The Compound and Friends - Relative Strength

Episode Date: June 23, 2023

On episode 98 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Mark Newton to discuss market sentiment, buying the dip, the DeMARK Indicator, fundamental vs technical analysis, industrials, commodities, and much more! Thanks to birddogs for sponsoring this episode! Go to birddogs.com/compound to get a free Yeti style tumbler with your order. Special offer for The Compound listeners, receive exclusive access to all FS Insight research from Mark Newton, Tom Lee, and the entire team, along with all stock lists, webinars, and more using the following link: https://fsinsight.com/thecompound Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com 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. Wealthcast Media, 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

This is so f***ing annoying. This happened today. Twitter killed all of the link previews everywhere. So in Slack, on text messages, they did that yesterday. Wow. I don't know if something broke or if it's deliberate because they want you on their platform. So you can't see any previews. I can't see any of this. It's horrible. I think their service providers are starting to cut them off of cloud services.

They're not paying Oracle bills. They're not paying Oracle bills. They're not paying Google bills. It could be that. It could be deliberate where they're like, no, come to the platform. There's no tweet preview anymore. Come to the platform. So last week, Josh said something about, what was it, Stealth Wealth? Yeah.

So I don't know if this is a spoof, but Sam just tweeted this. Sam, well, ditching a phone case is the latest symbol of stealth wealth That's stupid. So like like I don't care if I break it's just like I don't know if this is a bit I don't know. It's done to generate clicks. So it's like I don't care if I break my phone. I'm so wealthy That's the message that you're putting out. I think how it said that to us one time like jokingly, dude I'm on some new stealth wealth shit. I bet you thought this is a sweatshirt. I bought at the airport last week Yeah, it is. Okay Unwokingly. Dude, I'm on some new Stealth Wealth shit. I bet you thought this is a sweatshirt I bought at the airport last week. Yeah? It is.

Okay. Austin's a hell of a town. Great music town. Oh, man. Do I love it? Yeah. Yeah. How are we looking, everybody?

We're close. Robin got me. My wife got me T-shirts. They're like the dry fit, but they're a brand called Goat USA. Do you know about that? Yeah, that's what my 14-year-old boy wears. Yeah. It's a perfect fit. The kids wear that. She's like the dry fit, but they're a brand called goat USA. Do you know about that? Yeah, that's what my 14-year-old boy wears. Yeah, it's perfectly kids wear that. Yeah, she's like people awareness I said why you get the extra tight honestly, are you wearing goat USA? No, I said I'm not wearing this tell her

It's for 12 year old boys. That's for I don't even know who it's for Tom Brady only so no, is it a Brady thing? No, oh no, no, it's not his I don't know who it's for. It's not for me. It's not for you. It's funny that she dresses you like a child, though. But no, she doesn't. Because she goes, no, look, these are my shirts. Yeah, you wore them to your hard drive. It's all from Instagram. Mark, did I hear you right at the CMT event two weeks ago?

Steve Cohen showed up? Yes, he did. Really? So how does he not get mobbed? He wore a hoodie over his head and he sort of scurried in and sat down. So Mark is his guy. So he was there for that.

He was there for the content? He went to hear No, not for the content. He went to hear DeMarc sort of praise him and kiss the ring, which he did. And then gray, white, blue, red. We need you to... Yeah, sure.

So this way you'll hear yourself. So wait a minute. Where was the event? Shea Stadium? JC's house? Yeah. No. I got to get used to this echo here.

No. It was right here in Midtown. Okay. Yeah. Manhattan. So Steve Cohen slips in with a hoodie on, sits in the audience for DeMarc's speech, and then gets out of there?

What type of hoodie? Was it USR? Because there's media there. Like, there's definitely people that know who he is. I had disappeared, and I came in, and somebody mentioned it, and sent me a picture. Nobody was, I don't think people honestly knew at the time.

Okay. Good for him. Good for him. Good for him. He's obviously good at that. We applaud that. Let me get my thing up. Are we going? Are we clapping?

Wait, I don't even have my thing up. Take your time. All right. Let's go. Let's go. Let's go. Yeah. Nicole, hand off.

Is this like Hannity with the football in the audience? I don't even know why I have a football. Alright. Let's go. What show is this, John? What is it? 98? Welcome to The Compound and Friends. 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. Today's show is brought to you by Bird Dogs, the pants and shorts. I'm wearing pants today. They make you look good.

Bird Dogs stretch khaki shorts are designed to fit slimmer through the thigh and leg, giving you a truly sculpted look. And I can confirm I've been doing leg ups, stand ups, and my legs look very good, not to brag. Bird Dogs shorts do the exact same thing as Lululemon, Thank you. Go to birddogs.com slash compound for a free Yeti-style Tumblr with your order. That's birddogs.com slash compound. And you can see what I'm talking about. I got these nice gray pants on today. Birddogs.com slash compound. Every week, Josh acts shocked that there's one more episode than the last week. Yeah, I can't believe we did 98 episodes of this thing already.

John, when's it going to be next week? I think 99. 99's a big, everyone's a milestone now from now on. All right, welcome to The Compound and Friends, your favorite investing podcast. This is a really action-packed episode, all sorts of great analysis on what's going on in the markets. I am here today with my co-host as always, Mr. Michael Batnick. Michael, say hello to everyone. Zero percent chance.

We also have special guests. They're all special guests, but I've been looking forward to the show for a long time. Mark Newton is here. Mark is a managing director and head of technical strategy at Fundstrat Global Advisors. I have a long bio for you. I'm going to do the whole thing,

okay? Just sit tight. As a former managing member, owner of Newton Advisors LLC, Mark has more than 30 years of buy and sell side experience in the financial services industry. He formerly worked with Diamondback and Morgan Stanley as their technical strategists before moving to New York City in 2004. Mark traded equity options as a market maker floor trader at the CBOE and worked in risk management. Mark is also a member of the Market Technicians Association and a former member of the CBOE, CBOT, and PHL. This is the Philadelphia, what is that? Philadelphia Options Exchange? Yeah, Options Exchange.

That's right. Is that where you started? Yes, I did. For a few weeks, I moved to Chicago. Yeah, thank you. Warm welcome. I appreciate that. Welcome to the show.

Thanks, Josh. Thanks, Mike. Great to be here. What's it like working with Tom? We love Tom Lee. So what's it like working with Tom? Yeah, look, it's wonderful. The guy is a brilliant mind.

He looks at the world outside the box very different than anybody. So people appreciate his value added. And he doesn't care what people think, which is a wonderful quality. He really, he's one of those people that like throw whatever you want at him. He's like, look, this is my opinion. I don't want to get into a fight with you about it. This is how I feel. Well, he dissects things in an intermediate term manner. And I think, you know,

FinTwit has become largely a lot of day traders that expect immediate results. And his whole point is that, you know, this is happening and it might take a little bit to play out, but, you know, certainly the results speak for themselves. You know how psychotic FinTwit is? Not only do they expect things to play out immediately, they expect a immediately, they expect a thousand batting average. Like, oh, you said this one wrong thing in April, therefore you're an idiot. So that's obviously poisonous. And then in addition to which,

they don't even pay for the research. They're just offended by you having an opinion. They expect you to give everything for free and you have to be right all the time. And if you're wrong on one call a year ago, then you have to address it and why you were wrong and why you lost an opinion. They expect you to give everything for free and you have to be right all the time. And if you're wrong on one call a year ago, then you have to address it and why you were wrong and why you lost that money. Here are my insights for free.

You pay nothing for them. And I promise I'll never get anything wrong ever. Despite you not telling the investor to sell at the lows, they do, and then they blame you. And then it goes up and then they're- Hey, what happens when you and Tom disagree? Because you're looking at technicals and he's very often more focused on the economy and fundamentals.

What happens? Yeah, honestly, that was a condition before I joined. And he said, Mark, I always want you to be your own person, have independent thought. And if you think the market's going down, you're very free to write that. I encourage that. And so it's wonderful. It's nice having diversity of opinion when necessary and have it play out like last year. Also, whichever one of you ends up being right, that's the message after. Not necessarily. It's all about time frame and

risk tolerance. And his time frame is a lot longer than mine. I'm very tactical and look at things shorter term. So Mark, we have a lot of your charts. Before we get into all of them, how would you describe your style of technical analysis? So, I'm a little different than most. I am more of a momentum trend follower like a lot of people are. But I do a lot with relative analysis, stocks and indices and sectors relative to the S&P. And I use some time in my work, a lot of GAN, a lot of Fibonacci in both price and time, which people don't understand a lot about.

Elliott Wave. And I use a lot of DeMarc. I use Symbolic for all my DeMarc analysis. I believe that using a counter-trend technique is really helpful when you have a trend following type platform. All right, so let's get into the DeMarc stuff. So it's counter trend in terms of it's looking for things that are going too far in one direction and for those things to revert to some extent. It's basically an exhaustion system. He has 100 different indicators, but the ones I specifically use are designed to give you exhaustion signals.

