One Way to Be a Market Wizard

Market slide interrupted... The next week won't be boring... Jason Shapiro, a real contrarian trader... A market wizard's most important lesson from 30 years of trading... Go against the 'herd'... Doc's favorite trading strategy... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Market slide interrupted... The next week won't be boring... Jason Shapiro, a real contrarian trader... A market wizard's most important lesson from 30 years of trading... Go against the 'herd'... Doc's favorite trading strategy... --------------------------------------------------------------- For better or worse, Mr. Market has a bad short-term memory... Last week, the major U.S. indexes continued their slide... with the S&P 500 Index down 5.5% since its most recent highs. But this week, the benchmark U.S. index is up nearly 2%, even with its little-changed performance today. As quickly as hotter-than-expected inflation data and the escalating war in the Middle East caused a market kerfuffle, the hope of a decent corporate earnings season has appeared to be an elixir to volatility. If the markets continue to move higher, the recent slide might go down as just another "mini-correction" since the broad market bottomed in October 2022. You can see a chart of past mini-corrections below, which technical analyst Frank Cappelleri shared yesterday on X (formerly Twitter). It shows past drawdowns of 5.9%, 6.6%, and 7.2% in the S&P 500 after the U.S. benchmark broke through a somewhat arbitrary but still useful "trendline" during this bull market run... The outlook for a snapback... Yesterday, Stansberry Research analyst and DailyWealth Trader editor Chris Igou took a closer look at last week's 5.5% drop in the tech-heavy Nasdaq Composite Index. In DailyWealth Trader, he noted that the Nasdaq hasn't seen a weekly drop of this size since 2022, and these sharp drops have only happened 3.4% of the time since 1971. So these types of drops aren't common. And as Chris found by digging into history, the Nasdaq has tended to outperform over the next three to six months. Though interestingly, it underperformed over the ensuing year. DailyWealth Trader subscribers and Stansberry Alliance members [can find the full details and Chris' outlook here](. However, it's worth noting that the bullish percent index we told you about [last week]( hasn't hit "oversold" levels yet. Chris says this indicator could be useful in determining when the pullback might be finished. This indicator has been up over the past few days. So there's an argument to be made that more downside could still be ahead. We're also continuing to watch bond yields, which have traded sideways along the curve over the past week, though they were up slightly today. As I wrote [last Wednesday](... Have Treasury yields hit a near-term top or "resistance" level – with, for example, the 10-year yield around 4.6%? That's up nearly 1% from the end of December and nearly 50 basis points from early March, a significant move. We'll see soon enough. Either way, the bond market has been showing changing expectations for inflation and rates sooner than the stock market, per usual. So what comes next? Place your bets. Without making a prediction, I (Corey McLaughlin) will note that most of the major U.S. indexes remain in bullish long-term trends and are still above their late 2021 and early 2022 highs – before the bear market of 2022 began. However, the small-cap Russell 2000 Index last made a new high 29 months ago. Our Ten Stock Trader editor Greg Diamond tracks the daily gyrations of the markets round-the-clock. He says he's seeing signals of a possible short-term bottom and noted "panic selling" last Friday. Though as Greg [wrote to his subscribers today]( "with upcoming earnings reports, inflation data, and the Federal Reserve meeting, we could certainly see more volatility and perhaps a retest of these lows." So there are potential catalysts for the market to go either direction. Looking ahead... Yesterday, Tesla (TSLA) CEO Elon Musk appeared to get away with putting a positive spin on the company's lower-than-expected quarterly revenue and negative free cash flow by saying that Tesla will "solve autonomy." He also pitched the idea of a robotaxi again and more affordable electric-vehicle models to come in 2025. The stock was up around 12% today. Alphabet (GOOGL) and Microsoft (MSFT) will share their quarterly earnings tomorrow, following Meta Platforms' (META) report after today's close. Some underperformances from these popular companies, or others, could shake things up in the U.S. stock indexes again. And a few more underwhelming reports from big companies could make positive spins in the face of disappointing results more difficult for analysts to accept. Tomorrow also brings an estimate of first-quarter GDP. Consensus expectations are for a close to 2% annualized rate. And on Friday, we'll see the latest personal consumption expenditures ("PCE") index numbers for March. The PCE is the Fed's preferred inflation measure. So interest-rate expectations could possibly change. Further out, the Federal Reserve's next two-day policy meeting is next week, and Fed Chair Jerome Powell will hold a press conference on Wednesday. One thing is for sure... The next week won't be boring. Now, let's switch gears a bit... Truths about trading from a 'market wizard'... A few months ago, Jason Shapiro – a veteran trader of more than 30 years who was featured in the 2020 Market Wizards book – joined Dan Ferris and me on the Stansberry Investor Hour podcast. In short, Jason was great. I quickly understood why author Jack Schwager picked him as one of the Unknown Market Wizards: The Best Traders You've Never Heard of. You can [listen to the whole interview here](. After