The Compound and Friends - The Dumbest Crash Ever

Episode Date: August 9, 2024

On episode 153 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by fan favorites and TCAF legends JC Parets and Joe Fahmy to discuss: the Nikkei, buying green in a sea of red, the opportunity in industrials, the VIX spike, tips for traders during market corrections, and much more! This episode is sponsored by Global X. Visit https://www.globalxetfs.com/ to explore a lineup of more than 90 ETFs, along with insights to help you navigate a dynamic investing landscape. Sign up for The Compound Newsletter and never miss out! https://www.thecompoundnews.com/subscribe 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

So I told Fahmy don't worry about his trunks, he won't get a word in because Jasey's got 70. That's what I did. Motherf**ker just walked in here with his homework. Actual notes. What is this? Physical notes. What is this? We got this f**king seltzer? It's on loosely.

We got this f**king seltzer? Remember the old days we used to drink tequila? What happened to that? It's full of fumes and everything. You know what? I gotta get a drink. Hold on one sec. Okay. Old fashioned? You said I'm not gonna get a drink. Hold on one sec. Old fashioned?

You said I'm not gonna get a drink? Beer? You remember. You're just an all star with no charts. You're an obominator! Alright, I got all bases covered. You need to get me quarter. You need to return your call to Strasa. I have no more responsibilities. Cause Fahmy's ignoring strategy.

It's croquet. It's croquet. No, it's croquet. It's croquet. It's croquet. Oh. Never mind. Oh.

Oh. Oh. Do you guys have the internet? John at RIDHOLT's Wealth. No pressure. That's me. You're still employed here? Yes, sir.

Surprisingly. Fahmy, you unwound your yen. Reverse. Yeah, yeah, yeah. Double reverse carry trade. Was reverse, double reverse carry trade. Was it a double reverse carry trade? Jim Carrey trade, yeah. That's what I did.

Dude, I've been carrying that shit for decades. You were early to point out the yen as a safe haven, beware. JC taught me that in 2011. True? What's the difference between croquet and bocce? And what? And bocce. Croquet is aquet and bocce? And what? Bocce.

Croquet is a... You hit it with a hammer. A subset of bocce. Oh. Croquet is but a type of bocce. I don't know. It's like a bougier, doucheier bocce. Doucheier bocce?

Like douche, because you could be like just a degenerate. People don't play croquet anymore. It's not even really in India. You're just not that douchey. just not that douchey enough, John. They played in India. You gotta step up your douchey. So, I sent this to you, but Axl Rose came out for Billy Joel. He looks like Lindsay Lonehead's mom.

His hair is gutted, yeah. Fami, dude, I went to a slash on Monday. How was it? You wouldn't know, because you didn't come. Yeah. It was incredible, dude. Fourth row, 31 bucks. Where? 31 bucks. That's a lot. Fourth row, 31 bucks. Where?

31 bucks. That's a lot. Fourth row. That's a lot for that band. Dude, you're such a hater. Where did, wait, where? Just because your voice, not the drummer. It's a, all right.

Where did Slash play? He played by me? He played at a food truck festival or something. Joe, do you remember we saw him at the Paramount in Huntington? Yeah. And we were like sitting in the rafters right above him at the end.

That was like next level. It was fun. So my friend Adam who was there is like the biggest Guns N' Roses fan in my life. Oh that's right, that's right. We went to talk to Miles there, I remember that. Dude, he lost his mind. He was really happy.

I actually only have 35 charts today. Only 35? So I can get a word in. Let me get my notes back up. Cause I figured, you know. You only have 35 charts?. Only 35, so I can get a word in. Let me get my notes back up. I figured, you know. Can I get it? You only have 35 charts? I know.

I mean, I could do 350. We know you can. I had sushi today. I had other things going on. Can I play something for you guys while we're warming up? Headphones on. Headphones on. Did you just drop a diss track?

No. I don't diss anybody. All right. But you should study history. And this is the important thing you learn from. What you learn from history is the market goes down. It goes down a lot. The math is simple.

There's been 93 years essentially. This is easy to do. Can I get some juice? The market's had 50 declines of 10% or more. So 50 declines in 93 years, about once every two years the market falls 10%. We call that a correction. That's a euphemism for losing a lot of money rapidly. We call it a correction. So 50 declines in 93 years, about once every two years the market falls 10%. Of those 50 declines, 15 have been 25 percent or more. That's known as a bear market. We've had

15 declines in 93 years. So every six years the market's going to have a 25 percent decline. That's all you need to know. You need to know the market's going to go down sometimes. If you're not ready for that, you shouldn't own stocks. And it's good when it happens. If you like a stock at 14 and it goes to 6, that's great. You understand the problem. Not my problem. You have a balance sheet and they're doing fine. I hope it goes to zero. 14 to 22 is terrific. 6 to 22 is exceptional. So you take advantage of these declines. They're going to happen. No one knows when they're going to happen. It would be very... people tell you about it after the fact that they predicted it, but they predicted it 53 times. And so you can take advantage of the volatility market

if you understand what you own. All right. So that's Peter Lynch, who of course is one of, I don't know, is he Mount Rushmore? Is he the guy that would go to malls and like buy stocks based on? That is a gross overgeneralization, but. But he's the guy. Yeah, go outside and see what people are doing. It's not exactly the strategy, but. So what happens now that these malls don't exist? What do people do?

So can I tell you something about Peter Lynch? They go to Amazon. He retired at the peak of his performance and I think 13 years he ran Fidelity Magellan. Magellan, yeah. He retired at the peak of his performance. And I think 13 years he ran Fidelity Magellan. Magellan, yeah. Okay, he retired in 1990. Think of, and he's still around. Think of how much he missed.

And I wonder, could he have kept that going? He said he would stop because he remembered 3,000 symbols and forgot his daughter's birthdays. Okay. Like he was so, like he's like, I gotta quit. Cause that was one of the things. But he went out on a high note. He didn't go out after a year where he crushed everybody. And that's sort of rare.

By the way, when did it, was that 87? He gave that speech in 1993, which is 31 years ago. And it's still true. Everything he just said is still true. The stats are different now, but it still roughly holds true. His performance for, he privately managed like GM or Ford, I forget which one, their pension plan,

but because he didn't have the limitation of a 5% max position in Magellan, he was able to take bigger positions and had better performance for that. He could get more concentrated. Okay. That was one of the first books I ever read. One up on Wall Street. One up on Wall Street. Because of you. Yeah. You told me to read that. He's get more concentrated. Yeah. Okay. That was one of the first books I ever read. One up on Wall Street.

One up on Wall Street. Because of you. Yeah. You told me to read that. He's one of the best. Somebody handed me that in my first year. Because he hasn't been around in so long. But he's still like, he's in the world.

He's still around. Oh yeah. Be interested, he doesn't weigh in on markets all the time. He's not one of these guys that's like still looking for attention. I feel like every year or two he comes out with it. Maybe three years in an interview. So he, I think, dedicated the rest of his career to philanthropy. I feel like every year or two he comes out with it. Maybe three years in an interview.

So he, I think, dedicated the rest of his career to philanthropy. I think he made a ton of money. And he's not one of these guys that, you know, when the market is going nuts, he's not calling TV producers. Like, I have something to say. He just...

Do people do that? Yeah. But no, he's, he like, I guess my point is, he's like really retired his last CMBC interview He gave one stock. It was wing stop. It was like 160 and then it tripled see he's still doing the mall thing See still going to this Can we talk about the elephant in the room before we get going this is really important as an elephant here, okay Michael Batnick, so elephant

Archie Manning, the stockbroker. Oh. Did you appreciate that? I just assumed that we all knew he was a quarterback. I was pissing myself. I was urinating my pants. Can we just talk about that for one second? Your father, who was a stockbroker?

Who happened to be? Famous stockbroker. No, but Eli's response was like, think about how many times he's heard his father be introduced over the years. Now what? Dude, Archie the broker is one of the greatest. Oh wait, who got me that for my birthday?

