Investor's Edge with Gary Kaltbaum - Rally Pauses

Episode Date: August 4, 2022

Follow Gary on GaryK.com or http://garykaltbaum.com

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vary for to go to existences. Investors Edge with Gary Cultbaum. Straight talk about you and your money. Now from the BizTalk Studios, here is Gary Cult Bomb. And welcome once again to Investors Edge. I'm Adam Sarhan. As always, I want to thank you very much for being here.

Gary Kay is still out today, and today's Wednesday, sorry, excuse me, Thursday, August 4th. So before we dive into the show, we've got to note some Gary. I've wanted to go over the big. highlights here. Just so you know, this is a show about you and your money and all the fun points in between. And just as a quick reminder, if you don't get the show in your city, you can go to GaryK.com and listen live or archive. Gary's live Monday through Friday, 6 to 7 p.m. Eastern. Also at GaryK.com, you can follow Gary on Twitter by just pressing the button, or you can go to Twitter

and click the at sign and then Gary Kulp on, which is Gary's full name. That's how you can follow Gary on Twitter. Also on GaryK.com, you can subscribe to Gary's morning notes, send you to directly to your inbox. You may email Gary, ask about his money management services, or, and or join Convictionleaders.com, which is his private members-only website, where he shares with members several times a day what he sees happening on Wall Street. He also gives in-depth webcasts, entries and exits, and a whole lot more. All that is available at Convictionleaders with an S.com. All right, so let's go over the market today. And it was a relatively quiet day. What I mean by,

that is, for the most part, that is, the market was up a little bit, down a little bit, ended a little bit quiet, and just a quiet day. That's perfectly normal and healthy after a big move up. Remember, tomorrow we have the jobs report, the non-farm payrolls report, before the open. And you've got a situation here where the market is overbought. In fact, it's very overbought. So pullbacks would be very, very normal. Unless you see serious selling or heavy distribution, so far, you know, it's no big deal. It's perfectly normal and healthy, folks. That's just how the market works.

They don't just go straight up, right? So we had a big move up in the major indices from the June low. Now you've cleared an important level of resistance in the NASDAQ and NASDAQ 100, which I'll look at the QQQ since we can trade those. It's 31456, which was the high from June. That's important. NASDAQ 100 is now at 32440s where it closed today. And 314 was that line in the sand that it broke above. The S&P 500, I'll look at the SPY, still hasn't cleared its June high.

That high was 417, we closed at 414. We're just about to get there, but we haven't broken above there yet. And the Dow, look at the DIA, which is the ETF that tracks the Dow, closed below it. it's June high and that high was 33295 and close at 327. So, and I'll give you the Russell too, the small cap Russell, closed right near it's June high. The June high was 190.94, so figure 191 and we closed at 189.51. So the NASDAQ is clearly leading from the June low.

When you peel back the market onion, so to speak, or you peel back the onion and dive deeper, what's driving those gains? Well, it's mainly big gains in stocks that were beaten down. But big tech stocks have really led the market higher over the last few weeks. And that's a quote-unquote good thing for now. The idea is, from a fundamental standpoint, is that the Fed pivoted and or is going to pivot soon, meaning they are doing their best to fight inflation. and the best way they know how to do that is by decreasing demand.

Remember, price, where economics 101 tells us what, price is a function of supply and demand. It's just that simple. So demand goes down. What happens to price? It goes down as well. So the Fed's doing, and other central banks around the world as well, is they're aggressively raising rates. Why? Because that lowers demand.

it slows down economic activity. And then what happens to demand? Demand goes down. And then what happens to inflation, which is the goal, does it go up or down? Well, it goes down. Hopefully that goes down.

That's the whole goal. That's the whole point of what's happening here. And what the Fed pivot means is that the Fed will not have to aggressively raise rates to combat inflation. And if that's the case, then all of a sudden, the big sell-off we just experienced on Wall Street since November, December, is now possibly behind us.

