Investor's Edge with Gary Kaltbaum - Inflation Trade Showing Up Again?

Episode Date: September 1, 2023

garyK.com or https://garykaltbaum.com/Considered one of the finest radio shows on the markets, the business world and everything that affects them, Investor’s Edge with Gary Kaltbaum, a Fox News Channel Business Contributor, brings his in-depth take every day. If you want fluff, this is not the place. Gary is a hard hitting and pull-no-punches host especially when it comes to people in power affecting you and your money. His daily in-depth analysis on the markets is second to none.

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Terms apply. Lounge access is subject to change. See Capital One.com for detail. Investors Edge with Gary Coltbaum. Straight talk about you and your money. Now from the BizTalk Studios, here is Gary Cultbaum. And welcome once again to Investors Edge. I'm Adam Sarhan, in for Gary Kay, who's out today.

Today is September 1st. It's Friday, 2023. We've got a great show for you. And I want to thank you very much for being here. Before we jump into the show, as you know, this is a show about you and your money and all the fun points in between. Just as a quick reminder, if you don't get the show in your city,

you can go to GaryK.com. You can listen live or archive. We are live Monday through Friday, 6 to 7 p.m. Eastern. Also at GaryK.com, you can follow Gary on Twitter. Just press the button, or you can go to Twitter or X now. It's called X. And type in at Gary Culpom. That's his Twitter handle.

You can also subscribe to Gary's morning notes and get them sent directly to your inbox for free. You may email Gary, ask about a... money management services or join convictionleaders.com, which is his premium service. And I love it. It's sent out several times a day. I get it. I help him with it.

It's a fantastic, I love reading Gary's thoughts throughout the day. It's a great way of just staying plugged in. And it's short. It's to the point. If you know Gary, you're listening to the show, he doesn't mince words. He's bam, bam, bam. And he gives you the highlights and the important things, meaning he doesn't give you 50 pages of a lot of stuff and then tell you nothing at the end of it. So it's something I'd recommend

people do. Sign up at convictionleaders.com. You can take a free trial and see if it's for you. So let's talk about the market. It was jobs day today. Jobs report came in and it wasn't too hot, not too cold. It wasn't really a Goldilocks number either, but it was more along the lines of just taking pressure off of the Fed to have to continue to raise rates very aggressively. That's the Big picture. This market ended mixed today. You had the NASDAQ down just slightly and the down and the S&P were up just slightly. I mean, very, very, very small on a percent change basis. The actual jobs number, if you're interested, unemployment rate unexpectedly rose to 3.8% in August and the payrolls increased by 187,000. The expectation was 170,000. So that was 187 compared to 170. And then the counts for June and July were revised lower. Well, all right, what does that mean? You know, I remember in the old days when I first got started in the 90s trading,

it would be early 2000s. When you got 5% unemployment, that was considered what they call full employment. Literally, I mean, that was like the best you could possibly be. We've been pegged at 3.8% under 4 for a while now. So I've been under 5 for a really long time. So it's important to step back and put, things in perspective. It's really easy to do what my friend Danny talks about and get lost in the sauce and you get caught up with this number, with that number, or with whatever the case may be.

And that's possible. And it's normal. It's easy. The market, the world we live in is a very distracting place. Well, all right, this and that and this and that. What matters? What matters, folks, is price, right? What shows up in your statement? The single most important variable that determines whether you win or lose money on Wall Street that I'm aware of is the price. It's just that simple. The price is what shows up on the statement. Nothing else. Jobs report doesn't show up on my statement. The earnings don't show up in my statement. Even volume doesn't show up on my statement. So it's really important as you put pieces of the puzzle together to step back and always ask yourself, okay, what matters here? It's a puzzle. And it's the most fascinating

in what is a good word here uh fulfilling it is the most fascinating most intellectually stimulating most fulfilling endeavor that i've ever come across in my entire life now you might be like well adam you know it's the it's the challenge people like playing sudoku or like playing you know crossword puzzles or whatever the case may be and god bless all the more power to you to me it's all of that plus competitive sports plus plus plus you check every possible box you can think of in one and it's the market and it's it's a labor of love for me at this stage in my life it's it's something that i tremendously enjoy doing because it's always new it's always refreshing it's always changing

it's always challenging you know they it's not like there's a magic formula where you do one plus one equals two and that's it and it's tremendously satisfying and fulfilling when you quote unquote figure it out. And that's the high level picture of the market. So when you look at the market, the jobs are poor or inflation data, it's important to ask yourself, what does all that mean? And the topic of today is going to be inflation. It's really, really important to step back and understand inflation is the proverbial

elephant in the room for the Fed. The Fed's got a inflation problem and it needs to figure out a solution. and it doesn't have one just yet. The solution it's had so far has been raising rates. Well, all right. We started over a year ago, a year and a half and change or somewhere in that range, and you started at zero. Because after COVID, what did the Fed do?