Was that you? All of us did. So Archie, the stockbroker, for what's that thing? Patreon? Is that what it's called? No. Cameo. Cameo. Cameo. They got Archie for my birthday to say, hey Michael is your favorite stockbroker. Oh my god. Can you send me that? Oh my god. And by the way, Eli will never forget that. Of course not. So if I ever meet Eli, I'll be like, yo, you know that idiot that told you that's my boy? He's hit a lot of people, a lot of fan idiots.

Nobody's ever said your dad the stockbroker. He'll remember it. Ever. Yeah. It sticks out. In Michael's defense, he was like suppressing like hardcore emotion that day. He was like very focused on not falling apart in front of Eli.

You know Eli is like his hero. I know. So like that was the only thing that he said that day that was absurd. And I think we got to give him a lot of credit. Oh that was the funniest shit I've ever heard. That was so good. It was so good.

So I just wanted to get that out of the way. I was crying laughing. Before we get to the show. He's trying to stop crying and I am like literally in tears. JC before we get to the show, so Sean's here. I've been telling Sean a lot lately that gaps get filled. I want to hear from the master of charts. What's your take on gaps

and the proponent of them getting filled? Some gaps get filled. How do you think about gaps? I, it depends. There's a lot. This is a whole episode on its own, but there's all different kinds of gaps. Wait, so you don't agree with what Michael's saying. Well, breakaway gaps by definition don't get filled.

Eventually. No. No. No, not necessarily. No, not necessarily at all. I mean, maybe one day, but that's not even the... But it won't matter at that point. What's the difference between a gap and a breakaway gap? A breakaway gap is a gap that doesn't get filled. Well, it's a type of gap. So you have a base, let's just say, or consolidation, and it gaps up and goes. A gap and go. But you don't know that it's a breakaway gap until later.

Here, great example. You know in real time? Not like, look. The company is mispriced by Wall Street. 1992, Microsoft is like a breakaway gap. There's a million examples. It's never going to get filled. Here's the latest one.

So Nvidia in May of 2023, gap from 30, probably 300, up to 360, and it never looked back. That was it. It was gone. Gone forever. Because they mispriced the valuation. So that gap will never do so. And then there's exhaustion gaps,

which by definition get filled right away, right? Because it's an exhaustion. I'm just saying, as a gap is happening, you can't point to it and say, this is a breakaway gap. You have to wait 10 years. No, you can wait like a week or two. No, just saying as a gap is happening, you can't point to it and say, this is a breakaway gap. You have to wait 10 years. No, you can wait like a week or two. You can know the day off.

If it doesn't take out that low. And you can anticipate it as well. You'd be like, this has all the characteristics of a breakaway gap. We keep running into resistance, keep failing, keep failing, keep failing. There's a catalyst next week. We could gap above that resistance and take off.

That happens all the time. It's usually news that they have to reprice everything. Like Green Mountain, they said their Keurigs are going into Walmart. It just gapped up. It's like a, right, it's like a technical thing that happens in response to a transformative corporate event. Or 30 analysts follow NVIDIA in that example. They're like, we were way off.

But in the drugs and the biotechs, there must be breakaway gaps all the time then. In ADRs, there's breakaway gaps every day. Forget about ADRs. So stocks that gap up or down 10% within one year, how many of them get filled if you had to guess? What do you say? That's a larger percentage.

Just guess. Larger percentage, I would say. Half or less. It's environment dependent. I know. Guess. Like if it's a messy environment. Half or less. It's environment dependent. I know, guess. Like if it's a messy environment, then they're all gonna get filled.

You know, like it's, you don't quantify that. You get like a $300 million market cap biotech, and they're in like a partnership with Bristol Myers. And then there's an approval of a drug or a phase three trial that goes really well. And you could have like a $6 stock open at 18. That gap doesn't have to get filled ever. So hold on, I don't know if you've seen this,

but it's usually the opposite. She's 18, gapping down to six. Well, when I own it, yes. You're the one who told me never screw with these little biotechs. That was a good lesson you taught me. I don't play with that shit. What about Baby Gap?

I don't have the knowledge base. I don't have the knowledge base. I don't have the knowledge base to do that. There are people that do that 24 hours a day. That's their job. They think they have the knowledge base. Well, there are hedge funds that are dedicated health care hedge funds. Imagine trading against people that eat, sleep and breathe clinical trials and talk to doctors. And I'm looking at a chart.

I mean, there are some things that like are not for traders or casual investors. And that is that's a big one. All right. How are we doing? We ready to click it up? Yes. We have everybody's charts. All right, Sean, that was underwhelming. Stick with me. Gaps get filled. Ladies and gentlemen, the compound and friends. 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. Since 2008, Global X ETFs have been committed to empowering investors with unexplored and intelligent solutions. Global X specializes in ETFs that track emerging trends like the rise of artificial intelligence, as well as strategies aimed to generate high income potential. Visit globalxetf.com to explore a lineup of more than 90 ETFs,

along with insights to help you navigate a dynamic investing landscape. Yo, this has the makings of the best show of the year. This could literally be the best show of the year. Don't f*** it up. That's all I want to say. Don't screw with the potential here. Ladies and gentlemen, welcome to the best investing podcast in the world. Wow. You are now rocking with the compound and friends.

My name is downtown Josh Brown. I am here with my cohost as always, Mr. Michael Batnick. What's up, fellas and ladies? Let's hear it. Let's hear it. Let's go. Let's go. With us today, two returning champions.

JC Peretz is the founder, chief strategist for All-Star Charts, a technical research platform for hedge funds, RIAs, family offices, and individual investors. Make some noise for JC. Joe Fommi is a portfolio manager at Zor Capital, a New York based investment advisory firm. Joe has 27 years of trading and research experience and has appeared on CNBC, Yahoo Finance, Wall Street Weekly and more. Joe, welcome back.

Thank you. A round of applause. Okay. You could push that mic out of your way. You're not going to need it. JC's got 100 charts, so I'll just sit back. Can I point out that today is the fifth appearance for JC Perretts on The Compounded Friends.

Is there a jacket? Do I get a jacket? Do I get a set of climbers? Does he get a punch card? Does he get a punch card? There's actually, there's a hoodie. That was literally a joke. No, but in real life.

Oh! Come on. Dude, are you serious right now? How fly is that? Dude! That is like, that's the greatest gift you've ever received. Dude, are you serious right now? How fly is that? Dude! That is like, that's the greatest gift you've ever received. Wow, what is this? It says made in Miami.

It says Miami made me. Come on. And then I'm an astronaut now? Well, that's Pharrell Williams. That's Billionaire Boys Club. So, thank you for your fifth appearance on the show. Both you, but both you guys are fan favorites. We're so excited to have you here.

Obviously we can't time these things in advance, but you are here on the heels of one of the most interesting weeks we've had so far in 2024. Lessons were learned. Traders have adapted. Investors have had to learn about things that they never before considered, like the effect of carry trades

on the stock market in the United States. So this year was boring kind of up until now. You must love this. Yeah, now it's going. Right? I love it all. No, I know you love it all, but stick it in my veins. I love low volatility.

So Joe, you wrote about why sentiment changes so quickly. And I really think that this is the big thing that happened this week. Nothing fundamental changed. Everything that's taken place in stocks since last week was sentiment driven. You had fundamental events. You had disappointing AI cloud growth numbers

from some Max Evan names. Buffett sold half his Apple. He had a jobs report that came in below expectations, put a little growth scare into the market, and you had this currency related thing happen between the Japanese yen and the rest of the world and some ripple effects from that. But really like sentiment was the big thing that shifted. We didn't like all of a sudden fall into a recession. It's just that everybody started talking about a recession all at once.

So I wanted to get, you know, rather than quote your piece, I wanted to get from the horse's mouth. Why does sentiment change so quickly? I feel like when I started doing this, it used to take about two to three months for sentiment to change. And now I think it takes two to three weeks. Days. If not days.

