Rich Habits Podcast - 64: How to Hedge Your Portfolio (TACK) w/ Katie Stockton

Episode Date: May 13, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz are joined by Katie Stockton of Fairlead Strategies. Katie is a statistician with decades of experience reading price action and technical indicators. Katie shares with us a few of her favorite strategies to identify potential winning stocks as well as how anyone can begin hedging against market volatility with (TACK). ---To learn more about Fairlead Strategies, click here.To sign up for the Fairlead Strategies Idea Generator, click here.To follow Katie Stockton on Twitter, click here.---Yahoo Finance's website went through a redesign, and we love it! Austin has been using Yahoo Finance since college, and Robert frequents the site to check in on hedge fund activity. Check out Yahoo Finance!---Watch the Frec webinar replay by clicking this link!---Sign up for our next webinar, where we'll be learning all about trading options!---⭐ Download our FREE Budgeting Template – ⁠⁠click here⁠⁠⭐ Earn 5.1% on your savings with a High-Yield Cash Account – ⁠⁠click here⁠⁠⭐ Trade stocks, options, music royalties and crypto on Public – ⁠⁠click here⁠⁠⭐ Automatically buy stock where you shop with Grifin – ⁠⁠click here⁠⁠⭐ Protect your family with term life insurance from Suriance – ⁠⁠click here⁠⁠⭐ Use code “Spotify” for 15% off our 4-module video course – ⁠⁠click here⁠⁠⭐ Optimize your portfolio with Seeking Alpha – ⁠⁠click here⁠⁠---👤 Explore everything Austin does – ⁠⁠click here⁠⁠👤 Explore everything Robert does – ⁠⁠click here⁠⁠❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [e-mail]---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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We've got Katie Stockton on here to go through technical analysis. So before you think about clicking away, because it might be too deep or too technical, please, please, get out that notebook. Remember, I always say take notes and take action. Well, this is the episode where you can really learn a ton in a short period of time. And trust me, even I learned something today after 30 years of doing this. So this is a great episode for you to really step up your information and the learning curve. So follow along.

And don't forget, if you miss the direct indexing webinar that we hosted with FREC, you can still watch the replay. There's going to be a link in the show notes below. It is right there. Go check it out. It was a wonderful webinar. We broke down all things, direct indexing, tax loss harvesting. It was literally the best webinar. Cannot wait to have another one with them here soon.

So if you miss that, go watch the replay. It's completely free. Hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host Robert Croke. Robert is a seasoned entrepreneur in his 50s with lifetime revenues of over $300 million and I'm an entrepreneur in my late 20s with the background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I've built a seven-figure media business and actively advise some of the most well-known fintech companies around the world.

Now, as the show name might suggest, every episode, we talk about rich habits as they relate to business, finance, and mindset. However, we try and bring you two unique perspectives. One from an industry veteran, which is Robert, and the other myself, someone who's still in the process of building wealth and figuring it all out. Robert, we're excited for this episode. We have a special guest joining us. So with that being said, what are we going to be talking about in this episode? Yes, in this episode of the Rich Habits podcast, we're joined by none other than Katie Stod. You might recognize her if you're a frequent watcher of CNBC or Yahoo Finance.

She is what Austin and I would call and consider an expert on technical analysis. So we'll let her explain exactly what that is in a moment. But before that, we want to be very clear that you should not be buying or selling stocks and indices just based on technical analysis alone. But it is absolutely an important part of deciding what investments to make. We're all investors and have investment. Thesees for our ideas, and Katie is here to help you better understand when it might be a good idea or a bad idea to buy or sell a stock that you may love.

Katie, we are so happier here. We can't wait to dive into technical analysis. I am still someone who's learning it. I've actually become a lot more excited about it, as you've probably seen on my newsletter. But one, who the heck are you? And two, how are you so good at this? Well, thanks, Austin. Thanks, thanks, Robert.

I'm so glad to join you both. And I love the title of the podcast, Rich Habits. I'd like to try to contribute to that, of course. As mentioned, my discipline is technical analysis. So it's very specific. It's a narrow expertise. And it is incredibly valuable pertaining to investing and trading. So we focus all of our efforts there, but we see technical analysis as like the ultimate

complementary discipline. So whatever you're already doing in terms of fundamental research, macro analysis, political inputs, things of that nature, I think it's a great add-on to that. So hopefully we can add some value on that front today. My firm is called Fairlead Strategies. I founded it in 2018. So I, too, am an entrepreneur like you, Austin, and you Robert. So we've built it over the years initially as an independent research providers.