They took rates to zero and they pumped, I mean, almost an endless amount of money into the system. I think it was the largest bazooka, central bank bazooka fired, and it was global central banks. And what happened? Spark global inflation. Simple. That's all.

I mean, that's a consequence of printing all this money. So we have inflation. And by the way, they kept rates lower and artificially low for too long. And that's what caused inflation. Well, all right, we have inflation. So last year, the market was supposed to, quote unquote, well, the market fell, because the economy was supposed to, quote, unquote, have a hard landing or maybe a soft landing. And what actually happened, there was no landing whatsoever.

And by landing, it just means a recession. Instead of having a recession, we're now interest rates are near 5.5%. So they started at zero or less than zero because they were pumping money in. They stopped pumping money in. Then they started raising rates to combat inflation. Okay, what happened? You now have stubbornly high inflation. In the old days, I mean before the Fed went,

bonkers with their printing of money, 2% was their target for inflation. And for a long time, even when they were printing money, QE1 and QE2 and QE3, they still had relatively low inflation. Flation was just really low. They figured, hey, why not have a little bit of inflation? But they didn't expect it to be this high for this long. So when you get a jobs report where the economy adds almost 200,000 jobs, what does that mean? Inflation's going to, you're for now, stay stubbornly high. And what does that mean? The Fed has to continue raising rates.

On a macro level, the two big forces that sent stocks lower last year were higher dollar and higher rates, the yield on the 10 year. Okay, what happened most of this year? The stock market's gone up nicely. Okay. But the U.S. dollar and the yield in the 10 year were pretty much, were down most of this year up until about 6, 7, 8, just a few weeks ago, maybe two months ago. Maybe two months ago, let's put it that way, two or three months, the summer.

And then they started creeping higher. I think the dollar is up seven weeks in a row now. So that's put some pressure on stocks. And now we're seeing oil prices go up. Look at USO when you have a chance. And I'll talk about oil and oil stocks and ETFs and a whole lot more. But we're seeing inflation even now with rates from the Fed at five and a half percent, still inflation is a problem.

And the economy continues growing very nicely, even with higher rates. So what does the Fed do? They want inflation to come down, so they've got to keep raising rates. So it's one thing to raise rates from zero and stop printing money, injecting money to the system. That's one thing.

Now, with rates at 5.5%, what are they going to do? Raise another 500 basis points? And then what? Think about that. When do they stop? And what are the ramifications for the stock market? Go back to where I said earlier.

Price is what matters. And for now, the market, the stock market, that is, is doing its best to shrug all of this off. And it deserves a lot of credit. Because a year ago, had this been happening, you'd be way down. But the fact that the economy has been so resilient, it's been a bullish backdrop for stocks. Really, it's just, it's that simple.

If we were hemorrhaging two, three, four, five hundred thousand jobs a month and there was a recession and housing prices are crashing and, you know, if any remember 2008 or even other recessions, that's just not the case yet. That could happen. Anything is possible. But there's also a chance that inflation comes down. The Fed doesn't have to, you know, the economy doesn't go off the deep end into a big, hard landing.

anything is possible. And as investors and traders, our job is to assess risk and reward. It's really, folks, that simple. Almost every decision I make, I consider it to be a trade. Even should I cross the street or not? I'll talk about that more in a few minutes, but just put things in perspective. Mark was quiet today. Fed's doing its best to fight inflation.

And it's our job to put the pieces of puzzle together. Up next, we're going to talk about some more stocks, some sectors, some more fun stuff. I'm Adam Sarhan, and this is the one and only Investor's Edge. Hi, I'm Gary Kalbaum, hosted a nationally syndicated radio show Investors Edge. We're not just handsome radio people. We manage investors' money for a living, specializing in fee-based discretionary money management. No big commissions, just a fee on the assets that's managed.

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They're right by you. It's time to switch on the integrator units. get the brain cells working. You're listening to. Hey, this promises to be fun. Investors Edge. The last bastion of quality programming. With Gary Coltbaum.

