Investor's Edge with Gary Kaltbaum - Pullback Continues Before Jackson Hole Meeting [08.21.2025]

Episode Date: August 21, 2025

https://garykaltbaum.com/

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See website for full terms and conditions. Investor's 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 is Thursday, August 21st, 2025, and we have a great show for you tonight. As always, we want to thank you very much for being here.

Some quick housekeeping before we dive into the show, just as you do. in case you don't know, but you should at this point. In case you're new to the show, welcome. Gary's been doing the show for decades, and he does a fantastic job covering the market day in, day out. But this show is about the market, your money, all the 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.

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That's convictionleaders.com. All right. That said, Gary has been on this like wine on rice. The market is pulling back. You know, on Friday, we have the Jackson Hole meeting with the Fed and other central banks. It's an annual symposium where the U.S. Fed just invites a bunch of other central banks to Jackson Hole, Wyoming. It's a beautiful place. And they have a meeting just to outline, you know, where we were in the last year, what the current state of, you know, the global economy is for global central banks. and then a path forward, you know, what to expect going forward. It's a central bank meeting, but typically the head of the U.S. Federal Reserve, which is Jay Powell, before the meeting or early on Friday mornings, whenever they have their annual

meeting, which is the end of August every year, you know, gives a public statement, letting the public know what his thoughts are, his views are, so on and so forth. So you can look for that tomorrow morning sometime early in the morning. out either before the open, near the open, shortly after the open, depends on his schedule, and, you know, the time's on a difference, so on and so forth. But it's tomorrow morning. So what to expect? Well, the Fed, there's a lot of people talking about the Fed cutting rates. Trump wants the Fed to cut rates and putting pressure on Powell and so on and so forth. The Treasury Secretary came out and said that, you know, the Fed should be 150 to 200 basis points,

which is 1.5% to 2% below the current rates, you know, so on and so forth. But Powell and the Fed, even though there's some dissent, which is a fancy word for disagreement within the Fed recently, we saw that recently with the Fed meetings, Fed minutes, excuse me, from the latest meeting. The Fed basically has not cut rates yet. Why? Well, one, inflation is over 2%. why is that important?

I'll tell you in a minute. Two, the economy up until recently, until August, was strong. The economy is growing. And yes, GDP was, you know, lagged in the first quarter of this year, but it rebounded really nice in the second quarter of this year. And the tariffs haven't really moved the needle in a big way yet. They might going forward. But up until now, economy's been strong.

The jobs up until August, you know, if you look at July and backwards, we're not. We're strong. Economy's growing. We're adding, you know, jobs, hundreds of thousands of jobs month after month for most of the year. So why would you cut rates if inflation's above 2%? That's what the Fed stance was for most of this year. Remember, the Fed has a dual mandate, and here's where I was going with that jobs thing, why it's important. The first part of the mandate is to make sure unemployment stays low or make sure jobs people are employed. Second part of their mandate is to make sure inflation stays around 2%. Well, the downside of printing money, one of the downsides, yes, it stimulates the economy and

stimulates the market, so on and so forth, but one of the big downsides is it creates inflation. And what's happening is you have a situation where the Fed for a long time was, you know, inflation just wasn't a problem. But recently, the Fed inflation became a problem. Why? Because after COVID, the Fed really went just guns blazing, helicopter money, took rates to zero, printed unlimited money. And then after that, the years that followed, we had inflation.

And we still have it now. So coming to this year, 2025, which is five years after COVID, inflation is still above 2%. So the Fed's looking at the data. Yeah, jobs up until August. Jobs were good. economy is growing and inflation's above 2% why should we cut? I mean, that's more or less their logic.

Right or wrong, I'm not here to judge. I'm just here to look at both sides of the argument so we can make our own decisions, right? All right. Why should I cut rates? The downside of cutting rates now prematurely may cause inflation to go up even more. And inflation's already above the target of 2%. So why would we cut? That's what Powell has been saying all year.

What changed? Well, something big changed this month in August. For the first time this year, we saw the jobs report come in way below expectations in August, and the last two months were revised down big time. So the job situation has gotten much weaker. Another thing that's changed is that inflation has been. has come down considerably. CPI, you know, the consumer price index, came in weaker than expected.

