Investor's Edge with Gary Kaltbaum - Market Extended & Earnings [01.22.2024 w Adam Sarhan]

Episode Date: January 22, 2024

At CVS, it matters that we're not just in your community, but that we're part of it. It matters that we're here for you when you need us, day or night, and we want everyone to feel welcomed and rewarded. It matters that CVS is here to fill your prescriptions and here to fill your craving for a tasty and, yeah, healthy snack. At CBS, we're proud to serve your community because we believe where you get your medicine matters. So visit us at CVS.com or just come by your food. store. We can't wait to meet you. Store hours vary by location. Investors Edge with Gary Cultbaum. 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's Monday, January 22nd, 2024. We have a great show for you tonight. I want to thank you very much for being here. Before we dive into the show, as you 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, listen live or archive. We are live Monday through Friday, 6 to 7 p.m. Eastern. Also at garyk.com, you could follow Gary on X, formerly known as Twitter, or you just by pressing the button.

It's real simple. Also at garyk.com, you can subscribe and get Gary's morning notes sent directly to your inbox for free. You can also email Gary, ask about his money management services, and or join his premium stock market membership site, which is convictionleaders.com. So, once again, I go fast as I speak. I know that I've gotten feedback from many of you. It's a different style than Gary's, and I thank you all for the feedback and any ideas on

how I can improve. But if you miss anything, there's a lot to cover and there's a short amount of time. You can go to GaryK.com and pause, rewind, fast forward any part of the show at your convenience. So the big message today, it's one word, extended. The market had a big move. It's really important folks to understand timing. And before I talk about the specifics of the market and today and what to expect going forward, so on and so forth, it's really just let me talk to you.

I'm a big picture guy, as you know, listening to the show and reading any of my work or anything along those lines. It's really important for me to understand the direction that I'm going in. have some framework in place before I dive into the specifics. Why? Because if I have the direction correct, the timing of it is the next thing I have to focus on, right? So right now, we're in a bull market. Great.

The major indices, for the most part, the NASDAQ, the S&P, Dow, and some of the other ones, really at or near new highs. The Russell, the small caps, and the midcaps, not yet, but clearly the big money's been focused predominantly in tech. and that's why the NASDAQ 100 was the strongest performing index last year, and it's leading the pack again this year. Not all tech stocks are ripping and blasting off to new highs, but we've had a really big rally since the end of October, early November.

So timing in the market is really important. So after a big move up, a day like today where we gap up, people, I mean today, just flooding my inbox with, should I buy, should I buy, should I buy? It's like, all right, well, depends on your time frame, depends on your risk tolerance, so on and so forth. No investment advice is being given. Everything's general and informational purposes only. That being said, I'm just asking yourself, are you earlier late to a part? You know, think of timing as an important factor for any area of life or just about any area of life.

Think of a comedian who tells a joke, sets up the joke and then punchline. What if they just start with the punchline? Probably the joke's not going to work. Think of the proverbial guy and gal. Guy meets girl, immediately asks her, hey, want to get married? Probably she's going to say no. Same scenario. It just changes the timing of the question. Six months, 12 months, 24 months, whenever the timing is right.

Ask the same exact question between the same guy, same gal. Guess what? Most likely he'll get a yes if and when the timing is correct. And the other ingredients are in place, of course. Same thing in the market. I can be right on an idea. I think the market's going higher. Let's look at the NASDAQ.

Okay. But if I buy it after a big move up and it's extended, odds are I'm chasing. I'm a little bit late to that party. Think if you're going to, you know, the average, preferrifical high school kids going to a party. You want to be late to that party or early to the party or on time? They'll be fashionally late. All right. Maybe that's appropriate in high school, not in the market, right?

So any party you're going to us is a doll, a cocktail party, a wedding. My daughter's birthday was just yesterday we had a birthday party for. their birthday was earlier in a month, and one of the kids showed up an hour and a half late to a three-hour party. I mean, what are you going to say, right? So that's not acceptable in a childhood. I mean, even the other girls in the class and we're at the party, we're like, come on, like, what are you doing type of a thing? Could have given notice, could have said, hey, something happened, you know, blah, blah, didn't do anything. So timing is really important in markets and in life.

So how do we know when to get in, when to get in, when to get in? Now, all that fun stuff. Well, it's a lot of dynamics that play. A lot of different things change. But really, just ask yourself, did the market just have a big move up? If so, look at moving averages. Look at the 50-day moving average. And ask yourself, am I extended above it?

