The Compound and Friends - Katie Bar the Door

Episode Date: November 8, 2024

On episode 165 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Katie Stockton to discuss: the election's impact the market, the explosion in financial stocks, reasons to be cautious, small caps vs the S&P, the benefit of technical analysis, Bitcoin as a reserve currency, and much more! This episode is sponsored by VanEck. Learn more about the VanEck Uranium and Nuclear ETF (NLR) at: http://VanEck.com/NLR Sign up for The Compound Newsletter and never miss out! Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

All right, we're gonna have a lot of fun today. We're gonna get super political, okay? Oh yeah, you're trying to the right person. Where did you watch the election? So I was at a watch party up in Mount Kisco, and it was good, you know? Mount Kisco's far. It's a little far, even from Greenwich.

Are you in Connecticut? I'm in Connecticut, Stanford and Greenwich. And you know, that was an interesting night. My husband was up until three in the morning. He said he hadn't done it since college. Can I ask you, was the person hosting the watch party hardcore to one side or the other? Yes. Yes, but I'm going to just leave it there.

All right. Well, I'll tell you a story. I once went to a watch party at somebody's house, like a very fancy townhouse on Fifth Avenue. Nice. And like super, super all in for Hillary. Not her personally, but like an anything but Trump host. And so the whole party, let's say 70 to 80% reflected that. And this is like drop dead gorgeous home.

And it's catered. It's like there's giant TVs on multiple floors and like, there's like a vibe. And the vibe is, the vibe is we're going to do this. We got this. And then like Florida comes out and then Ohio comes out. The mood changed. Oh my God. I'm sure.

I have never experienced it. Maybe I have experienced this at like a sporting event where like the home team drops down 20 points or 30 points and it's like, so it was like that, but worse. So I didn't say goodbye. And it was supposed to be a festive atmosphere. I, I, Irish exited that place. Yeah, I just disappeared. Wow, I think that's the way to go.

Yeah, I don't think anybody wants to do a big goodbye after something like that. Anyway, so my point is the more political you are, the less you should want to host a watch party. It's like being a football fan, right? Yeah, it's like hosting a football when your team's in it. I like, when I think about football,

I think about nachos and beer and Sunday afternoons, like very positive. But when it's a real fan and they're not playing well, ooh, it's not that fun. You know, you're not sitting down on the couch relaxing. Yeah, but then, and you have to keep a smile on your face because you have guests. This is true. You have to keep the enthusiasm up your face because you have guests. This is true.

You have to keep the enthusiasm up even though you want everyone to just please get out. Leave. And get the catering bill back. Would you please leave? Exactly. All right, well, I don't do, I had a watch party at the New York Stock Exchange this week.

Oh, that's fun. No, you did the broadcast, right? Yeah, I was with all the celebs. Excellent. There were some big names in this joint. I love it. How did it go? I thought it went great. It was the first time we ever covered the election from the exchange. Okay.

So... It's like my favorite venue for it. So here's what's interesting. There's a watch party on the sixth floor in the boardroom, like the chairman's room, which is sick. Yeah, it's totally sick. But then we're down on the floor floor in the boardroom, like the chairman's room, which is sick. Yeah, it's totally sick. But then we're down on the floor doing the show, but then there was these huge breaks in between,

because they don't want the markets people on the desk the whole time. OK. So we're at a little side desk, just like the market nerds. The real people covering it is like Carl Kintenaya, and he's at the main desk. So we do like, yes, we get on at like 740, and they're like, OK, your next hit is 850. Oh, wow. So it do like, yeah, so we get on at like 740 and they're like, okay, your next hit is 850.

So it's like, oh, we'll go up to Harry's. No, we go upstairs to the party. The problem is I don't go to parties and drink club soda. You know, I think you know this about me. Well, you know, it's a late night. Right, so that's one of the issues and we stay there till midnight. Was it till midnight? You stay there until midnight. So...

Was it till midnight? You're broadcasting until midnight. Yeah. I didn't know that. I got there at 6pm. I was there till midnight. So by the last hit, maybe I shouldn't have done the hit. Yeah.

Fair enough. Now I'm going to go back to the tape. I want to see that actually. But I'm a true professional. Yes. I'm sure. Tom Lee, we got the call down once. They're like, all right, guys, the. Tom Lee, we got the call down once.

They're like, all right guys, the next hit is 910. It's 850, please report back to the desk. So we're all seated at the desk. Tom Lee comes with like a plate of food. Oh, that's, Tom is very relaxed about it. He's like a focaccia. Scott's like, maybe we could put the plate off the desk. Amazing, I love Tom.

He's very relaxed. He is the absolute best, honestly. He is, he really is. So, Katie, yesterday we were talking about what moves in the market, any market yesterday, seemed like the most overdone, or maybe the ones most likely to reverse. You know what? I was thinking about it after the fact.

Maybe Tesla. Like, does Tesla really need to be up 20% in two days or whatever it is? Yeah, but it followed through today. It did. Yeah, and it actually looks like a real breakout, right? It does. Well, in terms of the resistance that it's geared.

It's right at previous highs. Yeah, yeah, right up against 300. Well, I think the dollar is looking a little bit crazy. And to see any currency make such a massive move in one day. So I'm more leaning towards the dollar and yields is being overdone. That might be. Yeah, that might be a little out of consensus. Listen, there's definitely some equities that went a little bit too crazy, I think.

And whenever you see all these gaps up, you get worried that the gaps will be immediately filled. So we're not taking that action and looking at it as a breakout. It's hardly bearish, right? But we're a little bit wary of its sustainability. But the doc, so there's like a timing thing. Like, let's say you're like, all right, it's a red wave. They have all three houses.

A beautiful wave. Effectively, this beautiful wave enables the Trump policy team to put through almost anything they want to do. The thing with the dollar is that that's a tariff trade. And they don't even need Congress for that. That's an executive order. He can do tariff stuff in January. Yeah.

It could happen faster, you're saying. Right. This other stuff where it's like, oh, deregulation. Well, when does that show up in JP Morgan's? Oh, I know it's two years. Yeah, the financials the move in the financials was Really? Anticipatory for something that could take a year plus right at mark doesn't wait. This is true I think they think right I think but no, I think they think 2025 is an M&A

slash IPO slash Buyback and dividend bonanza. I think it's coming. And it could be. Yeah. I'm less constructive, but obviously it comes from a different place, right? And by that, I don't mean I'm bearish,

but I do think that we're going to get into a range, at least for the first part of 2025. I would hope for that. Like a digestion phase is the way to put it. I think bulls would want to see that. You don't want to see things go vertical. That's not healthy. And we've just struggled to find the entry, right?

And I do think we're going to see an entry. I do think it'll come lower. And we just want to have more indicators on the side. But by year end? Probably not right by. I wouldn't make that up. I would say we might see a correction start to unfold between now and year end. But I don't think it'll culminate necessarily before you know.

That'd be really pretty dramatic. Don't you or do you think it's more likely that people are going to chase? Like if we don't the longer we don't get the entry, the pullback, the people, they're going to have to they're under invested. They got to chase. They're already chasing, aren't they? True. They're under invested. They got to chase. They're already chasing, aren't they? You also don't have under... So if it's President Kamala,

then the conversation is, well, we better take these capital gains taxes this year because if they enact something in 25 and it's retroactive to January... So, look, I don't think anyone thought that she was going to have a blue wave and be in a position to enact anything anyway. Right. Right. But I'm just saying like that counter narrative is not even a conversation now. So people are trying to anticipate what is not going to happen. That's right. So, you know, you have to look outside of the U.S. right now, European benchmarks, Japan, China aside, I do think that the global equity markets are telling us a little bit of a different story, maybe a more realistic one than the

US is right now. And it's not to say Europe leads US, but there's like a distribution phase there that's been resolved to the downside pretty much already. And Japan looks toppy is probably the best way to simplify it. So we feel that it'd be really surprising to see that completely shrugged off by the S&P 500. But honestly, if the Russell 2000 does confirm

this breakout, you're going to hear me say confirmation a lot because it's really important in our work. We want to always make sure any breakouts are, like hold through another week. So for the Russell, it needs to hold above, I think it was about 2360. Can't be a pop. It has to.

Can't just be up there for like a few days. I'm going to interrupt you. We forgot to start the show. Oh, let's do that. We're going to put these on our head. Michael, got yours on? Okay. All right, John's going to do the clicks.