In other words, selling within uptrends or expecting things to stall out and pull back and buying in downtrends. And so it's great for normal technicians that are looking at things breaking out and you say, well, wait a minute. There are reasons to expect this might not have legs and might correct so counter trend exhaustion you could be looking for

and video is up 75% of the last week I'm making that I know it's not but you're looking for quick moves that go against the grain is that right?

not necessarily quick moves or you look or you I'm sorry to interrupt are you you're saying it's helpful to you because you are

a momentum player so having a sense of when the momentum might be running out. That's, that's absolutely correct. When you use it on multiple timeframes, it is really helpful to see that, okay, NVIDIA might have a short-term sell and Tesla did the other day. However, the weekly or the monthly counts are not there. So in other words, it's right to buy dips because the move still has longevity. Okay. That's a really tricky thing for people when they latch onto a winning trade there. So in other words, it's right to buy dips because the move still has longevity.

Okay. That's a really tricky thing for people when they latch onto a winning trade is knowing when it's over. And if anything, the more a stock moves in a certain direction, the more confident you become that you're right. So it's really hard to counteract that. I wish I owned NVIDIA. I wish I owned Tesla. And yeah, sure. I make the same mistakes as everybody else and it moves up and you sell it. And it goes down and you probably chase it and buy dips. But it's, look, it's a tricky process. It takes time knowing how to set stops, but stay in a trending move to the full extent of it. Well, that's why you need a process.

So, for example, I bought regional banks at the lows. And this is not to brag. It's the opposite. Not to brag to brag. It's the opposite. Not to brag. No, it's the opposite. I probably should have, with the benefit of hindsight, I probably should have sold last week, but I didn't. And now it's coming in a decent amount. And now I'm like, I'm stuck. What do I do? Regional banks have not technically rolled over to the extent that you think they're

going to go back to new lows. I mean, there's been a lot of talk in recent days about capital restrictions and this and that that I think are probably not healthy. But DeMarc's signals will tell you that if you look at ratios of KRE to KBE, we're within a couple of days of when that bottoms. So I actually expect banks are going to rally out of this, which is going to be important for the market. Now, intermediate term, look, banks are in rough shape. We've seen a lot of damage. But for the time being, I expect rallies into July. I saw something today that regional banks, if you add up all the market cap, it's less than the combined market cap of Wells Fargo and Bank of America.

Yeah, they're tiny. All right. So when you say relative, so the gist of this is like you're looking for sectors that are doing better than the overall index just to show you where the strength is in the market and then trying to decide whether or not there's still an opportunity? Sort of emerging trends within sectors and subsectors as well as deteriorating trends where they're starting to roll over that might not be immediately apparent when looking at an ETF, which is all large cap dominated. And so when you split them up into smaller subsectors and look at relative analysis, it really helps you to put things into perspective. Okay. And how do the clients utilize that from your experience? What are they looking to get out of that? Are they using that to maybe protect themselves from a sector that's relatively weakening or look for buying opportunities in the strengthening sectors?

So this is not necessarily a trading newsletter for day by day. Understood. Different clients get out of it what they want. Some people are fundamentally oriented and enjoy my technical take simply for color of the market because I'll talk about dollar yen or yields or what's happening with different sectors. I always try to have a little bit more of a shorter timeframe than my peers. So I want to know, you know, not what I hope what can happen in a year, but what's happening now in the market and

what's going to happen over the next four to six weeks and hopefully longer. So I'm looking at breakouts in different sectors, different stocks. These groups should be emerging. So to answer your question, some people like it as color. I do provide a long list of what I call upticks as a spin on Sir Isaac Newton's optics. We've been going through your stuff over the last couple of days. And some people like it for hedging and risk management

for those that own it and maybe want to stay in the idea. And some people hate it. Where do you think the state of technical analysis is with the context of a lot of people for a long time used to say it's voodoo, it's bullshit. And I think there's been a gradual acceptance that, no, maybe there's something to the very basic idea of supply and demand within share prices. I think that the U.S. embraces technical analysis less than overseas in countries like India and Australia and Japan. And there are countries that use it a lot more. I would say that the US and the prudent rule standard, you have to manage money for your

constituents based on fundamentals, has limited people from getting into technical analysis and learning about it because they've grown up learning about fundamentals their whole career. So yeah, obviously, it helps to take the blindfold off, in my opinion, if you can look at things from a multifaceted perspective and it helps to, obviously, I think, you know, look, I failed level two of the CFA back in 1998. So I figured out that we had that information. I was going to get into that. Yeah. Great. Okay. And you're doing this 30 years. So the style that you've developed, obviously it's as a result of things you've seen work and not work.

It sounds like you're focused on your brand of technical analysis and you're not terribly interested in things like pattern matching. Or do I have that wrong? Like there's other types of technical analysis that might focus more on formations in the market. I think formations are

incredibly important and they continue to work time to time again. I mean, there's been people that have written a lot of good books about that. I think they work. I think people don't manage money correctly. There's slippage. They do things wrong. But high volume breakouts on the upside or downside or breaking trend lines are, in my work, much more important than what something does relative to a 200-day moving average or a 50-day. That's a lot of technicians or people that are getting into technical analysis and say, well, this is what technicians use. That's honestly incorrect. Well, people getting into TA start with moving averages because it's a fairly simple concept. I think, you know, Edwards and McGee wrote the Bible, Technical Analysis and Stock

Trends, back in the 40s or 50s. It shows you powder analysis and explains divergences. And from there, you go on to William O'Neill and how to make money in stocks and finding stocks or sectors that are breaking out. RIP. William O'Neill just passed. I know. Yeah. He's kind of a giant. We haven't even really discussed it on the show, did we? We did not.

That happened last week. IBD was enormous. Investors Business Daily. Yeah, he was a really big deal. Mark, hold on. But last thing before you jump into the actual meat of the show, explain to us the difference between being able to objectively analyze a chart versus once you put on a position and there's emotions involved.

Like you are going through all of these things, but you have the benefit, the luxury of not having, I know you have skin in the game because it's your reputation, but not actual money on the line, which changes everything. Even though it shouldn't. No, but, oh yeah, right. But we're humans. Right. Those are psychological questions where each of us has our own degree of how we manage risk. And, where each of us has our own degree of how we manage risk. And sometimes I find different times of the year that it's easier for me to make money for others than other times or make money for myself where I don't make stupid mistakes.

And we all have our own patterns and cycles that somewhat govern the markets that allow us to do. But you have to have discipline. I peak in March. That's like my season. Michael trades really well in Q1. And but you have to have discipline. I peak in March. That's like my season. Michael trades really well in Q1, and then you have to sell him. You have to fade him all the way through the rest of the year.

So yeah, you could have things going on in your life that might color how you look at what you're looking at or just how much you'll adhere to your own discipline. I agree with that. I think it's important to stick to what you know. I have probably six to 10 things that I look at that I think are extraordinarily important, and I don't know how I would ever do things differently. So they help me, and I probably have a shorter timeframe. I'm not a day trader. I'm not a long-term investor. I'm more of a swing or

position trader, and I think those indicators fit well with how I look at the world. That's awesome. Well, let's dive in. We're so glad to have you walk us through this stuff. So the first chart, we're saying by the dip market. Mike, what are we looking at to start this off just first and foremost? This chart comes from Bloomberg's Michael McDonough, and it's shown the S&P 500 average return following down days by year. And it might not feel this way. In fact, you certainly couldn't predict this, that 2023 would be the second strongest by the dip year. Holy shit, this goes back to the 30s? Unbelievable. Okay. So again, what we're saying is the day after a down day,

2023 has been the strongest other than 2020. Remarkable. So meaning like you've been rewarded the most this year. So Mark, it looks like we're going to avoid the third time this year that S&P has fallen for four days or more because it looks like we're positive as of about an hour ago. Yeah. So yeah, in general, it's been difficult to find a decline that's been extending to the downside, you know, for any length of time. Why do you think that is?

Do you think it's because so many people were just leaning the wrong way? And so anytime there is a dip, you just have a really quick rush for under-allocated folks to... I've been leaning on positioning, and this guy was busting my chops earlier in the year.