The 50-day moving average, Gary has talked about a lot and done a great job. Tends to be a magnet for the market and for leading stocks. Both when the market gets too far above it, it pulls back into it. And when the market's too far below it, in bare markets, it tends to rally into it. Not always, but most of the time. The NASDAQ 100 just did that again this year, just a few weeks ago. We had a little bit of a pullback in the NASDAQ 100 after a big move in November and December, early January. The market pulled back.

The NASDAQ pulled back the beginning of this year. It fell just over 4%. 4.26% for those of you that like exact numbers. All right. It didn't touch the 50 exactly, but it came real close. And on a weekly chart, it touched 10 week, which is roughly the 50. All right, you had a pullback. And then it blasted off and rallied.

I don't buy the dip. You know, the dip, nobody knows how deep it's going to, that dip is going to be or how long it's going to last. What I like to do is buy the bounce after the dip. Years ago, I was with, I was claiming on Fox Business and she said, hey, Adam, you have a unique approach to buying the dip. You don't do it. I said, yeah. And then I went into it. It's buying the bounce after the dip.

Why? Because the dip could be 5%. Could be 15%. Could be 50%. I don't know. You know, it could be a beginning. of a new bare market. Could be a normal correction or normal pullback. Nobody knows in real time. But if I find support, which is a 50-day moving average or some other area of support prior

chart highs, upward trend lines, there's lots of areas to use, then, oh, okay, hold on a second. I don't have to chase it. Coming into the end of December, the market was very extended. And lo and behold, it pulled back. It didn't last long. It was only a 4% pullback, or thereabouts in the NASDAQ-100, the QQQ, but it pulled back nonetheless. It dipped. And then, and then, it After the dip, what happened? It took off and went. So I'd like to step in and buy on the way back up. You're getting in early in that up trend or that new move up, right?

If you miss the move in November and December, okay, there's another chance to buy. Then after it rips higher and hits new highs, enter Friday and then Monday today this morning, coming in and buying now after a very big move up, not only from just a few weeks ago, but after a very big move up last week and a very big move up since November, not my opinion, not the most ideal time to buy. Just because of the fact that, hey, it's a little bit extended. And most of the time, these markets pull back. Again, not always, but most of the time, leading stocks, leading sectors, markets,

just about all these things. I've been doing this since the 90s. I've yet to find one thing that just never pulls back or never pulls back, just go straight up. That's healthy and that's sustainable. Sometimes you see it go parabolic for a little bit. like what happened at GameStop after that, you know, the whole frenzy with Reddit and all that nonsense a few years ago. But that's not sustainable.

And I don't want to even be involved in that type of scenario because it doesn't end well. Just go look at GameStop now, GME. No, thank you. Same thing with any of these other crazy phases or fads. No, thank you. Not for me. Maybe for someone else? Great.

Just not for me. So knowing yourself is also really important, but timing. So getting in early or, you know, not too early because, hey, listen, And if I got in on the dip and it goes down 4%, it's going down, let's just say 14%, the average pullback over the course of the year and the S&P is double digits, right? 10, 11, 12, 13, 14%, somewhere in that range. It varies each year. Sometimes it's way less than that.

Depends where you are in the cycle. It depends where you are in the market, so on and so forth. But for the most part, we know pullbacks happen several times a year. Corrections happen several times a year. They just happen. It's part of the business, right? The market dipped from July, excuse me, all the way until October. You had three waves down, three clear legs down, however you want to word it, waves, legs, pullbacks, corrections.

Semantics aside, the market pulled back for months. And then the pullback was over, and the market started going up. Remember in November, the Fed told us they're done raising rates, more or less. And then in December, the Fed said, hey, we're ready to start cutting rates, and then bam. Bam in November, bam again in December. the environment changed. So again, coming into today, we are very extended, as Gary said all of last week with the market and being on top of it. Hey, look at SMCI, look at the semiconductors, look at Navidia, look at these leading areas.

AMD, he gave out in ConvictionLeaders.com and so many other ones. That service is, I mean, just give you a round of applause, Gary, phenomenal job on ConvictionLeaders.com. And you can get his thoughts, intraday updates. You get timely market webinars, just about every night he does it. and then on the weekend he does it also so you can see, literally see what he sees. It's fantastic. So, and I urge everyone take a free trial

at Convictionleaders.com. That being said, now we're extending. Okay, not the end of the world. Pullbacks happen, dips happen, corrections happen, they're healthy. When I shifted my mindset from a fear-based, oh my God, the market's going to pull back

to almost now anticipating slash expecting the pullback, I had this wave of freedom. because I wasn't in a state of fear anymore. I now said, oh, pullbacks are good. They're healthy. Just like going to bed at night. It'll give the market a chance to recharge, rest, and then have another leg higher. So just always ask yourself, am I early?