So both of those data points give the Fed room to cut rates where that wasn't there before. And a little bit later, I'll talk about earnings. This week we have a lot of earnings coming out from big retail stocks or consumer-related, home builders reported this week, a lot of retailers reported this week, ordered this week. And it's been mixed results, but many of the big ones target Walmart,

even today with Hovaney and HOV, gap down and fell, which means the market doesn't like the earnings, which means what? The consumer potentially could be getting weaker or not stronger. All of that opens the door for the Fed to cut. And that's what's changed, folks. Up until now, the Fed looks at the data. You know, we have a dual mandate, one and two. jobs, unemployment rate, and inflation. Neither one, from Powell's point of view, warranted a big cut, even a cut at all. Because it's a trade, right? Every decision, I like to say, is a trade.

There's an element of risk, element of reward. That's it. It's that simple. It doesn't matter if you're going to cross the street, if you're going to buy a stock, or if you're going to cut interest rates. There's an element of risk, element of reward, for the most part. All right. He's measuring that in real time, and the Fed has told us for years.

their data dependent. So the incoming data when that changes, which happened now in August, okay, that's going to likely change his stance. If I had the guess, I have no idea what he's going to do or what he's going to say tomorrow or what he's going to do in September at his meeting. Wall Street pretty much is a lock that he's going to cut rates, whether 25 basis points or 50 basis points, you know, a quarter point or half a point, it doesn't matter. Well, sorry, it doesn't it doesn't matter, but we don't know exactly what he does, but it's pretty much a lock at this stage from the analyst's point of view that he's going to cut rates at some point in September. Okay, great.

Now, could he surprise everybody and cut rates before then? Yeah, sure. He could do anything he wants. But up until recently, he hasn't had the data to support a rate cut. Now that data has emerged. And that's the big message I want to drive home before Jackson Hole tomorrow, before the Fed meets tomorrow and talks. That's one big thing to keep in mind.

The second big thing is the market is a forward-looking mechanism, meaning what? The market looks forward, and economic data by design or by definition looks backwards. So if the jobs report came out and said, oh, yeah, we only created one job last month. I'm exaggerating. You're just creating a hypothetical situation here to illustrate the point. that tells us what happened last month. The market's looking forward. Oh, inflation was lower last month.

The market's looking forward. Oh, the Walmart reported earnings and gap down. Markets looking forward. Because what does it mean for the consumer going forward? Walmart has to deal with tariffs. Target also, how these consumer stocks have to deal with tariffs. And they can't really pass that on to a weaker consumer. I'm not saying the consumer is weak now, but if the economy slows down, people lose their jobs or the jobs are poor, it goes negative.

Guess what? It's going to be very difficult for the consumer to stay strong, so to speak, right? So that's more, again, part of this job is connecting dots. It's saying, oh, okay, let's look at the data. This is an exercise I do that's very, very effective with investors. It's a role-playing game. intellectual, you know, hypothesis. Let's create the scientific method. Let's test different hypotheses to see what makes the most sense. In other words, if I'm the head of the Fed, what would I do?

Let's look at the data. Let's make sense of it. If I'm the head of a big huge fund, you know, managing $50 billion or $100 billion, what would my view be for that investment committee, so on and so forth, make our own decisions. Up next, we've got a lot more to cover. I want to thank you very much for being here. I'm Adam Sarhan. This is the one and only Investors 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

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I recently spoke with IBM's new director of research, Jake Embatta. We discussed his vision for the future of quantum computing. At IBM research, what we always do is answer what is the future of computing. Whether it's coming up with new algorithms, coming up with better AI, coming up with quantum, or coming up with just how do different accelerators go together. It's our DNA to answer the question of what is the future. Isn't it a perfect problem for IBM because you kind of need to have a legacy of building stuff? Yes.

Building actual physical machines. Yeah, it's why I came to IBM. I wanted the experience, the culture of building hard things that others have not done before. Where do you imagine we are in the time? timeline of this technology. There will come a point when it will mature. Right? Yeah. My cell phone is a mature technology at this point. How far are we from that point with Quantum? By 2029, we'll build the first fault-tolerant quantum computer. That is one that can run a very, very large, large problem. To learn how IBM is building the future of computing, visit IBM.com slash quantum.