It doesn't get better than this. And welcome once again to Investors Edge. In case you're just joining us or miss any part of the show, you can go to GaryK.com, rewind, pause, fast forward, listen at your convenience 24-7 anytime you want. So we're talking about inflation. Is the inflation trade showing up again? That's really the question. And if it is, what do we do?

You know, we talked about the market being a puzzle, and it's intellectually stimulating for those of us that are interested in it and trying to figure it out. It's challenging, so on and so forth. Okay, the market is an infinite game. I spoke about this the other day, opposed to a finite game, meaning a finite game was like baseball, chess, checkers, any sport that you can think of.

There's a fixed number of players, fixed number of rules, you know, so on and so forth. an infinite game politics or business Apple outlive Steve Jobs right and the market outlived every trader

that's ever lived you know hundreds decades ago or hundreds of years ago that are no longer with us and with them all rest in peace and God bless them so the market's not going anywhere

you as a user or an person participant player if you will in that game the idea is to have a different mindset from a finite game. Because the finite game has a beginning and end, fixed number of players, one wins, one loses. That's not the game here. People leave and come into Wall Street and leave Wall Street all day every day and they come back and some of them never come back and some of them,

you know, it's just, it's ongoing. It doesn't end. There's people that set up foundations and or do things in a really big way and their money is being invested and outlive them. You could think of Rockefeller, you could think of Carnegie, you could think of all these brand names, these big larger than life kind of characters in our history that have had tremendous success. And their investment system and philosophies outlive them. So the idea for all of us, as we're trading and we're investing, is to really put the pieces together and ask ourselves, what's our edge? You know, how are we going to respect risk?

That's all it boils down to. and then there's a trade-off between risk and reward. And look at the possible reward side. So I was mentioning earlier, every decision I make in my mind's eye is like a trade because there's an element of risk and an element of reward. Should I cross the street? Should I go to the supermarket?

Should I jump on the plane? Should I do this? Should I pick up the phone? Not pick up the phone. Should I blah, blah, blah, blah, blah, blah. It's all the same. Because, yes, theoretically, if I look both ways and I cross the street, is it safe?

Yeah, it's safe. But what if I trip and fall and a car comes out of nowhere? That could happen or something worse could happen, but I'm going to take that trade because the element of risk is so small. If I look both ways and I wait for it to be safe, I'm going to cross the street. Same thing with opening up a business, same thing with putting a trade on, buying Apple or buying Amazon or buying any stock for that matter or ETF or whatever it is. To me, it's a trade, right? So when you understand the risk and the reward, all of a sudden, you can look at things differently. because most people only look at one side of the equation,

and that's why most people don't, they're not successful. They only look at the reward. How many times you look at this, you know, you buy a stock, and the expectation, just about always, is the stocks can go up and you're going to make money. Okay, but we know most trades don't work, and we know statistically that it's just, there's an element of risk involved.

Stocks don't only go up. They also go down, right? So, okay, how many people pull out the calculator and say, oh, okay, I'm going to risk this much before I get in, if I'm wrong, I'm going to get out here, I'm going to enter here, and they do those kind of questions. Instead, what most people do is they pull up the calculation, oh, if I buy this stock, I buy this number of shares, it just goes up to here, I'm going to be able to be rich, and then buy, you know, for a year or this, whatever it is.

New house, new car, whatever. So I've learned, that was me in the old days when I first got started, right? So I've learned to do the opposite, switch it, and look at the risk component. So before I enter, I always ask myself, where am I going to exit if I'm wrong? And then more importantly, how much of my portfolio am I going to risk if I'm wrong? All this is outlined in my book. By the way, you can go to Amazon and pick it up on psychological. It's called psychological analysis.

The idea is that technical and fundamental analysis, in my humble opinion, are not enough to beat the market. If they were, everybody would be rich on a few islands in the Caribbean. So what else is missing? It's a user. It's a psychology. You ever, you know, in the old days, we used to have customer service. I guess you still do.

You buy a printer, you plug it in. Oh, sorry, you buy a printer. You call customer service, hey, it's not working. The first question they asked is it plugged in? My answer was no. Well, all right, there's nothing wrong with the printer. It's user error, right? It's the anything with the market.