Because the Fed's been a big headwind here for the market. But if the Fed's going to become a tailwind, would they stop raising rates and then potentially lower rates, depending on what happens here with inflation, then all of a sudden, things change and they change in a very big way. So what makes up inflation? basically food and energy. There's core inflation, there's lots of other components, but it's commodity prices for the most part, right? If you have oil prices going up, that means inflation's going up,

all things being equal. Like food and energy prices, let me rephrase. Food and energy prices go up. What happens to inflation? Does it go up or down? It goes up. Food and energy prices start going down. What happens to inflation?

Goes down as well, right? Again, this is simple, but very, very important. Just like losing weight, it's a simple concept, calories in versus calories out. Yet most people are weight. It's a simple concept, but it's one thing to understand intellectually. It's another thing to actually apply it and make it make sense. Right? So my job is to help you make sense of what's happening.

So when you look at food and energy prices, remember, the market's a forward-looking mechanism. What does that mean in English? It means that it looks forward, not backwards. By definition, economic data and by the way, earnings data do what? Do they look forward or backward? They look backward. Tomorrow we're going to find out what the jobs report was for July. That's backward.

We're in August now. There's nothing wrong with that. But just so you understand that disconnect, because I had somebody asked me earlier today, Adam, how come mortgage rates are going down? Right? Big piece of, I'll get into that later about what rallied today. A large portion of the market that rallied today are interest rate sensitive areas of the market. Utilities were up big.

Industrials were up big. Housing stocks were up big. Right? As mortgage rates come down, demand for those things can go up. So the idea is the market's looking forward. And a big disconnect that happened to me for years and years and years until I've discovered that little thing above, that difference there, or I learned it. I had discovered.

Someone else, I'm sure, discovered it before me. But it was my mind's eye. It was a discovery for me is that the market's looking to the right of the chart and economic data and earnings data look to the left. They tell you what happened. So that's why there's something called buy the rumor, sell the news, where the market rally really, really hard ahead of an event. So you buy the rumor.

and then the event comes out and the event is quote-unquote bullish, but the market sells off. It's selling the news because that event already happens now in the past. The market's looking forward. I wrote about all that and then some in my book called psychological analysis. It's another school of thought. There's fundamental analysis. You study the companies, earnings and revenue, all that stuff. There's technicals where you study, there's technical analysis.

You study the chart, patterns, so on and so forth. But for years, there was something missing. And there's that psychological analysis. That's the whole point in the book is introduced that third school of thought. But one of the points I cover in the book is that looking forward concept. So inflation is starting to come down.

Look at oil prices. Look at USO on a daily chart. I tweeted this earlier today. Has a head and shoulders top pattern for me. That's a bearish pattern. It's flirting with the neckline. Oil futures broke down below the neckline of that pattern. oil futures hit a high and this is energy prices right of 130 back in march they're now at $88 a barrel

this is crude oil gasoline futures hit a high of $4.32 now it's at $277 and tanking hard and just going straight down I think you've had two up weeks in the last 10 weeks for gasoline prices and this is the futures markets I'll show up in the tank like as you go fill up your tank, go to the gas stations over the next several weeks, they'll start drinking, prices are just coming down, coming down, coming down. So energy prices are going down. Now let's look at food, right? Because there's food and energy, the two main components of inflation. So we've got soybeans, S-O-Y-B, if you want to pull up a chart, you could see it. It's gone down a lot. Look at wheat, W-E-A-T. It's gone down a lot also. Look at corn, C-O-R-N.

it's gone down a lot as well. So the good news is everything the Fed wants to do, lower inflation, is starting to work. And that's letting the stock market, that is, have a big relief, sigh of relief. And that's been one of the big catalysts over the last several weeks causing the big rally. So that's a good news. Now, in the short term, the market's extended. What happens after the payroll report? Anything can happen.

But up next, we'll talk a lot more about the market, give you some sector, some stocks, and some psychological analysis. I'm Adam Sarhan. This is the one and only Investor's Edge. Hi, I'm Gary Kalpom, 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. 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 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 IHeartRadio. Listen now wherever you get your podcasts. Success starts with your drive, and American Public University is here to fuel it.