I saw him on CNBC yesterday saying positioning. I saw that. I f***ing saw that. Well, positioning was obviously wildly different going into the year than probably it is now. That's right. I think people have figured it out. Look, sentiment is probably one of the most important things

investors can pay attention to, more so than Fed policy or earnings or whether the Fed's going to hike a quarter or nothing. I mean, look, if you find times when there's rampant amount of bearishness and or bullishness, those are really, really important times. I don't have any answer as to why a couple of down ticks might mean it's a buy. Everybody's got their own answer as to why that might happen. I don't have any insight. I know that coming into the year, extraordinary level of bearishness into last fall. And we saw technology emerge off the lows, show really good strength. Well, it doesn't matter the why. I don't know why it's happening either. But what we do know

factually is that down days are being followed by strong days to a degree that has happened only once in 2020 over the last 90 years. Well, the good news is if you're a bullish investor is that it's no longer just a technology market. It's broadened out substantially in recent weeks. You've seen industrials and discretionary and even financials have bounced up until this past week. But it's gotten more broad-based. It was really a source of confusion for many people. And many of the institutions I talked to, they dug in their heels. They said, well,

earnings revisions are bad. They're going down. The Fed, we're going into a recession. And we can't get out. So there were different reasons. Every year, it's something different. But normally, this is one of the strangest years where technicals have diverged from fundamental and macro policy, where everything came into the air very much negative. A lot of reasons to be negative that made a lot of sense. The market took off like a rocket. People didn't want to believe and got caught flat-footed. And now they've had to gradually start to play catch-up.

And I would argue that the retail has done that a little bit. Institutions are still slow to go all in. I mean, they're certainly watching. But people are still on the sidelines, honestly. The negativity is still pervasive. Three reasons, and all of you can look at this and gauge whether I'm right or not. So people say three things.

They say, well, the market's so overbought. The Qs are 25% above the 200. They say, oh, it's a low-volume rally. That's the new thing that they're saying. Is it overbought bullish? The third thing is that, oh, it's so selective. There's only seven stocks carrying. When you hear those three things, you know that everybody's fighting it. They think of reasons why it needs to come down. They're not wildly speculating and buying calls and minting money on the upside. What are those three reasons? One more time.

So overbought conditions, low volume Low volume. Low volume and selective participation. Right. And so I would say that when you hear that go away and everybody's starting to make money, which I think does happen into mid to late July, that's when you need to pay attention. That's when sentiment truly will get a lot more complacent and or bullish where you do have the chance of a short-term pullback. But I'm pretty encouraged by the cycles and what's happened and what I think. Do you think if we had a short-term pullback in July, August, do you think we would get as bearish as we were in – not us in this room, but just generally?

Do you think that same level of bearishness from February and March would return? I do. A lot of it depends on the events that coincide with the market declining. And if it seems like a big thing, and if it's unexpected by the market, that's what causes the VIX to spike. That's what gets people really skittish. Look, a drip down like we've seen the last four days is not that negative. You still see great performance out of most of the sectors.

Look at the VIX. Just crushed it. It's a new multi-year low. 12.8. It's under 13. But that's another thing. That's probably number four of the sectors. Look at the VIX. Just crushed it. It's a new multi-year low. 12.8. It's under 13. But that's another thing. That's probably number four of the sentiment reasons.

Everybody says, well, the VIX doesn't work anymore. And I'm like, hogwash. I used to trade equity options on the floor. The VIX, unless you have a really unexpected- You could say bullshit on this show.

I can't say hogwash? No, you can definitely say that, but I'm also giving you other options. That's malarkey. Wait, the VIX does work. Why? It goes up dramatically when you have unexpected things that the market

doesn't expect. Yeah, what has been unexpected this year? Well, the regional bank crisis in late February into March. All right, so the VIX spiked a little bit. The criticism of the VIX lately, I'd love to get your take on this, is that it only measures a very specific time frame.

And if people are hedging risk either shorter term or longer term, they're not accurately being captured as people who are nervous. I don't disagree. I don't agree with that. I think that- You don't agree with that? I think there's a time this year the VIX will start to spike, but a meaningful rally in the VIX, it's probably a little bit premature. I mean, the VIX is – whenever stocks go sideways or go higher or grind lower, the VIX goes lower, and it should.

Implied volatility contracts when things move slowly. Between March and May, we were sideways in a very tight range. The VIX should have been plummeting during that time, and it was. But guess what also? Oh, all these concerns. We're going into recession. No, wait. But didn't you hear? Those don't matter. The VIX isn't going to go up because somebody thinks that, you know, oh, the R word is coming, and therefore, the VIX should be higher. Well, the risk-reward is horrible to be not long implied volatility don't you see what's going to happen and i'm like but didn't you hear people say didn't you hear people say to you or

say in general um that the buying opportunity will come only when the vix is 40 plus or 35 plus we need capitulation everyone a lot of people saying that we really didn't get that magnitude of a vix spike even at like the peak of the Silicon Valley bank stuff. Like we just haven't had it. Even in October. I don't think we had an October. The market rallies substantially as the VIX is going down. And yes, during violent spikes in the VIX, that's times of when generally market turmoil.

Of course, we know the VIX can go up during market advances and declines. But in general, normally when markets are selling off, does the VIX spike? So at times of fear, it's generally good if you can try to buy into that, hold your nose and buy. But that's not- I just think they said like, I don't want to buy until the VIX really spikes. And it didn't. People said we need capitulation. Says who? Why do you need that? The VIX got as high as 35 in October. You do not need capitulation. We can certainly grind sideways for a number of years. We don't have to. This whole age of social media and the quickness of dissemination, everybody wants either in a bull market or a bear market. You hear every

day, well, 20%, that's a new bull market. And we can easily go have a bear market and go sideways for a couple of years or have a brief rally. In the 70s, we made a brief new high, and then it rolled over again. I could make a strong case that we're in a period like the 70s, where we have a period like 2000 to 2010. You have an early decade bear market. You come out of it for a couple of years, and then you go back into it for the latter part of the decade. Recession can't be avoided, but it can be postponed.

So the Fed's hikes, this guy named Danny Blankwater, Blanchflower, he used to set rates for the BOE. So he said, you know, normally the rate hikes take about 18 months to even experience the effects of those. So we've had 500 basis points of rate hikes in 14 months. He's like, people saying, well, let's watch and see what this data comes in. And if it's high, then we won't do any. It's like, oh, this is garbage. We haven't even felt the effects of any of this yet. You don't think the first rate hikes have been felt psychologically?

Then what were all the layoffs about last year? It fell up in the housing market. Housing market is arguably fine. I think that people aren't selling their homes like me, who am a new empty nester. Why would I sell my mortgage at 3% to go move somewhere at 6%? The existing home sales market is not fine. It's like new home sales are skyrocketing. It's going to be the labor market and homes that are going to hold the consumer in there

while the stock market rallies. I agree with that. I don't think that the labor market, like in the aggregate, has felt the effects of even the first rate hikes. And my only evidence is that we're at 3.5% unemployment. So I know definitively that it hasn't. It's a strange post-COVID economy that nobody can understand. And there's still a huge demand for labor. And yeah, it's odd. But I'm

the economist. Even the economists aren't correct. So why? Let's do this bespoke chart, Mike. So this is mostly noise, but I would be interested to hear your take, Mark. This is from Bespoke. It says, the old saying is that the dumb money trades at the open while the smart money trades at the close. Since the S&P's last all-time high in January 2022, the prior close through the first half hour of trading, so really 930 to 10 Eastern, has accounted for essentially all of the market's decline. So a chart that we're looking at shows buy and hold. It shows the first half hour, the middle of the day, and the final hour. It shows the first half hour, the middle of the day, and the final hour. And again, just reiterating what Bespoke said, all of the declines essentially happen in the first half hour of the day, which is noisy but interesting nonetheless.

Mark, any thoughts here? I think it's interesting. I'm not necessarily the kind of quant that pulls out stats to try to justify my narrative. I think that, you know, we're not going to learn anything by saying this is happening. It's not actionable, but it's interesting. It's very interesting. I don't agree with the premise that dumb money trades at the open. They have to trade with someone. They put it in quotes. It's only dumb money trading

with dumb money. I think you could say that smart money trades at the very open and at the very closed. Milliday is lackluster. Milliday is a dead zone. But I do agree. Generally speaking, retail, which is pejoratively been called dumb money, probably does trade in the first half hour. That's a nice word, pejoratively. I'm going to add that to the Newton lexicon.

Look at that. Look at that. Dresses like a nine-year-old, speaks like an Oxford professor. It's really super impressive. Pretty good. All right. Are we getting into Mark's stuff now? Let's do it.

Okay. Let's do it. Okay. So I think the major point that we're leading with here is that you see the SPX as being healthy technically, broadening out, which started back on May 17th, has not reached upside targets in either price or time, and minor weakness is still viable. So what are we looking at here? And just expand on that, if you will. Like what's your overall premise for where we stand today? Well, I'm a big trendline guy.

