From the pits of 19th-century speculation to today’s systematic hedge funds, trend following has remained the ultimate trading edge. Here’s why it works—and why it always will.
For centuries, traders have tried to predict markets—chasing news, studying fundamentals, and searching for a perfect formula to outthink the crowd. Meanwhile, the only strategy that actually worked was the simplest one: Follow the trend.
Nobody wanted to believe it. Trend following felt too passive, too reactive. Human nature prefers action, control, and the illusion of certainty. But markets don’t reward ego. They reward discipline.
The Unspoken Truth of Early Trading
Trend following wasn’t born in a lab. It wasn’t a theory crafted by economists. It was a survival mechanism.
In the 1900s, the most powerful traders—Gould, Patten, Cutten, Livermore—moved markets through insider knowledge, manipulation, and sheer size. The only way smaller traders survived was by recognizing the trend and riding the moves made by the big players.
Stock market bulls have been watching the homies like hawks.
It's a vital industry right now.
Alfonso recently wrote about the Home Construction ETF $ITB breaking to new lows relative to its defensive peer group, the Real Estate ETF $IYR.
He said, "This ratio has historically been a leading indicator for the broader market. During prior cycles, you can see clear divergences where ITB/IYR tops or bottoms ahead of major turns in the S&P 500."
In true commodity supercycles, shiny yellow rocks outperform stocks.
Last week, we outlined why we thought buying gold and selling stocks was a good idea. If you haven't had a chance, you can check out that post.
But that's not it.
We've also been pounding the table on how bullish we are on the precious metal mining stocks. They're testing a key level of polarity relative to gold futures.
This is the level where the miners begin to outperform gold.
We're also heading into the sweet spot for junior gold mining stocks based on seasonality.