spending decades trading futures for a living, Jason is now sharing what he has learned, and dispelling a lot of what he sees as weak advice, in the financial and trading world. For example, during our interview, he described his contrarian investing approach – and how he creates "negative-correlated return streams" – but only after he clearly shared what "contrarian" means to him. As Jason told me and Dan... I am trying to pick turns in the market. I think I do it a little bit differently than most do... A lot of people think that they're being contrarian by thinking, "Hey, this thing has gone up a lot. Therefore, I'm going to short it." That's not how I do it. That will get you run over, over time, pretty badly. I look at it more from a participation perspective. So I'm trying to measure the participation. So it's not, "This has gone up a lot. Therefore, I'm going to short it." It's more like, "Everybody in the world has longed this thing. Therefore, I'm going to short it." I think that's what puts risk-reward hopefully over time in my favor. So I think that the discounting mechanism in the market – this is where I disagree with most things. I think the discounting mechanism in the market is not price, it's participation. By participation, Jason means the positioning of other futures traders. Jason looks deeply at Commitments of Traders data each week, which shows how large commercial hedgers or small or large "speculators" are positioned to see where the "crowd" may be piled into a belief – long or short – at an extreme. From there, Jason weighs the odds for which potential direction the broad market or a specific sector will go, and he might make a trade if the risk-reward setup is good enough for him. As he continued... I'm looking for mass, one-way-sided-based-on-history positioning... to start thinking about going the other way. Then the other things I do are more discretionary feels for it in terms of listening to people, reading a lot of things, and trying to determine where the positioning is. After doing that for 30-some-odd years, I like to at least believe that I'm decent at that sometimes. I think one of the perfect examples this last 12 months has been this Nvidia thing. Everybody wants to say, "Nvidia is up too much. It's up too much. You got to short it. You got to short it. You got to short it." And to me when I hear everybody saying that, then that's telling me that it's not time to short it. We interviewed Jason back in late January. As he spoke, Nvidia (NVDA) shares were trading for around $610 per share. They're up 35% since... The real struggle... Since Jason's appearance on the show, I've been following his work in his new, free Crowded Market Report newsletter, where he shares his thoughts on investor positioning, trades he's eyeing up, and past experiences and wisdom. A post that Jason published a few weeks ago came to mind this week. The missive is full of truths that those of you who are interested in trading may appreciate. I read a lot of financial writings, but rarely does one hit me as raw as this. As Jason [wrote on April 10](... In my view, trading the markets is by far the most difficult mental discipline in the world. Trying to predict where a mostly random time series is going to go, no matter what the time frame, often feels like an exercise in futility. Even if one can find a system or process that does a decent job of this task, that is only taking care of what is actually the easiest part. Next, trying to stay disciplined over long periods of time, where the message one often gets is that what you are doing is not working is a mental exercise that can absolutely suck the soul out of you... On top of this, it's only over very long periods of time that one can actually determine if what they are using as an edge is actually valid, and by the time you can figure that out, it is most likely too late. The only real answer I know to help combat this is one of diversified return streams. Trading the market, in whatever form, should be just one of these return streams, and ultimately should not be correlated to the other return streams in your financial portfolio. In this way, Jason says trading can be an "alpha generator," or a source of excess returns for your overall portfolio, "rather than the main driver of growing your wealth." That's why Jason says, "This may be the most important lesson I have learned as a trader for over 30 years." There's so much wisdom in these thoughts, it's easy to see why Jason is considered a "market wizard." First, you may notice a lot of what Jason says revolves around the idea of having a process and sticking to it long enough to see if it works. That's hard to do itself. Second, the idea of having "diversified return streams" is frequently overlooked but cannot be said enough. This is real, useful diversification: generating returns from different sources, not just owning a bunch of different things and thinking you are diversified. To be clear, Jason's a futures trader. He's not buying high-quality stocks and holding them for the long term, at least in his work trading for clients over the past 30 years. But his principles get to the heart of what it takes to achieve market "wizardry," no matter how you prefer to get there. Go against the 'herd'... Jason's work, though different in practice given his futures trading focus, reminds me of our Dr. David "Doc" Eifrig's trading strategy in Retirement Trader, which I've been writing about this week. Lately, I've been reading a lot of essays that Doc has written about his No. 1 trading strategy of all time. As Doc [wrote back in 2020](... There are two types of investors... The first investor is one who gives into fear and tends to do what the "herd" does. The other investor is one who