Am I late? Where's the market? What just happened? Am I coming in after a big run up? Am I coming in after a big move down? Am I coming in when the market's going sideways and then breaking out and going up? Which I'll talk about in a few minutes. you know, how the state of the market changes.

Or where am I exactly? So up next, we've got a lot more to discuss. Got state in the market, some sectors, some stocks, and a whole lot more. I'm Adam Sarhan. As always, 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,

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Investment Advisory Services offered through call-bomb capital management. Hi, I'm Dr. Jay Goodman, host of Beyond the Script, the podcast where I sit down with pharmacists to answer the health questions you didn't even know you could ask at the pharmacy counter. In this episode, we are diving into gut health with CVS pharmacist Victoria Motola, who explains why so many of us live with stomach issues we should not accept as normal. A lot of what I see is just like chronic bloating, chronic stomach aches. Like I get a stomach ache every time that I eat. And it just becomes like a lifestyle where, oh, yeah, you know, I just have a stomachache every day. Or I'm constantly feeling like gassy.

And all of those things are not something that generally, if you have a healthy gut, you should be living with. So that's when we deep dive. We deep dive into your medication. We deep dive into your OTC medication. And then at that point, we can probably identify something that we can change. Hear the full conversation, plus some fascinating facts about how gut health affects so much more than just your stomach on Beyond the Script, a podcast from CVS Pharmacy and IHeart Radio. Listen now wherever you get your podcasts. Success starts with your drive, and American Public University is here to fuel it.

With affordable tuition and over 200 flexible online programs, APU helps you gain the skills and confidence to move forward. Whether you're changing careers, starting fresh, or pursuing a lifelong passion, our programs are designed for people who never stop. You bring the fire, APU will fuel the journey. Learn more at APU.APUS.edu. One sweet, melty bite of a Hershey's bar, and suddenly I'm right back sitting on the front porch with my grandmother on a slow summer afternoon. She doesn't say much, just breaks the bar in half and hands me a piece.

I open my mouth to say whatever a nine-year-old wants to say. And she replies with a low, listen. So we sat there, listening. That was the first time I learned that quiet can feel full. Hershey's. It's your happy place. It's time to switch on the integrator units and 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 Investor's Edge. In case you're just joining us or missed any part of the show, you can go to GaryK.com, rewind, fast forward, listen to any one of Gary's shows.

anytime you want from any of your device 24-7 all for free on gary k.com. That being said, we spent the first part of the show discussing timing and saying that the market short term is extended. Now, from just some notes from Gary here, expect some back and filling. Wouldn't be surprised at all. What does that mean? Just let the market digest the big run it just had.

We had a very big move in a very short amount of time. It'd be perfectly normal and healthy to see it digest. And just be careful about buying after big moves up. All right. This next thing, earnings, earnings, earnings. This morning on my fine leading stocks.com update, I have an update every morning and a weekend report. But in the morning report, I said earnings bonanza. I think we have about 20% of the S&P 500 reporting earnings this week.

Thousands of stocks will be reporting earnings over the next several weeks. Now, what do I do during earnings season? Few things. Number one, I want to look at the numbers. The earnings are important. What does that mean? Do we have growth? Now, I look at the same quarter on a year-over-year basis.

Of course, look at consensus numbers. Where does the Wall Street expect the earnings to be? Where are the actual earnings? Did the company beat earnings or not? Did revenue beat or not? Sure, all that's fine and dandy. Did the company raise guidance? Beaten raise?

I mean, I love that. Who doesn't love strong growth? Well, maybe some people don't. I love that. Let's put it that way. I'll speak it on myself. I love companies that can beat and raise, and then the stock gaps up. Beautiful, beautiful action.

But in addition to that, that's what everybody looks at, the consensus and, you know, what happened and just that's one layer. The next, I go deeper. The next level is I want to look at the earnings on a year-over-year basis. So we just finished Q4, the calendar year of 2023, and the companies are reporting earnings now. Tell us what happened during that quarter. Okay. I'm going to take the earnings, and I'm going to look at them compared to the same earnings. the same period last year. So in 2022, the fourth quarter, let's say the company earned a dollar.