We saw the first evidence of us really breaking out towards the beginning of the year. And we saw a big surge in technology. And markets started to look a lot healthier. It was really the move above 4,200 in mid-May that caused some capitulation in shorts. That's when a lot of other sectors started to kick into gear. You look in the last month, we've seen discretionary communication services, but largely it's been industrials and tech. So it's not just FANG. It's been semiconductors and many parts of software. Dude, home builders, Walmart. So consumer discretionary. So yeah, the builders have gone crazy. You look at

casino stocks. You look at some of these leisure airlines, cruise lines, that's arguably, those are a bit stretched. None of these are AI stocks, importantly. Right. Okay. So when you see that kind of concerted move across all of those different sectors that have nothing to do with each other, what's your take on that? The market showed its hand in mid-May. And there were two things that could have happened. Either the first was you attempt to rally a little bit in tech, it fails, it rolls over, and the whole market rolls over. Or the second scenario, which has happened, is that the rest of the market joins suit and joins technology. And I view that as

being healthy at a time when it was rampant pessimism, even over the last few months. And that ended probably a few weeks ago, where people started to say, wow, I'm wrong. The market's going up and it's being broad-based and I really need to figure out. You know, I've noticed that Michael's probably been talking about it way longer than I have. But there is a tendency, I don't know if it's social media or what it is, when the breadth is narrow and when there's a rally that a lot of people missed because it's narrowly concentrated, the knee-jerk reaction from the crowd, most of whom are now trailing the index, let's say, the knee-jerk reaction is the breadth is narrowing. This won't end well.

And they assume that the next move is a catch-down where the winners roll over to join the losers. And yet, over the last 10 years, almost every time there's been that narrowing, the resolution was to the upside with the rest of the sectors catching up. Why do people keep getting fooled by that? I don't necessarily agree with that. I would say that in the early part of 2020, the broader market peaked out in January. The S&P and NASDAQ continued up into February, but it was very narrow breadth at the highs after an extended move. The same thing happened in late 2021 that gave me some clues that the market might actually have a down year in 2022. It was because

the broader market peaked out in arguably the spring of 2021. And I have charts that we'll go through in a minute. But we started going sideways. Very few people kept up with the S&P because nobody owned FANG. So momentum and breadth started to trail and roll over. That's important after an extended run. It happens almost at every market peak. It's very rare that it might have been 1937 where the market just went straight down. There was no warning. But generally, you have at least six months of advance notice where advance decline will roll over. Many popular breadth gauges will start to give you – and on the downside. But wait a minute. This rally started with advance decline already low. Right. So it's the opposite. The critique was that the first

rally up the lows into February and the choppiness – a sideways market is going to make momentum and breadth start to nosedive. Okay. And so that's, it's just, it has been a choppy market and now it's gotten a lot more positive in my view in the last month. Mark, when people talk about things being overbought, I feel like it's generally said as a negative, like, oh, you can't buy here. It's overbought. But how is that bearish? The fact that there's such an overwhelming demand for stocks, like, yeah, sure. Maybe it's things need to like cool off and consolidate. But when you see something that's overbought, maybe it is bearish for you because you'd like to do things that are counter-tribut. How do you see something that's overbought with an RSI above 70, for example? Elementary technical analysis would

teach you that when things first get overbought, oftentimes a sign of an explosive move. And it's wrong to generally sell when something first gets to overbought territory. It's when it dips down from overbought levels that you might have a pullback. It's also important to look at whether it's overbought on a weekly or a monthly basis, not just, you know, if you work in a sell-side shop and you're writing daily, oh, it's overbought. And this is a term that's thrown out by all sorts of people all over the media that haven't studied technical analysis that... They don't mean it the way that you mean it. They don't know what RSI is. That's right. They just say casually. They're like, oh, the market is overbought. They mean it like a stock just made a big move and they weren't a part of it. It's overbought.

That's correct. They're using it to justify— Well, that's why market cap— They're saying, well, this technician told me it's overbought and I'm fundamentally bearish. Therefore, I think the market's going to pull back. And if it doesn't, they say, oh, he's wrong. And unfortunately, you know, technicals, we've come a long way. There is a standard now as to how people look at things and how they should look at things. And, you know, it's not proper just to throw out these terms without really putting in a perspective. And so if you see something that's overbought, you're not saying go buy it because it's overbought. You're just saying, don't necessarily think that that means sell it. Look, it depends on your time frame.

And if you're a day trader or if you're a swing trader and something gaps up on heavy volume, the company wildly exceeds expectations and earnings and it reaches overbought territory, maybe it'll go down for a couple of days. But generally, it's going to continue to go higher. it's going to continue to go higher. Now, if it's an RSI of 80 or above on a weekly or a monthly basis and starts to stall and momentum starts to roll over on a daily basis when weekly and monthly are overbought, it's time to pay attention. And so it all depends on time frame. I would argue that the biggest thing that investors can probably do when looking at technicals is to make sure that you marry different time frames so you really understand. You know, put things in a – like the value line is not over – it's got a weekly RSI of about a 53. Or even the Russell 3000, which encompasses a majority of stocks.

I mean, it's not wildly over – it's the Qs. And that's what draws the clicks. People say Qs are overbought, and therefore the market's going to fall because we're overbought. And you have all the statisticians coming out of the woodwork, like, 99 times out of 100, or 25%, and you get a correction. I'm like, well, yes, but not right away. So, Mark, the Qs obviously are up 38% year-to-date, an incredible run. Within technology, if you look at the equal weights, a QQEW is up 19% at a new 52-week high. But RSP, the S&P equal weight, is still very much in the middle of the range that it's been for months.

What's your take on that part of the market? Well, the S&P 495. That has started to bottom out. That was part of the bottoming out process that started in mid-May. The acceleration of breadth helped things like RSP break downtrends, gave people like myself a lot of confidence that we can start to see a broadening out. So yeah, we definitely need to continue.

You know, yeah, yeah. Looking at the S&P and the NASDAQ is far different than looking at things that are equal weighted or, you know, it would be disappointing if we see financials go right back down to the lows and all of a sudden industrials roll over and it only becomes isolated and only tech's working again. I don't think that's going to happen, though. We're seeing some really good movement in healthcare this week. It's a number one sector over the last five days. Energy had a rally yesterday.

I mean, I know it's not a great sector, but it's tough. I think commodities are bottoming. We'll talk about that later. Energy is still under a lot of pressure. And so we need to see. Let's keep going through your stuff. Equal weighted indices gave their first proof that broader market recovery had begun three weeks ago in mid-May. Value line jumped to the highest level since March.

Russell 3000 pushed to new. Russell 3000 is the Russell 1000, which are large caps, right? And then the Russell 2000, which are small caps. It encompasses the majority of the markets. Russell 3000 pushed to new 2023 highs. Sentiment has begun to quote unquote respect this rally. This broadening out literally just started in recent weeks. So what are we looking at here? Well, this to Mike's point, this is what happened back in mid-May. So you see that the trend line on the right was a downtrend from February of the equal weighted S&P. So certainly between March and May, you could have said, well,

this just doesn't look good. Like tech's rallying, but nothing else is. It didn't. It didn't look good. And that has changed very dramatically. And I think a lot of stocks, now you look at the caterpillars of the world and everything else, and we were making substantial progress to the upside. And, you know, I just view it as a healthy broadening out. You say that. Still right to favor technology right now. Equal-weighted tech ETF from Invesco, which is RSPT, has risen to the highest levels of the year.

Arguably very bullish technical breakout. So this is not just FANG. Movement in semis, various software should be respected. Pullbacks in recent days should merit still buying dips in technology. And this sector likely outperforms in the second half of 2023. Do we have this? We're looking right now. So that's a very beautiful chart formation for those that study technical analysis,

looking at equal weighted technology, which just got up to the highest levels. Is this the retest the last couple of days? Yes, that's right. You think that'll be a successful retest? I don't know that we'll get all the way there. I think we could have bottomed today. I would buy this recent dip that we've seen this week. I think tech is going to go higher into July.

So what do you do? You buy non-FANG tech if you believe that this continues? Aside from just buying the equal 80 TF. I still like FANG, and I would still buy semiconductors. My ratio charts, relative charts of semis versus tech, and also semis versus the S&P both point to semis as still showing leadership. So Mark, I want to ask you about this. So this is a stock that I own.

It's AMD. It filled the gap. To me, you buy this right here. And this is obviously not investment advice, but I would love to get your take on gap fills, just generally speaking. I know it's a big topic. Sometimes they work, sometimes they don't. Normally, they don't have to be filled, but generally, that's a very strong area of support if you see a gap get down to that level. It's important to watch volume on the decline versus the prior advance. So something like this, where it had just an explosive move

higher and then had a huge gap, that got filled. Generally speaking, you buy that gap. The gap fell. So I look at about six to 10 things. I'm not going to judge my entire opinion on AMD based on one chart pattern. I'll look at daily, I'll look at weekly, I'll look at monthly, I'll look at DeMarc's

evidence of downside exhaustion as to whether it's ready to bottom yet. It doesn't sound like the gap itself factors very heavily into how you think. It doesn't because I'm not really a day trader. I'm not looking for— Well, my work shows something different. So I am going to go ahead and tell you that that looks like an abandoned baby doji in the works.

All right. We're not allowed to mock technical analysis during this hour, by the way. This is my hour. Fair. Okay. That's true. That's true. So broadly speaking, though, you wouldn't be shocked if we finish this year and nothing major happens to change the current state of things, which of course it will.