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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 missed any part of the show, you can go to GaryK.com, rewind, fast forward, listen at your convenience.

on any device you want for free 24-7 anywhere in the world that has internet. All right. Or you can even download it. A friend of mine just downloaded Gary's show and listened to it on a plane. He's going from Spain to France. He's going from Madrid to Paris. And he was listening to Gary's radio show. And he texted me when he got, he landed.

He said, oh, wow, blah, blah, blah. And we had a big back and forth. So anyway, it's available for free anywhere you want, GaryK.com. All right. So the first part of the show, we spoke about the Fed, to Marse Jackson Hole. And again, we spoke about a game that I like to play or an exercise that I like to do, which is if I'm in the Fed's chair, if I'm the chair of the Fed, or if you're the chair of the Fed,

let's look at that data. Let's make a decision based on the data that's in front of us. They're data dependent. Great. So are we. Let's look at that data. Let's make our own decision. Here's what I would be doing.

And just filter out all of the noise. Oh, this guy's opinion. He says this. He says, that's great. let's look at the earnings for these companies. Our earnings growing, not growing, contracting, so on and so forth. More importantly, what is the market's reaction to the news? That is so powerful, folks, I can't begin to tell you.

Why? Because that's what shows up on our statement, the price. It's not someone's opinion. If the Fed cuts rates and the market falls huge, or goes up huge. The Fed cutting rates or not cutting rates doesn't show up on the statement. Price. Only thing that shows up on the statement is price.

The difference between your entry price and the current price. So when I look at data, incoming data, I ask myself, what, you know, whatever it is, what does it mean? Okay, great. What does it mean going forward? Okay. And then more importantly, how does the market react to that data? because to me that's the most important thing.

That's the wild card. That's the Trump card. Whatever word you want to use, that's where the most of the emphasis in my mind's eye goes to. How is the market reacting to this? It's just a game of expectations. Because events, what is happiness? You know, I studied for a long time, this concept of happiness, right?

Well, all right. Events occur in life. The event itself, for the most part, I'm going to give you just a simple example here. For the most part, some events are good or bad, but for the most part, an event is neutral. How it relates to our expectation determines whether we're happy or not. For example, it rains outside. Is rain good or bad?

By itself, it's neutral. But if we're on a Caribbean vacation and we saved money for two years and we planned it and we only there for a few days and it rains every day we're there, not good. If there's a huge drought and we need water, very good. But the rain didn't change what changed our expectations. So how that event reacts to the market's expectation and then how the market behaves is super important. Because that tells me what the big institutional investors that move markets are doing with their money. Not what they're saying or what they're thinking. It's what they're doing. I'm not privy to see what their buy orders are or sell orders in real time, but it shows up in price.

It shows up in volume. If you see a stock that trades average volume of 5 million shares, one day has 20 million shares. Wow, 25 million shares, 4x or 5 times normal volume, and it's a big move up or big move down. That tells me pretty much what the market thinks at any given point. And that's really, really powerful. Why? Because as an investor, our job is to connect those dots, put those pieces together and make sense. Create that hypothesis tested. See if it's aligned with the market actions. And if it's not aligned with the market's action, okay, there's an element of risk, right? I'm going to be wrong. I'm going to be wrong a lot. As long as my losses are small and the winners are bigger than the losses, even if they're fewer winners, it's okay. But, and that's an important point too, which I'll touch on later and I'll talk about baseball. But it's really important to just do that thought experiment.

Let me empower me. Let me take that data that's out there. It's all public data. And I want to see what I think will happen and then test it against what actually happens. And I keep track of it, journal it, write it down. It's a very, very healthy exercise. You do it once a week. You can do it every night.

I recommend doing it when the market's closed. and then going back the next day and saying, oh, was I right, wrong? What actually happened? How can I adjust my analysis? What did I miss? Look for those blind spots. Super, super powerful if you take the time and do it. It's a great exercise, not just in the market, but in life, in business, anywhere you want to go.

My expectations are X. Y happens. Well, what did I miss? How can I improve? And do it with a loving fashion. Over time, you can detect patterns in your thinking. and find blind spots that otherwise, you know, just we're all creatures of habits. What are our habits?

Some of them we're aware of. Some of them were not aware of. How do I react? You know, what's not being said? Shows up my actions. All right. So that's with the market. Let's talk about the winning and losing for a second.

That's really important. Here's a fancy word. Asymmetric risk. Small risk on the downside. You know, asymmetric returns versus risk. Big risk, big reward on the upside. So, for example, baseball, the best baseball players in the world have, you know, 10 hit the ball three out of ten times. That means they're strike out seven times.