How come I'm not a billionaire? Well, it's a user error. There's nothing wrong with the market, the economy, the billion, you know, so on and so forth. So my job is to upgrade that user as much as humanly possible. So much so where I have a whole book about it. It was number one in Amazon for two straight months. And thank you all for the wonderful reviews and for reading it and sending me messages and all that fun stuff. It's my way of paying it forward the type of the thing.

All right, I don't have a holy grail. I don't have a secret formula. Nobody does. But what you can do is understand risk, understand reward, put things together, make intelligent decisions, look at the risk component. It's half of the equation, if not more. Because if you can manage risk, I have a whole chapter dedicated just to risk management. If you can manage risk better than others, you can be wildly successful over time

if you're able to have those big wins alongside of it. That's it. Keep those losses small. Let those winners run. Be impatient with your losers and be patient with your winners. That's all I mean, I've interviewed hundreds and hundreds of people. I've studied. I've read all that kind of fun stuff experience now for 20 plus years of trading. A little bit more than that. And it all comes down to that simple risk reward. Price. Focus on what matters. Eliminate the noise. Now pay attention to it because it's important, but eliminate it from the decision-making process. Remember, I said, there's three things I look at before I buy anything. Where am I going to enter? Where am I going to exit? How much I risk if I'm wrong? Not once did I mention the Fed. Not once that I mention the or any other component.

It's price. And that's why when you're able to look at it that way, you're really able to elevate yourself from the Pact because you're looking at the risk component, which most people ignore. So, let's talk about inflation and what this means. The Federal Reserve meets in September. all right when you look at things and you put things in perspective you want to ask yourself what is the Fed looking at what decisions will they make with the data what's changed from the last time they met well all right you look at oil let's see when you have a chance take a look at USO and you had a very clear breakout today on pretty heavy volume from a

sideways consolidation. You can look at it from on a weekly chart. You had a three, four week digestion there and then bam, a big, big rally, big move up. Oil prices, what is inflation? It's primarily core inflation, at least, is food and energy. Well, all right, energy, oil. It's not that deep like my buddy Moshe talks about. It's real simple. All right. How about food? Food prices, for the most part, are somewhat for now, and this could change, under control. If you look at wheat, W-E-A-T as an E-T-F that tracks wheat, that's acting fine. It's not roaring higher. It's actually approaching support.

You look at corn, C-O-R-N, another E-T-F that tracks corn. It's been up and down, but mostly going lower for the last year or so. You can look at soybeans, S-O-Y-B. That's been going up. So, all right, you got that. Then you got a lot of other kind of food that you can look at, and there's a lot of other E-T-Fs, but I don't want to spend too much time here. on looking at it, you can look at, you know, other things as well.

But for the most part, with inflation, it looks like it may be coming back. And the question is, what does the Fed do? And then how does that impact the market? Up next, we're going to talk about some more individual stocks. I've got some leaders to share with you, some ETFs, and a whole lot more. I'm Adam Sarhan. This is the one and only investor's edge. This message is brought to you by the Capital One Venture X card.

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What's in your wallet? Terms apply, lounge access is subject to change. See Capital One.com for details. You're listening to. America is talking. Investors Edge. He's got to be pleased with that. The crowd is just on his feet here.

He's a Cinderella boy. With Gary Coltbaum. highly recommended. You're going to feel better if you talk to. And welcome once again to Investors Edge. In case you're just joining us or missed any part of the show, you can go to garyk.com, rewind, pause, fast forward, and listen or re-listen to it as many times as you want. So, all for free, by the way, on garyk.com. So we're talking about inflation. Just a big thing today. What if the inflation trade shows up again? The dollar, UUP, is an ETF that tracks it. UUP. under, under, and then P is in a pool.

All right. If you look at a weekly chart, you zoom out a little bit, you're up every single week for the last, I believe, seven weeks in a row. Yep, seven weeks in a row. And you're breaking out of a big area of resistance going back to high. It's not seen since really November of 22. That's a long time. And, which is the highest level all year, by the way.

And the October lows in the stock market were October. October of 22. So if the dollar is going to break out and go up, what does that mean for the stock market? Next, you look at the 10-year yield. And that's getting ready to, it's been challenging its October highs. You know, back in October of 22, it topped out, pulled back hard until April of this year, and then it's been steadily going higher since. It's now back to the highest level since October of last year.