We provide research to our clients. And then also as an ETF portfolio manager exchange traded fund. I love it. That is a lot. Can't wait to dive in. So for the people listening that are like, wait a second, what the heck is technical analysis? Can you give us the tell me like I'm five years old breakdown of what technical analysis is? You know, in its simplest form, I would say that technical analysis is a study of price trends. We all know that securities have prices. And when they're trending higher, that's when we want to be invested. And of course, vice versa. So it's a great risk management tool in that it can help not only identify those trends, but also whether those trends have. momentum. So the measure of momentum and other factors like whether something's overbought or overdone on the upside or oversold or overdone on the downside. Plus relative strength analysis,

we like to look at things relative to one another to find opportunities and also manage risk and identify shifts on the macro front. And all of these price trends are really a manifestation of supply and demand. And that supply and demand is for the security. It's not even just for an individual company, right? We have the sort of, I call it them top-down influences from the equity market for one, meaning that we really need to have an understanding of the broader market as we're investing in individual companies via their stocks. I love it. That makes a ton of sense. And, you know, Robert and I, well, me very specifically, I think Robert does this as well, though, is whenever I have a stock idea or whenever I'm looking to buy a new ETF or a new something or add it to my portfolio,

it's like, okay, I have conviction, I'm excited about this, I know I want to own it, but now it's like, what's the price doing? Has it gone up a whole lot over the last two weeks? Am I maybe buying the top? Is it really oversold? Is there very low sentiment about like, what's going on with the price? And so that's sort of where technical analysis can begin to add some value to our portfolios, is we can take a step back and say, all right, is this price a good price to get in at as we holistically look at recent price action? So with that being said, I think Robert, let's jump into this interview. I'm ready to learn more and I'll let you kick us off. Yeah, I think one of the important questions for me to understand coming from you today, Katie, is, is technical

analysis as important today as it was 20 years ago? As we discussed earlier on, you see so much activity now that is based on social media, news cycles, hype cycles. There's so much going on in the markets that I believe there is just a lot more to consider when investing into a stock and using technical analysis. And I know that back in my early days, let's call it 25, 30 years ago when I was day trading and all I did was individual stocks, technical analysis was everything. Tell us all of the listeners what your thoughts are in today's market of the importance of technical analysis as an overall perspective of investing in a stock. Yeah, I think you sort of hit it when you said there's a lot going on in the markets. And that's why I would argue that technical

analysis is more important even now than it was 20 years ago. We see so much volatility, both to the upside, and the downside in this market. So I think technical analysis in the charts that are part of it are the essential tools and navigating that volatility. So we want to make sure that we're not buying a stock or security, you know, into a breakdown. As one example, there's ways to understand that just the market timing is not right for a position. So we can see. start ourselves a lot with that market timing element. And Austin, I know you've gotten to know the charts to some degree. My hope is that everybody on this call, you know, can say, well, I can't invest without looking at a chart. I just think it is that important where they need to understand, okay,

is this a countertrend position that I'm taking and they're in its higher risk? Because if you think about it, the market should reward the good stocks, the good securities for their fundamentals, right? So those good companies should theoretically be trending higher. If they're not, well, maybe that's a message from the market. And, you know, it's a manifestation of market sentiment. And that certainly hasn't changed in the past 20 plus years since I got started. So a little bit, can we elaborate about price analysis, overbought, oversold, sentiment analysis. Give us a little bit of breakdown of what those terms mean to the everyday investor that's following along the Rich Habits podcast and really just learning on how to do all of this. Because one thing that Austin and I always preach and I'd love to hear your thoughts on it is for most people getting started, they shouldn't even be buying individual stocks. They should be buying the S&P 500, buying, you know, QQQ in the NASDAQ and buying these products that they don't have to select these individual stocks. So talk about some of the different parts of this and what that means in each individual term. Of course, right. So for a technician,

some of them are going to be just looking at price trends as bar charts, right? Others might be looking at moving averages of price to look at sort of a smooth version of the trend. Others, like myself, will be looking at technical indicators. And while a lot of them have fancy names, they're really very accessible, meaning that once you do a little bit of homework and pull it up on a screen with a chart, you'll start to get to know these indicators really very well. design of the indicators is to take out some of the sort of biases that we all have as we approach different investments. We come into things if we spend a lot of time researching them with, of course,

a bias that we want to own that. We spend a good amount of time researching that company or what have you. And we look at that chart and say, I'm going to make something good out of this, whether it is good or not. So the indicators in a way keep us honest as investors and as humans by saying, okay, well, in this environment, sure, go ahead and take your position, but momentum is working against you, right? So negative momentum. These binary takeaways that the indicators that we have give us are so valuable. We have momentum gauges. So those would be things that are often moving average base.