And I have a list of reasons. One of them is information's being disseminated a lot faster. Fact. So everyone's looking at their balances, real time phone, everything, where in the old days you'd get, I sound like I'm 100 years old,

but you'd get like a monthly or quarterly statement. Now everyone has their balances, net worth, everything if you want in real time and people are checking it 200 times a day. So it's that and then you have, we're inundated with information, bloggers, financial networks, social media platforms where there's everything going on.

Apps, real time alerts. Apps, everything. Chimes, everything. Constant triggers for people to do something or not do something. So it's, yeah, it's the casino environment. No clocks, no windows, keep people engaged and keep people moving.

It's the same thing with all this real-time stuff So that is sparking emotion. Yeah, that is spoke sparking higher emotion and sentiment moves faster than it used to be I feel that we have to stop thinking about historic bull and bear markets Because we basically experience these things so much faster now this idea that like the average bear market is 13 months. We had one in 2020 that was 13 days. Yeah. Okay. We had one in 2022 that was like, I don't know, eight months.

Nine months, yeah. Nine months. Eight, nine months, yeah. It was a legit bear market. Nobody would say it wasn't, but like they don't need to go on and on and on and on the way 2000 to 2002 was for example They don't have to be multi-year events anymore in order for them to qualify as a full cycle

Turning turning its way through things happen quickly things happen a lot faster Maybe it's technology and you know another point I made is we live in the most impatient world ever You know everyone wants to do 10 sit-ups, and're like, why don't I have washboard apps? It's like literally everyone just wants to make $10 million by Thursday. And two days. All right, so let's double click on that. You said because of this impatience,

people are using a huge amount of leverage. Leverage includes options, weekly options, zero days till expiration options. Over 50% of the options traded every day expire by the end of the day. Over 50% of options traded every day or more than half are zero ZTE, meaning zero days to expiration, yeah.

This mimics society. People want to go on Instagram and be famous the next day. Oh, absolutely. Like people don't want to put in the time to generate career success. They don't want to put in the time to generate market returns. No, I want to make $10 million in two days.

And because of that impatience, it's leading to people using more and more leverage. And when you use leverage, that first 5% pullback on the S&P to the 50-day, the NAS that corrected about double that, it has higher beta, a lot of stocks drop 20%, 30% growth stocks. And if you have options on them, you get wiped out. So if that happens in like three, four days, sentiment goes from, I'm going to go buy a Lamborghini to like, I'm getting ramen noodles tonight. Like it just switches completely. When you saw the VIX at 60 on Monday morning, did you say what I said, which is this is

the dumbest shit I've ever seen? Or did you think about it a little bit more seriously than I did? I think that you say this is the dumbest shit I've ever seen more often than I would. Okay. I think, but I think you're spot on. Okay. And I was watching the VIX in real time and being like, you know, I've seen the VIX do this and usually the market is

doing something way different than what is doing that. It's not 9% off the top. Yeah, it's usually 30% of the time. It was down 2 to 3%. And also remember back in the day when we used to have real VIX moves, you would get swings up, swings down. In the middle of the day. In the middle of the day. Limit up in the after hours, limit down in the pre-market, up, down, up. It was just a nice orderly little day and I think I found the answer as to why.

Okay. You thought it was the dumbest shit and if John, if you can go to slide 132 please. No, no, no, no, just kidding, just kidding, just kidding. Just kidding, slide two, slide two. On the 2,000. See what I did there? You guys thought I was serious, right?

No. Slide two, please, if you will, my good man. So. What is this? So, for you math majors out there, the mathematics behind the volatility index that is the BICS, which measures the volatility of the S&P 500 is very complicated.

I don't know if you've ever looked at it or tried to replicate it. A lot of ins and outs, a lot of what have yous. Think about the craziest math you've ever seen, it's way crazier than that. So there are little idiosyncrasies in the way that the VIX is calculated that options contracts way out of the money,

very illiquid wide bid ask spreads can actually dictate the value of the VIX because it's mathematically calculated versus a traded product so in this case you're looking at the math equation overlaid with the actual traded product which is the VIX futures so while the VIX mathematically was at 65, the VIX Futures were nowhere near that. Does that difference ever occur to that magnitude? I've never seen it.

I mean, you could go back and see, I don't like to overcomplicate the VIX. It's very easy to overcomplicate it, overthink it. I'm not gonna do that. I never have, it's a bad idea. But this actually makes sense to me. How does this happen? Because one is a traded product,

which is the big futures. The futures themselves. And the other is just a math equation that can be dictated by things that aren't even traded. They're just bid ass spreads way out of the money. Got it. So I don't wanna over complicate this, but this is, I think, a big part of the answer to this shit is stupid and mine,

this doesn't look like other times. 37 makes sense though. Go back to the last slide though, cause I have a question. This is the third highest VIX since COVID and the financial crisis. That was the big joke on this on social media. Right. But this was not either one of them. So how do you explain that?

I'm very, I don't follow the VIX that much. I think this slide explains it. Hold on, keep this up for a second. So the joke was probably dug bone apart. According to this VIX chart, the three worst events to have ever occurred in my career, one, great financial crisis, two, COVID, and three, Monday.

The Japanese central bank raising interest rates by 25 basis points. It's a great joke. Shout out to Doug. Shout out to Doug. Yeah, it's a good joke. But that's how stupid this looked to me. But usually these type of VIXs above 40, 50, 60,

whatever is associated with a major disaster in the markets. Yeah, I couldn't find one. This wasn't, this was like we kept down three. Back to the next slide. So JC, what's the takeaway from this? So the takeaway is this is one answer to why when I was looking at it, I'm saying, yeah, this is it.

The Dow's down 3%, 2%, or the Dow was down one something percent, the NASDAQ's down two, 3%. I'm like, this is all you got? And oil is up, and you know, copper's flat or whatever it was. Like, I'm like, this is, I've seen this before. This ain't that.

You know? It's forced selling from a few participants who had to unload stuff. Nailed it. This is forced selling, forced liquidation. Margin clerks don't use limit orders, so they spray the market and maybe they're trickling in, so we know who blew up. Chances are it's a few funds, most of which we've never heard of. They're Japanese leverage funds that were too leveraged. They got to sell risk assets to buy back their yen. So then other people who own those risk assets, they get knocked down. It's just a domino effect.

But so to Josh's point earlier, you also had this within the confines of Buffett selling within the tech stock narrative, maybe changing. So it was like fuel on the fire. Kamala Harris flipping Trump. All that. So Jim Bianco did a thread and he showed, Jason, you probably follow this, Investors Intelligence Survey of stock newsletter writers. This goes back to the 70s. And he showed the two week change in Bulls and Bears and he says, this metric suggests

that investment professionals who get paid to write newsletters freaked out about the stock market over the last 14 days to a degree, not seen in the last 37 years. That's exactly my point. It was a sentiment. It was not true.

It switches so fast. That is true. No, that's true. That is true, Josh. The sentiment, the sentiment. No, that's true. What I'm saying is, what I'm saying is that everything is hyper sensitive now.

I don't believe that newsletter writers. To be changed the worst since 87. No, that's math. Newsletter writers, to be fair, were the most bullish they had been in three years. Needs not to have. And then last thing, this also came also within the confines of a historically, maybe not historically, a very calm market.

And this shit came out of nowhere. A VIX was at 10. So people were really... Not only was the VIX at 10, but you had in the month of July, the most amount of new 52 week highs on the New York Stock Exchange, this entire bull market. You had the most amount of new 52-week highs on the NASDAQ, this entire bull market. You had the most stocks on the New York Stock Exchange

above their 200-day moving average than at any other point in this bull market. So things, technically, mathematically, any way you wanna look at it have not been better at any point in this bull market. We're not ready for bad news. So throw up slide 10 and you'll see this So this is a sentiment composite that we bring up how do you go from 132 to 10 because we're bouncing around

We're bouncing around we'll get to the So so this is the composite that Josh likes so this includes individual investors the newsletter writers. Oh, I love And then it includes all the volatility stuff. So people did freak out. No, no, no. This is pre that. So we're coming off extreme bullish readings. Pre volatility, get in or whatever. Take that sentiment composite and look how complacent

everyone was. So you know what, people were like chilling out in a pool, laying on the balloon and a tidal wave hit them. And you got, have you ever been to a strip club at lunch? No. Right? The market last week was like that. Like go to the B squad, C squad if you're lucky.