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The last bastion of quality programming. With Gary Coltbaum. It doesn't get better than this. And welcome once again to Investors Edge. I'm Adam Sarhan filling in for Gary Kay, who's out today. Today is Thursday, August 4th, 2022. In case you miss any part of the show, you can go to GaryK.com, listen, or archive and all the shows are available. If I went too fast or if you want to pause and rewind

or listen on any device, you can do so for free all on garyk.com. Now, let's talk about, we left off talk, well, we spent the first part of the show talking about inflation. And that's important because that's what the big elephant in the room is, so to speak. The Fed is trying its best to do what? To lower inflation. So if inflation is, starting to come down, which is important, then you could see stocks go up because what's the logic there is that the Fed doesn't have to be so aggressive raising rates. They've raised rates a few times and if this is enough to slow down economic activity, slow down the economy, enough to slow down demand, enough to slow down, right, or to lower inflation, slow down demand for commodities,

they don't have to keep raising. Excuse me, keep raising. And if they don't have to keep raising, that could be a very good thing. Why? Because that reduces the chance that we have what's called a hard landing in the economy. What's a hard landing, you might ask? It's a fancy way of saying

an deep economic recession or a crash in the economy or the economy falls apart. And instead, it increases the odds or the chance for what we call a soft landing. And that's just,

for or another way of saying, probably a better word, for a very brief minor pullback in the economy. Inflation comes down and the economy continues to grow, markets go up and everyone's happy. That's somewhat more or less

of the underlying logic. Now, there's two possibilities, scenarios here for what happens next in the market. One, this is a bare market rally and it rolls over and fails. It hits new lows and we keep going lower and we have increased the odds of a hard landing in the economy and you get a deeper recession, so on and so forth. Or two, this is the beginning of a new bull market. Hey, the bare market's over. It lasted about six or seven months and this is the early innings of a new bull market. The jury's still out. All

All we know is what Gary's told you is the markets in leaning bullish, let's put it that way, in buy mode for as long as what, as long as the major indices stay above their respective 50-day moving averages. And really, that's all that matters. What we're seeing in this earn, what was a catalyst to do that, A, the Fed pivot, but really, more importantly, healthy reactions to earnings. that's the first time it's happened all year, this earnings season, where we saw companies come out. Now, there have been some blowups. I mean, they report earnings and they gap down. But by and large, especially last week, even the week before and before this earning season, the last few weeks, we've seen positive reactions to the earnings.

Now, the earnings don't matter in my mind's eye, as much as, the reaction to the earnings. Why, you might ask, hey Adam, why is that the case? Because if you have healthy earnings, but the stocks get, you know, collapses or falls 25% overnight, like what happened earlier this year in so many stocks from meta, which is Facebook, to Snapchat, to PayPal, to, you know, Netflix, the list goes on and on and on. It was disaster after disaster after disaster, blow up after blow up after blow up. And not even that. If it wasn't even blown up like 25% down like it just gaps down,

the stocks would report earnings good or bad and for the most part they would fall. That changed in July. And that's a big change. Why? Is that important? Because that tells you what the big institutional investors are doing with their money. Forget what they're saying. all that matters in my mind's eye, my humble opinion is what they're doing with their money.

Okay. Next, right? If you have strong earnings but the stock goes down, 25% is that good or bad? Well, if you own the stock, it's bad. You have lousy earnings, but the stock gaps up 25% is that good or bad. Of course, it's good if you own it right before the gap up. So that's why I pay attention to the reaction to the news. put a lot more emphasis on that because it's a good tell. Remember, this is a puzzle. We're trying to

figure it out. It's like a scientist. What does a scientist do? They have a scientific method. You can Google it. If you don't remember from high school chemistry or a high school science class. You have a hypothesis and you do what to it. You test it. If it works, great. You keep going. If it doesn't work, you drop it and you test another hypothesis. And you keep doing that, rinse, watch, repeat until you find one that works. It's just a scientific method. Same thing with this business. Oh, wait a minute.

