HX Weekly: April 14 - April 18, 2025

Hello reader, welcome to the latest issue of HX Weekly!

As you probably know, we stopped publishing HX Daily back in February.

If you would like to continue to receive similar FREE DAILY content from me (Enrique Abeyta ) – please sign up for my free e-letter Truth & Trends, which published by Paradigm Press Group publishes.

You can subscribe by clicking on the box below…

Since then, we've been very focused on the beta for our algorithmic trading platform, Signal Trader Pro. We're incredibly proud of it and are prepping for an official launch on May 1^st . Check out our Signal Trader Pro site here if you haven't seen it.

So, what's HX Weekly all about?

Well, each Friday, we'll bring you a new edition of HX Weekly that includes three distinct sections.

In the first section, Thoughts on the Market, we'll offer insights into current economic and market news.

In the second section, HX Daily Redux, we'll revisit investing concepts, tactics, and more from past issues of HX Daily.

And in the third section, Market Wizard’s Wisdom, we’ll share thoughts, quotes, and theories from the greatest investing minds of all time.

Now, let's dive in!

I: Thoughts on the Market – Volatility Equals Opportunity

Ok. It was a crazy week in the markets again.

It's been over two weeks since President Trump announced a wide-ranging slate of global trade tariffs, otherwise known as "Liberation Day."

As we all know by now, “Liberation Day” drove many to “liberate” stocks from their portfolios as we experienced a massive global selloff.

These types of events are known as “exogenous shocks," and they have occurred many times before.

Exogenous shocks are unexpected events that originate outside of an economic system or organization, significantly impacting it. 

These shocks are not caused by internal factors within the system but instead arise from external sources and can have positive and negative consequences.

"Liberation Day" was an exogenous shock, as was the Lehman Brothers' bankruptcy in 2008, which precipitated the global financial crisis, as was the global breakout of COVID-19 in 2020.

The reasons for the panicked market-wide selloffs were unique in each of these situations. Moreover each selloff “felt” different.

That said, the price action following these market selloffs is typically similar, if not predictable.

The fact is, whether a major decline occurs in a Bull, Bear, or transitioning market, there will always be a bounce.

The key to trading in these volatile environments is knowing when it's time to act and when to do nothing.

Now, there is never a perfect setup during these periods, but there will always be signs.

NYSE 90% Volume Downside

This indicator of panic selling occurs when 90% or more of the shares traded on the New York Stock Exchange are trading lower versus higher on a given day. 

This indicator is a sign that emotionally driven panic selling has set in.

Here is a chart showing the percentage of up versus down traded volume on the NYSE. We have drawn a red line at this level. 

This is one of the key signs we can look for to make some trades.

Please note that this does NOT mean the market has bottomed. Instead, it signals an opportunity for the market to trade higher between +5% and +10%.

This can be seen as an opportunity to exit losing positions. It also can be seen as an opportunity to take profits on anything you buy once you see the bottom.

VIX Over 35

Another common factor signaling tradeable levels includes the “VIX” or “Chicago Board Options Exchange (CBOE) Volatility Index trading over 35.

We have drawn a red line at this level on the chart below.

On the chart, you can see we last reached this level in August 2024. That set up both a tradeable bottom and a sustainable recovery to new highs. 

Please note, it doesn't have to be EXACTLY at the 35 level. Back in 2022, it got close several times, and those created tradeable – and profitable – opportunities.

Again, these are just two signs among many to look out for as we navigate these choppy market waters.

The signs are useless, however, unless you have a plan to execute when you observe them.

Now, nobody knows what Trump or other nations will do next. What we do know, however, is that the Bull market is over.

Moreover, we know we're in a transition period, and market transitions are volatile.

Within this volatility, however, many tradeable opportunities will appear.

For example, if we look back at a chart of the Covid era selloff of 2020, it looks like a very straight and rapid decline.

However, if we look at a daily snapshot of that same period, we can see the price action was anything but linear or straight down.

In the chart, we’ve highlighted several streaks of the daily moves up and down. You can see that within this massive selloff, there were tradeable opportunities.