But you would not be surprised if when this year ends to see technology continuously adverse as the rest of the market. That's correct. You're not like looking for some sort of rotation right now. I know that could change. I am not looking for rotation out of technology. We have not seen any evidence of that. Okay. And the semis, so talk about overbought, both statistically and just emotionally, they feel really overbought, but maybe that's what's being corrected this week. But exactly. The SOX is not near former highs. It's getting close, but it still needs to get to 4,000, right? So there's very little resistance between where we are now and those former highs that were put in.

And I would argue, you know, NVIDIA is probably— The highs are from 21? NVIDIA, I discuss with clients, is, you know, not as good of a risk-reward over the next three to five months because it has gotten tremendously overbought. And a lot of my stuff is starting to say that it probably doesn't get over 450. I like stocks like AMD. I like the mean reversion trade within semis to start to play catch up. Stocks like Intel and others that have lagged that are now starting to show real acceleration. And XPI, for example.

Intel seems like a nightmare for technicians because they have a tape bomb pretty much every week where they're screwing something up. Like they just had one yesterday. Well, if you're a trend follower, then short-term tape bombs shouldn't really affect your process. So you're looking at weekly or monthly and things are pretty much set. Like tech has been going, if we sell off a couple of days, it's not going to change trends dramatically. So yeah, if you're a day trader, then sure, you're freaking out about news and global affairs and everything else. I don't think that people like myself – Tom encourages us not to freak out. So that's good.

I try to pay attention. I agree with that. I like that approach. You're saying see the extent to which equal-weighted sectors like tech, industrials, discretionary, and communication services have been rallying, all outperforming equal-weighted SPX over the last month. Healthcare should begin to kick into gear and aid the market during this seasonally bullish time. Do we have this chart? Is this the one from before? Yeah, so it's just a performance chart. It helps to see. So I've looked at both cap-weighted ETFs as well as equal-weighted. And just sometimes they don't always line up where the large cap is too dominant, so

they might not be performing. But you see just in the last month, it's ranked based on that third column, which is one month. And you can see that RSPT technology has actually been the best performing sector in the last month, even though it's weak this week. The equal weight. The equal weight, right. Of course, the top two are large cap technology, FANG, XLY, XLK, but it's also been Equate Tech, Equate Industrials. They're right behind them.

Look at that. Look how much Equate Industrials has actually beaten XLY by almost 300 basis points. Do you care? 150 basis points. But in general, we've had half the market has beaten on an Equate basis, which for me is encouraging. That's very interesting. Do you care about which sectors are leading because of the economic ramifications where somebody says, oh, it's a defensive rally,

it's healthcare and staples leading? Does that not really mean that much to you? I agree 100% that the defensives strengthening or weakening is very important, but I don't say things like, well, it's a late cycle move because industrials are moving up. My time frame is probably a little bit shorter than that. Look, we had plenty of advance notice about the decline into last year because of all that defensive strength. We also saw that in 2020, right before the February decline.

We're not seeing it now. Defensive sectors are lagging sharply. We saw REITs are breaking down about 1.5% today. Utilities are under very, very pressure. I'm sure you look at the ratio of XLY to XLP, which is hanging very high. I do it on an equal-weighted basis, so I strip out the Amazons and the Nikes.

What are those tickers? So, yeah, you look at ratios, for example, of… RSPD. That's right. RSPD, RSPCA. Wait, so you'll look at discretionary versus staples. You'll equal weight the indices. Yeah, look at this.

Josh, look at this. So this is the equal weight of discretionary divided by staples. This is super bullish, right? Why? Because it's going up? Because not only is it going up, but it's not giving anything back. It's just hanging super high. Right. And you can't just say, oh, that's Amazon because you're equal weight.

So Amazon and Tesla, I think, are 40% of XLY. Maybe even more, actually. It's like silly. Home Depot, Amazon, Netflix. So yeah, there's a number of different stocks that are – I try to throw those out in analysis because it clouds if there's one stock that's super – Amazon and Tesla are 40%. Right.

So it's huge. That's why you have to look at that in equal ways. Look, this isn't a new normal. This is an old normal. And I explain to people that we've had this for 100 years. Back in the 20s, 30s, we had AT&T. We had the generals, General Electric, General Motors. They dominated these indices for years.

So we're back into another era where we have Apple, Microsoft, Meta, Alphabet. So all these are important. It's just important for an investor to know that to keep track with the S&P, if you don't own these leaders and they're actually working well, you're going to underperform. How do you make up for that? It seems like it would be almost impossible. You hire a very good technician

that can try to pick good stocks. Can we talk about Apple? Sure. Okay, your words. Apple's still showing no evidence of stalling. Okay, that's good. To mark exhaustion still early by three to four weeks on Apple

after this broke back out to new highs. Still quite early to expect peak. If Apple working well, expect gains to 197. Is this the Apple chart? That's right. Is this a point and figure chart? No, this is the DeMar account. So where do these numbers come from?

Can you explain this to us? I can if you have the time. It's a little bit wonky. We have you here until we spoke to your assistant. You're here until 8. Outstanding. Okay. We have the time. It'll take – it's a little bit wonky, but – We have you here until – we spoke to your assistant. You're here until 8. Outstanding. Okay. We have dinner coming.

All right. No, but what – I will – So, like, give us, like, the – if you were just trying to explain to a college class, let's say, so not professionals, how do you read a DeMarc count like this? So, if you look at the big run-up into late 2021, you see what that green 9 is? Yes. So to get those, they're called TD, after Tom DeMark, cell setup. So it's not necessarily a cell signal per se, but oftentimes it leads to consolidation after a move. To get that signal, you need nine consecutive closes where the weekly closes. Daily closes. No,

daily, weekly, whatever time frame you're looking at. In this case, it's a weekly chart. So in this case, nine weekly closes where the close is greater than the close from four weeks ago. So you start off, you got one, two, three. If at any time, if that week closes down under the close from four weeks ago, then it eliminates the whole count and you have to start over. Start the count again. That's right. So in this case, it formed a nine. So normally you expect some exhaustion, which is what occurred. After you get that exhaustion, and this, you see on the right-hand side of the chart. Stay by the mic. Don't worry. On the right-hand side of the chart, you see that we have a nine, but yet we've blown right

past that, and we started what's called the countdown. So the countdown is 13 consecutive closes, where the close is greater from the high from two bars ago. So this is weekly. So in general, I can look at my cycle analysis. I can look at the mark counts and I try to fine tune when they both come together. And that can give me an above average chance of being able to predict a peak as to when it's going to happen in absence of any technical. Okay. So from one to nine, you're not looking at sequential weekly closes. You're looking at it from four weeks prior, but each time. It ends up being a sequential because it

becomes sequential, I say. It has to be nine consecutive. And if any time it erases it, then you start again. So where do you have Apple? So where do you have Apple now? It looks, I mean, it looks like we- So in the right hand of the chart, it's on a nine. So you see that, you see the purple nine for, this was taken, by the way, maybe a week ago. It might be on a 10 at this point. I don't know. I don't have my current chart. But it's likely going to take another three to five weeks before this completes, meaning that Apple has a chance of still going higher into July.

OK. So what you're basically – this is about a stretched formation. It's a stretched gain for a particular stock or index. You're trying to like determine. When does it get stretched too far where it's most likely to snap back? That's right. It's not, you're not saying the top and Apple forever. You're saying a short term, is it exhaustion? Is that the word I'm looking for? Exhaustion is correct. And when you have a stock like Apple that comprises 7% of the S and P and you've literally just broken out to new

all-time highs, it doesn't make a lot of sense to say we need to sell the S&P and that markets are going to go down because Apple and Microsoft and other ones are acting quite well, and they don't show evidence of exhaustion. Well, Apple's going to close at an all-time high today. I'm sorry. One more thing on this. So you say expect gains to $197.

Is DeMarc involved with where you come up with the price, or is that separate work that you're doing? That is separate work. There are parts of his work that will give certain targets based on things like TD propulsion, which is another indicator. We don't need to get into all these today, but there are different things that will help me. I can take the area between the high and the low and project and use Fibonacci to try to find areas where if you have a ratio of the former decline, if it's like 138.2 or 161.8, there are things that all come together that give me a high probability. And so I'll say that on a note. And then as we get closer, if DeMarc indicators start to show up and show evidence of exhaustion, and I always use weekly. I know people, you know, are fond of just, you know, saying, well, this has got to sell.

