Making Hay Monday – October 6th, 2025

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David Hay

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Haymaker

Making Hay Monday

Continuing the break-out theme

“Markets move sharply when they move. If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try to fade that price move. When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.” -Hedge fund legend Paul Tudor Jones

“Trade the narrative but own the truth.” -David Rosenberg, from his 10/3/25 Breakfast with Dave

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Hello, Subscribers:

One of the primary reasons I recently did our comprehensive review of this newsletter’s accumulation suggestions since 2022 was to emphasize the efficacy of breakouts. These are otherwise known as range expansions, per self-made billionaire investor Paul Tudor Jones.

Naturally, these don’t always work, but over my 46-year (and change) career I’ve realized my best ideas have had this characteristic: shattering overhead resistance in at least a three-year trading range. As I’ve frequently opined, the bigger the base, or trading band, the bigger the move post-breakout.

The below charts were previously published in these pages, but the message is a powerful one. Moreover, as most of you are aware, we ran these early in their upside range expansion phase. In the case of gold, it was not only a range expansion out of almost a four-year trading band, it achieved a new all-time high when it definitively took out overhead resistance just north of $2,000.

Six-year chart of gold (XAU) with the critical resistance line at $2,000 illustrated

Bloomberg and Haymaker (resistance line)

Five-year price chart of the Senior Gold Miner ETF (GDX)

Five-year price chart of the Junior Gold Miner ETF (GDXJ)

Last week, I once again was hosted by the genial and erudite Adam Taggart on his Thoughtful Money show. (A link to that is provided at the end of this Making Hay Monday; caveat listener, we had some audio problems, but most of it was unaffected.) We’ve started doing a review of attention-catching commentary from other guests on his channel. One of those this time around was Mark Newton, the Head of Technical Strategy at Fundstrat, co-founded by one of CNBC’s perma-guests, and perma-bulls, Tom Lee.

Mark impressed me with his lucidity and logic. He’s a big fan of letting the trend be your friend; basically, he likes to buy high and sell higher. In my younger days, I struggled with this approach; truth be told, I actually fought that thesis. But around 25 years ago, I began to become a believer. It helped me exit some of the tech stocks that were breaking down in the early days of the dot.com (soon to be dot.bomb) bubble’s spectacular demise at the time. (Range expansions generally work both up and down; i.e., when a multi-year trading range is violated on the downside, more weakness is probable.)

Unfortunately, it took me many years to fully embrace this technique. As I’ve previously admitted in these pages, the worst mistake I made in my career, among many, was my failure to totally appreciate the significance of the breakout by the S&P in early 2013 and the NASDAQ two years later.

It’s also a lesson I (expensively) learned in my personal long/short account. As I’ve also conceded in my writings and my podcasts, it cost me a ton of money (I really don’t want to tabulate how much) with stocks that were breaking out but where I didn’t cover my short position, or at least materially reduced that exposure.

Someone once said words to the effect of: “You learn more about investing being on the wrong side of a short than you do in a Harvard MBA program.” Even though that’s a bit of paraphrase, the sentiment rings resoundingly true.

As I reflect on why breakouts work – and which perform the best after one occurs – a very simple analogy comes to mind. To wit, in the ideal set-up, both the price and profits are making new multi-year highs or, even better, all-time highs. That combination creates a pressure-cooker situation where the steam has built up to the point that it blows the lid off the pot. The longer the pressure has been building up, the more explosive the eruption. Often, the market seems oblivious to this development, even if earnings are also boiling over.

Admittedly, it’s not uncommon for earnings to follow the breakout. Even though some upside is foregone, it’s not unreasonable to wait for profits to confirm by also breaking a downtrend or making a new high.

With the gold miners shown above, it was clear last spring, when they continued to trade at bargain prices, that their earnings were poised to rip. At that point, gold was already selling for north of $3,000/ounce, allowing even mediocre miners to post robust earnings. Now, with bullion in spitting distance of $4,000/oz, this long-despised sector is up over 120% for the year. That’s enough to have motivated me to suggest more profit-taking with ETFs like GDX and GDXJ. (We’ll soon consider a name that, in my view, remains worthy of some accumulation.)

Another example of a previously highlighted breakout was XLF, the iShares Financial Sector ETF. As you can see, the message was clear and the follow-through has been rewarding since resistance at $40 was clearly overcome…