If you had made some strategic investments on 3/24/20, for example, and sold a few days later, you could have crushed it.

Now, we understand that on truly red days, it's challenging to realize you may be staring directly at a HUGE trading opportunity.

That said, if you've been paying attention these past two weeks, you'd realize we are seeing some of these historical patterns from 2020 repeat in real time. 

This means that within this tariff-induced volatility, traders will have opportunities to make money and reposition in the coming weeks. 

So, you may be asking? How exactly should we do this?

Well, as we wrote last week, whether you are fully or partially invested or 100% in cash on the sidelines, the time for action is now!

Moving forward, until the market establishes a new trend, we recommend employing the “3.5% rule”.

To apply this rule to your trading, divide your portfolio into several equal portions—say, six to eight "units."

On any day the S&P 500 drops by -3.5% or more, you use one "unit" to buy. On any day the market rises by +3.5% or more, you sell one "unit."

The goal of the "3.5%" rule is to be systematic about your trading and remove emotion from the process. This type of tactical trading would have worked during the Covid-era selloff depicted in the chart above, and it will work now.

No matter your current situation, aim to get to 30% to 50% invested as your base. Use the up days to exit your highly speculative positions and raise cash. Conversely, use the big down days to scoop up the high-quality stocks on your shopping list.

Remember, we always want to have some cash on hand so we can act quickly should other opportunities arise.

Following the 3.5% rule will help you to avoid common mental mistakes in trading like:

• “Loss Aversion” – refusing to sell a losing stock, even though you know you should

• “Gambler’s Fallacy” – looking for patterns in the market that don’t exist

So, remember, traders, volatility in the stock market equals opportunity! History proves this.

Create a plan and follow it to take advantage of this period in the market before it’s gone. If you don’t, you could miss out on substantial profits.

II: HX Daily Redux – The History of Gold

Today, we’ll revisit an HX Daily post from May 2024 titled "The Case for Bitcoin $100,000 Part 4”.

The title of that post is deceiving in that it was almost entirely about the history of gold within the context of Bitcoin being called “digital gold”.

That said, given gold reached historic levels this week, we thought reposting this content would be very timely. Enjoy!

As part of this week's series on Bitcoin, we did quite a bit of research about gold. Some of what we learned surprised us…

One interesting aspect about gold is that while we think of it as always having value as currency or a “store of value”, that aspect is likely only 3,500 years ago.

Gold had been around for thousands of years prior for use in jewelry, but it wasn't until the ancient Egyptians (using the gold from Nubia) began to use it as a medium of exchange. The initial medium was a coin called a "shekel," which was a combination of both gold (2/3rd) and silver (1/3rd).

The use of gold as a currency continued in many cultures, including the Romans and most countries across the Western world. It also eventually moved to other parts of the world across several centuries….

Another interesting note is that almost none of these countries used gold as their primary currency. It was too rare and difficult to work with, so most countries relied on silver and bronze.

Gold certainly played a role, but it was not the primary role in early currencies and as a "store of value."

This began to change in the United Kingdom. As the country ascended to a period of global dominance, they instituted a system where gold was used as a medium of "constant" value of exchange between countries all over the world.

As global trade began to expand, then it became necessary to have this medium of exchange. Interestingly, many countries also kept large stores of silver as a proxy for gold.

Until 1850, only Britain and some of its colonies were on the gold standard. The other used silver and/or a mix of metals. The "gold rush" in the United States led to a much more dramatic uptake in the use of a gold standard.

Beginning in the late 1800s, most companies began moving to some sort of gold standard. It started in Europe and then expanded to Asia by the early 1900s. That was only about a century ago.

The reality is that it was only about a seventy-five-year period when gold ascended to this status as the universal global "store of value" and was used as currency.

What ended it? War.

Once World War I began and sent economic ramifications worldwide, the governments saw their ability to adjust their economies negatively impacted. By holding to the gold standard, they were unable to make the adjustments they needed to keep their economies from collapsing.

