- The Economist loves Eli Lilly.
- “The Everything Drugs” will save us.
- Short LLY.
So, let me get this straight.
Instead of just exercising and eating healthier like a normal person trying to lose weight…
A “miracle drug” lets you sit on your fat ass and get skinnier?
Sure. What could go wrong?
Turns out a lot.
I keep hearing horror stories about Eli Lilly (LLY) customers.
It’s depressing, these horrible side effects.
Still, The Economist, in its infinite wisdom, is throwing a party on its cover:
These folks are notoriously on the wrong side, particularly at extremes.
This clearly fits the bill.
Too Late and Too Much
Keep in mind, LLY rallied more than 800% over the five-year period before this magazine cover was printed.
Notice how The Economist didn’t publish this cover before that historic 800% rally.
Whether it was on purpose, I don’t know, but it sure was too late to have any real value…
Here’s a chart of LLY as well as the stock compared to the S&P 500 Index:
We’re looking at LLY on an absolute basis along with its relative strength, plotted in blue.
Notice where that magazine cover was printed – right near the top.
Sentiment extremes like this follow a pattern. First, the stealth rally nobody notices. Then, the explosive gains everyone chases.
Finally, the magazine cover and late-comer hype… right before the rug-pull…
I’ve seen this story before. And I think LLY is good for a short entry.
The Economist and its cover suggest a bet that the price of LLY stock is going to rise.
We want to take the other side of that bet – that the price of LLY stock is going to fall.
I don’t know what problems Eli Lilly will face.
Fundamentals and the science behind so-called miracle drugs are far outside my wheelhouse.
But I can judge sentiment pretty well.
And the fact that these journalists parading around as economists waited until the company was worth over $850 billion…
Is it malicious?
Did The Economist wait for Eli Lilly to become a top 10 company on Earth?
You see that cover. You see that chart.
I’m not making this up. But that doesn’t really matter.
When I see Eli Lilly’s Danish counterpart Novo Nordisk (NVO) falling off a cliff, losing 60% of its value…
I’m thinking the American one is going to fall next.
When two industry leaders share the same catalyst – weight–loss drugs – but one collapses while the other lingers near highs…
It’s not a divergence. It’s a delay.
We’ll know it when we see it.
If and when LLY breaks down and joins NVO, we’ll enter our shorts.
I’ve been waiting for this one to break down.
And, during this bounce for stocks over the past month, LLY decided not to participate.
LLY’s relative weakness stands out. So the timing for this short could be very soon:
Look at that historic ripper in the Nasdaq-100 (QQQ) and the S&P 500 (SPY), up 22% and 17%, respectively.
Meanwhile, LLY never got the memo.
The Great Depression LOL
I just want to remind everyone how just three weeks ago, The Wall Street Journal was trying its hardest to scare your parents.
I especially enjoyed that part about the Great Depression. I thought that was a nice touch:
Meanwhile, since then, stocks have mounted a historic rally.
And we’ve been in Tesla (TSLA), Coinbase (COIN), Hims and Hers (HIMS), and others that have absolutely soared higher… essentially making our year.
We can just pack it up, take our ball, and go home for the rest of 2025 if we wanted to.
That’s how good the past few weeks have been.
But, I can tell you from experience, this wouldn’t have been possible without all the people who were wrong.
As they say, “If you ain’t fading, you ain’t trading.”
There were plenty of doom-and-gloomers to fade last month.
And for them we remain grateful…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs