Summary
Phil Anderson argues that the current rotation out of AI/tech stocks and into banks, industrials, commodities, and gold is not surprising but is a predictable feature of the real estate cycle. He explains how Mexican Pete patterns from Gann’s Truth of the Stock Tape serve as a confirmation tool for cycle positioning and a filter for selecting only the strongest breakout candidates. The email also raises stop losses on several existing portfolio positions and trims the watchlist.
Key Claims
- The “Magnificent 7” AI stocks (Nvidia, Microsoft, Amazon among others) peaked in late October–early November 2025, which Anderson identifies as a seasonal midpoint date — confidence: high
- Sector rotation into transportation, banks, industrials, and commodities is a predictable feature of the second half of the real estate cycle, not a random market event — confidence: high
- Speculative assets (Bitcoin, AI stocks) outperform coming out of the mid-cycle slowdown due to liquidity and stimulus conditions — confidence: medium
- Resource constraints from a construction boom and rising geopolitical tensions ignite commodities in the late second half of the cycle — confidence: medium
- A second-half peak and decline in the U.S. dollar acts as a tailwind for precious metals — confidence: medium
- Mexican Pete patterns (flat-top resistance with higher lows) act as a reliable accumulation signal and trade filter; stocks not forming these patterns should be avoided regardless of narrative — confidence: high
- PSE’s avoidance of Nvidia and Palantir was deliberate — neither formed a Mexican Pete pattern and neither fits the late-cycle sector profile — confidence: high
- Current stops for several positions are placed at the early February seasonal midpoint date, consistent with the methodology of using seasonal dates as reaction reference points — confidence: high
Mex Pete References
- Core reference: Anderson directs readers to page 67 of W.D. Gann’s Truth of the Stock Tape, where Gann describes the price and time behaviour of Mexican Petroleum stock — a flat-top resistance with higher lows, equivalent to what modern technical analysts call an ascending triangle
- Interpretation: Described as a bullish accumulation pattern; Anderson’s rule is to only enter on the breakout from this pattern, removing discretion from stock selection
- Stocks confirmed via Mex Pete breakout (recent portfolio additions): Gold (GLD), gold miners, other commodity-linked producers, and two unnamed bank stocks
- Stocks explicitly excluded for lacking Mex Pete setup: Nvidia (NVDA), Palantir (PLTR), iShares Global Energy ETF (IXC), Chevron (CVX), Kinder Morgan (KMI), Chorus Limited (CNU)
- Selection principle stated: Among energy stocks breaking out, PSE chose the first movers out of their patterns as a sign of relative strength, leading to removal of later-moving names from the watchlist
Stock Picks / Signals
Stop Loss Raises (existing positions):
- SPDR Gold Shares ETF (GLD) — stop raised to $420
- Exxon Mobil (XOM) — stop raised to $136
- BetaShares Global Energy Companies (FUEL) — stop raised to $7.20
Removed from Watchlist (Australian):
- Chorus Limited (CNU) — removed; stock trading weaker and invalidating chart setup
Removed from Watchlist (U.S.):
- iShares Global Energy ETF (IXC) — removed; later mover, already have stronger energy exposure
- Chevron (CVX) — removed; same rationale
- Kinder Morgan (KMI) — removed; same rationale
No new buy signals issued in this email.
Predictions / Forecasts
- Commodities (including precious metals) expected to continue outperforming as the cycle moves deeper into the second half, driven by construction boom resource constraints and geopolitical tensions — no specific price targets given
- U.S. dollar expected to peak and decline in the second half of the cycle, providing a tailwind for gold and precious metals — no specific timing or price level given
- Implicit forecast: AI/tech leadership rotation into banks, industrials, and commodities is ongoing and consistent with late second-half cycle dynamics — no end date specified
Notable Quotes
“In other words, our place in the cycle tells us what to look for.”
“By searching for Mexican Pete’s and only trading the breakout, there’s no guessing on which stocks to buy. Mexican Pete patterns will also keep you away from stocks trading in a weak position.”