Coming in with the three clocks. Alright, we almost forgot to start the show. That's okay. Whoa, whoa, whoa, stop the clock. John, before you clap, here's a word from our sponsor. Hey guys, today's show is brought to you by Van Eck. There's a huge wave of demand currently and on the horizon from hyperscalers for data center power.

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All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Let's go, ladies and gentlemen. World's Wealth Management may maintain positions in the securities discussed in this podcast. Let's go, ladies and gentlemen. Welcome back to the World's Finest Investing Podcast. My name is Downtown Josh Brown with me as always, my co-host, Michael Badnick. Michael, say hello to the folks.

You guys, John is here. Nicole, Duncan, Rob, whole gang, Daniel, my friend, welcome to the audience. All right. Hey, guys, I got to tell you, when we bring back a returning champion, we put a lot of thought into how the first show went, and we really only bring back our very favorite people. And also for the election, we had to have Katie. Very, very political, very partisan.

Katie is one of our favorite people. Katie's first episode on the show did unbelievably well. We heard from not only people that focus on technical analysis, but people that focus on fundamentals, people that focus on asset allocation. Katie's a star. Biggest crowd ever. Thank you. Wow.

You had a tremendous response. I'm honored to be back. So for those who don't know, Katie's the founder and managing partner of Fairlead Strategies, an independent research firm and advisory focused on technical analysis. Prior to joining Fairlead Strategies,

Katie spent more than 20 years on Wall Street providing technical research and advice to institutional investors. In 2022, she launched her first ETF, the Fairlead Tactical Sector ETF, aka TAC, T-A-C-K. And that's been a big hit. It has, yeah. It's unbelievable. I mean, I knew it would work, but... TACK, T-A-C-K, and that's been a big hit. It's unbelievable. I knew it would work. It's not an easy business, by the way, the ETF business.

It's a thing now. People reference TACK all the time. It's good to hear that. Active products to me have a real place in the market and it's sort of early adoption, but I think it's coming. Active is the hottest category of all ETFs. It's not the biggest, it's the hottest over the last year. It's now a permanent, it's not a fad. People are permanently utilizing different active ETFs. But they realize they can achieve the returns and sort of the risk profile that they could maybe

only before through a private fund with higher fees, right? So they're accessing good managers at a lower fee base with this nice like tax wrapper around it. So I understand why it's going that way. And transparency. Transparency. Right. People know exactly what the manager is doing and they can look anytime they want and say what happened today in the portfolio. You know one of the challenges is that advisors don't seem to know where to put active products right in their overall portfolio. So that's what's the learning curve for I think everyone. You know I feel like it doesn't necessarily fit into a sleeve by the traditional means

of the sleeves. Oh is this large cap value? Is this hedged equity? So that's going to be the learning curve. But I think if you think more of the outcome or the desired goal of these active products, that's going to help people understand where they fit. Advisors like to be able to categorize things because when the advisor is talking to a client, it's their

job to bring order to what would normally be chaos and say, all right, here's your portfolio. These are your core. These are like your satellite or core and explore. And I think it's easier to sell something to an advisor as a satellite than it is to sell as a core because core is a race to the bottom on fees. Core is like Vanguard versus iShares. But also when we're reporting performance and you're showing a pie chart, where does this thing, what slices this?

Yeah, where does it fit? What does it accomplish? The saddle eight node to me is like a catch all in a way. So I'm hoping to see that morph into something a little bit more crafted to the investable implications of these strategies. And it'll take time to get there. Our product happens to be a very good core product, right?

So that's another challenge for us is that it doesn't really qualify necessarily as a satellite unless you're saying, okay, well, technical analysis that makes it a satellite. What about active sleeve? Like, shouldn't that be? Excuse me, alpha sleeve. Alpha. The client doesn't care if something's active. The client cares is this gonna do better than something else I could buy instead. Yeah and does it serve a purpose right? Is it something unique? Okay. Alright well listen you're you have your lane now and you're no. So are we allowed to ask you what the AUM is? Are you allowed to say?

Oh yeah, it's all public. So it's about 220 million. Thank you to Trump. Well done. Yeah, yeah. So, Josh, before we get to the doc, I just want to, Kylie shared this with us. So as we speak, Jerome Powell is giving his

Fed press conference. They cut 25 basis points, as was widely expected. Oh, I forgot, was that going on this week? I know. So, all right, listen to this. Just another market moving event. Hi, Victoria with Politico. Some of the President-elect's advisors have suggested that you should resign.

If he asked you to leave, would you go? Jerome says no. Can you follow up on do you think that legally you're not required to leave? And he just said no. So then somebody asks a follow up. Do you believe the president has the power to fire or demote you, and has the Fed determined the legality of a president demoting at will any of the other governors with leadership positions?

And he said, not permitted under the law. She said, not what? And he replied again, not permitted under the law. Well done. Jerome. Stay off Twitter, Jerome. Jerome. I'm going to tell you right now, whatever laws you think are in place, LOL,

pretty much if he wants to get rid of somebody he can, he might have to use Twitter to get them to quit, but I wouldn't worry about Trump being able to do what he wants at this point. You might love that, that might be music to your ears, you might hate that. I don't know who, you know, I can't speak to like every single person and every audience everywhere. I can only say, this is what you should expect for the next four years.

I'm telling you it's a robber baron era coming. And again, you might make a lot of money in the next four years, so don't get mad. But we are now in an era where some very clever people have the attention of the commander in chief. And all of them want the same thing, which is their stock prices to go up. Speaking of that, Katie, going into yesterday, it had been the best return for the S&P 500 in an election year since, I don't know, what are we looking at, 1936, literally? Yeah. So given that backdrop,

were you surprised with the violent pop? You know, we were anticipating a rally, but yeah, maybe the violence of it we were surprised by. The difference is that most of these elections, we've come into it after pretty significant corrective phase. Volatility in the election. Yeah, yeah.

We didn't have that. And it made sense because there's uncertainty. And I mean, if this one wasn't uncertainty or, you know, rife with that, I don't know what was. So we came into it with almost like a, we had no sample size to reference over history for the current setup. Now that we have, usually when you get the gaps up

after these prolonged up moves, that is more exhaustive in nature than otherwise. So again, we're sort of a doubter of the strength of this rally. And yet we don't want to fight the tape. But the breadth doesn't change your mind at all because it was pretty substantially good. Yeah, so good. But if you look at the breadth

data, like the cumulative advanced decline line, it had lost some momentum ahead of this event, right? And so had the broader market. So even the major indices had seen a loss of intermediate term momentum that was somewhat meaningful. Weekly stochastics rolling over, weekly MACDs starting to get pinched, 20-day moving averages roll over. Those are usually indications that we're into some consolidation phase. I don't want to give too much credit to a two-day move. It doesn't negate what we've already seen from these indicators, including in market breadth. John, can we put this chart up?

S&P 500 year-to-date returns in election years. I understand what you're saying that the rally was sort of like narrowing going into the election, but it was one of the calmest 30-day periods going into an election ever, maybe because everybody that wanted protection already bought it. Like everyone was girding for a worst-case scenario with recounts and ballot boxes and all that. But just on the overall year, like to Michael's point, back to 36, from my perspective, understanding what I understand about human nature and the agency problem and Wall Street and people's careers being

on the line. It's on. I just can't picture anybody leaving the party, especially if they're trailing, which of course 50 something percent of active managers are. Yeah, and I don't think anybody should leave, right? No, of course. I understand what you're saying. They might want to wait to add exposure or get partially hedged.

While the US was very calm and obviously had great returns, we didn't see that overseas. So developed global markets were not enjoying the same follow through. So I think that that lack of global breadth is something that nobody's really talking about. Kind of, it nags at me a little bit. The participation on Wednesday was really very broad. As you mentioned, we saw, I think, 420 stocks reach new 52-week highs on the NYSE. We haven't seen that since, I think, 21.

And that's a... That didn't end well. No, no. It did not. It wasn't right at a peak, actually, the measure at this level. But it did give you a sense that things might be getting overdone. So we always look at those market internal measures, sentiment, breadth, leadership, all of that from a contrarian lens.