That's okay. And they're the best of the best. You know, four out of ten would be, wow. But really three out of ten. But why does that work? Because when baseball players are wrong, they have one out. Three strikes, you're out. You lose, you know, you lose one out.

Okay, great. best case scenario baseball player has you know bases are loaded and the baseball player stands up hits a grand slam home run wins four even if they have two people on base

and the base the headers says three even if there's one two people one and then more points than they lose worst case scenario for a baseball player when they hit the home run there's no one on base they score it's one they lose one out if they're right they get one run or more, two runs, three runs, or four runs.

That's asymmetric risk to reward. Small risk when you're wrong. You get one out. When you're right, you can have up to four points. And that can really move the needle in a big way, especially when it's compounded over time. So next time they get that fastball down the middle, good hitter is going to hit, swing.

And if they strike out, that's okay. Not get frustrated, not get upset, so on and so forth. Trading is very, very similar. where if you're an active trader, most active traders I speak to at least, most trades don't work. As long as those losses are small, that's quote unquote okay. Why? Because when you are right, and if you let your winners run, you'll do very, very well over time. To illustrate this in super simple terms, let's say there's two traders.

One person has 10 trades. The other person has 10 trades. One person loses nine out of 10 times. The other person wins nine out of 10 times. Which one do you want to go with? Well, the one that wins more, right? Not necessarily. Up next, I'll tell you why.

I'm Adam Sarhan. This is the one and only investor's edge. Hello, hello. I'm Malcolm Gladwell, host of Smart Talks with IBM. I recently spoke with IBM's new director of research, Jake Mbata. We discussed his vision for the future of quantum computing. At IBM research, what we always do is answer what is the future computing, whether it's coming up with new algorithms, coming up with better AI, coming up with

quantum, or coming up with just how do different accelerators go together. It's our DNA to answer the question of what is the future. Isn't it a perfect problem for IBM because you kind of need to have a legacy of building stuff? Yes. Building actual physical machines. Yeah, it's why I came to IBM. I wanted the experience, the culture of building hard things that others have not done before. Where do you imagine we are in the timeline of this technology? There will come a point when it will mature, right? My cell phone is a mature technology at this point. How far are we from that point with Conton? By 2029, we'll build the first fault-tolerant quantum computer. That is one that can run a very, very large, large problem.

To learn how IBM is building the future of computing, visit IBM.com slash quantum. 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 know, never stop. You bring the fire. APU will fuel the journey. Learn more at APU. APU.coms. That's Ryan Seacrest for Albertsons and Safeway. It's stockup savings time now through March 31st. Spring in for store-wide deals and earn four times of points. Look for in-store tags to earn on eligible items from Celsius, Body Armor, ORAIDA, Silk, Capri-Sun, Bavarian Meats, and Charmin. Then clip the offer in the app for automatic event-long savings. Stack up those. rewards to save even more. Enjoy savings on top of savings when you shop in store or online for easy drive up and go pick up or delivery. Restrictions apply. See website for full terms and conditions.

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 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, you can go to GaryK.com, rewind, fast forward, listen at your convenience on any device you want, all for free. All right. We spoke about risk versus a reward. You know, every decision I make, I think of an element of risk, element of reward in simple's terms. But okay, what's the worst case scenario here? Where's my stop? If this trade doesn't work, before I enter, I ask myself,

Where am I going to exit? How much am I going to risk if I'm wrong? If I'm okay with that risk, then I'll take. And then, of course, the other side is the reward side. And if the reward is bigger, for the most part, then the risk, I'll take the trade. So before, or just a few minutes ago, I said, okay, let's talk about two traders. They illustrate this point in super simple terms. Trader one has 10 trades. They lose 9 out of 10 trades.

90% loss ratio. Trader 2, or trader B, has the same thing, 10 trades, but this time they win nine times. 90% win ratio and they lose 1. Which trader would you give your money to? Most people say, oh yeah, the one that is right 90% of the time. The answer is we don't have enough information to determine because the win ratio versus the launch ratio really is secondary. It's not even a material. It's not important to the decision.

Why? It's how much do you win when you're right versus how much do you win when you're wrong? Oh, excuse me. How much do you lose when you're wrong? How much do you win when you're right? How much you lose when you're wrong? So, for example, guy loses nine times out of ten. Let's say he loses a dollar.