Inflation's coming down. That means the Fed doesn't, it's the last pressure on the Fed to keep raising. What if the Fed stops raising? Would that be good for the economy? Yes. Well, what happens to earnings? That'd be good for earnings. And so on is you put the pieces of the puzzle together.

And that, to me, is intellectually stimulating. That's one of the things I love about this business. Second is the competitive side of it. You're competing against the smartest, wealthiest, most resourceful people in the world. and you have a level playing field. You have a chance to win. And so do I. Right?

So that to me is incredibly liberating. And that intellectual stimulation is just, it's the next level. Because there's always something new happening on Wall Street. There's always a new dot to connect. There's always that challenge. And of course, when you win, when you're right, it's beyond the great feeling,

phenomenal feeling. So, inflation's coming down. That's a good thing. Commodities are coming down. Remember, on the way up earlier this year, the commodities were going straight up, and the market was going down. Now the opposite is happening.

So I'm watching the commodities very carefully because it's a good tell. Again, there's not one indicator that's a holy grail. It's several. You're putting the pieces together. As long as the market stays above the 50 day and we don't have serious distribution, folks, I mean serious, heavy selling,

from these institutions, then the market's leaning bullish, and I'm going to lean bullish as well. Our job is not to be right or wrong. The job is to make money. I can sit here and pontificate until you, you know, up, down, left, right, all day long, give you my opinions about the market. It makes me, quote, unquote, feel good. It doesn't mean anything. Well, I'm right. Markets wrong, losing proposition. The goal here is to be aligned with the market. The goal here is to make money. The goal here is to be in harmony with the market and not fight the market. Super, super, super important. Really important, like they say. Up next, we'll talk a lot more about the market. We'll talk about some stocks and some sectors. I'm Adam Sarhan. This is the one and only

investors edge. Hi, 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 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. APU. APUS.edu.

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Depending on certain loan attributes, your business loan may be issued. issued by on deck or celtic bank on deck does not lend in north dakota all loans and amount subject to lender approval 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 coltbaum 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 gary k.com listen live or our I'm going to live Monday through Friday, 6 to 7 p.m. And available 24-7 on demand anytime you want on GaryK.com.

So we spoke about inflation coming down. We covered a lot of ground today. Spoke about that's good for the market. Watch, I'm watching these commodities because the commodities continue to fall. That should be good because inflation is going to keep coming down in future inflation reports, you know, so on and so forth. All right. That's good.

Now let's talk about today's action and help put the pieces of the puzzle together, even more. And as that closed up about 52 points, 12,720, the S&P 500 was down 3.2.23 points to 515194. And the Dow was down about 85 points to 32, 72682. Now, the Russell closed down about two and a half points in 1906. All right, a few things that jumped down to me today. Number one, mortgage rates are coming down big time. What does that mean for housing stocks?

They went up. They went up a lot. You can look at the XHB was up about 2%. Toll Brothers, TOL, up about 2 and 3 quarters percent, almost 3 percent there. Meritage Homes, MTH, was up about 2. A little over 2%. You've got HOV, which is Hovaniian, was up about 2.3%. B-Z-H, these are lower entry-level home builders, up about 4%, 3.77%, Lenar, L-E-N, up almost 3.5%.

These are big moves in one day. But what does that mean? That means money is rotating back into these home builders. The one thing that's missing from here is heavy volume. If you look at Toll Brothers, TOL, marriage homes, M-T-H, they're rallying on light volume. Beezer Homes, BZH, light volume on the way up. Heavy volume on the way down last few months, light volume on the way up. And if you look at the QQ, the NASDAQ, the NASDAQ 100, same thing there.