We have one called the MACD or moving average convergence, divergency, a fancy name, but it's really just derived from moving average price. And it will give you actual buy and cell signals and crossovers that indicate whether something is shifting in terms of momentum. So that's really one great tool that people can access for free really anywhere online. So it's a very common technical indicator. We also have overbought oversold metrics and those are typically oscillators. And these oscillators will show you if something's getting a little bit overdone potentially. And then when you have a downtick and momentum, if something's so-called overbought, well then, you know, that's something that maybe is a good cell indication. So that overbought condition in and of itself isn't necessarily bad, but when you see

the downtick and momentum, it becomes a more vulnerable type of setup. And I think we all struggle, of course, with the cell discipline. And so great added value on that front with the overbought oversold metrics. And we hear a lot of, I'd say, references to overbought and oversold in the media, but it is measurable. When I say overbought, I'm talking about a stochastic oscillator above 80%. So it is something that we're not just going to pull in out of the air. We're seeing this security is actually overbought. And these things, as you can see, are mathematically based. So they are programmable, too, and they can help you approach markets more systematically. With the sort of next category, I would say, of indicators, I would put that as relative strength metrics. So we're looking at

price-to-price ratios, very simple line charts with price-to-price ratios. We're also looking at something called relative rotation graphs. Those are sort of a normalized, view of rotations in underlying sectors and areas of the market. All of these things taken together can be a valuable methodology and get you to a place where you're making decisions that are informed that have less of your biases sort of baked in there and with less emotions. Wow. Okay. That's awesome. I think what I heard from that, that can really help everyone listening right now, especially if it's a single stock or, you know, let's talk about NVIDIA. That's a really good example because Robert's been talking about NVIDIA for a while, right? Whenever someone is looking to buy a single

stock and NVIDIA is a great example where it's up, it's ran a whole lot and you're like, dang, is it too late? Did I miss the boat? Or you bought maybe early and it ran up, you're like, is it time to sell? So you're saying that technical analysis can be this tool that can help people who are existing investors figure out, maybe it's time to get out or take some profits. or two, people who want to become investors saying, you know, maybe it's a little too overbought right now. I should give it some time to take a rest. And, you know, maybe it will come back down 5, 10, 15%, whatever that might look like. Is that what I'm hearing about technical analysis?

That's a great way to think about it, especially pertaining to individual stock investing. As Robert mentioned, that is a higher risk approach to markets when you're doing this sort of bottom up investing without a good handle on the top down input. So with that, you, of course, want to have the momentum on your side. to make sure that you're not buying into a parabolic up move that's tiring out. You want to make sure that there is support, which is a potential sort of area of buying pressure not too far from the current levels. So there's definitely some inputs that will help you time that entry and also manage risk, have almost like a defined stop loss metric too, perhaps from the charts. So I think

it's essential for individual stock investing. I'll give you a very simple metric that everybody can watch, which would be the 20-day moving average. It's a very tight moving average to price movement, but we have a lot of steep uptrends like Invidia. And in order to navigate these uptrends, just a simple moving average like the 20-day can be added value in that it will tell you when momentum has shifted enough to maybe warrant some repositioning. It depends on your time horizon. If you're super long-term, well, you may be very willing to watch a pullback in Nvidia just with the thought that, well, you know, in a year, two years, three years, it will be higher. So I'm not going to worry too much about that. But if you're really attuned to those short-term

swings, well, then you may take that sort of reversal in the 20-day as an indication that risk is heightened to the downside, minimize your exposure throughout that potential down draft and have a way to get back in using the charts as well. So it's just a matter of navigating different swings, right? Navigating the volatility that is inherent to my. markets these days. And Robert, to your earlier point about investing top down, well, maybe it's not as exciting as in VITIA, but it's diversification. There's a reason why financial advisors focus on diversification, right? We know that it helps, you know, give you a way to manage risk and get exposure to different, not only stocks, but asset classes can be essential to not just, you know, participating

in a full market cycle, but also managing risk through that environment. because it all feels great when things are all going up. But, you know, we've all lived through bare market cycles because 2022 was exactly that. So we need to have some comfort level of being diversified. Now, Katie, you said the 20-day moving average is something everyone can go look at. Where? Where do they find that? Right?

