🗞 A Cure for The Common Trade

WHILE YOU POUR THE JOE… ☕️

Oh Palantir…

One of the few stocks to ever have survived a bullish call by Jim Cramer, and the poster child of the type of market we have today.

Look I stand by my melt up scenario posted in our last newsletter (if and only if the $RSP gap can be narrowed), but don’t get me wrong.

I am also very bearish on all fundamental data. From employment to housing and business data it’s all very 🐻 

And for the first time in my 11 years of trading, I can say that the market will keep on rallying as long as the Fed doesn’t cut interest rates.

Why? 👀 

Doing so would be an admission of recession, and the market would end up fighting back.

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

P.S.

For all those who keep trying to figure out the future of a stock by drawing lines.

I know I have no right to say anything negative, as most other “furus” have been doing pretty great since 2020, also known as five years of easy and cheap money.

But all that is about to change, the next 5-10 years are going to look a whole lot different.

It’s like you’ve been training against a punching bag, and now you are going in the ring where defense actually matters.

Here’s how I was forced to learn defense, and how I finally got on the right track with my trading ⬇️ 

Steal my lessons, avoid my mistakes ✅ 

NEEDLE IN A HAYSTACK
Idea Generation 101

Most of you are watching that $PLTR breakout wondering what to do.

Meanwhile, the real breakout just happened… in the Manufacturing PMI.

Hint: These start long before price ever moves. 💡 

To avoid getting too complex on this, I will first come up with an idea for manufacturing and then services separately, this way I don’t throw you right into the weeds.

That being said, let’s get into it:

Production Breakouts 

That chart you see above is the Production segment of the Manufacturing PMI, the second most important reading after New Orders.

Now while we’ve seen New Orders stay pretty stagnant for the sector overall, it seems order backlogs are stacking up enough (though quietly) to spark new production numbers. 📈 

That’s still demand, and a reason to dig further for that EPS upswing we know and love.

Here’s another useful clue, the Chemical Products industry pointed out that their sales are experiencing high growth still, specifically when it comes to aluminum in connection to data center construction. 🤖 

That’s our queue.

What we should do now is take this and spread out any and all industries that could be related to data center construction, spotting outliers that hone into this narrative altogether.

Let’s go:

If you’ve been through the stock selection module of our Sovereign Trader Program, then you know exactly why I’ve picked these.

We call this the PMI Domino Method: Backlogs → Production → Industry EPS → Upsdide Potential. ✅ 

In a nutshell: ⬇️ 

• Valuation outliers backed by above-average EPS growth

• Other ratios suggest this growth is not priced in yet

Here’s where I would place these in order of importance, keeping in mind their direct use in infrastructure construction:

1. Chemical - Plastic

2. Steel

3. Chemical - Diversified 

Feeling good now aren’t we? 🧠 

With this information and clear trend in mind, we have to hone in a bit further and check out what’s happening in these industries, lest we forget the entire reason we are willing to buy or sell in the first place.

So both new orders and production did show a continued expansion (a breakout even) for:

• Plastics & Rubber

• Primary Metals

• Nonmetallic Mineral Products

Looks like we are in the clear so far for our stock selection process.

But first, tell me..

How different of an experience is this compared to drawing lines on a chart, hoping that a stock somehow gets attention in a move you have no idea is happening?

You don’t have to answer that, I know you already did in your head.. 🧠 

This is all of the stocks I deemed worthy of grouping together for this idea, and highlighted some of the ones I am willing to explore buying and shorting respectively.

In the next newsletter series for this idea, we will walk through which ones we went with and why.

Not to mention, the process behind modeling up a trade so that we place the statistics (and the odds) directly in our favor.

Here’s a hint 🔍️, the spread chart (Stock A - Hedge Ratio * Stock B) looks like this:

Until that next post, think about this:

How much money are you leaving on the table right now, just by not knowing what you’re even missing out on?

Probably a lot, and what’s more, you’re taking on unnecessary losses as well.

Let’s change that together, just like others have, using exactly the same tools I stole from Goldman Sachs after watching them make billions.

Pumped to get you onboarded in our Sovereign Trader Program. 🧑‍🎓 

Until then,

G 🫰 

GO AND MAKE IT HAPPEN
Shortcut Time

This is how the real stock-picking happens, long before the charts everyone’s staring at.

Watch part 2 now and see how I narrow the list, find outliers, and set up a long/short trade…

So when the next newsletter hits, you’ll already know exactly what to look for.

Watch here ⬇️

To your success,

G. 🥃