OK. And so in mid-October, reasonably so, sentiment got overly bullish by historical measures, right? Fear and greed index got very, very bullish. So 75% is that extreme where you do tend to see markets start to sort of lose their stronghold. Is it important to you at all that financials were the best performers?

Is there any signal there in your work? or is that just something that's coincident with the moment and not necessarily predictive of anything? It was a really Explosive move. Yeah, and I think we need to evaluate it more on a case-by-case basis Look at the individual stocks that have run up. I looked at JP Morgan for one. Looks great, I can't argue against that chart. And certainly beneficial to the holders, right? So to me, they're all holds on that gap up. But we do have, and the Russell 2000 move, by the way, is really part and parcel with the financials move.

There's a lot of small cap banks that drag that thing up. So the regional banks were up massively. And with these gaps up, we just be careful. We'd wait for that confirmation. So not to be overly sensible, but we want to wait until really kind of next Friday to make sure that the breakouts that have developed above resistance levels hold. And that's where we can add value despite taking out some of the emotions of this week of which they're running very, very high, right?

And if we see them confirm, well, that's great because that suggests that it genuinely is broadening out in a way that we really haven't seen at least from large to small and mid. What's an ideal situation for next week then? Monday, Tuesday, profit taking, and then a resumption of strength into the end of the week? I would say that yes, in a way, like digestion would be great as long as that digestion doesn't start to see the major indices and a lot of individual high profile names come back into their gaps. I don't want to see those gaps penetrated for the most part. And the lows

from yesterday, they're far enough away that I think we have some wiggle room. want to see those gaps penetrated for the most part and the lows from, you know, yesterday they're far enough away that I think we have some wiggle room. So we could retest without breaking down into the gaps. Okay. Yeah, just kind of a hanging around current levels would be healthy. So yesterday was the largest positive day in the S&P 500 post World War II on an election day was up 2.5%. And again, coming off the strongest year in election year

heading into the day, it's just a wild. What the hell happened in 1948? Anyone? No idea. No idea. Who is, Duncan, who's the president 48? Is that, it's Truman? Rob says Truman. It's Truman, right? Okay. So I guess the market market was not a big fan of nuclear bombs going off

or? All right. So, all right. This one's no, this is, this is pretty, this is pretty notable though, no matter, like, no matter what, it's a historic day. The problem with yesterday, it's not a problem. The thing with yesterday is that in four years, we're going to have another election, we're going to have all the content leading up to the election. What does stocks normally do? Blah, blah, blah. This is going to drag everything higher. That's right.

And the averages. And you're going to say, you're going to hear everyone say, make sure you're in for the election. You know, you make a good point because it's the same thing with any seasonal phenomenon, right? We have front running of these seasonal factors, right? So what somebody said, well, Q4 is always strong. Okay. Well, it's already been pretty strong. And everyone knows it's going to be. And then Santa Claus rally. Well, is it possible that we've already had the front running of that seasonal push higher? No, by the rumor, by the news. I like it. So I like to front run longer periods of time.

I don't front run the Santa Claus rally. What I like to do is say 30 year periods are usually pretty bullish. So I'm going to get in today and I'm just... Well, you know, to take a long-term view, I actually agree with that. If you can put on blinders to a lot of the noise that happens over the short term, you're usually really well served by that. When we did a lot of back testing for our ETF, we tested different sort of signal frequency, dailies, weeklies, monthlies, etc. And we found that the longer term generally

either built on returns certainly improved on the strategy by not over trading and not getting you out of a market when it was just correcting, right? Corrections are healthy. They are worth living through, maybe hedging partially through them. And the market's usually in a bull market, right? So we want to make sure that we're there for those environments. And you can't do that if you're trading around all the time. Well, the problem is when you're in a correction, you don't always think it's a correction. You think it's the start of something worse.

Well, that's why you have to use technical analysis, right? And do it systematically. We agree with you on that. Yeah, the emotions get taken out of it. I think about the COVID corrective load. Now we can say analysis, right? And do it systematically because- We agree with you on that. Yeah, the emotions get taken out of it. I think about the COVID corrective load. Now we can say that, right? It didn't feel like it was a correction at the time. Oh no, it looked like we're about to get cut in half.

Yeah, it really felt pretty awful to me too. But if you use the indicators, they wouldn't have gotten you sort of fully risk off, at least in our work. And they would get you to a full equity exposure way before I think you'd be comfortable yourself, right? So. They would buy you back in.

Buy you back in. Well, that's the part. That's the hardest part. That's always the hardest part. Selling is easy. Yeah, yeah. So there was, as we mentioned, just an explosive move to the upside.

Yeah, so let's talk about small caps per second, because this is the area of the market that's been the yeah, but right like Right the laggard. It's not confirming. Yeah, it's like yeah, though. The the making caps are growing up, but look at the Russell Well, actually did you know John this charts a little bit further down? Raise your hand if you knew that over the last year the Russell 2000 is outperforming the SP 500 Now that only just happened as a way well on a on a 12 month basis? How wild is that? Yeah. Wait, really?

Yes. How? Really. All right. So I put a new one in here, but as of today, it's the Russell 2000 is outperforming on a total term basis of the last year. Is that wild? Nobody knows that. I would never have guessed that. I would have bet money against that. Now you know. So anyway, Kevin Gordon tweeted yesterday, I would never have guessed. I would have bet money against that. Now you know. So anyway, Kevin Gordon tweeted yesterday, the percentage of Russell 2000 members trading above their 50-day moving average

moved up by 17 percentage points. That's insane. It went from like 50% up to 76% or whatever the numbers are. That is the strongest increase since July when really this rally in small caps kicked off when we got that weaker CPI report. Right. So is that a good thing? And if you look, it's probably not, unfortunately.

It looks like it oscillates and we're at the upper end. Yeah, and we're at the upper end. We're nearing what ends up being a peak in absolute terms for the index. The interesting thing- It's a good thing if you were in it a month ago. Already. Yeah. Not a good thing to buy into it necessarily right now. We've had really good app performance off of just the recent low, Russell versus S&P.

And what I think a lot of people are hoping for is that this coming year is more about the small caps, right? Because then there's more opportunity and value. There's a lot of things that come with that that I think the market would welcome because it's not all that sort of leadership stronghold to the mega cap complex. And it makes it easier, I think, especially for financial advisors to add value

in a way that honestly they just can't when it's all the mag seven and all passive, right? So I think people are hoping for that environment. The catch is it's an environment that I think is more likely to occur in a range or sort of a down cycle where we have that small cap outperformance. Oh, that's interesting.

Small cap outperformance, cause that was a big phenomenon from 2000 to 2009, was that small caps did better than the S&P. Seems unfathomable today. And it was range-bound. But I mean, in 2022, I'm looking at the ratio. It was pretty much equal, right? So is it good to see the ratio of the Russell to the S&P sort of stabilize?

I don't know that it's good or bad in terms of the market implications, but maybe it gives us more choices, more to work with. It's good for IPOs. If people feel like there's interest in market caps below $50 billion, they're more likely to bring deals to market. And those deals are more likely to be supported by people that are willing to bet

this thing is going to get into the Russell in a year if it maintains its $6 billion market cap. Like, there's no interest in that part of the market right now. Yeah, good for Wall Street certainly. I think it's good for, I think it would be good for Wall Street. Let's do this, let's do this IWM chart with the gap. So sentiment trader Jason Gepfer tweeted that it was, yeah, this is yesterday, I think the other guy up for tweeted that it was, yeah, this is yesterday,

the fourth largest gap up in IWM history, but if you take out 2008, which was obviously not great, not bad in terms of returns on a go-forward basis. You could skip, this 2008 was the TARP approval. Is that why you had that gap up? You could skip that. That's a once in a century. Again, there's four events, so looking you know, looking out forward, you know, I guess you pretty much might.

You could toss this out the window. But it was notable just in the sense that the gap higher, and in a bull market nonetheless. So, I guess, Cade, to your point, like, is this the exhaustive gap that gets filled next week that clearly that's not what we want to see? So when you're thinking about gaps, because I joke around that all gaps get filled, that's my unofficial thing, but there's a difference between gaps getting filled three days later and gaps getting filled a year later. So how do you think about holding gaps?