Volume signatures are big moves up on volume, spikes in volume. That shows you tremendous demand. Up days on heavy volume or accumulation days. Down days on heavy. heavy volume or distribution days. But when volume isn't there, it's not the end of the world, it's just not a good sign. And that's leaving me to believe, you know, to question this, this rally. Now, again, I'm leaning bullish as long as the NASDAQ and above its June high and above its 50 day moving average. And the same with the other indices are above their 50-day moving

averages, leaning bullish. I'm just sharing some thoughts, some things that jump out at me. So DoorDash, after hours, reported earnings up about 18%. It closed at 81.36. It's at 9671 right now in the aftermarket on earnings. I'm going to watch that because, yes, it's rallying off the lows, but I like to see earnings gaps. And I'll go through some more. Yesterday, I briefly covered them, but then we ran out of time. So I'll cover some of them today.

Why do I like seeing earnings? First off, what is an earnings gap? and then why do I like seeing it? Earnings gap is basically when the stock closes one day, let's just say it closes at 100. The next day it opens up at 125. It's up 25%. They reported earnings after the bell.

The next morning it's up 25%. Or after hours and then it opens up the next day. It closes the next day up 25%. That's a gap up. It literally opened, it gapped higher from where it closed, and it closed way up. What's a gap down? The exact opposite.

Closes at 100, opens up the next day. 80 or 75 or 90. But why is that important? Like Gary says, it's not Aunt Mary and Uncle Bob doing the buying and the selling for those huge gaps. And you see them accompanying buying massive volume. That's, again, a clue. The institutions, the big institutions are in there buying a lot of stock on gap ups or selling a lot of stock on the way down.

So I'm actually going to log in the conviction leaders here because earlier today in the morning, Gary gave a list of stocks that are gapping up that were on his radar. And I'm going to read to you what he sent out to members early today. So it's in the pre-market. There it is. Publishes this before the open. So M-E-L-I, which is, I'm not even going to try to pronounce this. Mechidolibre. It's basically the Amazon, I believe, for South America. So gapped up today, closed up 16% on earnings, big spike in volume. earnings were up 77%, sales are up 52% versus the same quarter last year. Big move up, folks.

That could be the beginning of a move. We don't know. We'll see it rallied right into its 200-day moving average, closed in the middle of its range, so it wasn't the strongest close, but big gap up nonetheless. EPAM, E-P-A-M, next stock on the list. E-P-A-M, sales are up 36%. Stock closed yesterday at $370.

and $3. Opens today. Well, actually forget that. It closes today at 4.15. So keep it super simple. Yesterday it closed at 370. Today it closes at 4.15. And it cleared all the highs going back until February of this year.

Yeah, right around February this year. That's a big move up. Now, this stock has gotten beaten down hard. It wasn't set 719 or 725 back in November and December of last year. fell all the way down to 168, but now it's back to 415. Big gap up. It's still under its 200-day moving average, but I like noticing and keeping track of these big gap-ups.

Why? Because they tend to continue to go. Next up on Gary's list this morning in Convictionleaders.com was Baba, Ali Baba, which is the Chinese company should be familiar with it, but Amazon for China, if you will. Baba. B-A-B-B-A. they own a bunch of other sites.

Anyway, they gapped up in the morning. Get this. It closed only up 1.88%. And now it's down a little bit in the aftermarket. Closed in the lower half of the range. It wasn't a big gap like the other ones. You know, Melly was up on a percent basis, 16%. EPM was up, 12%.

Baba closed up today. 1.88%. Basically no gap. There's a big, big difference. But in the morning, before the open, Gary, you know, what he was talking about this, it was up much larger. Those were the ones that were up. Now, the gap downs, D-D-D-D-O-G, data dog.

Gapped down, but it rallied all day and closed in the upper half of the range. That's a good sign. So you don't have a big huge gap down. Only closed down 1.7%. It was down more throughout the day. That shows you the institutions were buying it. You know, they sold it overnight, but during the session today, there was demand. Pay. Paymentus Holdings, ticker symbol pay.

Down almost 30% today. Now that's brutal. Close yesterday, $18.11 cents. Close today at $12.97. Down 28.38%. Big heavy volume day. Average volume here is 148,000. Shares a day, this thing closed. I had 2 million shares today.