In fourth quarter of 23, they earned a dollar 25. That means earnings grew by 25 percent, same quarter year over year. Does that make sense? I hope it does. I can't hear you, but I hope it does. If not, I'll repeat it again. They earned a dollar this year in Q4 next year, same period. They earned a dollar 25. That means earnings grew by 25 cents. And the opposite is also true. If they learn less money, they earn 75 cents, okay, earnings fell, so on and so forth. So I want to see growth. I mean, that's ultimately what I'm looking for. That's for earnings.

Revenue, same exact thing. And I'm noticing, I'm comparing quarter, the same quarter year over year, apples to apples. I used to get in there and be like, oh, I'm going to compare Q1 to Q4. But Q4 for retailers specifically, just to illustrate the point here, is completely different than Q1 or Q4, for, you know, the Q1 for retailers. Q4s, the Black Friday's when the companies, these retailers go in the black historically. Okay, that means they start making money. They operated a loss more or less for the first two-thirds of the year.

And the fourth quarter is where they make their money. So you can't, I mean, you can, but I don't compare Q4 to Q1 because it's not, or Q4 to Q2, it's not apples to apples. But Q4 this year compared to Q4 last year, yeah, no problem. I've got, I love that. And this doesn't come from me. before me have done this Bill O'Neill and investors' business daily and Marketsmith and there's lots of ways to get the data.

So if you want, you go to GaryK.com at the very bottom there's a link. You can join Marketsmith right there, which is a great charting service. And the data is right there. So I look for that change year over year on a quarter over quarter basis. So same quarter each year, great. I hope that points made very clear for sales and for revenue. Sorry, excuse me. Sales and revenue is one thing.

and then for EPS. So sales and EPS. Okay, great. Next, the consensus, all that fun stuff, great. What do the company do? Do they beat estimates? They hit their mark, so on and so forth. And then the third thing I look for, in no particular order, one, two, three here.

You can switch them up wherever you want. But the third thing, which I give the most weight to, is the reaction to the news. What do I mean by that? Does the stock gap up after reporting earnings? Does it gap down after reporting earnings? Is it just a big nothing burger? Like my friend Brad likes to say. Does nothing after reporting earnings?

Because the reaction to the news, folks, is what matters more than the news itself, in my humble opinion, in this business. Why? Because it shows us what the big institutions are doing with their money. Not what they're saying on TV or they're writing in their tweets or posts or whatever it is. No, it's what they're actually doing. price is primary in my world and everything else is secondary. But price and volume are so powerful.

Because I'm not privy to the orders of what these big institutions are doing. In fact, they go out of their way to hide most of their orders from the street. And they do this, that, and the other thing, and dark pools and bulk orders and blah, blah, blah, blah, I don't want to get to the weeds. It doesn't matter. At the end of the day, it shows up in price and volume. if you've got, let's say, average volume of 50 million shares, or let's just keep it simple, one million shares in a stock, and one day you get 50 million shares traded, you know, like Gary says, it's not Aunt Mary and Uncle Bob doing the buying.

It's the big institutions in there. And if it gaps up above resistance, which I'll talk about when I talk about market states in a few minutes here, that's a change in character. It's a bullish event. It's a catalyst. something changed. And if it did it on earnings, that tells me, hey, listen, this is not a one-off.

This will likely continue for the foreseeable future. And that's bullish. It tends to be bullish. Not always, but it tends to be bullish. So I actually keep a list of stocks that gap up, explode higher after reporting earnings. And I track it for the whole quarter until next quarter. And I tend to get 20, 30, 40, 40, 50,

names depending on the market, sometimes five or ten names depending on, again, the strength of the market. You know, in 2022, when the environment was lousy, there weren't a lot of names that were gaping up and ripping higher. Most of the stocks were just doing the exact opposite. But in 23, especially in the end of 23, and now in 24, well, so far, 20 earnings season just began. But in 23, last quarter, we saw a lot of companies do that.

Gap up and go. Gap up and run. Look at L-O-G-I as an example. Look at Datadog. D-D-O-G. Right? Look at NVIDIA last year.

NVDA. Data Dog is D-D-O-G and L-O-G is Logitech. As just examples, there's many, many, many, many, many, many more examples. But just as quick examples of stocks that gap up and run and race higher after reporting earnings. NVIDIA is a great, the poster child, NVDA.

Last year, They reported earnings and raised guidance by a massive amount. Navidio was expected, well, Naviya earned a few dollars a share. And I'll give you the exact number since, why not? There's no reason not to. But if you take a look at Navidia, now the Nvidia, just so you know in case you're not familiar, is one of the strongest stocks in the market right now. And it's a big leader in AI.

