Mr. 1,000 Is Ready to Take on AGI
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In This Digest:
- The market pendulum swings back…
- But stocks are overheated in the short term…
- What happens when the S&P 500 snaps a long win streak…
- The latest Quantum Edge Hotlist rankings…
- How tech innovations make or break us…
- Why Mr. 1,000 says AGI is the top macro trend to prepare for…
There’s a funny thing about pendulums…
Quick physics experiment for you… trust me, it’s going somewhere.
Imagine you have a pendulum. If you hold it up some distance from neutral and let go, it’ll follow an arc down past the neutral point and rise to the other side, about opposite where you dropped it.
It’ll then return to you at the same speed. And no matter where you drop the weight along the arc or how long the pendulum is, it’ll always take about the same time to reach the other side as it does to come back. The law of gravity at work.
Stocks are a different beast from gravity. Any length of time in the market will tell you there are no rules to how they move, much less laws.
Yet, I was surprised to notice this same phenomenon in the market over the past few weeks…
It took nine calendar days for the S&P 500 ETF (SPY) to fall from its current level of $553 per share to the correction bottom of about $517. It’s since taken… nine calendar days for that move to completely reverse higher:
Market moves are rarely so symmetrical. If anything, this just speaks to the breakneck pace of the market these past few weeks. The market took the elevator down and decided to skip the usual escalator and take the elevator right back up.
Such a move might have you concerned that stocks are overheated. One look at the Relative Strength Index at the bottom of the chart shows us that’s not the case. We’re still south of overbought territory, but we’re getting there.
Not only that, but the rise above the red RSI-based moving average line shows that the market’s on a broad-based buy signal.
But that’s the situation on a daily basis. Let’s zoom in a bit and look at the one-hour chart:
Here, prices are plotted every hour instead of every day. It gives us a more short-term look at market conditions.
And indeed, on this view, SPY is overbought on the RSI. That means we should eventually see some selling that gets us back to neutral. Once it crosses below that red line on this time frame, that’s a good spot to take profits.
It’s important to understand these forces in the market. Yes, stocks don’t work exactly like gravity. But balances persist through nature. When the pendulum swings too far one way, it tends to swing back, trying to find its way back to neutral.
It’s also important to look at charts on different time frames, to help you find these potential turning points.
Enough physics, let’s get down to how to trade it…
As I write Friday morning, stocks are set to open lower and snap their six-day win streak.
Out of mercy for my hardworking editors, I’m writing this well before markets close on Friday. There’s a chance this streak pushes further. (And if it does, we’ll talk more about that this week.)
Assuming it doesn’t, though, let’s see what could happen going forward… Six-day win streaks are fairly rare. They’ve occurred just 87 times since the S&P 500 ETF (SPY) began trading in the late ’80s. On average, it happens just over twice a year.
You might assume that a break of a long win streak is a bad omen. It’s as if stocks have lost their mojo… and should naturally correct lower.
But you’d be wrong. Let’s look at the data for the proof…
If you bought and held SPY the day after it broke a six-day win streak every time since 1989…
- For five trading days: you would see an average trade (wins and losses) of 0.7%, an average win of 1.4%, and a win rate of 69%…
- For 21 trading days: an average trade of 1.5%, an average win of 3.2%, and a win rate of 73.3%…
- And if you hold for three months, or 63 trading days: an average trade of 2.5%, an average win of 6.2%, and a win rate of 70.2%.
If these gains sound small to you, you need to think about long-term market averages.
Over the last 100 years, the S&P 500 has returned about 9% a year. If you trade SPY around these rare win-streak breaks, the average winning trades beat that long-term rate of return on all three of the above time frames.
This should show us that win streaks are signs of great strength, and that breaking those streaks is not a bearish omen, but rather a necessary breather before the market keeps trucking higher.
But whether you’re trading these moves or buying the dip, sit comfy with the fact that there’s a strong bullish bias backing you up.
Let’s see how the market whipsaw impacted the Big Money…
Last Monday, our very own Jason Bodner published his latest Quantum Edge Hotlist to subscribers.