That's what we mean by heavy volume signature days. not Aunt Mary, Uncle Bob doing that selling that day in pay. And these are just no go zones, my friend Jim talks about, just no go zones. Stay away. To me, these big gap down. Lucid group, which is an EV maker, electric vehicle maker, LCID, down 9.73% today. Gap down on heavier volume than average. Average volume is about 17.5 million shares.

This guy was down, had heavy volume today, about 37 million shares. 17 is average, today you had 37. Clearly, the big institutions are selling. So when I'm involved with a stock like that, I just get out of the way. Hopefully, before the gap down. I mean, these stocks were all beaten down. They gave you many sell signals. Revolve, RVLV, down 13% today.

I'll go a little faster here. Shake Shack, S-H-A-K is a ticker there. This closed the upper half of the range. It was down more, closed only down 6%. But something. I'm watching. FTNT, this is a cybersecurity company, Fortinet, gap down 16.5%.

They're about 16.3% today on monstrous volume. Now it's in the lower half of the range. That's an ugly looking chart. If it takes out the lows from just recently $52 and $48, it's probably going much lower. So again, even though the market is acting better, you still have a lot of these quote-unquote blowups. Fastly, FSL-1.

down 12%. And then KLIC, the semiconductor, was down more but closed up. And that's a good example of volume coming in, but institutions defending that stock. And AMD as well, it was lower and then then it rallied afterwards. Anyway, up next, we'll talk some more stocks. I'm Adam Sarhan. This is the one and only investors edge. Hi, I'm Dr. Jake 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 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. 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.edu. On-deck is built to back small businesses like yours. Whether you're buying equipment, expanding your team, or bridging cash flow gaps, On-deck's loans up to $400,000 make it happen fast. Rated A-plus by the Better Business Bureau and earning thousands of five-star trust pilot reviews,

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Investors Edge with Gary Culpa. And welcome once again to Investor's Edge. I'm Adam Sarhan, as always, I want to thank you very much for being here. Filling in for Gary Kaye today, and we spent the first part of the show, if you case you any part of the show, you can go to GaryK.com, listen live or listen to archive. You can rewind it, fast forward, so on and so forth. So what's happening? We spoke about inflation coming down. We spoke about the stock market being a little bit extended here and a pullback being pretty much normal and or to be expected. We spoke about the jobs report tomorrow. The numbers

are not as much really on my focus isn't on the numbers. It's the reaction to the numbers. Next, spoke about big gaps up and big gaps down. We spoke about putting the pieces of the market it together. Cover a lot of ground today. Now I want to shift gears and talk to you about the importance of playing defense. I have an investment system. It's called AMP, A-M-P-D. It stands for advanced entry points, meaning buy a little bit early on the right side of the base as the stocks coming up the right side. So you get a little bit of an edge. That's the A. Buy leading stocks, strong stocks that are near their highs because those stocks have proven that they're working. You know, buy the best quality merchandise.

Don't buy garbage. Garbage are stocks that are making 52-week lows that are going down. If you're buying something, you want it to go up. Don't buy extended because that can be too far up. But if it has a nice consolidation, it's digestion period, logical area of resistance it can clear. And then if it clears it, it keeps going. That's called a breakout.

You know, you want to get a little bit earlier and buy on the breakout and buy it as it's going up and getting at the right time close to the pivot point, which are those prior chart highs. You don't want to be buying, let's say, It goes sideways for six months. And every time in a trading range between 190. Every time it gets to 100, it sells off. It goes 90, goes back up to 100, goes back down to 90.

Then one day it breaks out above 100. That's a big breakout. And it doesn't a monstrous volume. I love that, right? Okay, great. One or two things is going to happen there. Well, let me say one of three things. Either keeps going up and it goes to 105, 110, 120, so on so forth.