So I think of them as a great way to manage risk and to identify whether it's a real breakout. So if it gets filled immediately, that usually is a bad thing. That's a bad thing, right? But I kind of agree, yeah, you do often see them filled much later. The different, this chart's interesting,

but I have to say, look at the corrective phase, right, ahead of the last four instances. Right, this usually happens in a bear market. Yeah, much different environment. Oh, so you think about gaps at an all-time high, not for a stock, for an index. A gap at an all-time high has a different connotation than a gap after a 12-month consolidation. So those we would call breakaway gaps typically. So that sounds like it's a good thing.

A breakaway would be following a downdraft actually. So that's more of like a turnaround. So what kind of gap is this? Baby gap? It would be... This would be exhaustive. An exhaustion gap. If it is filled obviously.

That's when we know it's exhaustive, but it would be more likely exhaustive. So when you say it's a good tool for risk management, so let's say you have a trade-on, not you, your ETF, but like anybody. Let's say somebody has a trade on, not you, your ETF, but like anybody, let's say somebody has a trade on, they got this right, they bought small caps, they anticipated the catch up trade, the Trump trade, it did work in 17, I would point out. People love these little industrials and banks, okay.

These little industrials. No, they did, that was a hard thing for like six months. I was there, you were there. Let's say somebody got this right this time. What does the gap do in terms of giving them a risk management fulcrum? What do they do with that? Yeah, well first of all, it just makes it so it's math,

right, it's all about price, and you don't have to have the emotions involved. So I'm looking at IWM right now on a daily chart. Yesterday's low was- Michael's going to put this trade on as you're talking daily chart. Yesterday's low was 232 and three quarters. So that's our effective stop loss. We don't want to see that, but it has a limit. It's within like five days.

And this is not that scientific. And you want to give that like a weekly, like a Friday look, you're saying, you don't want to react instantly. Yeah, this would be more like if within the next few days it dips into the gap, to me that's, that makes the whole thing so much lower probability that I want to be out. But if it doesn't get in there within the next five days, then we've set a new floor for now. Flip the buck. What it also does, it makes you take pause, right?

It can be at times very frustrating because then you'll see maybe additional follow through. But this gap up also happened to be associated with a whole lot of demark cell signals. You guys know the demark indicators, right? Remind us, what is that? So these are all the numbers? Yeah, they're designed, the numbers, right? The count. Floating above and below.

Paul Tudor Jones was a big fan of this. And Steve Cohen. So you know, they're one of the best ways to identify trend exhaustion, in my opinion. So we can all look at a trend and identify it. Just use a moving average, a MACD. For us to understand when it might be nearing exhaustion, that's harder, right?

So usually we'll have lagging indicators that will roll over like those stochastics. And it's already too late. Yeah, it can be. You know, they're going to get to there closer than waiting for a breakdown at least. So Demarque is literally counting the days in a potential exhaustion period to note either the end of a selling trend or the end of a buying trend. Right. Right. So it comes on the downside and on the upside.

But when you see those numbers on the chart, that's not subjective, is it? No, it's really model driven, completely mathematical. There's like some basis in my opinion, and Tom, this is not, he owns this suite of indicators, but my sense is there's some Fibonacci sequence that's embedded in the indicators. And they're truly one of the most timely things that you use, but we can... Some people use it better than others because there's an interpretive... I think that's where I was just going to go. Alright, please.

Yeah. Just cross-referencing, right? So, if there is a breakout, then one of these so-called cell signals becomes lower conviction. So, there's some people that might follow it more to a T than we do. So we're always cross-referencing with other indicators and support and resistance to put more odds in our favor. But with these breakouts associated with a lot of 13s,

including by the way, the S&P 500 cash today, we want to just doubly make sure that we see that confirmation. So you have a chart, you have a bunch of charts for us. One of the ones that you brought is a fear and greed index with a 10-day moving average. Was this going into the election? Like what are we looking at here? Because it looks like it's, it looks like fear and greed was rolling over. Yeah, so coming into the election it was actually somewhat conducive to the bounce, right?

Because I think it was around 43 percent. But notice that the sort of faded gray line did reach 75% very recently. That was that mid-October reading. And we like to isolate it with the 10 days to kind of smooth it out. But you can see that the periods during which the sentiment metrics sort of rolled over,

right, generally are not great periods for the equity market. You would see some consolidation that needed to get you back to a level where people can feel comfortable adding exposure. So we feel like sentiment is a risk right now. So you ideally are looking for a moment at or below the green line for a lower risk entry. Yeah. But this is very short term.

This, I don't know about very short term. It would be more intermediate term. So for me that's like each quarter. Right? Sort of the swing. Okay. So we were definitely more toward the greed portion and then rolling over. Right there. And it's when you see that 10 day rollover that it tends to be like a think of it as like an overbought downturn. And you don't need to see it go all the way to the oversold reading of 25% to get an entry but and by the way that's when the market feels terrible generally right. Well I was gonna say like this year it really never did other than that one moment in August. Where I don't even know what was going on. I think like the non-farm payroll numbers started to accelerate negative,

but it was really about storms. Yeah, but like Texas had a storm and we just decided, oh now is the recession. It was claims. It was claims. Okay. But all right, so that's really the only moment where you had a very obvious, okay, sentiment just got way too negative short term.

A nice entry point off of sentiment. And I mean, look at each of those. I mean, there's what? I don't know, six over the last three or four years. Were those all great buying? I mean, everything's been a great buying opportunity. Yes, pretty much. Yeah. So and you don't... Oh, look. March 23 is the mini banking crisis that almost happens. You could like shout them out. October low last year. What a beautiful entry that was.

And sentiment helps us feel confident in adding exposure when it does feel that bad emotionally, right? So we don't feel like it's, I mean, you could describe it as neutral right now, that emotionally, right? timing right for a 90 day period and a lot of asset managers are like is today the best day not definitely and I know that's hard because the market does have such momentum right it doesn't wait for you to get in let's do this cumulative NYSE advanced the client line. So we got a sell signal how dare you Katie? Yeah I know I know and what I like about this I admire your. Is that it tells us that breath has been strong, right? Because I do feel like people are still kind of harping on 2023 when breath was really

lousy for the most part. Let's do 30 seconds on MACD. So this is moving average convergence divergence. It's an indicator, but it's not predictive of anything. It's telling you what has just happened. Tell people why that matters to technicians. Well, we want to eliminate noise. We want to identify prevailing trends

and we want to also understand if those trends have good momentum, right? And the MACD serves all three in a way. So it's a trend following metric. It'll tell us, is it an uptrend or downtrend over various timeframes. And it looks for the listener, it looks like a wave and you'll frequently see it as the bottom pane

of a chart of something, stocks or- Yeah, it has crossovers, two lines. One is a data line, one's a signal line there for crossovers. And the crossovers will give you so-called buy and sell signals. They'll give you an idea of whether it's a trend shift that's meaningful enough to act upon. You can evaluate it for divergences as well.

And you can also see if momentum is growing or contracting. You know, you might still have upside momentum, but it could be less so than it was a few weeks ago. And there's information in that. You want to buy the upside cross of the signal versus the data? Generally speaking. But you know, you always want to cross reference that with everything else. Yeah, it's not the only thing. The MACD itself probably would test all right, but certainly not perfect.

Because it will at times eliminate too much noise. So we want to enhance it with things like the stochastic oscillator and the demark indicators as well. But what is this chart? So you have a chart here, cumulative New York Stock Exchange advance decline, which I think everybody understands what that means. This is the number of stocks going up minus the number of stocks not going up and cumulative meaning it's not just today. It's building.

Every day. Yeah, it builds on itself. Okay. So that, if I know nothing about markets at all, I look at the top pane of your chart, you're showing a 40-week moving average, that looks amazing to me. That's a record. Yeah, it's a very good uptrend that has been in place since that October low.

So why do you show these two things juxtaposed with each other? It's to show that the uptrend has lost momentum, right? And it's not an outright, as much as it says, MACD cell signal, that's to denote the, that's right. It's more like, yeah, keep an eye on it. I'm sorry, this is a MACD of the thing above it. Yeah, that's right, yeah.

Okay. So it shows that the breath has actually lost momentum, which is kind of interesting. And all that would tell me is to say, okay, if we do see breakdowns in absolute terms by whatever, we're gonna be more likely to honor those breakdowns me is to say, okay, if we do see breakdowns in absolute terms by whatever, we're going to be more likely to honor those breakdowns and react to them because breath contraction

can be pretty tough. Well, we're getting a breath thrust in, or a surge, I should say. I know a breath thrust is an actual thing that's being measured. A breath surge, what's the difference between a breath surge and a breath thrust? A breath thrust is mathematical.