But honestly, the daily sells in most stocks or even indices tend to be very minor until you line up with weekly and or monthly, in my view. And let me ask you this. So you're talking about everything lining up. You don't need to have a strong opinion on every chart. There could be some things that you see that are just in no man's land, right? If you're looking at the NFL games and you're like, all right, I'm very confident that this line is bullshit. Like, I like this a lot. The others, they're just, you know, they're not familiar. You never want to bet anything if the juice is more than 110. So you don't want to lay

a lot of juice on anything, particularly unless you want to hedge if you got a good gain in there. Okay. So when clients come to you with their charts, you could just say to them, look, this is not really what I do. Like I'm focused on the charts where I have a lot of confidence in my work. And this one just doesn't match up with the way I look at stocks. I mean, DeMarc is a very small part of what I do. I mean, I, I, I, I talk to institutions every day and, and they give me their holdings and I analyze them. I say, well, to basically give them an idea of where they can size up the position, where the technicals are going to line up with the fundamentals, or if it's starting to break out or break down,

and that's very important. Where are the critical areas on the chart they need to pay attention to? So some people that use options can sell calls right near a former high or buy puts or do whatever if they want to try to lock in gains. So a different strategy. I feel like that's got to be super helpful to somebody that's looking at a portfolio of stocks that they've selected fundamentally. But they, let's say, they want to lighten up and they know they have to make some sales. To get a technical perspective on, well, if you're going to sell something, these are the two or three that look the most vulnerable. Even if it doesn't turn out to be perfectly right, if it's just close enough to being right, that's got to add some edge to what they're doing versus other

fundamental people who are solely going on their feelings on the fundamentals. I agree 100%. I tell people every day, technical analysis is about taking the blindfold off and actually seeing whether trends are up, down, sideways, and helping to mirror so you can actually help aid people in trying to add alpha to the portfolio manager process as opposed to, you know, everybody's different. The key is to line up my timeframe with what their timeframe is. If they're short-term, then I'm going to look at things differently versus if they're managing for the next couple of years and they want to stay in NVIDIA. They want to stay in Apple, but they're concerned about a 5% or 10% correction. And so everybody is different.

But, yeah, it's certainly – I found it to be very valuable. It seems like it will be really helpful. Let's run through these. We can go through a little bit more quickly so we don't miss anything. We can go through a little bit more quickly so we don't miss anything. Industrials have broken out versus the S&P in equal weighted terms above the prior peaks from 2008. Stretched, but has been a great sector. Expect pullbacks into fall.

Will represent good opportunity to buy dips. And you are showing us the equal weight industrials versus the equal weight S&P. Do I have that right? That's correct. So you look at this chart. This looks amazing. Going back over the last two decades, and you've seen a substantial surge back to new all-time high territory in industrials. So a very bullish sector. I like being long on an intermediate-term basis.

Now, I look at shorter-term DeMarc-type signals, and many of those say that by July, we're going to have exhaustion. I expect potentially we'll get some consolidation, but I would use that to buy. I love industrials. What's powering this within industrials? Is housing—are the home builders in the industrial sector? No, they're more of consumer discretionary. Okay, so what's powering this move? Well, it's stocks like— Defense? They had been strong, but a lot of the caterpillars, the electrical equipment names, the IR, the air transports. So it's Southwest, Deere, Delta.

Airlines have been very strong over the last two months. Okay, so that is part of the structure. But these are all very economically sensitive stocks. And the stock market isn't always right. But man, when you see it breaking out like this, you got to think

maybe the market knows something that the economy doesn't. Look at what Boeing did about two weeks ago. I mean, it was trading sideways for months and months

and months and just broke out above to new all-time high, I mean, to new multi-month highs. Cummings, Caterpillar. GE has been a monster.

Boeing and GE are not breaking out in a true recession. So, like, I think we could mostly agree with that, right? Holy shit. Or at least not at the early stages. I haven't looked at General Electric

in a while. Yeah, that's substantial. Monster. Look at a weekly or monthly chart and look at the extent of that move off the lows. And, yeah, we don't hear about that often enough.

Energy. So, you had a little bit of a rally this week for the first time in a while. These stocks just don't look good, though. Yeah. Talk to us about, because this was last year's darling and nobody rang the bell and said, okay, the energy rally's over. But it's definitely- It's the worst sector this year?

It definitely ended this year. It was an interesting move in the last year because crude had started to sell off from last spring, but energy actually held its value pretty well up until about November. And then it really started to get cracked. You see these stocks bottoming in August on weakness and then having a better second half. I came into this year with four long sectors, technology, industrials, health care, and energy. And energy obviously has lagged. Three for four.

Yeah, right. So health care and energy, I expect, are going to pick up. I think crude oil bottomed and made a bear market bottom in March of 2020 when it went negative. So I expect that— Yeah, that seems like a bottom. When it goes negative, is that a bottom? Negative number. So no, this trend is sort of—

Classic bottom. Look, I mean, this is equal-weighted energy versus the S&P. It certainly isn't a nice pattern. It's a downward-sloping triangle. And— So for somebody with an intermediate timeframe, though, this is where you would be, folk? You'd be looking for the strongest stocks in this weak group? No, I would wait till this downtrend is broken before I say it's time to get bullish on energy. And if people are involved, then yes, you have to look for areas within the group that are doing better. And I think the XOP, like the exploration of production, have done a little bit better than XLE, which are defensive. So stock market rallies,

you're going to see underperformance. This looks like shit. I'm holding up a weekly chart of Oxy. Yeah. Looks awful. Yeah, it's been certainly a dog. That doesn't look awful. You don't think it looks like it's going to break hard? I did some technical commentary for Tom Lee. We joined forces on his call, and that is one of his sleeper grannies. So sleeper— What does that mean? I overlay technicals on his fundamental.

But that's one of the ones that's sort of a laggard where it's going to take some time. But Berkshire Hathaway is the bid underneath that support level. All right. Until they're not. Until they're not. But look at this. This is on a daily. I mean, that looks super heavy. If it breaks this, this is a lot of support there.

Yeah. I mean, it's a very well-run fundamental company, but I think- You think that's a breakdown rather than a- I don't make bets ahead of when they occur. I say that it's dead money. And right now, you have to wait for it to break out or break down and respect that when it does. Is anticipating breakouts and breakdowns one of the big mistakes that amateur investors trying to use technicals make? I do that all the time. I do.

That's what I do. I think you have to follow the volume. And sometimes you can get some clues if volume is really, really strong. If you're looking for a breakout and you see a period of consolidation and volume is much, much higher on the up days, and you can get a sense for how it's starting to, that it can break out. But yeah, people do all the time. They say, well, it's a head and shoulders pattern.

And it's like nine out of 10 times. They're consolidations. They go sideways and then they go back higher. So you have to wait for the break. That's really important. When I look at like the category of my most mistakes, maybe not my worst mistakes, but when I just like look at trades that didn't go well, the thing that I do over and over again, even though I'm fully aware of it,

is I'll see a stock that's on the verge of a breakout and I'll pull the trigger because if I say it's breaking out, it's going to break out. Of course. And then, wait, but then that's not even the worst part. Only if you're from Austin. The breakout fails or it does break out

and then it's a failed breakout or whatever. Right. And then I just like forget why I bought it in the first place. And then like I look back, it's still in my portfolio. It's down 17%. And that's the category of mistake that I make more often than anything else. Look, human nature dictates that we all like to buy dips and sell things that are going up. No, I like the opposite.

Well, that's good. If you can buy high, sell higher, that's ideal. And sell low, cover lower. But then when I anticipate them and they don't happen, I forget why I bought it in the first place and I stay with it. Always give yourself more time than you need on call options. That's another mistake that rookie traders make. They don't understand the concept of burning theta and how it affects.

Oh, Michael is literally leaking theta right now. All right, let's do this. I cut back on my theta consumption. I know you did. I'm proud of you. Let's do the sentiment chart. So yeah, this is interesting. This is just... Is this Savita stuff? This is out of this past

month's B of A. I find this interesting. I find that this is one thing that makes me think that the institutions are still on the sidelines. We haven't really been moving up substantially. We're looking at, for the listener, we're looking at sentiment amongst

portfolio managers. Do I have that right? Fund manager survey. Fund manager survey. Global portfolio managers. So a combination of... This is not AII. This is pros. That's right. Equity allocation, growth

expectations. So you're showing that sentiment really crashed during the regional bank credit crunch. Sentiment got lower than where it was during COVID, which is amazing to me. But it hasn't rebounded. That's the thing. And it has not yet recovered. That's what's interesting.

They're going to have to chase if this market stays high. And some of the CFTC data will also, they show negative S&P positioning. I mean, there are different categories, but there's a couple of them that are still negative with regards to S&Ps. Okay. And now you're talking about the AAII flip-flopped back to bullish for the first time in months. Right. Important, but this first change to bullish is not likely a meaningful time. All right, so the media loves to do this. They see AAII flip bullish, and they say, oh, the rubes are in. Right. Pull the rug now.

You're saying that's not quite how it works. It is important, but it's not a sign of rampant speculative activity. It's been negative all year. It was literally the first week that it switched to positive. So, you know, it should have. It coincided with a big breadth expansion. Why wouldn't, right, why wouldn't retail investors be feeling good right now?

Look at, like, eye check, eye test, look at your portfolio. Probably everything is green that you just bought in the last few months. Yeah, a lot of them, yeah. So there should be positive sentiment. That doesn't mean it's- It'd be weird if there wasn't.

