🗞 600 More Points (Lower)

WHILE YOU POUR THE JOE… ☕️
Second Chance at The American Dream?

Look, taxes are a construct of the social narrative. ☁️ 

They’re only useful for countries that can’t print the global reserve currency, which we can. So, taxes aren’t really that necessary; if anything, they are keeping a lot of people and businesses on the sidelines.

How do you think countries like Dubai, or states like Florida, are able to survive and thrive without collecting taxes? 👀 

Well, Trump is now proposing no tax for earners below $150,000 per year, which would significantly boost spending, and maybe even bring back some off shore work to the country.

More than that, it would actually give people back the hopes of living the American Dream again. 📈 

Speaking of constructs, let’s get on with today’s email 📧...

PLAN B
Support Has Been Breached (Again)

If you saw this tweet from our account yesterday, thank you for not being mean. ❤️ 

We then tweeted at $5,540 that the entire macro picture had shifted from the morning bullishness, and that we had closed out the S&P 500 futures long position.

Then the market sold off nearly 40 points right after, and the macro remained just as bearish. That brings me to today's subject, as I want to warn you of what could come next for the index and where you should cover your backs. ✅ 

You see that thick white line? That’s the 20% discount from the index’s all-time high, which is a significant level where the market either goes into “Buy the dip” mode, or decides to keep dumping as margin calls are right around the corner. 👀 

Knowing that there are only momentum fund managers left in the market today, I think the latter could be the case here.

Here’s why I am now okay with sitting and waiting until we get to this $4800-$5000 level:

• Equity Risk Premiums soared for the second half of the day.

• $IVE / $IVW spreads spiked to recover the CPI drop.

• $TLT recovered past $90 without issues.

• EURUSD pulled back after what seemed to be a false breakout.

All of this DESPITE a cooler CPI and PPI, meaning that the real economy (on both consumer and business sides) is struggling, leaving the Fed with an open field to cut rates. 📉 

This is what Trump wants by the way, which is why we wrote a thesis as to why he might be looking to crash the market in this post.

Now.

If you’re new here, that bit above might not make too much sense, but that’s okay. This is why we wrote a primer on Global Macro and what we watch out for on a daily basis to determine our biases on the market. 🌎️ 

Not all of it, but a pretty big chunk of our strategy is there, so enjoy.

I would also like to take this chance to remind you of where the Commitment of Traders report stands right now.

Specifically:

• Green Line: Represents the institutional players, such as the momentum funds we mentioned above.

Notice that they are as long as they were doing the tops in 2007 and then in 2020; I would call this being “Tapped out” to the upside. 🤷‍♂️ 

Now that volatility is rising across the markets, you can see how they’ve begun to unwind some positions in the S&P 500 futures.

So let me leave you with this:

• Once you see the S&P 500 futures approach that $4800-$5000 area, watch the Commitment of Traders report very closely. 👀 

Depending on how these institutions react, you’ll know whether the bottom is in, or whether we are entering into a proper crash. 📉 

TRADE OF THE WEEK
Insurance Ain’t so Safe

That’s the market/volume profile for Progressive stock, and if you’ve been with us for a while, you know that’s not good.

We’re now sitting on a volume cutoff for 2024-2025, and no reaction has been had from traders yet to show potential support higher.

I am personally bearish on this stock and the insurance industry in general, let me explain some of the reasons why: ⬇️ 

• Lower consumer spending.

• Lower inflation.

• Lower business spending.

How is this bad for insurance carriers? Great question.

With people giving up on some of the discretionary spending, as seen in contractions in retail sales, as well as businesses pulling back on equipment and machinery spending as covered in our PMI breakdowns. 📉 

The result is less policies being generated on those nonexistent car and home purchases, among others.

Then,

Lower inflation rates will collapse the YoY growth these companies will have on policy pricing, and that means EPS will crash.

Don’t take my word for it, these are the Wall Street EPS projections today, seeing up to 50% contractions for Progressive into the third quarter of 2025.

So, good level, good thesis. 🐻 

But, now we need to check whether we are in over our heads or whether the market also agrees with this view:

Look at the low EPS projections for 2026, set at 3.3% for Progressive, making its current forward P/E ratio way too high and hence its PEG for 2026 sitting at 5.4x vs the industyr’s 1.3x average.

Yeah, nothing’s holding this stock up my friend. 📉 

In case we’re wrong though, look at Allstate, completely different story at 15.2% EPS growth in 2026 and PEG of 0.6x to give us enough breathing room. ✅ 

If you’re thinking long/short setup here, you read my mind. Hedge complete.

Happy hunting 🫰 

GO AND MAKE IT HAPPEN
No More Tears

Trading in the way we just covered for you takes practice, and lots of headaches through experience.

Lucky for you though, we’ve boiled down the entire Goldman Sachs trading program I went through, plus a few extra lessons I learned along the way, into a three-month coaching program.

We’re calling it The Sovereign Trader: 5 No-Sweat Tools Taken From Goldman Sachs. ✅ 

You can apply today, tell us your story, and then start improving your trading the same day you book a call with your success coach Max Torres.

See you there!

To your success,

G. 🥃