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Unlock the Wave Indicator!
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Monday March 3rd
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“Men are created different; they lose their social freedom and their individual autonomy in seeking to become like each other.
– David Riesman
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Happy Monday folks. Let’s dive in without wasting a moment.
First off, everybody should watch this video of Treasury Secretary Scott Bessent detailing the Trump administration’s plans for the economy.
He pretty much lays out the whole plan:
- They WILL slow the economy by cutting government employment and the welfare state, including SNAP, housing assistance and Medicaid.
- They will couple this with deregulation, tax cuts, and more energy production
The idea is to send the markets down. This will cause more purchasing of bonds, which will drive down yields.
The bond market can be confusing, but it’s the opposite of equities. With equities, more demand and buying = stocks go up.
With bonds, more demand and buying = stocks go down.
The goal is to get the 10-yr yield down around 3% I think. This will unfreeze the housing market and cause the economy to speed up again. Note that the process of getting there however will cause the economy to slow.
A bear market and recession in Trump’s first term is manageable for them. But it has to happen soon, while he can attribute it to the hangover from Biden.
Inflationary pressures are returning to the economy. Just a few moments ago, the ISM Manufacturing inflation numbers cae in hot, jumping almost 10% month over month. Trump’s policies are trying to thread the needle between deflation in order to prevent inflation, and inflation to stimulate growth and help the debt.
It’s a fine line to walk, and we’ll see if they manage to pull it off.
Let’s get to levels for the week.
SPX
Levels remain roughly the same for this week. I’m really watching the 5980 level. Above that, and we could see a bull cycle start. If that level is defended, we’re in red territory for a while.
RKT
With the 10-year dropping, this will be good for home mortgage companies like Rocket Mortgage. It’s tracking nicely above the EMAs, and recentl;y broke out today.
Not only that, but when you layer my Wave Indicator on top, it shows a Call signal:
I like the 4 APR 25 $15.5 CALL.
If you want to get the Wave Indicator to use in your own trading, you can see how it works here.
Defense Companies
This is more of a macro discussion than anything. I’ve been talking about the rise of European defense companies for awhile now, and following the saucy meeting with Zelensky and Trump last week, they’re up big.
Europe seems committed to continuing the Ukraine War. And good for them. But the U.S. is going a different course. As a result, the Euros will have to start footing the bill. They can’t, mind you, because they have no real economy. So, if they actually want to put troops on the ground in Ukraine, they will probably be buying equipment from American defense companies.
I’l be watching companies like Lockheed Martin, Boeing, and Northrop-Grumman. The Northrop call I issued last week is up 55% already.
More to come.
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Testimonial of the day
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To Better Trading,
Alex Reid