Also a big leader in crypto, also a big leader in gaming. Okay, they've got a lot of different products they serve. They, you know, design graphic processing units and chips and personal computers, stations, game, councils, and mobile devices. Okay, great. In 2023, they earned, or expect to earn $3.34, then in $24, that was $3, went to $11, and then $25 to $19. That is explosive growth. And much higher stock prices followed. Up next, we'll talk about a lot more support resistance, some more sectors, some more stocks. I'm Adam Sarhan. As always, this is the one and only Investor's Edge. Hi, I'm Dr. Jake Goodman, host of Beyond the Script, the podcast where I sit down

with pharmacists to answer the health questions you didn't even know you could ask at the pharmacy counter. In this episode, we are diving into gut health with CVS pharmacist Victoria Motola, who explains why so many of us live with stomach issues we should not accept as normal. A lot of what I see is just like chronic bloating, chronic stomach aches. Like, I get a stomach ache every time that I eat. And it just becomes like a lifestyle where, oh, yeah, you know, I just, I have a stomachache every day. Or I'm constantly feeling like gassy. And all of those things are not something that generally, if you have a healthy gut, you should be living with. So that's when we deep dive. We deep dive into your medication. We deep dive into your OTC medication. And then at that

point, we can probably identify something that we can change. Here the full conversation, plus some fascinating facts about how gut health affects so much more than just your stomach on Beyond the Script, a podcast from CVS Pharmacy and IHeart Radio. Listen now wherever you get your podcasts. Success starts with your drive, and American Public University is here to fuel it. With affordable tuition and over 200 flexible online programs, APU helps you gain the skills and confidence to move forward. Whether you're changing careers, starting fresh, or pursuing a lifelong passion, Our programs are designed for people who never stop. You bring the fire, APU will fuel the journey.

Learn more at APU. APUS.edu. One sweet, melty bite of a Hershey's bar, and suddenly I'm right back sitting on the front porch with my grandmother on a slow summer afternoon. She doesn't say much, just breaks the bar in half and hands me a piece. I open my mouth to say whatever a nine-year-old wants to say. And she replies with a low... Listen.

So we sat there. Listening. That was the first time I learned that quiet can feel full. Hershey's. It's your happy place. We'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 Colbomb. It comes highly recommended. You're going to feel better if you talk to him. And welcome once again to Investors. Edge. In case you're just joining us or missed any part of the show, I'm Adam Sarahan

for Gary Kay, who's out today. You can go to GaryK.com, rewind, fast forward, pause, listen at your convenience anytime you want 24-7 for free on any device. So we spoke about the market being extended. We spoke about the fact that we've got a slew of earning season, sorry, earnings coming out as we enter earning season. We spoke about the fact that timing is important in life in the market, or in markets. We spoke about the fact that some backing and filling would be perfectly normal and healthy, spoke about the fact of things I look for during earnings season, the reaction in no particular order, but the reaction to the news, extremely important. Stock gaps up after reporting earnings, all things being equal, that's bullish. Stock gaps down,

that's bearish. I look for the actual numbers. Do they beat estimates? They miss estimates. The EPS and revenue are the two big line items that I look at. And then guidance. Next thing, is year over year. This quarter last year compared to this quarter this year. Was there growth? Yes or no? How much growth? And then annual earnings and so on. So if we can go deeper. But typically my, you know, there's great book called Blink by Malcolm's Budwell talks about what's your blink. What's your gut instinct of the second you see it? That's what I'm looking for is gap up. What's the reaction? Good, bad. Okay, great. It's binary. Simple. Okay, do they beat estimates? Yes or no. Okay, great. Simple. I get it.

Okay. How they do compared to last year? Okay. They go bad. They raised guidance? Yes or no? Okay. I get that. And then they go deeper. But I'm just giving you the high-level stuff of hopefully some information you can use to go out there and help you make more sense of what's going on on Wall Street.

So that being said, let's talk about market states and let's talk about support and resistance. So first off, support and resistance. It's a popular, I guess, what's a good way, phenomenon or popular thing that people look at when they invest in your trading, especially when technicians look at it with charts. So support, think of a floor in a room as where you're walking. It's not going lower than that. And resistance for a period of time. It's not forever. It's just a period of time.