We're all about no gatekeeping, making sure everyone has their resources. What websites, what platform? Like, where do they find this information? Yeah, you know, a lot of platforms, fintech platforms, and, you know, wherever you hold, your account will often have charts. So I would start there with your existing account and see if they have some kind of charting service or offering because many of them have actually very robust charting services. And I would, I guess, encourage investors or traders to have little, I guess, real estate on their screen dedicated to a chart. And it doesn't have to be a complex chart.

There's a big sort of mantra and technical analysis to keep it simple. The goal is to eliminate our emotions and that. So to have that chart, and then there are websites, you know, tradingview.com, stockchirts.com that have either free or very low-price services that give you access to these technical indicators. You don't have to have an institutional level program like a Bloomberg, for example, to arrive at these indicators, which is really a gift because that wasn't the case many years ago. So I was hand-charting point-and-figure charts at the beginning, Robert, yes, I do that. That actually is with you. We don't have to do that anymore. And that gives us so much more capacity to consider different asset classes and investments. Yeah, and I wanted to

rally this point before we move on. This really kind of highlights and illustrates all of the options you have when you're beginning your investment journey towards building wealth. But also, I think, kind of reinforces what Austin and I always tell people. And that is, in my opinion, people should start out with the basics. We always talk about people building their base, get to that first 100K maybe before they start investing in individual stocks. Because so many people believe when they get that first 5 grand or 10 grand or 20 grand and they're ready to start investing,

they should immediately go to individual stocks and buying a real estate property. And I think that is a bad strategy starting out. You should get your bases covered. Get those index funds. Get yourself making some money before you do these other things, unless you have proper training to get there. I've been trading individual stocks for decades, but I also know what I'm doing.

And it's just something that we like to just explain to people. Yes, it sounds way more fun to go all in with your five or 10 grand on Navidia and maybe, you know, AMD and Tesla and all that. But then when there's a 40% correction, people get scared and go, oh, investing isn't for me. And then they get out and they sit on the sidelines sometimes for decades because they got burned one time. So that's why this is a really great episode for our listeners to kind of understand the cadence of the journey to know how to build wealth the right way rather than taking big yolo shots in the beginning.

I love it. And, you know, speaking of sort of having a measured approach to investing, Katie, you guys have an ETF called TACK, T-A-C-K is the ticker. So can you explain what TAC is the strategy around it, how you built it? and who the target investor is, right, the person who wants to add tack to their portfolio? Right. So it's the fairly tactical sector ETF. We call it tech, as you know. And the design is as a core U.S. large cap equity portfolio that has the ability to limit drawdowns through asset allocation. It sounds somewhat fancy, but in reality, we're using sector rotation to our benefit to make sure that we're participating in bulk market cycles. But then when the indicators aren't aligned,

when the momentum just isn't there, which, of course, we saw as recently as 2022, we have the ability to move tax from these sectors. We use sector ETFs as our positions into other asset classes, and that includes gold, for one. That's also via an ETF. Short-term treasuries, which you can think about as somewhat of a cash equivalent, very safe, but they sort of muted and return.

turns tends to outperform equities during down drafts and then also long-term treasuries, which will, you know, sort of get us that lack of relation as well with equities. So we're seeing the portfolio morph with the market and it's that dynamic nature that I think there's real, you know, sort of, I'd say value in that we can limit the drawdowns while being there to take advantage of the market upside through investments in what our models are telling us are the best sectors from momentum. and relative strength perspective and also lack any of those big cell signals, those overbought downturns that we are concerned about. We take a long-term view in the TACETF, and it is very

conservative. We're rebalancing that portfolio once a month using length and closing data. So it's designed to be something that you can sort of, I say, set it and forget it because we don't want it to be a position folks will worry about. We want them to trust it to be there for the world market cycles and to be navigating corrections, major corrections, and major down drafts in a way that limits the drawdowns versus a passive investment in something like the S&P 500 Spider ETF or Spy. That's the goal is to limit those drawdowns and be there for the upside. And we're doing it systematically. And we really are believers that are early in systematic approaches to investing.

And this goes back to Roberts point about you don't just start buying individual stocks. because that can actually prove to be careless, despite all the success stories, by the way, that we hear about, well, oh, yeah, I built my nesting in one position and, you know, maybe you'll get lucky, right? That does happen. But for every one of those stories, I think we hear probably don't hear the 10 that were exactly the opposite of that, right? So we feel like, you know, to have that sort of poor portfolio is really important and applies to all investors. So it's easy for me to see as the manager of the ETF, right? But that application is really very broad to anybody who wants that U.S. equity exposure, but who is

sensitive to drawdowns. And it will help us really get back to that exposure that, you know, a very tough market might shake us or, you know, COVID corrective phase is probably the best example of this in recent memory where we had a major drawdown and yet a major and very swift sort of come back from that drawdown. And I think folks were so shaken by the drawdown. And that it took them too long to get back to the exposure they should have had from a momentum perspective. So when you have a system or a methodology that can help you evaluate these trends without any real bias and not remembering that drawdown, you know, the market has its own memory. We don't need to worry about it. So, you know, to be somewhat reactive to these changes,