That's who's on the desk at the hedge funds in Connecticut. Wow. Wow. Where are they, Beamers? What was that place called, Beamers? Pretty good enough. It's actually not bad, right? Beamers was outside of the Greenwich County lines.

No, but the A squad that shows up on Saturday night at midnight is in the Hamptons, you know, is anywhere but their desk. In the age of like tech, like do we still really believe that that's a real thing? That like, I think people underestimate the power of psychology. People underestimate the power of psychology in the markets. When things are complacent,

all of a sudden this news comes out, everything you listed earlier, and magically this is what happens. That's, it's, sometimes it's earlier, and magically this is what happens. Sometimes it's just the market needs to shake out bullishness just like it needs to shake out bearishness. You know what Straza calls it? Because Straza worked at SAC and other hedge funds,

grew up in Greenwich, Connecticut. He calls it the parking lot indicator, right? Because when you're the low man on the totem pole out of college working at these hedge funds, you're parking probably in another parking lot. You're not even in the main parking lot, but then come July and August when all the top portfolio managers with the best parking spots are wherever in Europe.

In the Hantons, they can get on their computer in two seconds. That's what I mean. It's not the same as being out of office 20 years ago. You've been out of office and you're more of a bigger deal now, but even now. I will still log in and save the firm when volatility hits.

Michael is counting on me to do that. Let's be real. These people have families, they're out in the Mediterranean, they're drinking. Literally, every other person I know is actually in Italy right now. Yeah. Or Greece.

Yeah. It's like the degree to which people are in Italy is higher than I can ever remember. Well you just have more bougie friends now as you've come up in the world. Not even people I know, just people that I follow, people that I hear about. Is anyone not in Greece right now? It's August. Yeah, no. What do you want?

People that I hear about? That was some Long Island hedge. No. Josh, what do you want? Okay people that I hear about that was some Long Island hedge No, Josh is hearing about people in Italy. No just No, I think I didn't go away this year I didn't go away this year What you just in Italy recently? No like uh tweet last year two years here. I don't know. No, I don't think so Maybe what a great place. Yeah Italy and go back right now. The calls on her way tonight I'll go back she in here She left already he went to Greece Maybe. What a great place. Yeah. Italy and Greece. Holy shit. Nicole's on her way tonight. I'll go the right. Is she in here?

Nicole's going tonight. She left already. She already went to Greece. Joe, you tweeted on July 9th, the day before the top in the NASDAQ, that you were reducing investment exposure. What did you know and when did you know it? Lucky.

Let me read the tweet. I reduced my exposure into the strength this morning. Over the next few weeks, I feel the market will see a normal pullback and eventually correct down to its 50 day into August. In other words, it won't be straight down because the market is very resilient. I have a feeling Biden will step down from the race.

That could be the market's excuse to correct a bit. Again, I don't think it will be a significant pullback somewhere in the 3 to 5% range, but the potential uncertainty from a Biden announcement could give the market the excuse it needs. To which asshat69420 responded, fuck you Joe Fahmy. Pretty much, yeah. Okay, that was super prescient The Biden thing I think a lot of people saw coming but so what I don't think that and that wasn't really the trigger anyway No, but we did top in the big Nasdaq stocks specifically Nvidia

and that was pre-earning season and It didn't take long to get your your correction. So what. So what's in your crystal ball today? Have we done the correction, are we good? I don't think we're done with the correction yet. Today was so far, today was a pretty good day though. Solid day, yeah. It will still be volatile I think through the summer or through September.

I like to try to educate rather than just say why you picked it is that I do what JC does which is we screen the markets every night. We look at different things. He looks a little bit more global macro. But what I judge the health of the market on is growth stocks. That's what I'm looking at because that's risk on assets. So if I'm finding great fundamental companies, building great bases, breaking out on volume, holding their breakouts, that's healthy. I literally don't care what any of the news is. I don't care about anything except what stocks are doing. Because like Livermore says, follow the leaders. So basically you follow Nvidia, follow

Eli Lilly, Microsoft, those types of stocks. That's as the leaders go, so goes the markets. But all of those stocks were technically extended. I don't use Fibonacci or any of that stuff, but I just know that they broke out of bases. They were getting exhausted. That was one reason. Sentiment was super high. We were heading into seasonally two of the weaker months. A second half of July. August and October notoriously are volatile months. And the other thing is roughly, I don't have the exact statistics, every three months roughly, the market visits its 50-day. And we had been about two and a half months from visiting the 50-day. We last visited in early May.

So now we're mid-July, we're two and a half months. So I didn't expect it to drop as quickly. I said, it's gonna drop into August. But even during the bear- You dumbass. I know, so it's horrible. Even during the bear market in 2020, when we dropped for the first two and a half months of 20,

sorry, 2020, yeah, 2022, sorry. We dropped during the first two and a half months of 20, sorry, 2020, yeah, 2022, sorry. We dropped during the first two and a half months, we had that counter trend rally back to the 50 day in March and again in June. So roughly every three months, not exactly, but roughly the market visits its 50 day, even when it's below its 50 days. So we were extended. And I just said, okay, there's not really any safe entry points

and that's what led to it all. Jasey, how much technical damage was done on Monday? Like with number of stocks breaking through there, whatever day? I know there wasn't a lot of new lows, but like, you're shaking your head, nothing? Surprisingly, that was part of what I agree with Josh. This is the dumbest shit I've ever seen.

Yeah, super dumb. You're right. That was pretty dumb. You know, I, JC, what I, what I said on TV was if you're not leveraged, if you're not a hedge fund that's borrowing in yen and buying S and P stocks on margin, don't act like you are. Like why do you need to do anything? A lot of people are using leverage. Not just retail investors. Clearly, hedge funds are, because of the whole yen carry trend. Jason, you might actually have a chart of this. If you look at, like, I'm making this up,

new 20-day lows, that probably spiked. Slide eight, please, John, if you will. What do you think when something like- John's really earning it today. I know you don't use moving averages as much as I do, but when something breaks the 50-day and just goes right down to the 200 day, is that, to his point,

a lot of technical damage in your view, or is that not like- I don't look at it at all, it means nothing to me. Like it's like a big wide- You look at weekly closes like I do. I look at weekly closes, I look at daily closes, and I use moving averages to quantify market breadth, but I'm not like, well, I broke the 10 day,

so now it's gotta go to the 20 day, and the 30 day, and the 47 day, and the 297- Does the wider ranges mean anything to you 20 day and the 30 day and the 47 day and the 297 day. Does the wider ranges mean anything to you? No, you're looking at the number of stocks above or below. So what are we looking at here? So here's the great thing about the market, and it doesn't matter if you're a fundamental analyst or a technical analyst or you look at the moons and the stars. Or if you go to strip clubs during the day. Yeah, you could do any of those things.

I don't judge. Mathematically, you cannot have a bear market or a correction of any kind without the prices of stocks falling. Fact. Profound. Yeah. Fact. So if we know that we can't have a correction without the prices of stocks falling, why don't we take a look at how many stocks

are falling in price? Okay. Seems like a novel approach, but I'll go with you on that. Sounds pretty logical. Call me crazy, right? So if the world is coming to an end and the recession and Biden's ruining everything and the Trump and the war and this, if any of that was true,

wouldn't the prices of stocks be falling? I don't know what he just said there. I don't think he knows what he just said. If the VIX is f***ing tripling overnight, literally tripling overnight, you wouldn't think the prices of stocks may be falling. As it turns out, they were not. So this is the 10 day low. Well, they were falling specifically on Friday and Monday. Not really. Okay. Not really lows. Well they were falling specifically on Friday and Monday. Not really.

Not really. No they weren't. Then tell Fidelity to take a look at my account. Because you're parked in utilities? So stocks at new 10 day lows was the biggest spike. Something we hadn't seen since spring of last year. That's a bullish wipeout. I mean I think it's just noisy.