I have to be honest, just the term thrust makes me very uncomfortable. I'm very comfortable. I am a thruster. I know that you are. Alright, so breadth and Nasdaq's surging. Chartkin made this chart that shows 14% of Nasdaq stocks are at a 52-week high, and historically, this has not been a top signal, like at all. Yeah. So why is this, all right, this is an interesting question.

Do you think about NASDAQ stocks differently than the S&P 500? Yeah, I would say collectively, yes. I give more weight to the S&P 500 just as a broader, right, a broader sector representation. So I think of the NASDAQ as being a little higher beta in general, and also a little bit more mega cap heavy, right? So those things matter.

We often, if we are recommending hedges, short term hedges, we will use the inverse triple Qs, or PSQ, for that recommendation. You'll get more bang for your buck on the hedge. That's right. That way. Because oftentimes you do see the technology sector to which the NASDAQ is more heavily exposed underperformed on the downside, high beta.

So we want to get that tech exposure when we're getting hedged. So if you're putting on a hedge to the S&P 500, the right way to do that might be, but don't you also pay the price for that? Not if you're wrong. If the market continues higher, you're definitely paying a beta price because the Qs are probably gonna outperform. Of course, yeah.

Typically, I would say. But we have seen the Qs, and this is not a technology problem as much as it is a mega cap problem, you have Apple and Microsoft which are two massive heavy weights as you know having kind of lost their relative performance that that is impactful to the whole benchmark. Let's do this secular and cyclical trends. What's this first chart? This is a monthly chart of the S&P 500 index. A great chart, yeah.

So it shows a lot of the- I'll be the judge of that. Tell us what's in it. It shows the indicators that we use most, including the Demarque indicators on there. So there's your number, there's your Demarque count. So you see the secular bull trend, you see that the shaded area, that's our cloud model,

and it shows that we are likely to get into range and then resume higher, right? So maybe a cyclical range and then the secular bull can resume just visually. It's not really a gauge of support right now, too far away to matter. Hopefully it won't have to matter. We also had the stochastic oscillator

that's in the middle window there in the MACD indicator with the histogram in the lower window. What is the stochastic pain telling us? Because you have as a note here long-term overbought. Yeah, so we have to clarify to folks that overbought is not necessarily bad. Overbought is actually a natural... It's a mathematical term. I have JC in the back of my head.

How can too much demand for stocks be bad? Yeah, yeah. So, and it's momentum, right? It shows momentum. What's bad is kind of what you saw with the sentiment metric where it rolled over from overbought. That's when it's bad. It's when you get the stochastics coming back below

that overbought threshold, which happens to be 80% in our work. So we are overbought and that has us sort of on edge. But we don't have an overbought cell signal. So that's how we'd interpret that. The one thing that we've been using more and more this year, if you look at the MACD, the histogram in the bottom is another way to represent it.

And it's basically the spread between those two lines. And you see how it kind of like builds a mountain and then peaks and then goes. One peaks before the other. Right. So the histogram is showing sort of the convergence and divergence of the MACD. And what we found is there's real value

in trying to identify that peak in the histogram because it will occur well before the MACD cell signal itself. it'll give you again a sense of Indicator for an indicator. Yeah, this is what Warren Buffett uses. Yeah, I was gonna say you're playing it just like Berkshire. It's like two derivatives away from preps, right? But that's about as far as I'll go. But anyway, the bad news is we've got a big fat number 13 up there. That looks ominous. It does, doesn't it? And listen, they're not perfect, right?

If you look over history, but it does, again, have you sort of bracing for something that could lose some momentum. 13 is the demarc count for this monthly candle. That's right. What is that? Why is it 13? And it's a 13 on the daily as well. It's a 13 because of the qualifiers that Tom has sort of built into this one indicator

that you see here and the qualifiers. I'll give you just a, I'll give you an example of one of the qualifiers. In order to go from, you know, a 10 to an 11, the close has to be above the high from two bars ago. Okay. Don't quote me on that. But that's something like that. Right. So it's looking at how price is trading in the current price bar versus bars, you know, two, four bars ago. And it's there in measuring price momentum. It's like an extended. So it's so crazy is we were you're saying not you. The formula is saying we were a 13 before this week. Like ending October as a 13, what are we now? 50?

Well, the 13 was actually there in October, but based on October's close, it disappeared, which is one of these very frustrating things for people like me. But now in November, November's bar is up there. Oh, okay, so this is. So it is not locked in. We'll only know that at the very end of the month,

but it does give you just a visual sense that it's overdone. And by the way, we're not terribly far from that measured move objective, 6118. It's a pretty widely known objective. What does that take us to? 6,000, just a little bit more? 6100. 6100, yes, 6128-ish.

So that would be a measured move in Fibonacci terms. Which is, this isn't even really Fibonacci, it'd be like a 100% replication of the move that preceded the bear cycle. I think even the most bullish of bulls would say, yeah, it would probably be healthy if we could just correct through time a little bit. Just digest, take a breath.

Just visually, right? And let's hope it doesn't have to look as sort of pronounced as 2022 does when you take a step back. So I want to be careful with correct, it needs to correct. I think most bulls would say they would prefer a consolidation, not a correction. That's a good nots. Because where does a correction take us down? Where does a 10% move take us down to from today?

Is it 5200-ish? That's not pleasant. Where does that 10% move take us down to from today? Is it 5200-ish? That's not pleasant. Here's the catch. It's like every consolidation or range, unfortunately, has to pretty much start with a correction, like a proper correction to establish the low point of that range. So we do think that we'll get that correction that is probably going to happen relatively soon. And that's why we're just saying, hold off on new purchases,

hedge some of the higher beta exposure that you have partially. We always say partially because we wanna be there for the bull cycle. Our fund is 100% in equities right now basically. So we're still exposed ourselves, but we do see, you know, look at that MACD histogram. It kind of feels like it's peaked to me.

Okay, so that sounds completely reasonable. And you know, one of the beautiful things about using technicals is not that you'll always be right, but it's when you take action and do something, you can point to a reason why you did it. And also, if it was the wrong thing to do, whether you shouldn't have bought or you shouldn't have sold,

because the outcome went against you, the technicals will help you fix it. Well, they won't let you be wrong for too long is what I say. That's actually the better way to phrase it. Yeah. And JC and I were talking this morning about how... Did you get a word on Edgewise? I did. He's very generous. But we, I mean, we're very much like philosophically on the same page typically, right? And, you know, when we think about technical analysis as

a discipline, you know, people are like, oh, it doesn't work in this environment or, you know, it's not, we agreed that it's not technical analysis that ever fails anyone. All technical analysis is, is the identification of price trends, the analysis of supply and demand, where it falters would be in the eye of the beholder, right? So it would be me saying, you know what? I'm probably giving a little bit too much weight to these overbought oversold metrics in an environment in which I probably should have given more weight to momentum.

So it's more in how you're weighting the various inputs that you get from the technicals that I think you can be on the wrong side of things. But the market won't let you stay that way for very long because you're just going to have to concede. And that might mean for me, the MACD does something that just, I give up type of thing.

I think with technicals now, there's more of an appreciation of how they can be used even by people that are not technical analysts to manage risk. I think where technical analysis as a discipline gets into trouble is when something happens and somebody pulls an indicator out of their ass that you've never heard them use before and say, yeah, look, this totally explains it. But that's any fundamental people, same thing. Systematic approach is really the right way to go

with most disciplines. Like you shouldn't have a new indicator just because the one you normally use didn't spot something. Confirmation bias. They don't do that in fundamental analysis. There's no community adjusted EBITDA, oh wait. Oh yeah. All right, so I know you're a fan of intermarket analysis

as a technician and ratios and all that good stuff, so I want to show you what I think is one of the most bullish charts in the world, which is the equal weight consumer discretionary stock divided by the equal weight consumer staples stock. These are Invesco products. Okay, oh that's good to know because I didn't realize it was equal weight.

