| | Hey there, it's Garrett. | I spent 12 hours staring at the ceiling last night. Not New Year anxiety—my mystery signal is flashing red heading into 2026, and I have no idea what's coming. | This indicator went negative March 7, 2023. Five days later, Silicon Valley Bank was gone. | Flashed red in August 2022, two months later Liz Truss was out in England. Zero media warning either time. Just this signal I can't even explain. | Right now? It's telling a story I've seen before. | I don't know what this thing measures. Financial stress, liquidity problems, leverage unwinding—something. But it goes red about a week before major stuff breaks. Not normal corrections. I'm talking events that nobody sees coming until they're already happening. | Everyone's publishing 2026 predictions. S&P to 8,000, recession calls, the usual forecasting theater. But the events that actually move markets? COVID lockdowns, SVB collapse, Russia weaponizing energy, China's zero-COVID flip—all unknown unknowns that consensus missed completely. | Here's what keeps me up: We're sitting at what looks like a liquidity cycle peak. The Global Liquidity Index shows we're hitting levels that historically precede big outflows. When those peaks reverse, foreign money leaves fast. | 19% of US GDP is linked to equity markets from foreign capital. The way markets went up since 2022 wasn't earnings growth—people just paid higher multiples for everything. Only 5% of gains came from actual earnings. The rest? Pure speculation from more money chasing the same stuff. | If international flows reverse, valuations compress whether companies are earning or not. | Want to see an unknown unknown developing? Look at the Russell 2000. We've been bouncing off the 50-day moving average for months, showing weakness into the new year. | When small caps break that level, institutional funds automatically shut off. It's coded into their systems—break the level, selling accelerates. | The Santa Rally everyone expected? Failed to show up, especially in small caps. That's not normal. Weak seasonality signals fragile momentum heading into January. | I'm going into 2026 expecting 2022-style volatility—seven major reversals instead of the usual one or two. Shorter trades, tighter stops, more respect for momentum. | What I'm watching: 50-day moving averages on the S&P and Russell. These are institutional shutdown levels. Insider buying in beaten sectors—when CEOs put their own money down, like Nike's guy dropping $1 million, the research shows it matters. Keep cash ready because the best trades come when everyone else is forced to sell. | Markets need catalysts to move higher, and I can't identify what that would be. Foreign capital? Risky given geopolitical mess. China stimulus? Maybe, but that lifts commodities more than US stocks. | The Fed can provide liquidity to prevent breakdowns but can't force upside without a major catalyst. We might get a sideways market into April—liquidity preventing crashes but unable to drive the next leg up. | Nobody knows what 2026's unknown unknown will be. Trade agreement, war ending, something nobody's thinking about. What I know is this: The stress indicators that predicted SVB, the gilt crisis, every other "surprise"—they're flashing warnings again. | Everywhere I went in New York last week, people were talking silver. When everyone's talking the same trade, that makes me nervous. Silver's up 166% this year. | The COMEX keeps raising margin requirements. Classic signs of a top forming. | I don't know what's coming or when. | But I'm watching the signals, keeping stops tight, treating this market with respect. | Look, I could be completely wrong. Maybe 2026 is smooth sailing and I'm just paranoid from too much time reading market data while fighting a sinus infection. But I don't think so. | I'll be breaking down exactly how I'm positioning for this in the TheoTrade chatroom over the next few days—specific levels I'm watching, which sectors I'm avoiding, and what I'm buying if this signal proves right again. | If you're not in there yet, this might be the week to get in. | Because if this signal's right again, things are gonna move fast. | Stay Positive, | Garrett Baldwin | |
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