I don't think it means anything at all. I'm more interested in one month lows, three month lows, six month lows, 12 month lows. We got no expansion in one month lows at all. I know, but give it a minute, right? Like, doesn't that eventually happen if it keeps going? We've given it four days now. Okay. What do you mean? It reached the same level as April 19th.

It couldn't reach the same level as April 19th. It couldn't reach the same level as April 19th. It's the same line. Oh, you're looking at three months or one? I'm looking at one month. So one month, three months, right? Like these were not the highest spikes and new lows that we've seen in years. Which-

They're contained to the levels of last fall. Yeah, it seems very muted. Or the spring. Yeah. So in other words, you would expect to see the levels of last fall. Yeah, seems very muted. Or the spring. Yeah. So in other words, you would expect to see the new lines way above. You would in theory. VIX was 60.

VIX was 60, yes. Yeah, you would think so. Now go to the next, skip two slides, go to the next one. So last month we got the most amount of new highs in the New York Stock Exchange, this entire bull market. Same thing on the NASDAQ next chart. Is that bullish, JC? Is it bearish for more stocks to be going up?

No. You know, for me, if it go back and study every market top ever, I mean, it's a market of stocks. You see deterioration underneath the surface. You don't see breath expansion. You don't see things getting better. If you're trying to tell me things are getting worse. To your point, just before this huge sell-off, the predominant theme in the market was the Russell rip and thousands of stocks that had been doing nothing all of a

sudden coming up. The New York Stock Exchange advanced the Klein line hit a new all-time high. Yeah. You know, like, I mean, it wasn't just small caps, you know, the rally was broadening out. Yeah, it was broadening out. That's right. Yeah, you're broadening out. And you're seeing that in the New York Stock Exchange numbers, because remember, it's not the S&P 500 numbers. It's not the NASDAQ 100 numbers.

It's everything combined. You got global equities on the New York Stock Exchange, small caps. No, this is limited. We exclude. This is stocks only. Yeah, we exclude all the other stuff. JC, let's limited. We exclude. This is stocks only. We exclude all the other stuff. JC, let's go through some charts. I know we did a couple already, but let's turn the screen over to you. Take us through what you're seeing. I mean, we could start in a number of ways. I would... Start from the beginning. I'm just going to piss everybody off and start in a place that I think... Not piss you guys off,

but piss my people off. And start in a place that I think, not piss you guys off, but piss my people off, and start in a place that nobody wants to talk about. Okay. And that is transportation. Okay, why doesn't anyone want to talk about it? Nobody cares because this has nothing to do with AI and the chips and the thing and the the future, J.C. You're starting to talk like an old Jew from Miami.

I just, I mean, I know you're Cuban, but you grew up in Miami. So I know there's some cross pollination between the two communities. I got to Wall Street at 22. So there's that. And then there's that too. All right, talk about the transports.

What are we saying? So throw up slide 13, please, if you will, Jon. So here we have the world's most important index of Dow Jones Industrial Average, making new all-time highs, highest monthly close in the history of human civilization. End of July, highest monthly close. Yeah.

The Dow Jones Industrial Average. And then you will notice that the Dow Jones transportation average has yet to do so. Mm. So is it that, oh shit, transports aren't confirming, or is it? Dow theory? Is this old school Dow theory? This is part of Dow theory. This is in the top 10 most important Dow theory tenants in my opinion.

But nevertheless, you can look at this as a divergence that transports are not confirming. Or is it that they're not confirming yet? Yet, because this is not pointing downward. I agree. Doesn't a divergence have to be going in a different direction? Well, one's going up, one's going sideways. Right.

But yeah. If you were a DJ, would you be DJ Transportation? Would that be your name? DJ Transportation? DJ Industrials. I'm probably more of an Industrials guy. I feel like this is poetic. One of the worst charts out there is UPS.

See that piece of garbage? I do. Look, that's a gap that's getting filled from 2021. Ain't that some shit. Not a very good guy. That's probably what it was weighing down on. It's too soon to pronounce this a negative divergence, is what you're saying.

Like we can't definitively say that this is not gonna confirm. I think it's a great reminder where if you want to get a better understanding of which direction this particular index is going, why don't you take a look at what's inside the index and see for yourself. Let's take a look.

That's what I'm saying. I was. But Josh's question is a great question because you can apply that principle to any index. Like, you wanna know what the Russell 2000 is gonna do? Why don't you look and see what's inside the damn Russell 2000? Right, to your point, no one cares about this and they should.

Nobody cares and I think they should. I'm old school, right? I've studied markets forever. I've been participating for several decades. I am still in the camp that it's, these are the DJs on the ones and twos, right? Ones and twos. This is what you're looking at.

Industrials and transports. And if you wanna go, let's just go through them quick. Here's CSX Railroad. Does that look like a bear market does that look like a downtrend or does that look like a healthy consolidation with an ongoing trend? I would buy that chart and then I would sell the false breakdown immediately. No that's what I would do. That's what you would do. No I would buy this if I had to make a decision I would this is a buy.

I sell the retest. Okay. All right keep going Union Pacific. This went out of Omaha What did you just say? Omaha a lot of syllables in oh my oh my like it's like it's a Japan. What do you you got? For southern Do these look like downtrends to you? They look these are weekly. They all look like the next the next breakout Look pretty healthy, right? Yeah.

Look at J.B. Hunt. Not as good. Fine, but lower end of the range. Yeah. Does that look like it's going to break down, or is it digging in and looking to rally? You see, these are the things I don't touch. I don't like this no man's land in the middle of a consolidation.

I let it play out. Fine. Fine, fair. Landstar. I like this. What is this? Landstar is this is. Trucking and logistics.

Logistics, they do a bunch of shit. Are they integrated? They are. Indeed. They do a bunch of shit. They do. Well, because some transports are not just truckers. Highly.

Highly integrated. They are highly integrated. Yes, yes. For the record, my wife's in the logistics business. So I ask her about all these companies. And in a lot of cases, they do multiple things, right? In some cases. To Bobby's point, they do a lot of shit.

They're very integrated. As simple as you can explain. Old Dominion, this is one of the greatest performing stocks in the history of the stock market. Just an absolute leader from a secular perspective. Very few stocks have done as good as this one. Old Dominion, does that look like a downtrend or just a continuation?

Look at FedEx, pushing up against new all-time highs granted I don't understand the divergence between FedEx and UPS I've never understood it how could how could that that UPS chart looks as bad as this looks good looks horrendous they're just probably managed better I don't know yeah it just seems with me okay but this looks amazing I would buy this Unqualified it came it came up. It came up pretty quick So I think it's got some consolidation do but nevertheless doesn't look unhealthy look at expeditors, you know again absolute monster There's one other integrated logistics company for you look at Kirby, which is marine shipping big base

It's a lot like FedEx look at Madsen by the way shipping, big basics like FedEx. Look at Madsen by the way, a four billion dollar company. I almost had to brawl with these guys in Guam once. It was wild. I was ready to throw down. Why? Why were you in Guam? You'll tell us the story at dinner. Yeah. Look at that. Look at that breakaway gap. Holy shit. I didn't have to brawl fortunately for the local Chamarros. But nevertheless, Madsen making new all-time highs and then Ryder. Keep going. Look at Ryder making new all-time highs. Why are you starting fights in Guam and it's strip clubs in New York City? I was not starting fights, but I was... It's not a dislike.

I was told to prepare. Okay. Because we were disrupting a monopoly that was taking place at the time by Madsen. Okay. My wife's company was coming in there and the guy running was from Queens. Oh, this is like real shit. This is not a bar fight. This is like business. Oh yeah. So Madsen had a monopoly in Guam because they don't grow anything, they don't make anything, like everything gets brought in. So Madsen had a monopoly and then my wife's company comes in and

the guy in charge is from Queens. So he's not f***ing around. He's like this is my money. And you think these Chamorros in Guam have any chance versus a guy from Queens? You're***ing around. He's like, this is my money. And you think these Chamarros and Guam have any chance? Versus a guy from Queens. You know what I mean? So he's like, they don't like me around here. And I was like, I got your back, bro. Are we currently endangering anyone? With this story or everyone's cool now? Oh no, we're the sweetest, nicest people ever.

