and trading function is now made up of the following: ⬇️ 

• You sit and watch algorithms work all day, executing orders and clicking around every once in a while.

• Getting on client calls to answer questions and occasionally pitch something or execute something that the bot can’t.

So, where are all the real traders going? Well, there’s an answer to that too:

• If you have a degree in quantum physics or are a world-class programmer, you are either sent to the quant department.

• You have to prove you can trade in 1-3 month timeframes using global macro strategies.

Everything else is being thrown aside, and the trader function, as we know it, has changed forever.

Which is great news, because nobody in the financial content space knows about global macro, at least that we’ve seen. (Trust me, I’ve been looking.) 👀 

So, on that note, here’s a primer on the strategy and how it works:

Start of Each Day

The first thing you should have in mind is a narrative for the global markets. That means, are we headed to inflation themes, recession, boom, bust? 💡 

From there, you have established you macro bias, but then as we know the market can be a lot more complex than that on a daily basis.

So, I want you to ask two simple questions at the start of each day:

1. Are we on Risk-On mode?

2. Are we on Risk-Off mode?

That’s it.

Let me explain what I mean by these two. ⬇️ 

Risk On

Do traders want to take on more risk today? 🤷‍♂️ 

To answer this question, you have to understand what the risky assets in the economy are, what the safer ones are, and how they are doing on the day and the week.

That way, you can answer that question through a sort of sounding board before you even hear the opening bell ring.

Now here’s a list of the risk assets I look to each morning:

• S&P 500, NASDAQ 100, CSI 300, Nikkei 225, FTSE 100. (World Equities)

• Dollar, AUD/USD, USD/CAD. (Commodity and leading currencies)

• Oil, Copper. (Economic growth commodities)

• Bitcoin. (The riskiest thing in the market today)

• Equity Risk Premiums. (Ten-Year US bonds vs Corporate Bond Spreads)

• $IVE / $IVW Spreads. (Gauge on economic sentiment and risk in stocks)

Makes sense? If you see these going up together, or most of them at least, then chances are you’re going to have a pretty bullish theme happening that day.

Here’s a live example: 🐂 

After I ran through the whole list, and some implications why they moved this way, my bias for the day on an asset like S&P 500 was long. 📈 

Timing is a different topic, but I knew if I was going to trade, it would be nothing but buying.

I bought some at $5,565 and tweeted about it.

Bought more at $5,545 and tweeted about it.

Then by the day’s close I was holding enough overnight inventory to keep me happy given how all these risk-on assets ended up moving.

100-point move came after that, money was made. 🫰 

Risk Off

Okay, now let’s talk about risk off for a minute.

Basically, if you see risk assets start to have a bad day, it typically means you’re going to have a flow into risk-off assets, which are:

• EUR/USD. (Flow into the most liquid pair in the FX market)

• Bonds. (Nothing is safer than bonds, kind of)

• Gold. (Historical safe haven during volatility)

For time’s sake, I’ll just leave you with this list, and tell you that when these do well in face of falling risk-on assets, you’ve got yourself a pretty bearish day. 🐻 

On that note, I want to give you one of the most important things in Global Macro, which is expressing your view through a trade idea.

Spreads & Correlations

Within a quarter, we caught the massive moves in both $TLT bonds ETF and the $DXY dollar index. How? ⬇️ 

Simple, we had a recession narrative drive our decisions the whole time.

But that’s not all, as we mentioned earlier there’s a timing aspect to the whole thing. Since we already covered the short-term timing angle, I’ll give you the long-term version of it.

On a risk-off day, we decided to look to the spreads between dollars and bonds, this is what we got:

Not to get technical here, but look at that triple bottom.

This ratio (TLT/DXY) shows us that for the past economic regime of 2022-2025, the narrative (inflation) had kept the spread to a tight range.

But

Now it’s time for a rotation and uptrend as bonds outperform the dollar in the coming quarters if not years. This tells you what to buy, the question now becomes when to buy. 👀 

The time to buy was November 2024, which is when we put out this Twitter thread warning everyone of the rotation.

By keeping track of rolling correlations, we were able to spot the cyclical bottom, and then expect a return to the highs at 50%.

In simple terms, that means that now bonds and dollars need to converge their gap, which we know by the ratio is at a cyclically wide point.

When we get to that convergence, and the ratio looks like a topping pattern, then we can safely assume the recession might be over and inflation (the next phase in the business cycle) will start. 🌀 

Then we can do it all over again.

By the way, this is not something AI can do yet, as it cannot connect numbers to broader economic theory or your own intuition of what’s happening and why.

Which is why banks and hedge funds still keep global macro guys around, and why you should start taking this seriously. 📒 

I know you’re probably eager to:

• Stop starting each day from scratch—finally trade with a clear bias and market theme in mind.

• Stop getting stopped out, only to watch the trade move in your original direction.

• Stop relying on outdated indicators—AI just killed technical analysis (As you no doubt have understood by now).

• Stop the unpredictable swings in your P/L and start paying yourself like a pro.

Which is great news, because I know exactly how to help you solve all these problems, and over the next 3 months or so, that's exactly what we're going to do.

Most traders get stuck in Idea Purgatory.

That ends now. ⬇️ 

Apply to The Sovereign Trader Program: 5 No-Sweat Tools Taken From Goldman Sachs.

Your winning streak starts here.

GO AND MAKE IT HAPPEN
Traders Trade

This Global Macro Primer is only the beginning.

Below, I’ve attached a YouTube video that can help you see this strategy in live action as I break down some of the economic themes and data that got us to our trade ideas in the first place.

If you’ve already watched it, then here’s today’s book recommendation 📖, which is more on Global Macro talk.

To your success,

G. 🥃