It would be a ceiling. So if a stock example is trading between 50 and 55 for six months, that support would be 50. every time it gets down near 50, it's art, not an exact science, it bounces, gets to 55, where thereabouts, and it falls. Okay, well, it goes sideways for six months, an orderly pattern. And then all of a sudden one day, well, 55 would be resistance. Let me just be clear. 55 is resistance to that example, 50 is support. Okay, one day it breaks out above resistance, and it does it on ginormous volume. Gynormous. I mean, let's say average volumes of million shares a day, it does it on 20.

Okay, great. That's an example of a breakout. A breakout on heavy volume, all things being equal, tend to be bullish. Now, lots of breakouts fail. In fact, the majority of breakouts in some studies, depending on the environment, fail, and that's okay. As long as you're around, you understand what's happening here in the phenomenon that just because a breakout fails doesn't mean the stock can't go higher. Lots of times a breakout can fail, and then it just takes off and goes. So understand, it's not just like, oh, binary, it just breaks out, therefore, green light and it's got a double from here. No, that's not the way the world works. If it did, we all own a few islands in the Caribbean. So, again, go back to my daughter. I was just talking to her last night after the party. I said, you know, part of life, their friend that she was, all the girls that were there were upset that this one friend didn't show up

and didn't text her, let her know or call her before. She knew she wasn't coming or she showed up late and all that kind of stuff. Some other girl didn't show up. Anyway, all the stuff, I said, listen, honey, there's three things we should do in life. And you could get this from Jim Rohn, Tony Robbins. I mean, all over the board, Bill O'Neill does this, on and off Wall Street. Pattern recognition, understand there are patterns.

Humans, there's human behavior, right? Patterns. Learn those patterns. Okay, stocks, you've got simple patterns like cup and handles, you've got flat bases, rectangle bases, whatever you want to exclude. You can get head and shoulders patterns, you know, all these kind of double bottom patterns, double tops. You've got bullish patterns and bearish patterns.

I outline all this in my book on psychological analysis. You can go on Amazon type in psychological analysis from my, My name's Sarhan and you pull it right up. That's one. So recognize there are patterns. Step two is learn how to use the patterns. So pattern recognition and then learn how to use the patterns. And then step three, once you learn how to use the patterns, is, okay, look for an edge.

Investors what? The name of the show, Investors Edge. So when you go back to the market, we'll talk about it's market states in the second, which I also cover in the book. but understand that the concept of support and resistance is important because the pattern of the way the stock is trading tells you basically it's human nature on display in my humble opinion but it tells you what the underlying investors think about the stock and or think about the market okay great so again a pattern would be like we said the beginning of the show

the market's very extended so it's due to pull back okay that's a pattern not every Every time the market gets extended, it pulls back to the 50, but we know after a big move up, buying it is a lower probability rate of success when it's so far extended up here. We know a greater probability is it's going to pull back or digest or go sideways or consolidate or any other word you want to describe a consolidation or a sideways move after a big move up. So just thinking probabilities. Anything is possible. What we're looking for with that edge is stack the odds of success in our favor.

Look at the probabilities. What are the probabilities of X, Y, Z happening? Play the odds. That's it. So that's what I want to say about that. Now, as far as states, there's only three things the market can do after you buy it. Anywhere in the world, it doesn't matter what the market is. It can go up, it can go down, or it can go sideways.

That's it. I'll repeat it. Up down or sideways. Now, once you understand that, there's different time frames. So you're looking at a daily chart, intraday chart, week, chart, monthly chart, annual chart, you know, so on and so forth. Warren Buffett loves, has a great saying, if you read his annual reports, which I do, learn from one of the most successful investors in history, he's going to say something, I'm going to listen. Okay, he credits in his humility

at his success, at his age. The vast majority of his success has come from what he calls the American tailwind. I call it the great American tailwind. It's over the last 50, 60, 70 years while he's been around. The stock market's gone up huge. The economy's grown huge. That's just, that's the tailwind, right? Okay, great. So if you zoom out long enough, it's a complete different environment, then if you're looking at a daily chart. But if you're zooming out that long, you know, you understand, even Berkshire Hathaway, the S&P 500, the NASDAQ, whatever it is, got cut in half multiple times along that rate. So in real time, are you going to have the stomach to sit there and withstand a 50, 60, 70% correction? Look at the NASDAQ 100. After,

the 2000.com bust, you know, bubble, it fell over 80%. Holding onto that in real time, complete different than in theory. Oh yeah, sure, I'm going to a long-term investor, sure. But in reality, when, you know, are you going to have the discipline? If that's even, is that even advisable? Do you want to hold something and watch your wealth drop by 80%? I don't. Again, for each of their own.

