Three Hot Breakouts to Watch

(No, Not NVIDIA!) [Morning Reckoning] September 17, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Three Hot Breakouts to Watch Baltimore, Maryland September 17, 2024 [Greg Guenthner] GREG GUENTHNER Good Afternoon Reader, The rate cut cycle you’ve waited for is finally here! Yes, the Fed is finally cutting this week and the noise couldn’t be louder. Grab your earplugs! Trading could get a little wild as everyone jockeys for position heading into Wednesday afternoon. We’re even dealing with some interesting new wrinkles as traders debate just how much the Fed might cut tomorrow. Last week, it was looking like 25 bps was a lock. But now, the potential for a 50 bps cut is on the table. The probability of a 50 bps cut jumped to 49% following Fed whisperer Nick Timiraos’s claim that the FOMC rate decision remains a coin toss. The chance of a double-cut continued to climb Monday morning, registering as high as 59%. Either way, someone will be caught on the wrong side of this trade. Between the lightning-fast sentiment swings we’ve experienced since August and the intense expectations heading into the rate-cut season, we could see some serious market swings this week. Now’s the time to mentally prepare for whatever the world throws our way. Plus, there was yet another Trump assassination attempt over the weekend that’s already getting buried by the hyperactive news cycle. We have just 49 days until the election, but it might feel like a lifetime at this rate. As always, I like to try to ignore political nonsense – but this is nearly an impossible task heading into November. My only hope is that we get minimal market disturbances and that our pool of potential trades isn’t affected too much as the chaos spreads. While more of that dreaded uncertainty creep back into the markets this week, it’s not all bad news for investors. In fact, I’m seeing some downright bullish developments percolating under the surface of this market. A little positive momentum has found its way back into the market. We’re even starting to see some promising trade setups emerging. But I need to offer a few words of caution before you go out and buy every stock in sight: it’s only September. A few more blips of volatility are certainly possible before we enter what could be a more bullish period for stocks in October and November. Still, potential market leaders and snapback plays are perking up. And we have to be ready to take advantage of these setups! Despite everything going on in the world right now, it’s beginning to look like melt-up season is just around the corner. As we’ve discussed many times, we only get “ideal” conditions a couple of times per year, so we have to capitalize when we can. These are the times when breakouts extend (and overextend) and we are spoiled with more viable trades than usual. We’re not there yet. But I can feel it building… In fact, that pesky rotation trade is starting to extend. [Biden Admin Furious Over This New “Alternative” Currency]( [Click here to learn more]( Take a close look at this photo: [What you see here is a new “alternative” currency that’s taking America by storm…]( One which could ruin Biden’s CBDC plans. It’s already popping across the nation… including Utah, New Hampshire and Nevada. [If you’re worried about Biden Bucks then you must watch this short 2-minute video that breaks down how this “alternative” currency works…]( [LEARN MORE]( The Big Boys Fall Behind Last week’s rally was a solid bounce following the early September rout. Yet while the major averages are quickly approaching their all-time highs, the first-half leaders still have a lot of ground to make up. Don’t get me wrong – the mega-caps logged a nice snapback week. But the numbers haven’t budged following the four-day swoon that kicked off the month. While the Magnificent Seven names are off their lows, the Roundhill Magnificent Seven ETF (MAGS) still needs to run up another 11% before challenging its August highs. It’s an even steeper hill for the chip stocks, with the VanEck Vectors Semiconductor ETF (SMH) requiring a rally of more than 20% to overtake its own July highs. For the record, many of these big, popular stocks are nearing some excellent risk-reward levels for folks interested in buying the dip. They might not bounce tomorrow. They might not bounce next week. But if and when the market finds its way out of this seasonal weakness, these names could go on a tear as a fourth-quarter meltup emerges. Meanwhile, some of our former rotation trades are quietly beginning to firm up. To be clear, these are the same breakouts we were tracking back in the summer that reversed and subsequently failed heading into August. The charts have been messy at best, especially the small-cap Russell 2000. Yet after 10 volatile weeks, the iShares Russell 2000 ETF (IWM) is finally setting back up for a potential breakout extension. Back over the summer, it looked as if IWM was going to make another run following its early July thrust to 225 and fresh year-to-date highs. It failed to extend higher from there, opting instead for a nasty whipsaw move that was exacerbated by the Yen panic in early August. But a move back above 220 could finally trigger the next leg higher for small-caps heading into the fall. Keep an eye on this chart for an explosive move! Two More Breakouts in the Making… Small-caps aren’t the only group on the cusp of a big move. What about precious metals? Gold continues to quietly post new highs as it gets comfortable in the $2,600 range. Meanwhile, silver jumped nearly 10% last week – its best performance since May. So we shouldn’t be surprised