🗞 Stock Market Compass

WHILE YOU POUR THE JOE… ☕️
Last Bullet

Remember when everyone thought we were going into recession in 2022?

I was one of those people, and today I am really just amazed at how the market has been able to keep on pushing despite the fact that we are in a recession and have been for a while. 📉 

But.

The yield curve is back above 2022 levels, bringing the odds of recession higher, and therefore a real risk to the S&P 500 index.

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

INSIDER’S TABLE
Elite Performance

Every single day this week has been amazing, that’s all I’ll say.

Sure some people are getting wiped out left and right, but that’s because they rely on the wrong type of information and methods to trade these markets. ❌ 

Our remote trading floor members? They bagged close to 600 points on S&P 500 futures this week alone, by receiving snippets such as the screenshot above along with a bias for the day.

This newsletter gives you instructions on how to join.

Now back to business. ⬇️ 

What you see above is some of the volatility measures we cover every day within these morning meetings for our remote trading desk, and they’re not looking too good for the S&P 500 right now.

You see, volatility is now 8x the average for over a five-year period, and as you can see in the volume measures, so are the number of participants coming in to raid the index in whichever way makes sense for that day.

So, when it comes to direction, I’d say there is none right now. 🤷‍♂️ 

Which is why we’ve recommended to trade short bursts between key levels and decrease your time exposure to the market lest you be trapped offside all the sudden.

That’s where most retail traders would fail, since they have no idea that current statistics call for this type of trading, and are perhaps stuck in old ways like swing trading or overnight plays.

When the market changes, you have to change with it or get wiped out, simple as that.

Now right along with the pop in the yield curve we showed you, this is also a bit concerning for the United States economy.

Credit Default Swaps rose by 4.5% this week, getting us to levels not seen since the financial crisis of 2008. 👀 

We’ve warned that indicators like the PMIs and housing figures are not really stable right now, if anything they’ve been calling for recession for months.

That being said, I wouldn’t call for a wider crash yet, or until the following happens:

That thick white line in the S&P 500 index is $4900. 🎯 

This matters because it’s a 20% drawdown from the all-time high price, which is where margin calls are typically issued, as they were earlier this week.

Now two things happen in this scenario:

• People are forced liquidated and selling takes over

• Calls are met with cash injections and create more confidence in the market

This happens all the time, and the level is usually tested 2-3 times before a true direction is set, so I wouldn’t celebrate any victories yet, at least until we retest this another time or two and really see what is going to be the path forward.

By the way, undecisive markets call for decisive tools, and technical analysis isn’t one of them. ❌ 

In this newsletter, I break down some of the ones we use to come up with our daily biases in the market through a global macro strategy. 🫰 

TRADE OF THE WEEK
Deal Or No Deal

I’ve always liked the whole cigar butt thing from Buffett’s ideology.

And while United States Steel stock isn’t a cigar butt, it does have one pull built into it right now. 👀 

You see, Japan and the US are in the middle of landing an agreement for these tariffs moving forward, and I think that Nippon trying to buy US Steel is one of the factors being held hostage.

Trump announced he would review the deal again, and see if it’s got any legs to it.

Honestly, we could use some of that efficient Japanese manufacturing practice in the US, especially if Trump wants to bring back those jobs here.

When it comes to paying a fair price for the company, I see that today’s P/B of 0.8x would press the Japanese to make a much higher bid. 💵 

Options traders seem to be okay with calling for $55 a share to be that target, judging by the outlier open interest headed to that strike.

Whether the deal goes through or not is purely speculative, but hey, who wouldn’t want a low-risk high-reward setup like this one?

Deep dives will be coming back, once the market calms down, for now pitches will be sweet and simple. 🔥 

GO AND MAKE IT HAPPEN
What is Money?

Money as we know it is only based on the “full faith and credit” of the entity issuing that money to us.

Otherwsie, it’s just a piece of paper.

Which is why today’s book recommendation 📖 is focused on things money can’t buy, to remind us that trading and investing is only one of the million ways to make a million dollars.

What matters is what you do with this money and the type of life that you then lead.

To your success,

G. 🥃