But that's, understand the market states. So there's timeframes and states. So understand your time frame. That's really, really important. Why? Because when you zoom out and you want to be aligned with a time frame that works well, at least I do. I know myself at this stage of my life.

I know what I'm good at, big picture stuff, and what I'm not good at, minutia in details. Okay. I'm not going to try to actively day trade a one-minute chart. It's not my area of expertise. It's not my skill set. I have no interest in doing that. I know that on an intermediate term basis,

weekly, monthly, quarterly time frame, I shine. Okay. I know I can find leading stocks. Got a service called find leading stocks.com. The whole idea is to find leadership. I can do that job very well. So part of my work is to make sure I stay in my lane.

You know, I'm a contributor at Forbes. So when I go to Forbes, they said, hey, your lane is invested. So I can write about anything to do with investing. I can't go write about politics, about the weather, about any other lanes, out of my lane. But investing, car plunge that and do whatever you want to do. Okay, great. Shake hands and that's it. That's a deal.

Stay in my lane. So with investing, with buying and selling stocks, is I want to make sure I'm in my lane with respect to my time frame. And get that market analysis right. Are we in an uptrend, the bull market, bare market, sideways market, and the states change. That's the important thing. Now we're in a bull market. Q's are at all-time highs, the S&P 500, new high, so on and so forth. But short term, that's intermediate long term, but short term, we're a little bit on the extended side.

Okay, be a little bit patient here. Wait for that pullback, wait for that dip, and then do what? Buy the balance after the dip. And as we make our way through earnings season, which is the next thing I'm going to talk about, again, there's a lot to cover here. I want to go out there and make sure I can separate the winners, the leaders, the leaders. from earning season. Why? Because studies show and history shows over the next six months, 12 months, the ones that, you know, an object in motion does what? It stays in motion. The ones that lead, the ones that gap up, the ones that blast off, tend to continue to rally. So up next,

we've got a lot more to cover. I'm Adam Sarhan. This is the one and only investors edge. I'm Dr. Jay Goodman, host of Beyond the Script, the podcast where I sit down with pharmacist to answer the health questions you didn't even know you could ask at the pharmacy counter. In this episode, we are diving into gut health with CBS pharmacist Victoria Motola, who explains why so many of us live with stomach issues we should not accept as normal. A lot of what I see is just like chronic bloating, chronic stomach aches. Like I get a stomach ache every time that I eat, and it just becomes like a lifestyle where, oh, yeah, you know, I just have a stomachache every day.

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Investors Edge. With Gary Culper. And welcome once again to Investor's Edge. In case you're just joining us or missed any part of the show, you can go to GaryK.com, rewind, fast forward, listen and relisten to anything I covered, or anything Gary covers, anytime you want 24-7, all available for first. on Gary K.com. So,

covered a lot of ground today. Earning seasons around the corner, short term, the market's a little extended, understand the different states in the market, what do I look for during earning season? I'm looking for strength. I'm looking for stocks that gap up. I'm looking for areas of the market

that are leading, because it's much easier for a leading area and a leading stock to continue to lead than for a lagging one to continue to lag. You know, in the old days, I'm going to put old days in air quotes here. There used to be physical newspapers where people would read the paper. And I remember years ago going into Gary's office,

just way, way back, and he had a stack of newspapers. And he goes, pick up an old newspaper from a few years earlier. I said, sure. He goes, look at the 52-week highs. And I pick up the stack a year or two later and look at the stocks. And so many of them were, you know, year-over-year, six months down the road. You'd go just show me year-over-year, six months, and just boom, boom, boom. The same stocks that are making new highs will continue to make new highs.

And lo and behold, the same stocks making new lows, not always, but for the most part, would continue making new lows or would stay off that new high list for a very long time. Well, what's the whole point of leadership? Leadership or true market leaders or leading stocks, whatever word you want to use to explain the strongest stocks in the market. Success leaves clues. Tony Robbins talks about that. Jim Rohn talks about that years. I mean, just success leaves clues.

If I want to learn how play tennis, I'm going to go study the best tennis players. I want to trade stocks. I want to buy and study the best stocks. Again, simple. Not easy, but simple. So, I want to buy a stock. Remember, only three things can happen after I buy it. It goes up down or sideways.

I want to buy stocks that go up. I don't want to buy stocks that go down. I don't want to buy stocks that go sideways. Well, if the stocks that make new 52-week highs and are hitting the new high list or trading near for new 52-week highs are more likely to continue going higher. Markets trend, right?