Okay. Advanced decline on the verge of a breakout back to new all-time highs. Let's put- Yeah, this is interesting. So you look at the bottom chart. This is just the S&P advanced decline. We saw a minor breakout in the NYSE, and this is closing in on all-time high territory. So it hasn't happened yet, but it is something that I think is important and very positive.

If healthcare really starts to kick into gear in the next month, which I think it can, and financials can hold up. Financials have gone down this week, but in general. When I look at this chart, there seems to be a high correlation with price. And then it doesn't necessarily seem like buying these breakouts has led to great short-term outcomes for investors. You're right. In the last few years, it's been – it's up against the wall. So we'll wait and see. It's just interesting that this is on the verge of potentially breaking out when there's so many people that are negative.

And it's had – if you look at the lower end, you just draw a trend line, you've seen a pretty nice period of higher lows just since last fall. Okay. The S&P weekly cycle bottomed in May. Yeah. The decline from March to May echoed equal weighted SPX decline, which has fallen three out of five months, but then turns up sharply in the back half of the year in late May, early June. I believe this turned on schedule. This is seasonality? No, it's not. This is looking at highs and lows over the last 100 years. Do you know this shit? Finding.

So I use, and I'll give props to. Are you DMing with babes? What is that going on? Chris Paul to the Warriors. I'm sorry. All right. Financial. This is a foundation for the study of cycles.

So they make available a cycle finder tool, which allows you to go over the last however long you like. And they rank cycles by strength and Bartell score. And so basically you can put a few together and form a composite. And I've done this and, you know, this time perfectly the peak back in 2000, the peak in 2007. One of the main cycles that people should be aware of is one that's about 41 months in length or about three and a half years, like close to the economic cycle. And this is 180 week cycle along with a few others that I put together. I'm sorry, did you say 180 week cycle? Yeah.

That's about the average lifespan of a person, I believe. How long is 180? Is that three years? Three and a half years. Three and a half years. Okay. So, in general, you have very remarkable results when you backtest that. You look at over the last 100 years and some other ones that I included in here also. But this coming into this year was one of the reasons why I thought we could have a nice equity bottom. And you notice that it actually falls into May before turning up. So, on an equal weighted basis, I mean, S&P has been down the last three out of five months, right? So it has actually fallen, but now it turned up very sharply right on Q, which I think should lead to a rally the rest of the year. I want to read this from Charlie

Grant at the Wall Street Journal. Smaller speculative stocks have endured a historically weak stretch. Investors are betting that a turnaround is finally in the works. The gist of the piece is that investors put $1.6 billion into small cap ETFs last week, $3.5 billion all year. So it's a big acceleration, at least for one week. The Russell 2000 is like stocks that are on average $3 billion in market cap, is up 6.5% in June, the best monthly performance since January, better than the S&P for the first time in a long time. The index, however, is still down 24% from its peak in 2021. And the Russell 2000 has been lagging the S&P for seven percentage points annually over the last five years, which is the worst relative five-year return for small

stocks since 1926. So how important, in your mind, is a small cap rally just when everyone is done saying it's just seven stocks? Yeah, I agree that that's an interesting headline. And normally, those bearish type headlines come out at lows, coincidentally. And so, yeah, you have seen a decent move off the bottom, you know, really in late May, early June in small caps. Small caps have done well. The trend is certainly still down in small caps over the last year, but there are some

evidence short term of them bottoming. You look at charts of IWM or MDY for mid caps, both of those showed a move almost to the highest levels in the last couple of months. Good moves in the latter part of May, which was lacking for a while. I own a bunch of small cap stocks. Not all of them, but some of them feel like they're levitating right now. Just like not even, I don't know if it's because money is going into the index and they're just getting bought. But that phenomenon has just started over the last, let's say, five or six days.

It's certainly a new phenomenon. And if you look what's happened with cryptocurrency stocks, some of these cheap names, I wouldn't say cheap as a technician, but they're small, low-priced stocks. Low-priced. That are cryptocurrency-related have started to really act very well, coinciding with Bitcoin and Ethereum breakouts. Some of your macro stuff, which we won't spend a ton of time on, but the dollar rolling over sharply as FOMC policy becomes more wishy-washy and closer to being complete. Yeah, I agree. They paused, but then they said, we're going to do two more. Right.

It seems incoherent. They're just preserving the option to act. It's like an attempt by Powell to sort of check raise a flop. And then if you three bet him, he's got to fold because he really has nothing. So you're bearish dollar though. I am. Yeah, they're going to hike at least another four or five times in Europe. ECB and also BOE are at least another four times.

Bank of England just did a 50 basis point rate hike this week. So are you bullish commodities? I am bullish commodities. You would have to be, right? I think the dollar is going to fall to the mid to high 90s in the next month or two. And that should – we've already started to see emerging markets prop up and decent moves in the grains. Nice breakouts in the grains of late. Copper has started to turn higher.

So those are – I mean I expect that that will happen eventually. Do you remember how inversely correlated the dollar and U.S. stocks were? 22? Was that 21? 21 or U.S. stocks were? 22? In 20, was that 21? 21. 21 or 22. Is that coming back? If you look at what happened in late May, the dollar peaked and started to decline exactly when the stock market broadened out and broke out. So that might be back.

That was a direct correlation with dollar weakness, stock strength. So I think that is back. I think the dollar pulls back to new monthly lows into July and stocks rally because of that. Put up the commodity chart, John, if you will. So you're saying buy commodities, relative charts of equal weighted commodity gauges like GSCI versus SPX have made minor breakouts, which should show much more strength in the week's months to come. But then you have some commodities you like and some you don't. That's right.

You want to walk us through that a little bit? Sure. So this is just an equal weighted gauge of commodities versus the S&P. And this is interesting because we have seen a little bit of bounce in some commodities. Of course, it's not energy per se, but a breakout of this means that commodities actually might outperform the equity market over the next three to six months. And you've seen the momentum gauges start to gradually show some evidence of positive divergence and turning up breakouts in RSI and MACD. And so, yeah, I think everybody came into the year thinking that was the home run for this year was commodities. And it was a bust. And now it's actually starting to work at a time when the dollar is really going to start

to roll over, specifically because of US policy likely being done, or close to being done. Well, to that end, I'd love to get your thoughts on interest rates. I'm looking at the two-year, which has closed at the highest level since the bank breakdown in early March. Is this going to make a new cycle high? Yeah, a big flattening. I don't think it does make a cycle high right away. I don't think it gets over, what, 5% was a former peak? I think

the top was Silicon Valley Bank. We're close. It's not that far away. Yeah. I think we've had a very big flattening down to almost 100 basis points between twos, tens now. So eventually, that's going to matter. My thinking is a 10-year yield is close to peaking out and actually is going to turn down along with the dollar and likely goes to three and a quarter, if not lower. So that's going to provide some relief. That sounds bullish equities. The correlation has come unwound a little bit.

Yeah. It hasn't. It's not as strong as it used to be. It's actually was inverted. Like yields going up was actually happened as equities were going up. They had some negative correlation for a while. So we'll see if it returns or not. I do think that, look, a lot of this regional bank crisis would have been resolved if they just held out for a month and let rates drop about 50 basis points. All these unrealized losses,

they would have been able to hedge them. And so, you know, rates have been choppy for about a year now. And I think that the consumer has some relief to come with regards to, you know, mortgage rates being down, housing market is going to hold up, stock market goes up. So for the time being, but the US economy might very well, you know, end up being stronger. So I think that, you know, the latter part of Q3, Q4, we might see a move back up in rates. But for the time being, the next big move, I think, is going to be a treasury rally. So buy TLT, buy IEF, expect rates fall, roll over, get down to 3.25%, if not 3%. You have cryptocurrencies playing catch up. And obviously, Bitcoin's made a huge move this week, patch up. And obviously, Bitcoin's made a huge move this week, mostly on the back of the Black Rock ETF application, I would say. And now Ethereum USD underperforming Bitcoin, but now

starting to break out. But John, let's do this last one. ETHUSD, we have this up. I mean, this obviously could be a fake out, but this looks like a pretty real breakout to me. This dovetailed what Bitcoin did on Tuesday when it broke out, and Ethereum did it yesterday. And so both of them have broken two-month downtrends. The shape of the pullback is very corrective in Elliott Wave parlance, which when you get back over the prior lows, which we've done, and we've actually broken a trend, means that that should go back to new highs for this year. I don't mean all-time highs. I mean that Ethereum likely goes above that 2100 peak in April and probably goes to 2400. I think Bitcoin gets to, my target short term is 35, 36 into July. I'm not willing to say it's

going to double. I think that in general, if equities start to pull back in the latter part of July, coinciding with cycles, coinciding with the mark, cryptocurrencies aren't just going to be able to continue to go up regardless of the bullish fundamental. They're highly correlated. We've learned. In declines, they are. NASDAQ and Bitcoin are almost one trade. It came uncoupled, decoupled a bit in recent weeks. But a lot of that was, I think, SEC fining of a lot of everything. But they stood up in pretty resilient fashion.