I think is key. So you mentioned that tack can also be thought of sort of this, position in someone's portfolio that's more on the defensive side when they need to be. And so to add some more information and data around that, I just pulled up the TAC performance, total performance, when you guys, right, the last time I had a bear market was in 2022. You all introduced TAC to the market, I think the last week of March in 2022. And then throughout that, let's say, March, late March, early April to the end of 2022, TAC traded down about 7% compared to the S&P 500 trading down 17% right so you guys outperform from a drawdown perspective by about 10% against the s and p during this sort of bear market volatility people were scared not really sure what was going on there how did you do

that what was tack invested into where they didn't see that extra 10% drawdown that the broader indices did see and that was just the s&P the nazdak was probably another probably five or six percent on top of that since tax inception as you mentioned in march 22 we've had i'd say three major drawings downs, including that barricle for the S&P 500 of more than 10%. And during those three major drawdowns, TAC has outperformed the S&P 500 on average by about 7.5%. And that's exactly what we intended the model to do. So in a strong tape, we start with really eight buckets, eight equal rated buckets of 12.5% or thereabouts in the sector ETS. Now, if those sector ETS aren't qualifying because of the momentum metrics and the things that we track,

we will take that bucket and divide it between the short-term treasuries, long-term treasuries, and gold. And that's exactly where we stood for much of 2022. We had very heavy, what we call risk-off exposure. And that contributed to what we call a low beta for tack as an ETAF. That makes it a bit more conservative, meaning that it doesn't hold the same concentration risk. I'd say that some funds do. And then when we see that the tack ETF morph back into a more full equity position, if the market's on fire, that's when we are all about supplementing attack as a core holding with technology stocks, right? Because we know that technology stocks tend to be higher beta, meaning that they tend to outperform on the upside.

So when we see a strong tape like we have had over the past six months or so, we are all about having tack as a core holding. and then going ahead and taking that position in V-Vidia and the likes to supplement it. I love it. And so what I'm hearing then is that for the average investor who is building that well-diversified portfolio, tack could be thought of as the position of black swans, right? It's like, wait, I do want to have something in the portfolio that if the markets go down 5, 10, 15%, if we do see some, you know, new war or something with inflation or something bad, this position is sort of going to be that hedge, right? It's going to be the little bit more stability in my portfolio.

Is that correct? Hedge is a key word there. Hedged equity is where some financial advisors would categorize the TAC-ETF, and that it does give you that sort of, you know, enhancement to the drawdowns, right? Limiting those drawdowns. And it does so, though, with less complexity, I would say, than some of the options-based ETS and products out there, which we like how understandable and digestible the strategy is for folks in that we have the sector investments through the ETFs.

It's effectively a fund of funds, right? And then we can manage through these drawdowns in other ways by being invested in the other asset. Let's talk about the recent volatility we're experienced. Let's touch on that for a minute and how it's relative to TAC and the way you invest through that. So we did see a pretty good drawdown from the equity market in April, and we saw a tech move from a full sector exposure to one sort of bucket less than that, right? So we are seeing a morph that should be not full based on what we think and feel about the market, but probably a partial move to this risk off stance, which is what we would expect in a correction, but not a bare cycle where we would go to nearly a full risk off. position. We don't want to, as investors, move fully out of equities during corrective phases because we want to make sure that we have a substantial position to be there when the market

resumes that long promotion that has most often spent its time. So we want to hedge, but we want to hedge a leap, I'd say partial exposure through that volatility. And tax can facilitate that. And we can do so without really the taxable implications of moving out of these funds. yourself. So I think there's a real nice tax sort of wrapper around a strategy like this. So it's dynamic, but it's not incurring those same taxable events is moving in and out of these sector funds. Okay, Katie, so just so we're all on the same page on how tack works, you can think of tack as a bucket and inside of that bucket are other buckets that represent the different sectors of the stock market. And you all have full exposure to those buckets.