to see the VanEck Gold Miners ETF (GDX) pushing back toward a breakout near $40. This is the same area where GDX ran into sellers back in 2020 and 2022. If it manages to post a clean breakout here, it’s off to the races. Then there are the big biotech names. The iShares Biotechnology ETF (IBB) has clawed back its early September losses and is now knocking on the door to a $150 breakout and its highest levels since late 2021. Again, these biotech names haven’t posted the smoothest trends this summer. But like the miners and small-caps, they’re setting up for potential market-leading moves should these breakouts materialize. Bottom line: Give the mega-caps and semiconductors some space over the next couple of weeks as precious metals, biotechs, and small-caps approach key areas. These “messier” trade ideas could quickly take on leadership roles and provide excellent trading opportunities heading into October. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Nearing Retirement? Claim This Exclusive $1 Book Offer Right Away!]( [Click here to learn more]( “The Banker” is a hedge fund titan who spent years helping America’s richest families grow even richer. [And today, for the first time ever, he wants to send you his new book – where you’ll find 36 of his never-before-revealed income and wealth generating secrets](. If the potential at steady, predictable income (as well the chance at a few nice, quick windfalls) interests you, then I urge you to act right away. [== > Click here now to claim this exclusive $1 book offer](. [LEARN MORE]( In Case You Missed It… Werewolves in Sheeps’ Clothing Sean Ring, Editor [Sean Ring] SEAN RING Hi Reader, Next week in Frankfurt, I’m teaching “soft skills,” which are interpersonal skills that enable effective communication, collaboration, and problem-solving. These skills cover a wide array of areas, such as presentation skills, negotiation skills, business writing skills, and other critical and transferable skills. I’m always looking for new games and simulations, as chalk-and-talk gets boring quickly. The only way to learn those skills is by doing them. During my research, I came across the most fascinating game I’ve ever heard of. It applies directly to what’s going on in the Western world. I’ll share it with you now. The Wolf at the Door The game "Werewolf" (or "Mafia," as it is sometimes called) is a social deduction game in which players are divided into two groups: the informed minority and the uninformed majority. The goal for each group is simple: survive and eliminate the other. However, what makes Werewolf fascinating is how it mirrors social dynamics, power struggles, and the subtleties of influence — dynamics that relate to modern U.S. politics. The Origins of Werewolf Werewolf is a variant of the Russian game "Mafia," created by Dmitry Davidoff in 1986. Davidoff designed it as a psychological game to explore social behavior, communication, and the breakdown of trust in groups. Originally used in classrooms and psychology studies, the game rapidly gained popularity, spreading to parties and conventions and eventually spawning several iterations, including Werewolf. The premise of Werewolf is simple: a village is plagued by werewolves, and each night, one villager is killed. By day, the villagers must try to identify and lynch the werewolves hiding among them. The tension of the game arises from the fact that a small, informed group (the werewolves) knows who they are and coordinates their actions in secret. Meanwhile, the larger, uninformed majority (the villagers) must try to deduce the werewolves' identities through conversation, accusation, and often baseless suspicions. The Uninformed Majority In Werewolf, the uninformed majority is made up of regular villagers. Their only advantage lies in their numbers, but their disadvantage is their lack of knowledge. They don’t know who the werewolves are, so they must rely on intuition, social cues, and communication to uncover them. Throughout the game, villagers are vulnerable to misinformation, manipulation, and internal division, often turning on each other in desperate attempts to identify the wolves. This mirrors the challenges faced by the general public in political environments. In any society, most voters (the uninformed majority) don’t have access to the same level of information as political insiders, campaign strategists, or policymakers (the informed minority). John Q. Average decides based on limited information, media reports, political rhetoric, and, often, partisan bias. In this environment, misinformation spreads easily, creating confusion and mistrust. In recent U.S. politics, we’ve seen how easily the uninformed majority is misled. From the rapid spread of disinformation on social media platforms to the growing polarization of traditional media, voters are bombarded with conflicting messages — especially from their government! Just as the villagers in Werewolf must decide who to trust based on incomplete information, U.S. voters must navigate a complex landscape of political messaging, fake news, and emotional appeals to substantiate their opinions. The Informed Minority In Werewolf, the werewolves are the informed minority. They know who they are and use that knowledge to deceive the villagers. Their goal is to sow confusion and distrust among the villagers, steering suspicion away from themselves. Often, the werewolves will accuse innocent players or try to exploit any existing divisions among the villagers to weaken the majority. Similarly, in politics, the informed minority consists of politicians, lobbyists, and other insiders who have access to