Well the reason why it's so important, as you know, is because. You were going to say. OK. Oh, that's good to know, because I didn't realize it was equal weight. Well, the reason why it's so important, as you know, is because you were going to say it's all Tesla, it's all Amazon. Yeah, yeah, it was ready. XLY is 40%, I think, Tesla and Amazon. Yeah, it's a great index. If you look at the equal weighted version of the discretionary divided by staples,

it is ripping to new all-time highs. It is, yeah. And listen, if that breakout is confirmed, then that'll be meaningful. Right. So I'd make sure that it's a risk. It's another risk on a very much, you know, it's like this week is the week that lifted above that resistance. So I just make sure that it holds up there. Right.

And that would be bullish, in my opinion, as well as just one sort of enhancement and it would also... We'll put it this way you wouldn't want to see the reverse. You wouldn't want to see a 1500 point rally in the Dow and this is the reverse. Well look what happened. So look at look at 2020 right this ratio crashed during the bear market, ripped during the bull, crashed during 2022 and now we're on fire again. Yeah and it feels a little extended to me admittedly. It's going vertical.

Yeah, me too. Yeah, I thought a few weeks ago that it was rolling over. Well, this will fix itself. It has to. It's a ratio chart. Like at a certain point it has to come. It oscillates. And we also have to remember it's hard because we do a weekly

report that focuses on sector relative performance, right? And we give overweight, equal weight, underweight recommendations with an intermediate term time horizon, which to me is very helpful. What's intermediate term to you? So if I had to say weeks to months would be sort of the general, if you could center it, maybe around three months. And then for short term, it's days to weeks, long term would be six months plus.

Okay. So what sectors look good based on the last thing you put out? You know, it's funny because it's in this weird transition period right now where we're actually equal weight most sectors that are recommendation because you've seen like a transference, right? So tech has kind of fallen out of favor. So that's equal weight. Energy is still underway, but maybe that'll move to equal weight as it transitions potentially here with drill, baby drill. Banks, financials, if you look

at the ratio, it's probably pending confirmation of a breakout this week, but my guess is that we won't get that confirmed breakout in the ratio, so we're equal weight financials as well. So equal weight a lot, but if you take a step back and look at the longer term view, we have an RRG relative rotation graph. So it's really cool. Yeah. Jeff at RenMack has one of those too. Yeah.

Julius De Kempener is the creator of these. And they're a way to look at relative performance normalized. And you get this cool data visualization tool. It's like a wheel. and you have some sectors rising, like growing in relative strength, while others are falling. I don't know that it does anything for a 10-year investment, but if you're like, what's working now? That's a really great way to visualize it.

I actually would argue that it's almost even better for that 10-year timeframe, just to give you a general sense of what's unfolding. And if we look at a six-month view of sectors within the S&P 500 versus the S&P, it favors utilities, REITs, and staples, which that gives me information, right? It kind of tells you it's rewarding what we saw in the way of a relief rally in relative terms for those sectors.

It's saying that the momentum has shifted. And then conversely, tech and communication services look the worst. They look like they're the ones that are rotating out of favor. Is that bullish or bearish to you? That would be bearish. Yeah. Because they're so big. Those market caps are so big.

It's the market cap, but it's even more so than that. It would just be the defensive sector rotation that that could imply. But it's not something that we're taking as like investable information. It just creates a backdrop. But the challenge that I was going to mention with the sector rotation and relative performance is that people don't realize that you really are talking relatives, right? We're not saying with an overweight recommendation necessarily to go buy that sector. So that's a challenge on our end

in terms of making sure people know that, you know, they're not totally independent, right? But relative performance is, you know, something that you want on your side, but it's not necessarily a buy or sell trigger. You agree with Michael though, this is a bullish chart. It might be extended, but it's like what you would want to see. Yeah. Oh yeah. Yeah. That's supported the

uptrend for sure. It shows risk on versus risk off. The consumer staples stocks have gotten pretty interesting, I have to say. Well, as interesting as they can, I guess. You know, look like shit in the rally and like it should be obvious that it would. Pharmaceuticals. Yeah, and right. Trump hates these companies. Kind of makes sense. He doesn't like, I think.

Lily has a breakdown. Yeah, it doesn't look good. He's going to start yelling at them about drug prices for sure. And he wants to make deals with them all for the US purchasing of drugs. Biotech's looking good. And Bobby Kennedy is like, I think anti-vax.

He might be involved with the FDA. Those stocks look awful. Yeah, they've been really beaten up. In that sometimes there's opportunity, but you don't want to be too early. We've been constructive on Boeing as a good example of a counter trend, sort of hopeful. What are you fucking nuts? Hopeful trade. But you don't seem to be, that doesn't seem to be central to what you do like falling

knives. No, it's really not. No, and listen, Boeing honestly, we only got there recently once it's showed some stabilization and held trend line support, that type of thing. But you're not looking for that. No, we're trend followers. We much prefer to have most of our positions be in long-term uptrends.

We're okay living through corrections, as you've heard. But- You were about to say something interesting about Staples. Oh yeah, the Staples. So the corrective phase that has sort of damaged their relative performance of late brought a bunch of these high-profile names into their 200-day moving averages, which are often

I want to say even self-fulfilling as support at times. So it was like General Mills, Coke, Kimberly Clark, PG, all of the really very high-profile but not very exciting consumer staple stocks had these pullbacks simultaneously. So it was very much a sector move, right? Not specific to any of those individual names. And I feel like that was at least a short-term entry for some of them. But a good entry, right? A good entry, yeah.

And something where- Because they should find support there, you're saying? These names have been a wild uptrends and they're giving you an opportunity to get back in. Yeah, some of them. And it feels also like if you are like me expecting consolidation, well, the consumer staples relative performance should be a little bit better, right? And so it feels a little safer to me. So not only do you have an oversold reading near their 200 days,

you have the potential for staples to be better insulated if we do get into more prolonged consolidation. Know what happened this afternoon as we're sitting here talking? The largest market cap company that's ever existed in the United States and ostensibly in any country, Nvidia, hit an all-time high for any market cap. It's a 150 yet. Any US stock ever. It's $3.63 trillion. No US stock has ever been that large. Nvidia is at 148. All's $3.63 trillion. No US stock has ever been that large. Nvidia is at $148. All time high.

It's not a break. People ask you about Nvidia more than any other stock. They do. Yeah, they do. I mean, I really... How good are semis looking? I have to say that's not the best chart that I've seen. Exactly. Yeah. Yeah. Say interpretation, interpretation.

So what do you tell people that ask you, because if the people are asking you about Nvidia, they're either in real life, they might not use these words, they're either asking you for permission to buy it because they missed it, or they're asking for your like stamp of approval for them to keep holding it. Right, so a lot of them already own it and they're wondering if they need to manage risk somehow around their position. The answer is yes, you need to manage risk. Yeah, I would think so.

The big sell signal, the demark indicators that you saw on the S&P is shared by Nvidia on its monthly chart. So Nvidia has been such a huge influence on market sentiment and really a driving force as we all know. It's a general big time. And it's not to say that it's a bearish set up.

It's not to say that everybody should sell Nvidia. All time hearts are not bearish. J.C. told me that. No, this is true. But if for someone who feels like they missed it, just be patient. Let me throw another chart in your face. All right.

Does Micron look a little bit better? It's more of a turnaround. So, you know. You want to wait for it to clear? What about that chart do you like? I don't understand. Well if it goes, if it gets past, because I'm not a triple top guy, don't believe in them. If it gets past $1,1350, it's gone.

Yeah, there's no triple top because it hadn't been trending higher. For me with a lot of these, in fact it does have a Demark buy signal by the way, That's active short term You and Todd Demark what else you got? Two weeks in duration so you got to be there now But but for these, you know that the semis in general

I'm not talking like a asml with its breakdown But just kind of a generic semi actually has a pretty notable loss of momentum that's carried over to the monthly chart So it's really not a great sector right now. What I think there's, and you guys might feel it too in your conversations and with your clients is that there's just, um, interest really not, not even just the mega caps, but really very tech centric. But software not susceptible to tariffs in the way hardware is. It seems to be, like I was looking at CrowdStrike and some of my software names,

these things look like regional banks. So it's a really mixed group. I just looked at them today for someone. And some of them look just like the S&P, right? And those to me are the ones that carry a little bit more risk. And then others, like look at a HubSpot or something. These names have just been on fire. And they're coming off of what were really long-term base breakouts.