Well, all right, if that breaks out, and goes up, what does that mean for the stock market? If the dollar in yields, both the 10-year treasury yield, both take off and go higher, those were the two primary factors that sent stocks lower last year. So just keep that in mind because that could cause the stock market to have a lot of downward pressure. Now, if they back off a little bit, that'd be bullish, just based on the way the market's been trading in the past. Now, past performance is not indicative of future results. The correlations change all the time.

But I do want to be very clear here because this whole idea of inflation dropping, it could be a big mirage. So next, let's talk about we spoke about oil, USO. Look at, you want to find the money. We're looking for leaders, right? Where is the money rotating? Look at the institutional investors. What are they doing with their money? Look at the XLE when you have a chance.

XLE just broke out to the highest level since January of this year. And just before that, the last time it was really at this level, you can go back to, yeah, it was about January this year. And before that was Q4 of last year. You've got a really big base forming in the XLE. If this thing breaks out, which is an ETF, by the way, that tracks the S&P energy sector, okay, that's going to lift a lot of energy stocks higher with it. another one is OIH. Well, how do you know, inflation is going up? What do we do? How do we play it?

Where do we put our money? Well, if this is going to actually end up unfolding, I'm not telling you where to put your money, you figure that on on your own. I'm just showing you ways of investing in assets that typically go higher when inflation goes up. Again, there's no investment advice being given. So that's very, very important. So, OIH. another ETF that could be bought.

It's coming up the right side here. It broke out a few months ago, pulled back, retested against its prior chart highs, which was near 335 or 330 area. Now it's back up to 350. And that's at the highest level going back to 2019 now. That already took out its high from last year. So keep that in mind. You're talking about inflation.

This thing is at the highest level in about four years. years. Next, you've got, and I'm just, it's not a doom and gloom thing, it's just, I'm just showing you what I'm seeing. XOP, this is the oil and gas ETF. Same thing. It broke out today on about average volume. The pivot point was 150, 53. You're at 152.35. And that's at the highest level. Going back, that's not as bad. That's going back to about November of last year. Oh, which happened to be right near the October lows in the stock market. So what does all this mean? I put the cards on table, I'll let you fill it out and figure it out kind of a thing.

You decide, as always. Or even coal. It's not just oils, right? It's oil, coal, showed you some food with the soybean. You know, just putting it out there. Now, look under the surface. When you look at the stock market, it's important to understand that the indices are made up of stocks. And one of the things I like doing is every week is I track the leading stocks.

What stocks are leading the market higher? Because all the indices are just a basket of stocks, right? Each one's composed differently. The S&P 500, it's 500 stocks. And NASDAQ 100 is 100 stocks. The composition, what keeps these stocks in there differs depending on each index and the mandate that it has. So when I look at the leadership, we want to find stocks that are bucking the trend that are going higher because over time, if you find a lot of leaders, that tend to be bullish for the market.

And vice versa. A lot of leaders are breaking down or just a lot of weakness that tends to not be bullish for the market. So where are we right now? You can look at the NASDAQ 100 and now go onto the surface. This week was a big week because we got back above the 50-day moving average for the first time since early August. Well, going forward next week, what I'm going to be watching is to see if the NASDAQ-100, the QQQQ, can stay above its 50-day moving average. And if it doesn't, if it undercuts it like a hot knife through butter, that's not going to be good. In fact, it's going to be bearish. Same for the S&P 500.

You can look at the SPY. This week got above its 50-day moving average. It did that on the 29th, which was, no, hold on a second. Yeah, on Tuesday. Okay. Since then, it's gone sideways. It's been near 450. It may close at 449 on Tuesday, and today's Friday, it's at 4.

451. So you're more or less this very close to where you were on Tuesday. Made very little progress higher after it got above the 50 is my point. As long as it stays above the 50, the bulls have a slight, you know, slight edge since this is an investor's edge, right? The 50-day moving average there is 445-84. The 50-day moving average, for those of you that want to write it down, here is 371-38. The Dow, look at the DIA, which is the ETIP that tracks a Dow, it's just sitting on the 50. The 50 there is 34733, and you're at 348-98 now. So as long as we stay above the 50 in those three indices, the bulls have earned the benefit of the Dow.

If we undercut the 50, we roll over and we start seeing some heavy selling again, like what happened in early August, that's not good. September typically has a negative bias seasonally. That doesn't mean every September's down, no. September in October, really August, September, October, tend to be rocky months in the market, historically. But they've also seen some really good up months during those period as well. So I do want to put that out there. The next thing I'm seeing on a big, you know, you zoom out type of a thing, on a monthly chart, you can look at the NASDAQ 100, you're seeing a really bullish cup and handle pattern form.

