The First Big Deal of the Cheaper-Money Era By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - October’s bumpy start and what comes next…
- Two major moves from big corps, and what they say about the future…
- Billions are pouring into early-stage tech with another huge catalyst set to hit Thursday…
- Uranium stocks are white-hot…
- The failed bitcoin breakdown…
Election year seasonality has struck again... As we showed you Wednesday, the S&P 500 loses an average of 1% through the month of October. Where September has the long-term reputation for being the worst month for stocks, the last-ditch chaos of election years is also a threat. Here’s that seasonality chart of the S&P 500, going back 18 election cycles: 
But this October has been even more dramatic than usual. As I write, the S&P 500 has already lost precisely 1% month-to-date. But let’s dig deeper. What happens if we look at all the times the S&P 500 has put in a 1% loss, over three days, at the start of October? We ran the numbers, and you’d be surprised by a few things… Turns out, this is a pretty common occurrence. It’s happened 26 times since the SPDR S&P 500 ETF (SPY) started trading in 1993. In other words, there have only been five years where October didn’t see a 1% drop to kick off the month. And here’s what happened if you bought the SPY after a 1% drop at the start of October and held for 21 days: - A win rate of over 69.2%…
- An average trade result (wins and losses) of 1.9%...
- An average winning result of 4.9%...
- And an average losing result of 4.8%.
These stats really blow my mind. If stocks are positive by the start of November – which, in a year of such strong momentum, seems likely – they could tack on nearly 5% from these levels – enough to be at new highs. And the likelihood of that happening is more than 69%. What’s more, this gain could hit just as the election ends: which will the uncertainty from the air and set the stage for an even bigger end-of-year rally. October may continue to be volatile, but history says this is a dip to buy with both hands. And of course, we won’t stop there… Just for fun, I went and ran the same screen on the S&P 500 stocks. Note, this isn’t conditional on the S&P 500 falling 1%. This is just what happened when any given stock fell 1% in three days at the start of October: 
With an incredible 86.7% win rate over 15 trades, NextEra Energy (NEE) is the top trade for a volatile October start, in terms of win rate. But take a look at the average gain in utilities stock Edison International (EIX). It’s put up an average trade of 5.5% and an average winning trade of over 7%. And further down the list, there were even bigger average wins and trades for Ross Stores (ROST). Check out the stats for Goldman Sachs (GS), too. There are your targets for the month! Meanwhile, there have been two huge tech investments from big corporations this week... First and most recent is OpenAI’s $6.6 billion fundraise at a $157 billion valuation. That’s just a mite shy of CEO Sam Altman’s ambitious $7 trillion goal to power the future of AI chip production, but it’s a start. The fundraise comes at a convenient time. The Fed has just cut interest rates, putting a dent into the gobs of income being raised by cash-rich companies like Microsoft (MSFT) – who ponied up $750 million on top of the $13 billion it’s already put in. That makes private investment far more viable, especially when borrowing is cheaper. Nvidia (NVDA) was also part of the raise, along with a smattering of major money managers. And as I write this, news broke that JP Morgan, Goldman Sachs, Citibank and other big banks have opened a $4 billion credit line for OpenAI. To me, this raise is the opening salvo in a revival of the startup and IPO market. Now that credit is cheap, we’re about to see a whole lot more stories of major fundraises and exciting IPOs. Something to keep an eye on. But another investment, not quite-so-headline news, perked our ears up. Toyota Motors (TM) just invested $500 million in Joby Aviation (JOBY)… Joby Aviation is an early-stage company in the Vertical Take-Off and Landing (VTOL) vehicle space. In layman’s terms, Joby makes small helicopters that they bet will be as common as Ubers for taxi transport, especially in large metro areas. And in time, the idea is that these flying vehicles could even operate without a human driver. Toyota’s new $500 million investment in Joby represents a huge piece of the pie. Joby is currently a $4.4 billion company by market cap, so we’re talking roughly one-eighth of the enterprise. And Toyota knows a thing or two about transport. They’re only the world’s biggest automaker by production and second biggest by market cap, behind Tesla (TSLA), after all. This also ties us back to the automation theme we explored Wednesday. A major upcoming trend is autonomous vehicles and robotaxis. And just as OpenAI’s fundraise may be the first thunderclap in a massive hurricane of early-stage tech deals, this investment from Toyota may represent the first turn of the gear for high-tech transport. Our friend Luke Lango from our corporate partner InvestorPlace is all over this story. In fact, he’s set to debut a huge research presentation all about the opportunity in autonomous vehicles next week. There he’ll be discussing the key industry subsector that every autonomous vehicle company desperately needs. And the details of one small-cap growth name he thinks could dominate. Go here to sign up for that. While you’re at it, stay tuned for tomorrow’s TradeSmith Daily. We’ll be publishing an interview I just recorded with Luke, and I’ll just tell you now: This interview will be essential viewing for anyone looking to get invested in this space before the crowd’s gears really start turning and the best buys are gone. Nuclear energy stocks are white-hot right now… Call it the impact of Microsoft’s massive investment in Three Mile Island, which we covered last week, but the momentum has not faded in the nuclear energy trade… From the first reports of the Microsoft deal on Sept. 19, the Global X Uranium ETF (URA) has run away from the flat S&P 500, tacking on another 8.8% in gains since: 
We put nuclear energy on your radar all the way back in October of last year. And while the recent summer volatility has not been kind to the sector, URA is still up a cool 16.4% from those levels. And as we showed you back in January, nuclear is one of the few viable fossil-fuel-free paths forward… especially when AI energy demand is set to skyrocket. This is all just to say: Make sure you have some amount of exposure in this space. Microsoft securing Three Mile Island is a big deal, and it shows that the world’s top minds are very seriously thinking about nuclear energy as a necessity to power the AI future. Finally, let’s check in on bitcoin… Vexing my analysis last week, bitcoin (BTC/USD) failed to break out over the weekend. And the chart looks pretty ugly, as you see below. After it briefly broke above the minor falling resistance (top black line), bitcoin quickly dipped back and smashed down through the second, primary resistance that it had previously tested as support: 
So, we’re back in the falling parallel channel. That means we should expect lower bitcoin prices in the weeks ahead. That is, if the current horizontal support at $60,000 doesn’t hold (second blue line above). There’s been a lot of price action around this level this year. There’s also some support down at $54,000, which could hold BTC up before (and if) we test the bottom of the channel. I still read this as short-term pain for long-term gain. Zooming out, we’re entering a new era of easy money policy not just in the United States, but also abroad. We haven’t yet seen the traditional post-halving run, so it could be that the macro-level financial pressures have kicked the can down the road. 2024 may not prove to be the year we see a six-figure bitcoin. But there are plenty of signs that 2025 could be. History has proved that bitcoin, as a disinflationary asset, is one to buy on the dips. I would have a strong appetite if we do plumb the bottom of this parallel channel. To your health and wealth,  Michael Salvatore
Editor, TradeSmith Daily | 
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