Even Zoom, as one that was beleaguered, has started again. I bought and sold it. God damn it. That's why it's worth it. Remember, Softore is dead, like Salesforce. Salesforce did get murdered. But look at that chart of Salesforce. Came roaring all the way back.

It did, yeah. It came right back. Can we do this Microsoft, let's do this Microsoft stuff. Katie, you have a chart here. Can we do like a second on the Wall Street Journal quote? Is this from me? I didn't put it in the center. Is this from you?

Who is this from? Who did this? The Wall Street Journal. Oh, you know what? Guilty. I'm sorry. Not me. So I want to make sure we get to this. Alright, so listen to this from the Wall Street Journal. This is knuckin' futz.

The AI boom has transformed Microsoft's structure and its balance sheet. In the past four quarters, the company's capex worth $64 billion, up from $36 billion in the period a year earlier. It's now spending in a quarter what five years ago it spent in a year. Microsoft is spending in a quarter what it spent in a year five years ago on capital expenditures.

And ostensibly all going to... A lot of it going to Nvidia, not all but a lot. Yeah, it's GPUs. It's wild. And data and building construction for data centers. And notably, the company recently disclosed that all its AI services combined are pulling in revenue at a rate of $10 billion annually.

Does anybody want to bet that it's not going to be 20 billion in very short order? I don't, let's do the Microsoft chart. Buy, sell, or hold. I mean, would you guys buy that? No. No, not yet guys buy that? No. No. No, not yet.

Me neither. Yeah. Brand new MACD sell signal on the monthly chart, right? And an overbought down turn. Now rolling over. That's a great example of where it goes from overbought healthy to overbought problem. Can the market survive this if this looks this way and then we get something similar with Apple? Like can the rally hold up?

It feels like it rests on the shoulders of Nvidia in a way. Is this a good chart? I know it's rhetorical. The answer is this is a disgusting chart. There's some support. Okay, but this is... So I was about to ask, when you're thinking about ratio charts... Wait, what is that?

This chart is Microsoft divided by XLK and it looks like trash. Yeah, it looks like... It's really underperforming. When you're thinking about Microsoft relative to, I assume are you relative to its sector or the market? Relative to the broader market. Because it looks different. Okay.

But I mean, it's not a great ratio. It's not great either way. But hold on. The quote in that article ends with, the company recently disclosed that all its AI services combined are pulling in revenue at a rate of 10 billion annually. Maybe I'm an idiot. It doesn't sound like you can spend $64 billion a year in AI CapEx for 10 billion in annual revenue for a really long period of time.

So either that CapEx number comes, I don't want to say comes down, but stops accelerating, which I think probably hurts Nvidia, or it stays where it is and Microsoft starts to lose a lot of money. But it feels like one of those two things has to break. Right, and neither are good, right? Neither are good for the market. So yeah, I mean, I don't have a handle

on the fundamentals, of course. So you would not get long Microsoft here, technically. So if your time horizon is like a week or two, sure. It's got a short term over sold up turn within this context. So the timeframe is really important. And in fact, as I look at the ratio, it does actually have a counter trend indication. Maybe it just means that the under performance

has gotten to the point where it's a little overdone. But if we're zooming out, I mean, this is still very much in an uptrend. Like, let's be real. It feels toppy though, doesn't it? I mean, you know, to me, it's got what could be a classic head and shoulders top unfolding there. So I think it's somewhat risky from a long term perspective.

And certainly at a very minimum, there are much more compelling setups out there. Well, if this thing breaks down to 360, I'm in. Away from the charts for one second. minimum, there are much more compelling setups out there. Well, if this thing breaks down to 360, I'm in. Away from the charts for one second. I think next year the conversation shifts from LLMs with the AI stocks to agents. And agents has the potential to become a really bullish investing theme. So something interesting happened this week. Google accidentally made its Jarvis AI product available in their own store, their own app store, and then they pulled it like a day later.

A whole bunch of people downloaded it. They couldn't access it because it wasn't really ready, but it seems like this is going to happen before the end of this year. For those that don't know, Jarvis is an agent. So this is not asking an LLM to help you with your homework. Jarvis allegedly will have the ability to call a restaurant for you and get you a table. Jarvis could then change your reservation because you tell it to. Jarvis can put you on an airline, which to me sounds like the hardest problem on earth

to solve given how many variables. Like I want to fly out an hour later, no wait a minute I want to be in first class, no wait how much is the price for this, but whatever. If that's where we're going next year, I feel like it's out of, it's hard to not be in these AI stocks

because Claude already exists and what these agents are doing is taking screenshots of your computer while you work so that they can then replicate the things that you already do. You know, imagine if you could have it call your health insurance company and stay on hold for you and get it done. I mean, that would be a game changer. Let me read this to you.

This is potentially very creepy. It's called on-screen awareness. That's what the next generation of AI is going to be about. It's going to watch you in action and then mimic you when you ask it to do something. What if you're incognito? Dude, you have a lot to worry about. That's a separate conversation. All the news about Project Jarvis is giving us major deja vu because of how many times we've seen the capabilities being touted just by another company. So, Anthropic has Claude, which Amazon is all in with Anthropic.

It controls your computer for you. It already works. It'll be taught to use computers by taking screenshots, sending them back to the model to analyze what's happening on the screen. Apple Intelligence is going to do on-screen awareness, which seems like it's very invasive. Observe your activity, feed that into its system to intelligently carry out those tasks for you

on another occasion. Microsoft has Copilot, famously, plus Recall. Very nosy, it's all in your business. I love it. This is where things are going, and that makes it for me, somebody who really wants these tools, I don't want to give up on any of my Nvidia stock. I don't want to because I feel like this brings new life into the story. Can't you just buy PSQ, right? To manage through any risk.

I suppose I could. I suppose I could. If you wanted to get hedged to some degree, it is hard to time the entries in a stock that has such good momentum. So I think the message is, yeah, maybe you hold your existing position, you hedge through top down sort of avenues, and that's your risk management. You also have to, you know, sort of incur taxable events if you're trading in and out of these core holdings. Yeah. So if it's a core holding, we usually say as long as that core holding has long term upside momentum, stay with it.

But then you can sort of hedge it. Yeah, you don't want to turn yourself in a position that you view as like truly core to what you want your portfolios to be invested in. I agree with that. We can't let you get out of here without Bitcoin. This is exciting. This is like an exciting. truly core to what you want your portfolios to be invested in. I agree with that. We can't let you get out of here without Bitcoin. This is exciting. This is like an exciting week, not just because of what the price did, but because the decriminalization of investing in this stuff is now coming.

And I just can't, I said this over the summer. I said Trump's going to be the Bitcoin president. He's just going to fall in love with all the money that's come to him during the campaign. Now he has all these really smart friends and they're going to stay very involved, it appears with the administration and a lot of the dominoes will now fall on the side of this becoming more mainstream, not less. Like there's probably going to be change at the SEC. There's, okay. You also basically have the acquiescence of Larry Fink

and even JP Morgan. Acquiescence of Larry Fink. Yeah, he's all in. But three years ago, he thought it was a scam. So we have to watch Bitcoin. Now the added reason is that this might become a reserve asset for the government Okay. Yeah. So now this is now something that every technician every macro person they have to they have no choice They can't dismiss Bitcoin any longer. It's a great example of where you can't fight a trend indefinitely

Right. So when you have a breakout, and this one is looking like it will confirm this week, you have to honor that breakout as acting as a positive catalyst, as long as you don't have any big sell signals, and Bitcoin does not have any of those. So we do also get from Bitcoin sort of diversification in a portfolio.

Our recommendation really historically has been that everybody should have a small position in Bitcoin, even just for the call option of it really working and really exploding. But now also from a technical perspective with it having advanced from a downtrend channel that had been in place since March. That's a big deal, assuming we see it close strongly this week. Look at this weekly chart. That is so bullish. It's almost like a classic cup and handle. You would buy any asset that has that setup. The cup and handles are pretty high probability. Even Microsoft before

got into this corrective mode, had this beautiful cup and handle breakout and follow through on the back of that. So we like this breakout assuming it John, can we put Katie's chart up? It's toward the end of the okay. So all right. This is Bitcoin weekly. You're looking at both a 10 week moving average and a 40 week moving average and you have a cloud and you're looking at that cloud area as if it falls as long as it stays in there, it's still intact.