I'm like, these are the people you thought we were going to fight? Ah, okay. Nothing happened. It has a happy ending. But I was ready. Okay. You have a particular set of skills. Did you tell them?

Skills that have been acquired over a very long career. I forget how the rest of it goes. Chamorros are just not tall or in good shape at all. Okay. In fact, the motto in Guam is half a day. They look like fahmi. Like where are you walking around? They're just like half a day, half a day, because they only want to, they only live

half a day. They just eat just sleep the rest of the day. That's another story. Anyway, Ryder knew all time highs, and then here's a good one, right? Next one. Fun fact, Uber replaced Jabu in the Dow Jones transportation average this February. Oh, so don't tell me nobody cares.

I'm in this stock, people trade this stock. Somebody cares about some of these. Big IPO base. Well, you're like, oh, well, as long as there's a tech stock in the transports now. Not really a tech stock, it's logistics. It's an industrial stock. No, I understand, but it's like, it's logistics. They don't own any cars.

They don't own any railroads. They're just moving things around for people using tech. But I get why it's in the transports. And I never thought of it as an economic, like a thing that would confirm the Dow. I never thought of it that way. But maybe it's a good thing to be watching. I don't know, they have like, it's a hundred-

Look at the large, the large. Yeah, indicator of consumer. So then here's what the transports look like long-term. Healthy. Does this look bad? No. All right, so I like it. So the takeaway is if people would just look at

these old school things that they've forgotten about, they would see this is obviously not a bear market or some sort of diversion away from the rally that we've been in. We just had a bear market. Yeah. We just had a pretty in-depth correction. I mean, when you go back to the February, March highs,

I mean, most sectors and stocks have done nothing for four or five months. So what you're trying to say is nothing is f**ked, dude. I think some things are f**ked, dude. Like what? Like UPS. Like... Why do people, why do so many market participants seem like they want punishment?

I have no idea. Or act like they deserve for things to turn against them. People keep saying we need a bear market, we have to have a bear market. We just had two in the last four years. Yeah. And if you study, but why... Real ones. Tough ones. But why do they want that?

I don't know. People have this obsession with wanting the Fed and the government to pay for printing all of these deficits. They want the chickens to come home to roost. They don't want the Fed to interrupt and interfere in the markets, but when we gap down 3% on Monday,

do an emergency cut, the same people. So that's totally contradictory. Yeah, it just feels like there are a lot of people who can't get comfortable remaining long because they haven't been punished enough. It's almost like a weird... It's torture. It's like a childhood thing. No.

I was going to say it's like a sex thing. It probably is. There's a book, Bulls, Bears, and Dr. Freud. Yeah. And it's all about how like, you know, Who wrote that? how we deal with stocks, like we date them, we get to know them, you know, before we really, really dive in deep, a little too deep sometimes.

So it's like I dumped Uber two weeks ago because like I was just dating, I didn't want it to get serious. You sold Uber? It's not. It's an old book from like the 60s. It's not Uber, it's you. Yeah. It's a good book.

Okay. I think people's views on the markets have to do with their current psychology, the period they grew up in, and the experience their parents might have gone through in the markets. So if you grew up in the Great Depression, you just hate the markets. Of course. I started trading 95 to 2000, that's why I lean bullish and I love big winning stocks. I do agree that's really important. If you're going through a divorce or this family member's sick or something that's affecting

your mind, that's gonna affect your views on the markets. I think so. I also think the status of your employment situation, you really don't love watching people celebrate big wins in the stock market if financially things aren't going great or you're at a point in your career

where there's some uncertainty. I think it pisses you off watching people spike the football in the end zone every day. Or if you, your parents just lost half their retirement in 08, 09 and that's all you heard growing up is how the stock market's rigged and I hate the stock market. That's, how does that not affect your views?

Yeah. Yeah, that's, I agree. It's powerful and there's both a short term and a long term component to that. But think about how their act, how that what they're doing about that. What they're doing about that is trying to make themselves feel better because they can pick on the Fed and say the Fed is doing it wrong.

The Fed should be doing this. This is what the Fed should be doing. So they spend so much time criticizing the Fed that they're completely forgetting about why they were in the market for the first in the first place is to make money for themselves. There are people that have there are people that we have watched, spent the last 15 years tweeting political cartoons making fun of the Fed. It's like, could you imagine you put 1% of the effort that you spent on that bullshit

and like actually learn something about long-term investing? 1%. Like this daily bullshit about how... Every day. Like everyone who's making money is illegitimately benefiting from the stock market and the stock market's illegitimate and the Fed. It's like what if none of that were true and you are just an asshole? What if there were some companies that are actually growing and doing well and you're

investing in them? No, I can't be like that. They really don't like that chart of long-term S&P 500 earnings relative to a long-term chart of S&P 500. Oh, how about the compound interest chart? They really don't like that chart of long-term S&P 500 earnings relative to a long-term chart of S&P 500. Oh, how about the compound interest chart? They really don't like that one. Can I throw two more trannies, please? I want, but we refer to them now as transports or transport Americans. We did this last time. Yeah, we don't use that term.

So there's two that didn't make the cut. He's the least woke person I know. The D-Squad, if you will. So this is a $700 million trucking company from Tennessee. What is it, Covenant Logistics? And it's making new all-time highs. I never even heard of this. Well, obviously.

And also the Hub G from Illinois, shout out Illinois. Also very integrated, Michael. And also making new all-time highs. So I would encourage everybody to not only take the time to go through the 20 stocks that are in the Dow Jones transportation average, it'll take you a hot second, but also understand that there are other names down the cap scale in transportation that also look great. So the sum of the parts, weight of the evidence analysis that we do, I think is great, but

any idiot can do it. It's 30 stocks in the Dow. It's 20 in the transports. By the way, this is the original index? Were the transports before the industrials? I think they were. No. No, the industrials were all railroads.

No. No, they were the railroads. There were the industrials index and there were the railroad index. But what was in the industrials? I thought it was... GE... US Steel. In 1896? Bethlehem? Bethlehem. There's no GE in 1896. Yeah, GE was in the original Dow. It was? Uh huh. Oh, was it Edison? It was Thomas Edison's thing before it was GE. Westinghouse? General Electric at the time, yeah. Okay, and then there was a railroad index. It was

the railroad index. It was like 10 or 12 stocks or maybe 8. Maybe the Dow industrials were 12, transports were eight. They were all railroads. The railroads were like NASDAQ stocks back then. They were the high data. That was the crack of the time. Right, well that was like the internet, the rails. And people traded them like we traded 7 or 8 stocks.

Literally they were like 200 or 300 rails that all went up just like the dot coms because that was the invention of the time. Do you think there was people in 1896 saying these railroad stocks are such a bubble? Yes. Yes. Absolutely.

If you had to get from New York to LA, it would take you three and a half years. Yeah, but understand, there was a panic every other year. It was like the panic of 1884, the panic of 1887. I mean, there was a lot of bubbles. I remember. All the scams and frauds were related to transports. Before there was oil. Oil was not a thing in the stock market yet.

But canal stocks, they were like SPACs. Basically it'd be a guy be like, hey we're gonna dig a canal, which before there were rails, that's how you moved heavy shit. By the way, it's why Procter & Gamble's based in Cincinnati because of the river system. You had to move a lot of goods to people.