not only ignores the herd, but takes advantage of others' fears in order to gain profits. We all like to think we're the second type of investor. But in reality, few of us are. Most investors fall into the first category. Think about it... After the housing bubble burst in 2008 and 2009, were you willing to buy stocks? They were trading for a mere 12 times earnings in 2009 when the economy started showing signs of life. My guess is that few folks had the courage to buy. That would have certainly been going against the herd. But some brave investors – the legendary Warren Buffett, for example – took advantage of the massive opportunity to buy quality stocks at huge discounts. For the smart investor, this led to life-altering returns. Doc's trading strategy isn't solely focused on trader "positioning" like Jason's, but it is similarly tailor-made for going against the "herd" and diversifying your income streams while profiting from others' fears and behaviors. Here's the deal... Doc's strategy uses options, which I know might turn some people off immediately. You see, most people buy options to try to juice their returns... but they end up taking on more risk in the process. But with Doc's strategy, you sell options on stocks you love and get income up front in the deal... with less risk than owning shares of the stocks outright. In my view, this should be one of the most popular trading strategies, but you won't find it mentioned in the mainstream. However, Doc has shown hundreds of thousands of readers how to use it since launching his Retirement Trader advisory back in 2010. It works in virtually any market environment but really well during fearful times. And as we've mentioned before, Doc has put together a staggering record of 211 consecutive winning trades in Retirement Trader... an average annualized return of around 20% in each of the past three years... and a 95% win rate since starting the publication. So this is a repeatable process... and one that we think every investor should consider today if they have capital to put to work. It's particularly great for folks looking to boost their income in retirement, but it can work for anyone willing to try it. There's no better guide than Doc. And through midnight Eastern time tomorrow, you can try a Retirement Trader subscription for 60% off the usual price. You can hear all the details, directly from Doc, [through this new free presentation]( if you haven't already. And, if you're still not convinced to hear Doc out, let me end with this... 'Just do what Doc says'... One year ago today, our publisher Brett Aitken sent an e-mail to all Stansberry Research readers with the above subject line. It made me chuckle because I knew what Brett was getting at... In short, when Doc speaks, we listen. As Brett said in that note... I'm absolutely certain that simply listening to Doc and following the approaches he recommends will make you far wealthier and more secure than anything else you could possibly do – at Stansberry or anywhere else. [Click here to learn more about Doc's favorite trading strategy right now](. --------------------------------------------------------------- Recommended Links: ['Things Don't Feel Right in America...']( And regardless of who wins the White House, it's unlikely to get any better. But this 95% accurate trading strategy can help. It has racked up 55 winners and ZERO losers during the last three elections... and can add thousands of dollars to your income every month, no matter what's happening in Washington, D.C., or on Wall Street. [Click here for this "instant cash" solution](. --------------------------------------------------------------- [Forget the Election – This Man Could Shape Our Destiny]( With the election around the corner, you're probably wondering who will take the White House and how that could impact your lifestyle and finances. But Pentagon consultant Joel Litman warns it won't matter who sits in the Oval Office – because this "shadow" politician has triggered a chain of events that could have far more impact on your money than any president. [Click here for details](. --------------------------------------------------------------- New 52-week highs (as of 4/23/24): Grupo Aeroportuario del Sureste (ASR), American Express (AXP), Liberty Energy (LBRT), Ryder System (R), Sprouts Farmers Market (SFM), and Veralto (VLTO). In today's mailbag, feedback on [yesterday's Digest]( about "being your own financial boss"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "[Investing is] what I call a 'black art', by which I mean something where there is no right or wrong, but some approaches are better than others, but there is no best approach. Other black arts: art, sport, weight loss, health, entertainment, story writing..." – Subscriber Richard A. All the best, Corey McLaughlin Baltimore, Maryland April 24, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,348.2% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,294.1% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 895.5% Extreme Value Ferris WRB W.R. Berkley 03/16/12 720.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 624.7% Retirement Millionaire Doc HSY Hershey 12/07/07 459.1% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 451.8% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 373.6% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 365.3% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 333.3% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,666.2% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,248.5% Crypto Capital Wade MATIC/USD Polygon 02/25/21 816.3% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 421.1% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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