of the stock market for upside potential when things are looking juicy, strength is there, and we're all having a good time. But you're also now using different types of technical analysis to identify weakness and sort of these other opportunities that say maybe it's not a good time to be in that sector. So you pull that bucket out of tack and then you replace that bucket with something less volatile, which is gold, short-term, and long-term U.S. treasuries. And sometimes all of the buckets can get taken out of tack and be replaced with, these short-term treasuries and gold and long-term treasuries, which is assuming probably what happened in 2022 and why you outperform the S&P

by that 10% or so during that drawdown. You've got it, Austin. You definitely are tuned into what we're trying to do here. And I think the point that we can take away from that is that in a way to most like the old 60-40 model. You know, this farkens back many, many decades where financial advisors will often put you into a portfolio that is about 60% in the world. the exposure to equities in about 40% to fixed income, and that becomes your so-called balance

portfolio. Well, with the volatility that we have this day and age, that old 60-40 model just isn't quite as appealing, right, especially if it is static. So attack is sort of a dynamic version of the scene where actually over history, if you back-test the model, it looks something pretty close to a 60-40 model. If you can rope in gold into that 40%, it's about a 65-35 type of balance between the risk-on categories, i.e. the sector, ETFs, and then the risk-off categories, but it does so dynamically to navigate the shifts that the market is dealing us and dealing us today more frequently than ever. You know, we have 2008 not too far in our memory. And that environment, I think, is where technical analysis really started to shine and come to the forefront as a

discipline. It used to be considered something that was more predictive. And now, with, these bare cycles having been so damaging to investors' portfolios, I think people are really seeing the value in employing technical analysis to minimize those drawdance. All right, that was an incredible answer. I'm learning so much on this. And I am excited about this next question. So Katie, give us some of your breakdown on the S&P 500, the NASDAQ 100, and maybe some of the MAG 7. What are you seeing from your technical analysis? Because I'm sure all the listeners are excited to hear what's next for tech. But before that, Robert, I know we talked about Yahoo! Finance's website, Yahoo!finance.com, and they're redesigned last week, but I just can't get enough of it, dude.

It looks incredible. So here's why I've been a user of Yahoofinance.com now, literally since college, their portfolio management tool. Yahoo Finance makes it incredibly simple to securely log into your existing. brokerage accounts, allowing them to instantly pull your transaction data. They then present this data to you in such an intuitive way. I'm looking at my total investment portfolio right now, and it's broken out by brokerage account and by asset class. For example, I can easily see what percent of my stock investments are in technology, utilities, and the other sectors that Katie was just talking about, as well as the different asset classes and their performance. So if I want, I can actually click

into some of this information, see what those holdings are, as well as any recent news that might be impacting their prices. Yes, Yahoo Finance is a resource. Every single listener should be taking seriously if you're trying to level up your portfolio management in 2024. I use Yahoo Finance when I'm researching new stock ideas and their website offers key financial data across the income statement, balance sheet, and cash flow statements. And if you're into trading options, they have a simple breakdown of every stock's option chain. So what's my favorite stock research tool? Their holders tab.

I can see what investment firms and what hedge funds and how much of what stocks allowing me to follow the big whales and what they're buying. Be sure to check out Yahoofinance.com. Not only is their new website awesome, but their portfolio management tool is top notch. Everyone should connect their brokerage accounts to this tool and unlock the insights you need to stay on top of the markets. And all of this is free, but you can also sign up for the company. the bronze account for $8 a month, and I think it is the best deal there is. And again, that's Yahoofinance.com. All right. Now, let's see what kitty has to say. Well, yeah, of course. I know we all care so much about tech, and we should because it has such a huge footprint in the major indices

for the equity market. As mentioned earlier, we do like to start top down with our research. So we look at metrics like the S&P 500, then we'll drill into the sectors, then we'll drill into the individual stocks for a more holistic view. There's something called market breadth. So when the major indices are going up and there's not a lot of participation, that can be a weaker tape. That would mean that breadth or participation just isn't there on the individual stock level. And that was very characteristic of 2023, in fact, where the MAG 7, the mega caps of the market were really the primary source of upside leadership in that environment, which made it very difficult to navigate if you didn't have that negative app exposure.

So metrics like market breadth can be very helpful to that and to identify the kind of environment that we're in. And indeed, we have been in a very strong breath environment as of Q4 last year. And that Q4 bottom that we saw was October for the S&P 500 gave way to what was a very steady uptrend all the way through April. And April's pullback was actually very orally. We do think that the pullback will resume after this bounce that we have underway as of early May.