On a monthly, you've got a cup, and now you're maybe a month and to the handle. What does that mean? It doesn't mean you have to break out and go higher. It just means the foundation is being set right now for higher prices. If we can break above the 400 area in the NASDAQ-100, the QQ. You really want to break above the high of July, which was 388. It's 387-98, but let's just round up to 388. And then you want to break above the all-time high from back in November of 21 of 408-71. So again, you really want to break above 388 and then let's just round up there to 409. If we can do that, you can have a really bullish pattern. In hindsight, you look back and look, oh, that was really obvious.

Well, how come we weren't mentioning it in real time? Well, here we are. We are mentioning it in real time. That's our job is to point these things out and let you know what we're seeing. So as always, you just... So the idea here when you put these pieces of the puzzle together, is to ask yourself, oh, okay, what's working? And more importantly, what's not?

And stay away from things that are not working and lean towards or, you know, try to be aligned with the things that are working. And the ebb and flow. You know, the inflation trade was not working most of this year. Now it appears to be coming back to life. Well, all right. Oil stocks, for the most part, last year, one of the leading groups in the market. All right. noted, right? So, keep that in mind. Let's talk about the financials. The XLF is an ETF that tracks the

financials. That got above its 50-day moving average this week. All right, we want to see it, stay above its 50. And there you can look at 34 as a round number, because you have a few in the moving averages right there. As long as it stays above 34, it's okay for now. So I'm going to go through some more sectors. I just want to step back and say, all right, Right, be aware of this inflation situation, and let's see how it impacts the market. Up next, I'll talk about a lot more sectors and some stocks. I'm Adam Sarhan. This is the one and only investors' edge.

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You're listening to. What are we waiting for? Well, what are you waiting for? One, two, ready, go. Action! Investors Edge. With Gary Culpa. And welcome once again to Investors Edge.

In case you're just part of the show, you can go to GaryK.com, listen live, or Fast forward, list the archives at your convenience 24-7. So we talked about the market. We covered a lot of ground. The inflation trade may be coming back to life. If it does, what do you do? Adjust a portfolio, not adjust the portfolio,

looked at areas that could benefit from the inflation trade. We spoke about food and energy being, you know, pretty straightforward. As far as higher energy, higher food, that typically means higher inflation. You can look at the energy stocks. You can look at food stocks. You can look at the dollar, UUP. or you can look at ETS, a track or any of these areas. Energy, for example, has been in the leading area right now.

USO, the XLE, the OIH, the XOP, are popular ways to trade the energy theme, if that's something you have interested in doing. We spoke about the financials, trying to hang in there for now. You've got this area of support near 34. Okay, you want to see that hold. The semiconductors, Broadcom reported earnings and fell. Well, last quarter, Broadcom report earnings and soared. Semiconductor stocks, SMH is an ETF that tracks the semiconductors,

they're moving sideways, really for the last several months. Okay, when you step back and zoom out, that's healthy. Because they say the market take the stairs up and the elevator down. The stairs up means it goes up, go sideways, up, go sideways, up, go sideways. And now it's just doing one of those big sideways digestions. If the SMH can break above 161, that'd be real bullish. Now, if it doesn't and it breaks down, below 150 and then really below 143, then odds are we're probably going to have another leg down.

It's just the way the, it's a probability business, right? That's what's happening here. The idea is to study history so we can learn from it and then stack the odds of success, the probability success, in our favor. Real simple. Next, it's not easy, but it's simple. The discretionary stocks, xly, had a big rally most of this year, pulled back in July to the August low of 160. You rallied back back this past week, we got above the 50, but we closed right on it or right near it. So I think you're penny off of it or somewhere really close to it. The XLY discretionary stocks are just range bound. They're digesting. You know, you went from 126 in December to 177 in July. Now you're at 169.

It's okay. It's earned the right to digest. It's got to give a time. But if it breaks down below 160, look out below. Really the big message here as I go through these is just understand there's support-resistance. Think of it like you're in a room. Support is the floor, resistance is a ceiling. The stock goes between 50 and 55 for six months. 55 would be resistance and then 50 would be support.