There weren't major declines. They held trend lines even through all this uproar. Let's get to the important stuff. Could Mark Zuckerberg beat the shit out of Elon Musk if they have this cage match that's being talked about on Twitter? I doubt it. No, I like Musk's chances. Well, Elon's much bigger. Elon's bigger, but Elon's not in shape. But Mark does jujitsu. The question

is, are you watching Mark's jujitsu lessons on Instagram? Zuckerberg might send a bot. You might not know if it's Mark or not. Ah, you see that? Right, I don't think Zuckerberg's AI is advanced. Elon's got to have 70 pounds on him. Maybe more. He's a little beefier. I don't know if he's AI is advanced. Elon's got to have 70 pounds on him. Maybe more.

He's a little beefier. I don't know if he hits the gym as much as… Put this tweet up. I kind of like that they were joking around. I think Elon tweeted something like, sure, I'll fight him. And then Zuckerberg went on Instagram, of course, not Twitter, and said, name the location.

Why is he wearing a bulletproof vest? I don't know. It's really odd. And then they went and asked Meta to comment, and they said the story speaks for itself. I would pay to see that at the Sphere in Vegas. Yeah, I think a lot of people would. I think that'd be pretty good.

Well, one thing I've learned from getting beaten up is that you bet on the little guy that's in training and is obsessed with physical fitness. You don't just bet on the guy who's genetically bigger. And I was the guy who was genetically bigger. So I'm having you up. We don't have enough time on the show. You got some good muscle.

It's like the BMI. You can't say that anymore though, right? That's- I used to have a big mouth. Not anymore, thank God. But I used to, it doesn't matter all right uh i i would say i would say uh elon might die if if they fought i'm just i'm just being honest i think you're showing your your political bias sir no not at all i'm watching the kids i'm watching the kids training sessions on instagram

he's he's not joking around okay Okay. Are you a baseball fan? I don't watch as much baseball anymore. Nobody does. I'm more into hockey. My son got into hockey, and he's a sophomore at DePaul in Chicago. So I got into hockey. I watch football, professional football, college basketball. I watch the playoffs of NBA. I follow baseball, but I'm not a rabid fan where I'm going to go sit through a—

even though they're shortened—a game anymore. You know, it's the thing you take clients to and you can have a drink and you just chat while it's going on. I'm a Red Sox fan. You're watching baseball? Not really. Not at all. I don't have time anymore to sit around and watch an entire game.

I find it amazing that nobody watches baseball. I used to be super into baseball. All right. Well, one, we're going to leave off on a positive note. Baseball is making a comeback. Attendance has averaged 27,283 a game this season. That's a lot. That's up 7% from last year.

I don't think that's a baseball phenomenon. That's a post-COVID phenomenon. I agree with you. But we're going to let them have that because television ratings are rising too espn is averaging 1.5 million viewers a game which is up seven percent also which is probably not a covid thing tbs said their viewership is up 26 percent i guess they show a game of the week or something um they shortened the games so So they were, these games were three hours and five minutes. Brutal. Nobody has time for that.

Now they're two hours and 37 minutes on average. That's a big difference. It's 15% difference. You know, I just, I like more action. I don't like. Hockey, very different. It never stops. I would watch baseball if Arnold was in it.

Agreed. All right, let's do favorites. Did you have fun on the show today? Love it. Yeah? Great to be with you guys. All right, let's do favorites. Did you have fun on the show today? Love it. Yeah? Great to be with you guys. All right, we have another hour to do, so I'm really glad you enjoyed yourself.

Can I get another glass of wine, please? I'm kidding. Yes, you may. All right, thanks. By the way, thanks, Mark Newton. You were outstanding today. Thanks, Josh. Thanks, Mike.

Great to be with you guys. So favorites is where we just give the viewers something to leave off with that maybe you're reading, something you're watching, something that maybe they don't know about that you want to turn people on to. Wow. Okay. Michael's going to go first. What do you got for us?

So I started watching the new season of Black Mirror, and I very much enjoy that show, but I don't watch it, which doesn't make sense. I saw the first season. I think this is the sixth season, and I haven't watched seasons two through five. I don't know why. Just never did it. It fell off. Somebody told me to watch it. And the first two episodes are very good. It's very meta. Netflix is doing some meta trickery. The second one, I mean, it's good. Very unsettling. Very unsettling. So I go out of my way not to watch anything unsettling. I'm a sick puppy. You love that stuff.

You love horror movies. The second episode is very f***ed up, but I enjoyed the hell out of it. Okay. Have you seen Smile for a horror movie? I loved it. Was that good? You liked that? I saw it.

I saw it with my daughter. That was good. That was very scary. They don't make scary movies anymore. Oh, yes, they do. It's all they make. What's your all-time favorite scary movie? No, really.

It's all they make. I can give you five. I like the original Texas Chainsaw Massacre. Okay. I like The Exorcist. 76. I like Halloween.

I like the true, you know, slow-building, terror, like John Carpenter type stuff. Not the jump scare. You like the foreboding.

I don't like comedy in my horror, like Scream and everybody laughs and it's funny and I just, I like the old-school type horror movies. like comedy in my horror. Like Scream and everybody laughs and it's funny. And I just, I like the old school type horror movies. What's four and five, you sick bastard? The Shining?

Yeah. Classic. And let's see. Five would be, I don't know. Maybe it's just four. We'll take four. I don't want any dead air. So let's just go on.

Bodies, Bodies, Bodies. That was awesome. That is f***ed up. Wasn't that fun? New movie. Yeah. Like probably a year old. Yeah, yeah, yeah.

A lot of fun. You know what I say? A couple of the recent ones, like The Conjuring, I thought was good. I love The Conjuring. I thought Paranormal Activity was really well done. Dude, that's like 2007. I know. I'm an old guy, right?

Did you see Hereditary? Yes. Okay. That was too much for me. Yep. I didn't finish it. Yep. Oh, you stopped right when the head went off?

I don't mind. To any dead kids, I'm out. Yeah. I heard the new Oppenheimer is going to be very unsettling for a lot of people. Can I tell you, the review that I just saw, you probably saw the same one. Right. That people are walking out of the theater speechless. Yep.

Yep. That doesn't make any sense, but I can't wait. We're going to, I bought tickets for that already. IMAX. Yeah. We're going to go see it in IMAX. That's the way the director wants us to see it. I just wanted to give a shout out to Arnold Schwarzenegger's documentary on Netflix.

Did you watch it? I haven't, no. You're going to get to it, though, right? Great, of course. Everything's on a list. My list gets bigger and bigger. I don't get to anything, but it's there. Did you finish it?

I finished it the first—I couldn't turn it off. I watched all three at once. Oh, yeah, we spoke about it. Yeah, he's the best. And, my God. He's the best. I wish he could be the president. Yeah. I know he turn it off. I watched all three at once. Oh, yeah. We spoke about – yeah, he's the best. And my god. He's the best. I wish he could be the president. Yeah.

I know he can't be. But this is maybe the best three hours you'll spend watching Netflix this year. Yeah, excellent. Truly. He's a – All right. Here are the lamentations of their women. That's right.

That's right. Hercules. One of the funny things about that is when they were making Conan, he barely spoke English. So you picture them teaching him to say lamentation. It was probably not easy. I kind of wish I could miss a Deutsch speck in that way, huh? Yeah. He knows Austrian German.

That's right. Close. All right. Our thanks to Mark Newton today. We want to let people know we got to all Fundstrat Insight research from Mark Newton, Tom Lee, and the entire team, along with all stock lists, webinars, etc., using the following link. It's fsinsight.com slash the compound. And that's not forever. So, right?

I'm assuming. I don't know what the time limit is on that. I think it's the next few weeks or something. This will be exhausted by July. We'll try to. Guys. You have to do it tonight or else it's going to run out. If you want to read Mark's stuff, Tom's stuff, go to fsinsight.com slash the compound.

Our thanks to Mark. Where's the best place people can follow you? You're a Twitter guy. Are you at MarkNewtonCMT? I don't do a lot with Twitter. I jump in and off and on. You do some charts. But I put charts on. Are you at MarkNewtonCMT? I don't do a lot with Twitter. I jump in and off and on, but I put charts on. I'm at MarkNewtonCMT. Contact.

No, you don't want anyone contacting you. No, no, no. Follow me on Twitter and you can DM me. And you're on LinkedIn too, where people can DM you and get free career advice. That's 24-7. Alright, Mark, you're the man. Thank you so much for coming.

Thank you guys very much. Appreciate it. Hey, guys, make sure to like and subscribe. We will see you next week. All right. All right. I'm melting. You guys thought I was good?

Tacticals make you tired, you know? Hey, thanks, man. Have fun.