Legally, many countries maintained a gold standard, but the reality is that they were departing substantially from really adhering to it. The Great Depression further dented the adherence to this idea.

This was cemented when President Franklin D. Roosevelt officially departed from the gold standard after taking office in March 1933. This allowed the government to devalue the dollar against gold and begin to attempt to stimulate the economy.

After this, other systems, including the Bretton Woods international monetary agreement of 1944, maintained some role for gold in the currency system. At this point, though, the U.S. dollar became more important than gold as a medium of international exchange.

These ties continued until roughly 1976 when the U.S. officially changed the definition of the U.S. dollar to remove references to gold from the standards.

Now – this is important for us to say – we know that many of our readers out there know 100 times more about the history of gold. We have presented a VERY abridged version of it here and its role in history and the economy.

There also are many theories about what role gold should play now and in the future in the economy. We are not weighing in on any of those ideas in this note.

Our point is that gold has had "value" for about 3,500 years, began to be adopted as currency about one hundred and 150 years ago, and that period lasted roughly one hundred years.

At this point, it was replaced by the U.S. dollar, which has been dominant for the last seventy-five years.

Again, there are major debates about whether that will last and what happens next.

From our learnings about gold (and the U.S. dollar), our central point is that "store of value" can be more transient and fluid than we think…

III: Market Wizard’s Wisdom – Herb Greenberg

As we're all painfully aware, the recent implementation of a new tariff regime by the U.S. and global retaliation have injected high volatility into the stock market.

In times like these, we all need to remember our investment goals and what type of investors we are.

This situation reminded us of a post we published in May 2024 titled "The Wisdom of Herb Greenberg". We want to share parts of that post here today. Enjoy!

We have been lucky in our thirty-year career to meet and work with some incredible folks. One of the best of those is Herb Greenberg.

Many of you are probably familiar with Herb.

He began his career as a journalist more than forty years ago and, after several stops, built a great franchise as a business reporter for the San Francisco Chronicle. He built a reputation there for doing critical reporting (and research) on the many "questionable" companies emerging during the bubble.

This attracted Wall Street's attention, and Jim Cramer eventually recruited him to his upstart financial website, TheStreet.com.

Not only is he super bright, but he has an incredible work ethic. Not sure how he does it, but it feels to us like he puts in a LOT of hours!

The output of all that work is also always great. He combines a critical viewpoint with a healthy dose of plain common sense. It is a rare combination.

Recently, he joined many smart and experienced investors to create a new company called Wall Street Beats. You can check it out here.

In May '24, we had the privilege of having Herb on the HX Podcast. We went through our long history and shared some stories about the past, but the last few minutes of the podcast were the most important.

On the HX Podcast, we like to ask our guests what a few (three to five) pieces of advice they would give folks interested in investing but who don't have the benefit of their years of experience.

In answer to this question, Herb had some powerful advice!

His advice? As an investor - KNOW YOURSELF.

Understand what your goals are, what your risk tolerances are, and what your comfort levels are.

Herb has a fascinating juxtaposition where he has been willing to take huge risks in his career, but he is very conservative as an investor.

He built an awesome portfolio of recommendations at our former firm that performed very well. They all were well-established businesses with deep moats and strong cash flow, which paid dividends.

Herb built a portfolio of stocks that reflected his tolerances. It was a portfolio that also did great.

Here is what he said on the podcast…

“…what I said here is very basic, but you know what? I think I have a decent finger on the pulse of the average guy. And I can tell you that people get carried away. And the reality is, I come back to know what your risk tolerance is. And if your risk tolerance is you love to be in the game, it's going to be very different than me. But you know what the reality is? There's no right or wrong way to it. There's zero. There's no right or wrong way to invest and make money.”

This is an especially powerful insight given current market dynamics…

Where investors make big mistakes and do real damage to their wealth is when they think they are one type of investor, but they are really a different type. THIS situation leads to permanent capital loss and can set folks back.

We strongly encourage you to check out Herb's work. You can follow him on X/Twitter and subscribe to his newsletter.

You rarely find someone with this experience, critical insight, and plain old common sense.