I'm oversimplifying. Nine times. He's minus nine. The tenth trade, he wins $10. Net net, the guy's up a dollar. The other trader that lost nine times. in a row, lost one, excuse me, next trader wins nine times in a row is up nine. Wins one every time for nine times, up nine.

The 10th trade loses 10. Net net, even though that trader was up 90% of the time, lost a dollar out of those 10th trades. The guy that was lost 90% of the time, one each time, minus nine, the 10th trade made 10. Net net is up a dollar. That person made money. The guy that won 90% of the time lost a dollar. in that hypothetical example.

I'm just oversimplifying to illustrate the point. Nine losing trades, lose one nine times. Boom, $9 lost. 10th trade, they win 10. What if they win 100? What if they win 20? Follow? That's the beauty of this business.

So learning how to control the losses and limit those losses when you're wrong becomes a superpower over time because this compounds. You know, I give a speech every year to a bunch of seventh graders to middle school at my kid's school. And I always ask him how many wonders are there in the world?

And they usually say seven. And I say, okay, well, I'm about to show you the eighth. And I talk about compounding. I show them how money compounds. I go through the whole example of it. And you kids are young, you're 12 years old, 13. Fast forward. Average age of retirement, 65.

And I show them on a chart how money can scale and compound and grow, so on and so forth, invest early. Okay, great. At the end, the kicker is not just money compounds, but other things in life compound. knowledge, relationships, health, good decisions over 30, 50, 80 years adds up. Both ways. Good bad, right? Eat that cookie every day. Not good. I got to take that advice. Do the workout. You got to take that advice also. Go that muscle. Slow and steady.

You know, over, I'm generalizing is good. So think of that when you look at your decisions and you look at your trades and you look at your outcomes. Being wrong is part of the business. It's inevitable if you're an active trader. I don't know any active trader that's right 100% of the time. Maybe that person exists. If they do, please get in touch. I'd love to hear from you. But most traders lose. As long as those losses are small, you're fine. So all right. Next, like Carrie says, next, let's talk about the data. So company like two big stuff. stocks report earnings today, Hovenian Home Builders, which is a lower price home builder, and Walmart that I want to discuss.

Hovannian, the PE ratio is 7. It's 0.3 times the S&P. So it's considered, quote, unquote, cheap compared to the S&P. Stock is down, double digits, or was down at some point, you know, more, even more than that. But, well, I think it was maybe down 10, 11, 12, probably 13%. So anyway, down double digits that's not most of the day today, right? On heavy volume, earnings in the quarter ending July 31st, 2025, compared to the same quarter in 24, fell, ready for this, by 80%. Sales were up 11%.

Earnings fell 80%. Stock was down double digits on heavy volume. Wow. Earnings were down 80%. That's a home builder. Lower priced homebuilder. They go after the lower income folks. Toll Brothers, which reported earnings the other day, earnings were up only 4%.

And they go after the high end, the luxury home market. Walmart, WMT, HOV is a ticker for Hovani and TOL is a ticker for Toll Brothers. WMT is a ticker for Walmart. Gapped down to its 50-day moving average today on super heavy volume, super, super heavy volume. after reporting earnings growth of only 1% year over year. That same quarter ending July 31st, 25, they earned 68 cents. Last year, same quarter, they earned 67 cents. So it was one penny more this year.

And sales grew by about 5%. The pre-tax margin was only 4%. So yeah, with the problem there, market didn't like it. Tariffs, what are the impacts going forward? We're not sure this senior management CEO, the C-suite executives at Walmart. like, yeah, a terrorist might cut into the margins. Looking forward, the senior management wasn't really excited,

so why would the market be excited? All that matters, stock is down, gaps down today on heavy, heavy volume. So again, being able to take a look at the winners and losers and and turp, listen to the market. You know, I'm a book. I wrote a book in case you don't know. It's called psychological analysis.

The idea is that fundamental and technical analysis are not enough to beat the market. There's a third school of thought, which I'm introducing. It's how people make rational, not emotional decisions with their money. Thankfully, the book was number one in Amazon. You could buy it, you know, it was number one for three months. You could buy it on Amazon or Barnes & Noble anywhere where books are sold. Again, it's called psychological analysis.