I was really excited for this one… because it reflected where the Big Money was placing their stakes during the highest period of volatility since the COVID crash:
There was indeed some shakeup. A few strong names from previous buy lists persisted – such as Check Point Software (CHKP), Arista Networks (ANET), Cactus (WHD), and MakeMyTrip (MMYT). But a few new names, such as AvePoint (AVPT), Parsons (PSN), Clear Secure (YOU), and Brown & Brown (BRO) caught our eye as new entrants.
Half of the top Big Money buys are in software companies – indicating to us that the smartest and deepest-pocketed institutions sought to find deals in little-known software tech when the market went awry.
Some interesting stuff in the sells, too. One previous biotech high-flyer back when genetic sequencing was in vogue, Intellia Therapeutics (NTLA), is on the Big Money hitlist. There’s also a great example of how discerning the Big Money is – Vermillion Energy (VET) is a fossil fuel company the flows want nothing to do with… but WHD, an oil & gas servicing company, graces the top of the Big Money buy list.
As for Beyond (BYON) – formerly Overstock – we’re just trying to figure out if the only way for this company to stop catching the ire of Big Money is to go bankrupt.
BYON is a case study in why this list is so valuable. It’s down more than 60% this year, and we first started noticing it in the Big Money sell list on June 17, at a price just under $15. So, shorting the stock back then would’ve earned you close to $4 per share.
Jason’s Quantum Edge Pro readers get access to the latest rankings every Monday and will get the newest top Big Money buys and sells later today.
For more info on a subscription, which also gets you Jason’s regular market commentary and small- and mid-cap growth stocks recommendations, go here.
The world’s biggest macro trend is accelerating…
The only guarantee is this world, save for death and taxes, is change. Adapting to change is a crucial skill for an investor, or really just about anyone who participates in this thing called life.
If you dodged the internet revolution, you likely have a hard time communicating with people… making payments… getting around to unfamiliar places… and finding a job, among scores of other things.
Just like if you decided that the automobile wasn’t for you, then your horse-drawn carriage transport business probably had a hard time competing.
Going back further still, you don’t want to be the publisher who’s not using the printing press and opts for scribes to manually hand-copy everything.
For the luddites out there, I have some bad news. We’re about to face another breakthrough piece of tech that could make everything that’s come before seem quaint in comparison.
I’m talking about Artificial General Intelligence (AGI). This will be when:
- The capabilities of an AI agent surpass that of the smartest human in the world
- That agent can teach itself new information
If you’ve been impressed with what we’ve seen so far in AI, where ChatGPT is helping people learn and write and create faster than ever before… you ain’t seen nothing yet.
AGI could usher in an era of unparalleled productivity and exponential technological progress. Everything from manufacturing, to drug creation, to publishing, to food service, to even our base infrastructure will feel the impact. And even that is the tip of the iceberg.
To be honest, I’m not entirely sure how to prepare for AGI as a citizen of the world. The implications are just too vast. In all human history, we’ve never faced something quite like this before.
But because of one very smart guy named Eric Fry, we can all have a good idea of how to prepare as an investor.
Those who know Eric Fry may have the pleasure of knowing him as Mr. 1,000…
That’s because he has a curious knack for picking stocks that go up 1,000% or more in value – he’s found more than 40 of them in his career.
Eric’s able to do this by applying big-picture macro trendspotting skills to growth stocks. When he isolates a trend and is certain it’s playing out before our eyes, he goes after the stocks that are set to see the biggest impact from that trend.
Right now, Eric’s sounding the alarm on AGI being the single most important investment trend of the moment, and perhaps of the 21st century. And he’s doing everything he can to make sure as many investors in our network as possible are prepared for it.
This Thursday at 1 p.m. Eastern, Eric will be hosting a research presentation he’s calling “The Road to AGI.” In it, he’ll share everything he’s uncovered about the AGI trend, including why he thinks it could happen far sooner than anyone expects… (Hint, some recent news from Elon Musk accelerated the time frame to potentially by the end of 2024.)
He’s also sharing one big stock idea, completely free, on a company that’s quietly implementing AI in one of the world’s biggest “old tech” industries.
According to Eric, the company could grow its revenue 100-fold once they implement what they’ve been working on.
This is the can’t-miss tech investment event of the year. Attendance is free. And everyone who joins will learn everything they need to know about AGI and the types of stocks to buy. Click right here for the full story.
To your health and wealth,
Michael Salvatore
Editor, TradeSmith