And we say that not just because the old added sell in May go away, but rather there is enough of a loss of momentum that's reminiscent of the corrective phase that we saw in Q3 of last year. And we want to respect that as increasing risk to the downside for the coming couple of months. And some investors may say, okay, good to know. and maybe I'll fold off some purchases with that in mind. Others may say, I think I'm going to get hedged. Maybe I'll buy an inverse ETS, maybe I'll use an option strategy, or maybe I'll simply tighten up my stop loss points for my existing position. So different people will handle that in a different way,

but it is good information in our opinion to have to know that there is heightened risk of a deeper corrective phase from a momentum perspective. Now, we talked about technology, exhibiting upside leadership and strong tapes. Well, guess what? They also exhibit downside leadership during corrective phases and bear cycles. So that's when we actually see the more boring sectors of the market are so-called, you know, utilities and so we're staples and real estate. These are sectors that are never really that sexy to investors. But they really can provide a great safe haven place to hide during corrective phases.

for those that like to maintain full equity exposure. So we'll see the relative strength that those types of sectors improve through corrective fees, but it's often only temporarily. So it's just a matter of keeping those long-term trends on your side and then navigating at the drawdowns when they do unfold. So we do think that technology has the potential for a deeper corrective phase and downside leadership during that environment.

Well, I'd love to know to touch on that a little, further, what is your overall view of, let's call it, the Navidia tech boom of AI, where do you see it going for the next two to three years, even through these corrective phases? Yeah, the long-term upturn is still very much supported by our low-term momentum metrics or trendfall and engages. To that end, let's take the monthly MACD indicator for one. It is positive, not just for even the S&P 500, but even for the small cap rustle, 2000. Even for the Futsi 100 index in the UK, it's broad-based. It's global, this positive long-term momentum.

And so we've had a full cycle within what I would call a secular bull trend. So we're going to assume that that trend will remain in force until it tells us otherwise. So while we can't be sure where the markets will be in two years or whether AI will still have that trend of momentum, we at least have ways to measure it, right? And as it stands, so the current environment is very conducive to that long-term upside follow-through. And if that changes, well, we'll change with it regardless of how we feel about the markets. We have to respect the price action, respect those shifts and trend, just knowing that there are points at which market psychology can contribute to overvaluation, right? we have market sentiment from a technical perspective as often the driving force behind some of these

moves. So if we can measure market sentiment in a reliable manner, that can be added value as well. And so you mentioned that, you know, Robert and I actually, we just posted an episode a couple weeks ago talking about, you know, the stock market might have some volatility in Q2 and Q3. So that's pretty timely there that you would agree with us on that. And we said it's because obviously what's going on in the Middle East, the reacceleration of inflation, the Fed going from, yeah, we'll cut rates like, you know, a couple times to maybe not even once this year. So that's sort of what we're coming from, but it seems like that is even also reflected into some of the technical analysis you're seeing. So you mentioned utilities, consumer staples, some of these other types of sectors of the stock

market that might have some strength over the coming months. What can people do to learn more about those, to keep tabs on them, and maybe even they want to add them to their portfolios? How can they learn more about that? There's a lot of ways, of course. I think that defensive sectors of the market often are interest rate sensitive. So an understanding of the direction of interest rates, of course, is going to help you succeed and investing in high yielding sectors or high yielding stocks of the market. We, of course, in the tack ETF, we're not discriminating for sectors, whether they're super exciting or otherwise.

We are just respecting the price action. So we're still sitting with a pretty risk on. at this time on the sector positions. And yet, with the breath having improved, you would expect to see movement, ultimately, into these more defensive areas, the market. So to have some kind of mechanism to evaluate the sectors from a relative perspective, I think is a good thing to do.

We can take ratios, some of the sector ETFs or sector indices, throw them up against the S&P 500. And you'll see trends there that are actually very clear. For example, utilities have been downtrending for some time relative to the S&P 500, but just recently they've become more topical because we've seen this turnaround in relative performance. Still, it is seemingly in this early stage position, but it's garnering interest for just that, the relative performance. And you could imagine that utilities, for one, would become more attractive as Treasury yields come in, right, because they're higher yielding types of security. So an understanding of the macro environment, what we consider to be macro technical. So anything that would influence the equity market is of interest to us.

We've published in our research on a weekly basis, charts of treasury yields, gold, crude oil, the dollar. Knowing that a lot of our readers are not investing necessarily too much outside of the equity market, those are really very strong influences to have a good handle on. Oh, my gosh. I feel like I've learned so much on this episode of the podcast. And that's what this whole thing is, right? Like, we want everyone to be learning not just alongside of us, but bring in the experts. I can certainly talk toward the things that I'm interested in.