And in the book, I like to say there's an infant number of ways to make money in the market. Your job is to find one that works for you. And how do you do that? By listening to the market. I always like to say the market is speaking and then ask, are you listening? Well, the market's not literally speaking, just like humans. most communication is nonverbal. But when the market moves up a lot or down a lot, that tells us a lot.

Right. So other stocks that reported this week that are important, also big retailers, Home Depot, ticker symbol is HD, initially was up on earnings. Earnings were flat year over year, more or less, 468 this year compared to 467. But from a percentage standpoint, it was a bit. not even 1% difference. And stock is pretty much given back. It's lower than where it was before the earnings.

LOWW, another retail stock. earnings were up 6%. 433 compared to 410 was up initially and then sold off. And now it's kind of flat. Hasn't really gone anywhere. The one big standout, there were others, but the one big standout is T.J. Max or T.J.X is a ticker. T.J.X.

They have 5,000 off price apparel in home goods stores. All right. Gaps up yesterday on earnings. Closes in the lower half of the range. Earnings were up 15%. In the quarter ending July 31st, 25, they earned $1.10. Same period last year earned $0.96. Sales were up about 7%.

Okay. Stock gaps up and clears resistance. But it was a very weak close. And now it's down just a little bit. So, and they also service, it's the off-price retailer, so it's not going after the high-end audience, it's going after the lower-income folks. So, okay, great. Now we have Hovaneyan. We have a little mixed news from T.J. Max, because that was up, but that could be more company-specific.

We've got Walmart. Target, TGT, also gaps down yesterday after reporting earnings and earnings and Target fell 20% year over year. Same thing, quarter ending July 31st, 25. to they earn 205 target same period last year they earned 257 earnings down 20% sales a target down 1% that and they're expected to earn $8.86 this year next year targets expect to go to $7.35 a decline of 17% year year stock gap down yesterday to a multi-month low so what does all that tell us All right. Economic data is slowing down.

The consumer might be slowing down as well. And go back to the Fed. We'll see what he says tomorrow. And more importantly, how the market reacts. Up next, we've got a lot more to cover. I want to thank you very much for being here. I'm Adam Sarhan. This is the one and only investor's edge.

Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvin Krishna. And I asked him, how can companies use a... to its fullest potential to create smarter business. My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example.

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mode. You know, markets go up and they go down. Sometimes they go sideways. After a big move up, markets tend to pull back. That 50-day moving average tends to be like a magnet. By the way, on both sides, if you sell off hard like back in March, it tends to be a magnet where the price comes back into the 50. You get too extended below it. It tends to rally into it. And conversely, When you get too extended above it, it tends to pull back into it. Now, Gary's mentioned this before, which is brilliant. There's two components when you look at markets. There's time and there's price.

So what are levels of extension? I'm going to look at the NASDAQ 100, which is a QQQQ. You can follow along if you want. The NASDAQ 100 just recently hit an all-time high about a week ago, right around the 13th of August. At that point in time, it was about 5.2% above its 50-day moving average. Historically, if you look at the last few years, getting extended around 5, 6%, it tends to pull back. But it's gone as high as double digits, 10% above the 50, 12, 13, 14, I believe I've seen 14,

but right above 10% above the 50. And then it gets really extended and pulls back into the 50. But anything above 5, 6%, tends to be an area where, oh, okay, pullback is likely, higher probability. So it reminds me of a traffic light. After every green light, what happens? You get a yellow light and then a red light. So after every red light, you get a green light.

It's just the way it works. So when markets are going up and doing great, so on and so forth, that's green light. After every green light, you're going to pull back. I mean, it's inevitable. It goes yellow and then goes red. You get the pull back, and then you have another green light again. So that's the first component, which is price. It's time and price.

I talked about price first. Second one is time. The other element to keep in mind, even though 5% is not crazy extended on a percentage basis above the 50 for the NASDAQ 100, the other component to keep in mind is time. The last time the NASDAQ 100, the QQQ, touched the 50-day moving average,

folks, was back in May. We're now towards the end of August. That is a long time. Most likely, again, it's all the probabilities. Markets are going to pull back at some point. You get long in the tooth, you know, several months of not touching the 50. That's a big piece of the puzzle. So a few weeks ago, I was saying, oh, the market's extended.