far more information than the general public. They understand the nuances of policies, the intricacies of the political process, and how public opinion is molded. Often, this informed minority will use their knowledge to manipulate the uninformed majority, whether through targeted advertising, misleading statistics, or emotionally charged rhetoric. This has become increasingly evident in U.S. politics, particularly with the rise of highly sophisticated political campaigns that use data analytics and behavioral science to pinpoint specific groups of voters. Political operatives craft messages that play on voters’ fears, biases, and insecurities, much like how the werewolves in the game try to manipulate the villagers' paranoia. One striking example of this was the 2016 U.S. presidential election, where micro-targeted ads on platforms like Facebook were used to sway key swing voters. The informed minority, in this case, consisted of political consultants, data scientists, and social media companies who understood the power of these tactics, while the majority of voters were unaware of the extent to which they were being influenced. Luckily, the Hildebeast failed to win that time. The Erosion of Trust A key aspect of Werewolf is the gradual erosion of trust within the group. As more players are eliminated, the remaining villagers become increasingly suspicious of one another. Werewolf is a game of paranoia, where no one is entirely sure who is telling the truth. This mirrors the decline of trust in American politics, particularly in the era of hyper-partisanship. According to the [Pew Research Center]( trust in the U.S. government is near historic lows. This mistrust is not only directed at politicians and institutions but also at fellow citizens. Political polarization has led to deep divisions in American society, with people increasingly viewing those with opposing political views as enemies rather than fellow citizens with different opinions. This is the essence of what happens in a game of Werewolf when players begin to turn on one another, unable to discern truth from deception. The Role of Media: A Double-Edged Sword In Werewolf, players rely heavily on communication and persuasion to navigate the game. Some players may dominate the discussion, while others can’t get a word in edgewise. The same is true in U.S. politics, where media plays a critical role in shaping the narrative. The media serves as a primary source of information for the public, but it’s also a tool for Deep State manipulation. Just as werewolves in the game may spread misinformation to throw the villagers off their trail, Deep State and its media minions use media outlets to promote narratives that serve their interests. This is particularly evident in the rise of partisan media, where different news outlets use the exact words to report stories, further fueling division among the electorate. At the same time, the media should act as a guardian, exposing corruption, uncovering hidden truths, and holding the informed minority accountable. (But those days are long past.) In this way, the media in U.S. politics plays a dual role, much like certain players in Werewolf who have special abilities, such as the Seer, who can secretly uncover the identity of the werewolves. However, as in the game, the alternative media's efforts to reveal the truth are undermined by those who seek to discredit them, labeling unfavorable reports as "fake news" or biased. Lessons for U.S. Politics Werewolf is a game of survival, strategy, and social dynamics. Its lessons extend far beyond the game table and provide valuable insights into the nature of politics, particularly in the United States today. Misinformation leads to disastrous outcomes both in Werewolf and in politics. The ability of the informed minority to shape the narrative and manipulate the uninformed majority is a powerful tool. Voters must critically evaluate the information they receive, question sources, and seek out multiple perspectives. In Werewolf, trust is the key to success for the villagers. Similarly, in politics, trust in institutions, leaders, and fellow citizens is vital for a functioning republic. The erosion of trust leads to division, making it easier for manipulative actors to gain power. The uninformed majority in Werewolf only wins by coming together and working as a cohesive unit. Divisions and infighting only serve to weaken them, allowing the werewolves to win. In U.S. politics, overcoming polarization and finding common ground is crucial for addressing the nation’s challenges. Just as the Seer in Werewolf must use its powers wisely to uncover the truth, voters must remain vigilant, stay informed, and hold political actors accountable. Blind trust or indifference leads to the rise of harmful forces within the political system. Wrap Up At its core, Werewolf is a game about power dynamics, trust, and deception. These same dynamics play out in U.S. politics, where an informed minority holds the upper hand over an uninformed majority. However, by recognizing the strategies of manipulation, fostering trust, and promoting unity, the majority can reclaim control and ensure that government works for the benefit of all. Understanding Werewolf's lessons may not solve all the problems in U.S. politics, but it provides a useful framework for thinking about how power is wielded and how the public must resist manipulation in an increasingly complex political landscape. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [UPDATE PREFERENCES]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. 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