But that's how they scam people with fake canals. And then the railroads had more booms. Fake canals? Yeah. We're going to be like, yeah, we're going to make a canal and everybody would invest. And then they would just disappear. They were the mean coins of their day is these fake canals. So you had the companies that made the goods in theory, the companies that made the goods

and the companies that delivered those goods. Strong clothes. Those were the industrials and the transport. Can I ask you this question? I said five years ago or seven years ago and it sounded really smart when I said it so I kept saying it that semiconductors are the new transports. Yeah. Agree. You agree with that statement? Yeah, I'm with you. They go in everything. My big idea is that a lot of the earnings in the market are now coming from intellectual property and communications and those things are

not moved by rail, they're moved by semiconductors. If that's true, the semis do not look as good as the Dow transports right now. The answer is it's not an or, it's an and. Or, semis are the Dow transports for the NASDAQ. Oh, I just don't think that we need to over complicate it. Like we have two perfectly good indexes. We have plenty of data. We know the components and the sum of the parts, you know, when you look at the semi space, do you see the same kind of confirmation that you're seeing from the transports?

Yeah, you can throw up, uh, throw up slide, um, throw up slide four. So we're looking at the S and P, the NASDAQ, Google, and semiconductors, all reaching perfectly normal Fibonacci extension levels from their entire, you know, bull market basing process. And they all halted at those levels. I don't think it's a coincidence. Like, look at S&P. I do. So 161.8%. You don't believe in Fibonacci extension stuff. It's just math.

Yeah, I mean, this is, you can argue that this is just one giant coincidence. As somebody who looks at these every single day for many, I mean, this you can argue that this is just one giant coincidence. As somebody who looks at these every single day for many, many years, it happens quite too frequently. It's not a coincidence. Google is one of the largest components in the Nasdaq and the S&P 500. Yeah. Is it a large component of the semiconductors too? No, it's a large consumer of semiconductors. So it's 4% of the S&P is 5% of the NasdaQ. So it's big, but it's not like outrageous, you know? It doesn't swing the whole thing by itself, but back in the day, any 5% stock would have

been really important. Now we take it for granted. Yeah. Okay. But my point, you know, they're consolidating in normal ways. You were talking about, Fahmy was talking about growth stocks, how he looks at growth stocks as a bull market indicator. I think that's spot on because when you study every bull market over the last

hundred years, technology is a leader and an outperformer in pretty much every single one. With very few exceptions, like there's one or two exceptions. Tech is an outperformer. So if Tommy's looking at tech and growth as an indicator for the bull market, like that's what you should be doing. It's like a shortcut. It probably wasn't a leader in the run up to the GFC, like in 05 or 06. It was an afterthought, dude, remember?

Nobody cared about tech, it was industrials, energy, financials. That's pre-iPhone, it was pre-everything. The leadership was getting thinner and thinner, like all the way up until like October of... What I'm saying, like 0304, 05. It was RIM, Apple, and Google, and that was it. This is a really important point that you bring up.

The sentiment on large cap tech was still in an overhang from 2000 to 2002. So in the year 2006, nobody wanted to talk about Cisco and Microsoft. Well, it's the banks and home builders. Five years earlier, they had just gotten the shit kicked out of them. It was really, I mean, JC and I will argue this with anyone.

If you weren't trading energy stocks, you weren't in the market. It was oil, Google, and Apple, and RIM. That was it. Industrials. Yeah, like I feel really strongly that the best corollary to the Mag-7, like in the mid-2000s, was big natural gas oil companies, drillers.

Gold. Yeah, we were trading. Oil went from 50 to 150, so the earnings were way behind. So anything coal, aluminum, natural gas. $2 to $13. Coal. Coal was hot. What was the coal stock?

I remember the ETF. Walter Industries. Was it Patriot? Was there a WLT? Warrior Met. WLI? WLT. Was that the only one?

No. Walter. James River Coal. JRCT. Was there Patriot and River Coal? Yep. And you know what else fertilizer stuff Wilbur Ross had a giant coal stock he consolidated all these bankrupt coal mines

Potash all of those anything that had to do yeah Commodity related was benefiting from that tell him that please that Chesapeake was Nvidia for like three years? It literally was. Is he telling you that? That's not true. Yes, it is true. Thank you, Jase. How is that not true? No, anything commodity related was Nvidia.

Did you know anyone that wasn't trading Chesapeake Energy? We were trading Chesapeake Energy. Like how many times a day did we trade Chesapeake? Well, Aubrey McLendon and Tom Ward were trading it every day because they were filing every day these motherfuckers coming in, a million dollars, half a million dollars, together, every day, four and fours, every day because they were filing every day. These motherfuckers coming in, million dollars, half a million dollars, together every day, four and fours, every day. So why do you disagree with my analogy? Wasn't that the most active, talked about stock

for like three years, like the way Nvidia is now? So is Jared Wang gonna run into a bridge or something like that? Jared Wang, holy shit dude. What's his name? I have no idea what he's talking about. The CEO of Nvidia. The chair.

Why'd you make him the guy from Subway with the chair? What's his name? Jensen Winston Wong. That's funnier than Archie the stockbroker, I'm sorry. Jared Wang, that's gonna stick dude. Jared Wang. There's your top in tech on a relative basis by the way. Yeah.

That's another coincidence. I called that but I called it in February. So I don't get credit for that. I Why wrong? I said the best the best way to get out of tech is happening right now for the year and I still feel that way So 10 month lows on a relative basis yesterday. Yeah, but this is so healthy because the rest of the market is I don't know. It was a crowded trade. So yeah, you think it was a crowded tree I mean how many people have messaged you about a hey, should I buy NVIDIA in the past two months?

Everyone, everyone. Everyone's talking about NVIDIA. Yes, and you have stocks like ABVI and Lilly that look as good as any of the tech giants and nobody wants to talk about them. Yeah. Like, except for people that are actually in them. Although Lilly and NOVA were getting a little crowded

from retail, just because it's such an easy story to understand. The banks were up huge in the first half of the year. I can't find anybody who wants to talk about a week ago. Homebuilders was outperforming SMA. XHB was outperforming Bank of New York, Mellon. Holy shit. But yeah everyone wants to talk about the ones that are going up but yeah beneath the surface of some other stuff doing. I'm curious why you have this stuff what do you think about this? So shout out Eric Bauchunis. You have have you had him on the show? Yeah. Yeah. Um, he does great work with ETFs and everything. Um, just one of his tweets that they filed a top 30 stocks ETF in the nasdaq. That's black rock. So what do you make of this?

Wait, what day was this? There's no date on this. This is recently. Oh, they're doing this now. Does this look toppy to you? Is that why you put them up here? Is this the top 30 of the Q's? Why does anyone need that? Exactly. They already have a Fang ETF. It's the same thing. It's Mags. Why does anyone need top 30 NASDAQ? That looked weird to me too.

It's like the OEX of the S&P 500. These are the things that happen now, not 10 years ago. But wait, why 30? It's like the tech DAO? Is that what this is going to be? Or the NASDAQ DAO? It's going to be defDao? Is that what this is going to be? Or the NASDAQ DAO? It's going to be defunct soon is what it's going to be. But it's like, no, no, no. Why don't you just trade 90% of the queues?

It's the same thing. Well, it's funny you said that. I actually did the math because I have too much time on my hands. It is 52% technology. And then if you add Google, Meta, Tesla, and Amazon, which are not tech stocks, and you add those to the tech exposure in this, you get 88%.

Yeah. So this is basically the portfolio that everybody already owns. No, you know what it is? It's BlackRock saying, we don't have the queues. This is their answer to the queues. Instead of 100 queues, buy 88 queues. That's it. Same thing. I is their answer to the cues. Instead of 100 cues, buy 88 cues. That's it.

To be fair, to be fair with Sentiment, they also did a other 70 ETF. Okay. But the fact that this is even in the conversation reiterates the slide five that little long in the old- Is there a 10 time 30 ETF? But we also, we're balancing that out is we just got an S&P

493 ETF that pulls out the Mag 7. That's a dumb, talk about the dumbest shit I've ever seen. I don't know. I bet you it's having a decent month. I wanted 10 times ETF. I bet it's having a decent month relative to the Q's. You know there's a 4X now. Does that not make it stupid? Yeah, I guess. There's a 4X. I'm not buying it. Four times that's a B ETF now. Thanks. Really? So let's do this Japanese stuff. Michael, coincidence? Yes. Funny you should ask. He, well, Michael is just not gonna go along with you that there's market memory from 1989. Dude, I questioned it myself and the market has spoken.