I'm going to imagine a lot of our listeners are too, except I'm not the expert, right? Katie is and she's got the decades of experience. So Katie, this has been such an awesome interview. We're so grateful for your time here. And hopefully we'll have you back very soon. Thanks so much, awesome. Thank you, Robert. It's been great to join you guys.

It was definitely great to meet you. Thank you for all of the insight. our listeners are going to love this episode. And it's just so important to just really find the best information out there. And that's why I love getting to do this each and every day and to be able to have interviews like this to help our audience understand all the complexities of the market and help us break it down for them in bite-sized chunks. So then we can keep analysis, paralysis out of everyone's lives and help them understand the

importance of being an investor. Now, Katie, before we sign off, everyone's problem. thinking, how do I learn more about TAC? How do I learn more about Fairlead strategies? Where do I learn more about Katie? Where is she on Twitter? Does she have a newsletter? What's Katie up to? So breakdown for listeners, where they can learn more about all the things you do. A great starting point, of course, would be our website. So Fairlead Strategies.com or Fairleadfunds.com for specific information about the TAC ETF. We are on Twitter. We are on LinkedIn. It's at Stockton, Katie, on Twitter. Beware of imposters, of course. And we also have a subsect newsletter. And we published new ideas there,

new ideas that have a technical origin, great places to start with your fundamental research. I love it. Awesome. Thanks so much, Katie. Man, what a wonderful episode with Katie. Robert, that was intense. Don't get me wrong. Definitely intense. I had to turn my thinking cap on for that one. But I learned a lot. And I think that's what's so cool about Katie is she's not only an expert, but she's able to sort of break things down in a way that's a little bit more approachable to the everyday person who's not an expert like her very much talking about myself here. And I think her TAC ETF is very interesting, right? We always talk about building out these well-diversified portfolios and having some of this money and the T-bills and the bonds and things like that, right, call it 5 or 10 percent. I think TAC is something that could fit in a portfolio at that same 5, 10, maybe 15 percent waiting depending on someone's risk tolerance.

I'd imagine if someone's on the older side of the spectrum here and they want to really pretty. reserve wealth. They don't want to have so much of their money invested into the ups and the downs of the indices like we've seen so far in April. You know, TAC could very well be an ETF that they might want to have a little bit of exposure to to what Katie said, act as that hedge against volatility. So I think it's an awesome sort of ETF she's built. It's a very interesting strategy regarding the different sort of sectors of the markets and the gold and things like that. It's really cool, man, and I'm really glad we had her on. Yeah, that's why I love what I get to do every single day with you and the Rich Habits podcast is being able to

to really uncover the best information out there to help people build their wealth and do it in a systematic way. You know, so many people haphazardly invest over time and don't really have a handle on what they're doing. And that's why with us being able to break down all the complexities of the different markets and diversity and different ways of investing, it's just really fun for me because even though I've been at this longer than you've been alive, Austin, I really enjoy learning from other people because bringing these experts on just really extends our reach of giving the best information to our followers and our listeners. So it's a great honor for me each and every week to do this with you. And I just love it. And it's really enjoyable that so many people out there

enjoy it as well. And that is why we've maintained such a high ranking with this podcast. And it's just such a blessing to be able to do this every day. Well, speaking of bringing experts on, that brings us to our next webinar that we're hosting. Our first webinar was all about the covered calls, right? We talked about that. Y'all ate it up. We had Troy and Garrett on from Nios, and it was a blast. But that sort of opened up Pandora's box to all the other different strategies with options. I'm talking long calls, long puts, long strangles, call debit spreads, call credit spreads, long call calendar spreads, right? There's a lot to cover here as it relates to trading options. I'm certainly not. the expert here. Robert knows more about that than I do, but we do have an expert coming on. Her name

is Emily Kurtz. She's the director of product at public.com. She built the options trading platform inside a public. She knows how to trade options. She knows how to make money with options. And more importantly, she knows how to make those hedge strategies that we're talking about in today's episode. So listen, our next webinar is taking place on June 4 at 4 p.m. Eastern Time. That's a Tuesday. And we want all of you there. We are going to break down. every single option strategy that the experts, the hedge funds, all these smart people that are been doing this for decades are using today. And we're going to break it down in a way that everyone can understand. So be sure to join us. Save your spot. It's completely free. There's a link

in the show notes below. Again, that's June 4 at 4 p.m. Eastern Time. And as always, we thank each and every one of you that follows along, listens, shares with a friend, gives us those five-star reviews. You can help us that way. And we're so excited to finally launched the newsletter. The feedback has been incredible. So please join that if you haven't yet. And we are so excited with so many great things that we're launching in the rich habits community coming up. Thanks, everyone. And have a great start to your week.