We're pulling back. And at the time, a lot of people email me and said, Adam, what are you talking about? The markets are strong, so on and so forth. And then, boom, we get a pull back almost touching the 50 be moving out. average yesterday, just about in the NASDAQ 100. The S&P is stronger on a relative basis. SPY is a ticker that I'm looking at there. That only pulled into the 21 day. And same thing, the last time the S&P touched the 50 was in early May. So it doesn't have to touch the 50.

There's no magic rule here that says, oh, you have to. But again, investing, it's all about probabilities. Like Gary says, stack the odds of success in your favor. That's big. It's all about probabilities. Anything is possible. We want to focus on the probabilities. What's probable. So after a nice little pullback into the 50,

you know, it could be tomorrow. Fed Powell can come out and say, oh, yeah, by the way, we're going to cut rates and so on 40. You cut, you know, data dependent, blah, blah, blah, blah, whatever he wants, cut rates, market rallies. Or we're going to cut rates, market falls. Or we're not going to cut. And either event happens.

Goes up or goes down afterwards. But so far, we've seen a pull back into the 50. in the NASDAQ. So that happened. Okay, we did see distribution. We did see higher volume, little sign of weakness, but we had a strong close yesterday,

and today's a nice quiet day. And we're in an uptrend. We're still in the bull market. So watch that 50-day moving average, folks. That's an important line in the sand to watch, right around 556 for the NASDAQ 100, the QQQQ. All things being equal,

we stay above it. Bueno, good. You go below it. Not so strong. Not the end of the world, but we'll see more, most likely more distribution. Again, you can even watch yesterday's low,

which is Wednesday, of 558-84. You undercut that, you're probably going to head to the 50, which is 556. I mean, you're right there. So let's just say it goes down to 558, 556, and then what happens?

Let's watch at that stage how the market, what happens afterwards. That's on the downside. If we rally from here, we bounce off the 50 and rally, which is a very high likelihood, again, depending on how the market reacts to the Fed tomorrow, we can easily have another leg up. Again, that's just the way markets work, right?

They pullback, pullbacks percent the climb from the high. Right now we're just a few percentage points off the all-time. high, time and price. And how long is that pullback? So far, it's been a few days. The last few times the market tried pulling back right away, boom, bulls showed up, and the market hit new highs. So if this 50-day moving average is defended, great.

It'll become a good buying point with an exit below the 50. If not, and it rolls over, bye-bye. Again, small loss. Risk versus reward. And I'm not saying to go buy the market, no investment advice is being giving, everything is general in nature. All I'm just trying to do is help you think in probabilities, understanding how to shift the focus to looking forward and understanding what are the odds. The beautiful thing is that this business is that there's only three things that can happen. Mark can go up, market can go down or market can go sideways.

That's it. Same with any stock, up down sideways. It's the only thing that can happen. Now we've got to adjust and we've got to price accordingly and size accordingly. you have too big of a position and it goes against you, that can really hurt your overall performance. And if you have too small of a position and the market goes, you're away, it's not going to really move the needle. Sizing is an important thing. And that varies from person to person.

Everyone's risk tolerance is different. You know, Sir Richard Branson, the guy from Virgin, he jumps out of airplanes. He's a billionaire. I'm not. Either one of those, I don't jump out of airplanes. I'm not a billionaire. He likes risk. He loves that stuff.

My DNA, I'm not jumping out of airplanes. It's not for me. Again, no judgment. Nothing right or wrong. It's just for each their own. So it's, again, one of the situations where know thyself, right? We all have strengths. We have weaknesses.

We have blind spots. It's important to know what's good, what works for you specifically. That's important. So as we wrap up here, as always, want to thank you very much for being here. We'll see how the market reacts tomorrow to the Fed. And I believe Gary will be back. But as always, it's a pleasure. Have a great evening, everybody. I'll speak to you again soon.

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. 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. Hey, it's Ryan Sechrest for Albertsons and Safeway. It's stockup savings time now through March 31st.

Spring in for store-wide deals and earn four times of points. Look for in-store tags to earn on eligible items from Celsius, Body Armor, Oira Ida, Silk, Capri-San, Bavarian Meets, and Charmin. Then clip the offer in the app for automatic event-long savings. Stack up those rewards to save even more. Enjoy savings on top of savings when you shop in-store or online for easy drive-up and go pick up or delivery. Restrictions apply. See website for full terms and conditions.