Object and motion stays in motion. It behooves me to focus on leadership. Now, not just blindly by them, because some of them are very extended, like we spoke about earlier in the show. They're going to likely pull back and stop me out and a normal pullback and then take off without me.

No, thank you. But wait, and watch those. Week in, week out, week out, week in, week out, which is all I do. Separate these lists of strength and based on market cap, and hey, I want to find the strong stocks in the market. Now I'm going to stay away from 52-week lows. I had coaching call this morning

with one of my clients and he goes, hey, well, Adam, I like the bottom fish. It's just my nature. I like to buy things that are on sale. I said, all right, but understand if you're doing that, there's nothing wrong with doing that. If that works for you, it's going to be very difficult to find stocks that are going to go up and hit new 50s two-week eyes. Maybe you want to just buy it and get in, get out, being active trader and take 4% or hopefully find a balance. or a turn or something. But to me, I just, I haven't had any luck doing that. So it's one of those situations where you definitely want to take your time here

and you want to understand that market's trend well, and you want to understand that the environment, you know, stocks, the environment changes. That's the important thing. Semiconductors, and I'll talk about some stocks now. have been leading this market higher. Tech stocks have been leading the market higher. Big Cap tech specifically have been leading the market higher.

Focus on leadership. You don't have to blindly buy them just because they're up. That's what I do, though. I not buy them blind. I focus on leadership, number one. Number two, I wait for setups. Wait for consolidations. I'm going to be looking for stocks that are gaping up

and breaking out of earning season. I'm going to be looking for stocks that are leading the market higher, making the 52-week highs, gaping up on earnings, leading on a percent basis on a year-to-day basis, have strong earnings growth, have strong revenue growth, so on and so forth. Strength begets strength. And then filter out all the noise. You know, Warren Buffett talks about this too. He goes, no, your circle of competence.

Part of being successful is learning how to say no. It's just no. it's not for me. Nothing's wrong with it. It's just not for me. I'm not looking for a stock in a 52 week low because to me it's just not part of my process of my world, my universe. I'm looking for stocks that are trending and that are moving higher. Not stocks that are making new lows and continue to make, most likely they'll continue to make new lows or just futs around a little bit near 52 week lows. I want uptrends. So I hope this is helpful putting the framework together and understanding the importance of looking for new emerging. areas. Look, these small-cap stocks, the IWM, have lagged for a long time. Well, the interest rate environment was not conducive. It was going straight up and those, more or less, those stocks have were getting punished. IWM, the Russell 2000. Well, when November, December, as the Fed now pivots and it's going to change and cut rates, guess who can participate? The small caps that have been, you know, punished during a higher interest rate environment. Maybe they will not participate

I don't know. But will I watch them? Sure. Are they making 52-week highs? Not now. Some of them are, but for the most part, the IWM is not. It's lagging. I'll keep it out in the corner of my eye.

I'll cover it. But I'm not going to put my hard-earned cash heavily into it. Instead, I want to focus on strength, the cues, the semiconductors, you know, so on and so forth. But I'm watching the other areas, too. Because I want to get a holistic view and get a feel of what's happening. Where's the money moving? Right? Because this way, it all boils down to risk and reward.

That's all it is. I have a show I interviews big money managers and CEOs of publicly traded companies for timeless advice. And one of the money managers gave me a great line. He goes, Adam, we're not buying and selling stocks. I said, so what are we doing? He goes, we're buying and selling risk. It's all it is. At the end of the day, you're buying a stock, hope that you're risking your money,

hoping you're going to make money. Or with the expectation, there's going to be some kind of, of reward for all this activity. Risk, reward. Decisions can be boiled down to risk, reward. So on and so forth. So as you put everything together, understand we're entering earning season. What I'm going to be doing is I'm separating the winners from the pack. I'm going to be looking for strength. I'm going to be looking for new emerging areas in case we see new leadership show up. It's really powerful to get in early. Talk about timing at the beginning of the show. Now it's near the end of the show. I'll talk.

about timing again. Getting into emerging areas and new uptrends early is very, very powerful. I don't mean off a 52 week low. I mean off breakout from a consolidation and seeing other stocks in the group break out, so on and so forth. Very, very powerful. So take your time as you put everything together and just take it day by day. There's no rush. You don't have to force it. Believe we're running out of time and that's all the time we have for today. As always, I want to thank everybody for being here and I'll say, speak to you again soon. This is the one and only Investor's Edge. 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 GaryK.com. Guys, it's no use putting it off. The best time for an underwear refresh is now. Tommy John Underwear is

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