Option one. Option two, which just sits there and does nothing, goes sideways. Option three is it rolls over and goes back below 100. If it goes back below 100, that's a failed breakout. They happen all the time. And just because you have a failed breakout doesn't mean the moves over. It can easily pull back and then break out again and go. And it happens all the time, these failed breakouts.

It's almost like a Bronco. We're trying to kick you off the horse. We want to stay on it, so to speak. But again, if it fails, you get out because you can keep going down, way down. And if it turns around again, bam. I'll get to that next point in a second, which is, defense first. That's the A. The M is align yourself with the market. Market conditions is the M. Stay in harmony with the market, folks. That's the job. Number one. I said earlier, you don't want

to be right or wrong. Fight the market? Just make money. Be in harmony with the market. It's the goal. That's A, the M, market conditions. P is psychological analysis. Know thyself, right? We're all on sometimes. Sometimes we're off. Sometimes we're dealing with external events. Death in the family. You heavy divorce, of this, of that, and the other thing, illness, whatever, that happens all time. Your attention can be focused. It's binary. You're either focusing on this or you're focusing on that. If you're focusing on investing in trading, stay focused on that. If some external event demands your attention, then you either take a break from trading, hire Gary, or do anything you got to do to protect yourself from those scenarios so you're

not trying to do two things at once. And when you're off, back off. Give yourself some time. Distance yourself. We all have long. in this business, we all have wins. To just be very aware of your psyche, for lack of a better word. And then that's A-MP and then D is defense first. If there's anything I can tell you, anything that I've learned trading since the 90s, professionally with individuals, with professionals, all over the place, is the single most important attribute or trait that these big successful investors

share, including Gary, by the way, is to always respect risk. If you go back to 2008 or the 1929 Depression or any other major crisis, dot com crash, any crisis in history, the reason why people get blown out of this game or this business just crushed. Doesn't matter if they're an individual, if they're an institution, or anywhere in between. It's for one reason, one reason only. They didn't respect risk. In 2008, the entire investment banking business model got destroyed. They were buying the subprime loans, the MBSs, CDS, LMNOP, QRS, TUD doesn't matter. What happened?

They didn't respect risk. That's why Washington Mutual failed and Bear Stearns failed and Lehman Brothers failed, and I can go on and on, but you get the point. They didn't respect risk. They took too much risk. and then when things went the other way, bam. Warren Buffett says when the tide goes out,

you can see who's naked or who's not wearing a bathing suit. Same thing here. Always respect risk. This business, it's a game, it's a business, it's a game, it's a business of managing risk and reward. On the other side of risk is what? Reward. The potential for the reward.

But if you risk too much, your size can kill you. If you go 200% on margin, you borrow money, you go all in, this is the best stock in the world, and then it goes down. You potentially can get wiped out. It's math. If you're down 5%, you can recover from that relatively easily. You're down 10%. You need an 11% gain to just get back to even. If you're down 25%, you need a 33% gain to get back to even.

You're down 50%. you need a hundred percent gain to get back to even. How many times do you see a stock that goes down 50 percent? You buy it 100, it goes to 50. How many times you see it go up 100% after that? It doesn't happen often. In fact, it's very rare. So how do you avoid that situation to begin with by managing your risks?

Before I enter, before I enter, I'll speak to myself, before I get into anything, I always have an exit plan. Where am I going to get out if this does not work? All right. This way, I'm protected. I do it for life too, by the way. And with money, end investing, trading, with business, with family, with anything. Because to me, decisions are just trades. Because what's it behind the trade? It's a decision. So if you understand there's a risk and reward, what's the worst that can happen and what's the best thing that can happen? Bam, you can make a decision. Risk one, make five. Okay, I get that. So, hope all this makes sense.

friends, hope you enjoy it. And stay tuned. If you miss the rally, that's okay. There's going to be another chance in front of us. Do what Gary does. Always hug your children, hug your wife or your spouse or whatever it is. And I believe Gary will be back tomorrow.

If not, I'll be back again tomorrow. Have a great evening. Take care, everybody. Bye-bye. This has been Investor's 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. If you want something done right, you do it yourself.

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