If one day it breaks above 55, that's bullish, biggest it would suggest that higher prices will follow. If the stock's going to double or triple, it's got to go above resistance. And if it breaks down below support, the odds are that it's going to go lower and that's bearish. That's how support and resistance works, and the most simplified version that I can explain. Now, not all breakouts work, not all breakdowns. work. Most fail and that's okay. Sometimes it gets above 55 in that example, then goes to 53, then sits there for a little bit, gets above 55 again, goes to 53 or 44, and then ultimately takes off and goes higher or just rolls over completely. So it's not a hundred, there's nothing that I know

of on Wall Street that's 100% perfect, 100% of the time. It's okay. You don't need to be 100% perfect 100% of the time. What you need to do is understand probabilities and success and manage risk and so on and so forth. So those are discretionary stuff. stocks. I know we're running out of time here. So you can go through the other ETFs and just look at the market. I always look at the major indices first and then I segment them and look at the the ETFs and the sectors under the surface and look at the financials. Look at the transportation stocks, the IYT. That's below the 50-day moving average and ask yourself why is that below the 50? Something's not

right there. Look at the small cap stocks, the IWM that we're literally seeing on the 200 day just a few days ago. Now they barely got above the 50. All right. The mid cap stocks, MDY, barely just got above the 50. All right. It's been range around for a while. This thing breaks above 500, the MDY. That's going to be real bullish. It breaks down below 456. It's going to be bearish. And then just keep track, week after week after week. And then guess what? You get the edge. Because if you start seeing things break out and go up, all right, things start breaking down and go down. All right. Again, odds favor. So, stocks, how do I find a common question that's asked with a little Q&A here and then we'll wrap up? is how do you find big leading stocks or big monster stocks or the next big winners?

It's by looking at price and then volume. The big institutions that are aggressively buying these stocks that are required in order for the stock to go higher, I've yet to see a stock go to the moon without having some kind of support behind it by big investors or a big group of investors. That shows up in volume. Even if they're individual investors, if you want to go look at some of the crazy stocks from just recently look at Reddit with Game Stock back in 2021 game stop went from 17 bucks to almost 500 and it had monstrous volume show up before the move and it was average volume was around

6 million shares at the peak it was almost 200 million shares that's what I mean by big institutional buying and what I do is on a daily basis I sort stocks based on price and volume look at the stocks that are moving up the most on the most volume and then just go through them So something like today, Dell, gapped up about 21% on earnings. earnings only grew by 4%. Sales were down 13%. Doesn't matter, the market liked it. The reaction is what matters.

Look at next one. You've got Lulu Lemon, LULU, big gap up on explosive volume. NTNX, big gap up on explosive volume. Average volume here is about 1.4 million shares. Today, what we have today, about 10 million shares. Again, 1.4 million is average. Today shows up and you get 10 million shares

and the stock's up about 12%. That's not, like Gary says, it's not Aunt Mary and Uncle Bob doing the buying, folks. That's the big institutions in there buying. And that's right. I just go through stock by stock by stock and look for these stocks to stand out. ESTC, Elastic.

Okay? Computer software database company. Earnings were up 2067% last quarter. Sales were up 17%. expectations next year earnings expected explode by 325% compared to 2023. Like in 24, they're going to earn $0.6 cents. And 23, they earn $0.25. And then grow another 41% the year after.

Oh, that has my attention. The last four quarters, you've had triple digit growth. And then so on and so forth. So that's the idea there is that we're looking for what the, just imprints or thumbprints or footprints of those big institutions. And then do our homework and see if it's get good risk-adjusted entry points, you know, where you can enter, where you're going to risk, how much you're wrong, so on and so forth. So I know we're wrapping up, we're short on time.

Like this hour goes by fast. I mean, it's a pleasure being here. I really enjoy it. Gary, want to celebrate him for doing this every single day. Everybody, have a great weekend. Enjoy the weekend. And let's keep our eyes open for this inflation trade and see what happens. I'm Adam Sarhan.

This is the one and only investor's edge. Thank you all for being. This has been Investors' Edge with Gary Cult Bomb on BizTalk. To listen to past episodes or to get in contact with Gary, go to GaryK.com. That's GaryKK.com. This message is brought to you by the Capital One VentureX card. Venture X offers the premium benefits you expect, like a $300 annual Capital One travel credit for less than you expect. Elevate your earn with unlimited double miles on every purchase, bringing you one step closer

to your next dream destination. Plus, enjoy access to over 1,000 airport lounges worldwide. The Capital One Venture X card. What's in your wallet? Terms apply. Lounge access is subject to change. See Capital1.com for details.