It shows a good band of support, essentially below current levels. It served as a staging ground for the most recent relief rally. Momentum has shifted. Oh, sorry. You're labeling this a pending breakout. Ain't nothing pending about it, girl. See, this is where it frustrates folks, especially in a high beta asset class like this. Say why it's pending.

Say why it's pending. Because we haven't had the two weekly, and we have to say closes with quotes for Bitcoin. The two weekly finishes above our resistance level. So could this confirm for you by next week? It's Sunday. Yeah. Sunday. It's when it rolls to a new price bar on the weekly chart.

The good news is I could buy it Sunday when you text me and say it's confirmed. You'll see it coming. You'll see it coming. And just make sure it's actually me. So why are you saying measured move 80,600? What is the significance of that? That's just based on the width of the pattern and where it's come from before.

It's that same 100% extension. It's only any measured move is assuming the existing trend is resuming and in a similar slope and fashion. But what does that mean to the person that goes long on the breakout? Like 80 is where they should think about taking profits? You know, it's more of like an objective. It would be a stopping point, a natural stopping point on the chart, but by no means should

it be where they say, okay, I'm going to close my position there. It would be a natural place for consolidation typically. Okay. So even with that 6,100 level for the S&P, same type of idea there. That doesn't mean that's where it's all done, bull cycles over necessarily. But it's an objective that if it's reached,

it would be a natural place for it to pause. My price target is derived a little bit less scientifically than yours. I'm going to say 110,000. I've heard that before, yeah. But the reason why is because once it goes to 100, that's when like the real desperation starts. Any asset management firm, any asset allocator that has no Bitcoin is going to want to kill

themselves. And that last burst at the end, and that could take place in one day, that's like a trillion bucks coming in as it breaks 100,000. And we've gotten to the place where there is- It's like FOMO on steroids. There are more ways to invest now, of course, in Bitcoin. Oh, now it's easy.

Now it's easy. Yeah, yeah, yeah. And I don't feel like it has the institutional adoption really yet, but just imagine if all of the pensions out there or the state funds, what if they picked up just a little size? Sorry, central banks.

This is actively being discussed at the US Treasury. And if the US Treasury decides this is a serious asset for American stability or whatever, you're going to have central banks in other countries say, well, I guess we have to do something. It doesn't have to be a lot because we're talking about trillions of dollars like, you know, that are buying gold, buying dollars, doing other things. We saw what gold did too, right? So gold is if it's any proxy, we've seen what gold is capable of. It hasn't been acting like a safe haven asset class really. It's just, you know, crazy momentum.

All right. So you're constructive on Bitcoin and you think the breakout could confirm as soon as this week? We assume it will confirm. It doesn't mean you have to chase the move. There's a little resistance, final resistance just near current level. So maybe some consolidation for a couple of weeks, and then that would be your trigger to add exposure. I don't think we're going to see a lot of things just run away in the way that they did this week.

I think we can kind of calm down a little bit and let things confirm, let things digest and consolidate if you do want to add exposure. You know what, I don't know, can you imagine somebody selling Bitcoin right now? No. Like what would make them want to sell it right? Like of all the times to sell it. So again, this is not science. Yeah, yeah.

And you can make a case from different sort of perspectives, right? You're talking almost like a money flow perspective. We're talking charts. There's the government, you know, so there's a lot of things that are bolstering the asset class. Okay. Hey, did you have fun on the show today? I did. Yes. You did? Thank you for bringing me back on.

We always have so much fun and we always learn so much from you. I want to ask, I want to just ask you before we get into favorites, for people that are unfamiliar with TAC and unfamiliar with, I guess you would call it your flagship ETF, right? The one and only. Okay, so like broad strokes, we want people to go research it of course, but broad strokes, like what is the elevator pitch?

If you meet somebody for the first time and they say, should I buy your ETF, what does it do? What do you tell them? Yeah. I think think of it as the alternative to the old sort of buy and hold mentality because dynamically it will do that for you when it's appropriate, right? So as a technician, it's hard to ride down the market in a 2008. So it's a rules-based approach to do that for you. Very long term. So think of it as a slow-moving chip designed to only really change during major reversals. And it uses asset allocation to limit drawdowns.

So it's not the sophisticated option strategy or something that arguably is hard to understand and could sort of break. It's very classically moving into short-term treasuries, long-term treasuries, and gold. And that's kind of unique and it becomes almost, you know, the 60-40 model is getting some criticism. It actually is about a 65-35 model over history, but it's dynamic. At times it will be 100% equities like it still is now. And at other times it could be nearly 25% in gold.

Do you have any sense of who's using it, like percentage-wise, wealth management versus retail? And at other times it could be nearly 25% in gold. Do you have any sense of who's using it percentage wise? Wealth management versus retail? A lot of retail and a lot of RIAs I'd say. And we're on some of the major platforms as well. So that was really awesome to see. Congratulations. And great risk metrics. 200 million is a big deal for any act of anything. So congratulations and can't think of anyone more deserving than you. I appreciate it.

Absolutely. We always close the show with favorites as you know. Besides Trump, is there anything that you want to shout out? What's something that you're into these days that other people should check out? You know, so I would say what I thought about this, because I knew you'd ask, ancient apocalypse. Okay. Say more. Have you seen this?

Oh, I thought you were calling for one. Cause I'm all in. I'm ready for it. I'm leaning in. What's this? So it's a, it's a documentary and it goes into sort of the mysteries. Is this on Netflix? I think it is Netflix.

Okay, I think I saw it but I didn't watch it. They're into the second season and highly worth it. I really think it's fascinating. I know documentaries might come off as seeming boring, but this is, it really kind of challenges the common theories about when mankind, sophisticated version of mankind existed. So, and at the same time, it's a little bit of a travel log. It's really a good show.

What other conspiracies do you believe in? Oh gosh, well... Who built the pyramids, Katie? No, I'll check that out. They go to Easter Island in the episode I just watched, and the Maui, you know, statues. The heads. And they go into a sort of controversy around that,

and it really is very compelling. There's like a lot of Mayan stuff where they say like how do these people build this? It's remarkable. Yeah. Yeah Okay. I know I like stuff like that Michael give a favorite for us last night. I was watching Sam Morrill a comedian has a special on Amazon It's it's came out with the summer. It's called You've Changed and quite funny. That's good. That's funny. Write it down. So I have two favorites of things that I haven't seen yet.

Ridley Scott gave an interview to the New York Times this week. First of all, great interview. He pulls no punches. They asked him about Quentin Tarantino stopping making movies at 10. He goes, bullshit, that guy's making another movie. But he's in his 80s,

and he's made some of the greatest movies of all time. Gladiator 2 is coming out, and he said it's the best movie he's ever made, or one of the best movies he's ever made. And the people that have seen it are saying Denzel Washington is going to win every Oscar. Let's go to the IMAX. I bought, so, sorry, I bought tickets with Smirkels.

Here with Shari? Yeah, I'm going to take Shari. She has no idea what I just did. I'm going to draw. Those are hard to watch, but on a big screen it would be. It's going to be awesome. It's going to be amazing. So I haven't seen it yet, it's my favorite.

The other thing I haven't seen yet, this Saturday, they have Bill Burr coming on. So it's the first Saturday Night Live from the election. They normally have Chappelle in that spot. The last two elections, they've had him on Bill Burr coming on, so it's the first Saturday Night Live from the election. They normally have Chappelle in that spot. The last two elections, they've had him on the next Saturday night. Bill Burr is one of my favorite comics. I like that SNL is allowing these people now to do their thing.

I say these people, there's kind of like an unofficial list of comics that were maybe like not politically correct. They're like the they're the best part of this season so far and Bill Burr is one of the greats so I'm looking forward to that. Alright that's it from us this week. Special thanks to the crew. You guys crushed it this week as always. We did a lot of content.

We laughed, we cried, we voted, we did all the things. Guys thank you so much for listening to the show. I want to tell you where you can follow Katie Stockton. You're big on Twitter. It's x.com slash Stockton Katie. Fairleadstrategies.com is the URL. And if you want to learn more about the Taki TF, make sure you visit FairleadFunds.com. We're good? Thank you so much. All right. We're good? Everyone's good? All right. Guys, thank you so much for listening.

Please subscribe. Please like. We'll see you soon. Thank you.