Dude, it hasn't spoken! Oh no! No way. A 20% correction. As soon as it kissed those levels from 1989, it's just a coincidence. Yes. When I got back to even, I sold my Nikkei

when I got back to even from 147 years ago. Joe finally got back to even. I got back to even. I had a limit order in for 40 years. In 1989, he walked out of the theater, he saw Tango and Cash, he bought the Nikkei. I had my Sony Walkman on, and I put in a limit order to sell it,

just got filled 40 years ago. Did you have the yellow Sony Walkman on when you bought the Nikkei in 89 and I had a Panasonic Discman and I saw it all right there JC this is stretching this is stretching I thought so too What changed your mind facts the great line bro Jared Wong we bought in 40 years. It's 40 years ago selling is in video. I heard it's Every CEO's every CEO. It's 40 years ago. Jared Wong is selling his Nvidia I heard. Every CEO. It's a 40 year gap.

There's nobody that's been long. Fine, there's nobody that's still long that was long. No one's still alive. It's like the end of the Irishman where they have to explain to De Niro. They're like, you could tell us now, everyone's dead. Your lawyer's dead. Everyone is dead. You could tell us now, everyone's dead, your lawyer's dead. Like, everyone is dead, you could tell us now. Like, nobody who's managing money now

was managing money then, and all of the shareholders have changed hands. Let's keep it moving. That's an interesting theory. And I'm not disagreeing with any of those things, but what we think and what's actually happening are two different things, and it is a fact that it took 35 years

for this mother-fucker to get back to those 1989 highs and what happened when we got there they sold them for the record when we got there in 1989 the real estate in one park in Tokyo was worth more than all the real estate in the entire state of California combined. That's crazy. We are now back to those levels. The baggage pad said alright we're in we're in the clear. It's all time highs. Now we can hike. We're good. They were waiting for the all time highs to hit. Okay, but you're not saying it's a conspiracy. It's not a bad theory. You're not saying it's a conspiracy.

You're just saying for some reason, there's something about that level. He's just saying. He's saying there's resistance at 38. For the record, it's 38,000 on the Nikkei. That's the level. So we crashed in 1989 at 38,000 and the Japanese stock market just topped at 38,000 35 years later on Monday?

No, it talked months ago. Okay. They just don't talk about it because everyone's, you know, talking about whatever. Do you think electric vehicles? What are they talking about these days? So I know there's psychology for people that weren't there that know the dates just like if you're writing a blog post or a tweet And you include 1987 you're doing that to evoke emotions in people that weren't there at the time But it's like a jarring. It's it's like a callback to something that everyone knows was traumatic

We happen to have had a 1987 style crash in the Nikkei. Uh, what do you make of something like that? I for months, I would argue for years now, I have been looking at this chart, because it's what I do, as you guys know. I've been looking at this chart and I'm like, huh, I wonder. I'm like, we're definitely going back to those highs, right? What will happen at those highs? What's going going back to those highs, right? For sure. What will happen at those highs?

What's gonna happen at those highs? And I was in your camp and Michael's camp. I'm like, no way, there's still market memory up there, bro. No way. It's so, it's crazy how symmetrical this is. It literally stopped going up in the first quarter as soon as we got there. Okay.

What do you do now? What do you do now with, not that you have to do anything, what do you do now with Japanese equities? How long do anything, what do you do now with Japanese equities? How long do you have to give this to let it settle? Or is that not how it works to you? I mean, I've never traded the Nikkei in my life. I probably never will.

We look at Japanese ADRs, look at the Muff G, right? Which is the Mitsubishi. Yeah. The Muff G. The Muff G. That's like their biggest bank. And it got annihilated. Yeah, but whatever,'re Toyota, Honda.

I mean there are there are Japanese stocks like you don't have to trade the Nikkei, you know what I mean? Like so I don't- A very popular ETF in the United States with investors for portfolio construction purposes DXJ. Of course. Which is hedging out the yen, just pure Japanese stocks. That's a wisdom tree.

Yup. I think that's the biggest funds though. Do you look at something like that or you want to look at the real? I've come to the, and I think that you're going to like this. This is something I learned from Todd Sohn, who I know you had here on the show recently. Good for you. Great guy. Todd's a man. And I like the way he thinks about it. He's a yellow belt, bro. Yellow belt? Yeah. Like in karate?

Uh-huh. Really? Uh-huh. So his theory is you're not smart enough, you're probably not smart enough to time the price of the stock market. You're definitely not smart enough to get the currency right.

Yeah. So what Todd likes to think about it is 50-50. Half DXJ, half EWJ. So if you want Japan, if you just split it into two, you're eliminating the currency risk and now you're just long the equities. I really like that. So are any of these stocks popping up on your radar as opportunities or they already recovered so much? There's some Japanese industrials like in the index level that you could look at. I look at mostly, for the most most part international indexes as

Information to then apply to US markets Right and understanding that what drives Japanese stocks and what drives European stocks and kind of bring that back to the United States There's some ADRs here and there of course you trade ADRs. You know, that's not a big thing for you Occasionally, yeah, you will you will trade foreign stocks that are listed here. Yeah, you'll trade Mercado Libre. Yeah, Chinese. You will trade foreign stocks that are listed here. You'll trade Mercado Libre. Yeah, arm holding stuff. Best stock I've ever seen. Melly. J.C. the S&P just had its best day since November 2022 according to Eddie Elfenbein. Is that something that happens in a bear market or bull market? The best day ever? The best day since November 2022. The best day ever over the last two years. For the S&P.

Yeah, you know, if you go back to like the last pages of the stock traders' almanac, Jeff Hirsch puts like the list of like the best days ever, best weeks ever, you know, in the Nasdaq and the Dow and the S&P. Those happen in bear markets, we know. They all happen in very high volatility markets. Yeah. Usually, that volatility comes in a bear market. Not this time, though.

So it's more specifically volatility. So Favi, you brought us a chart from 1980. What is this? That volatility comes in a bear market. Not this time though. So it's more specifically volatility. So Favi, you brought us a chart from 1980. What is this? A follow through day. So we got a follow through day today. I think it was, I have to look, but it could be a follow through day.

It's a follow through day. Because we- We can put this on screen. Okay, so when you talked about, okay, some of the things I saw that I lightened up. So the next obvious question would be, what would it get you to get back in? And the follow through day was invented by William O'Neill,

founder of Investors Business Daily, where just the simple definition is when you're coming out of corrections, look for one of the major indices to be up. The definition has changed, but I just ball parked it one and a half percent or more on higher volume than the previous day. And it usually occurs on day four to seven

of an attempted rally. So technically we came off the lows this past Monday, so I'd have to go look, because I haven't looked at all the volume and everything, but it would be day four today. So this could be timely. Follow through day confirms the fact that the worst is over?

It doesn't necessarily mean that we've bottomed, but we've never had a bottom in the market without one. Oh, okay, so it's a prerequisite to a bottom. Yeah, basically he invented this because you always have that dead cat bounce, that snap back bounce, but after the normal bounce, if I'm oversold, you wanna see follow through since the big institutions control the markets.

You wanna see, they can't hide their hand. So when they're coming back in with a lot of volume, you want to see it after the normal. Does today qualify on volume? I'd have to see. Are you looking at indices or individual stocks? Indices. Not ETFs, indices.

So this is just the basic, because I wanted to give a definition of a follow through day. There's a few other slides here. Well, take a look. Here's the guy that got your volume right here. That's SPY. Not on the SPY, on the actual full index. The overall market.

The comp or the SPY. Oh, oh, oh, oh, oh, gotcha. Yeah. So that's just the basic definition, is coming out of a correction, look for a big update. Let me read these. Coming out of correction, look for the major index to close up 1.5% or more on higher volume

than previous day. Occurs on day four to seven of attempted rally. Usually. Ignore days one through three to let the rally prove itself. Volume was higher yesterday on the red. But we had a really big intraday sell off yesterday, so I'm not surprised that the volume was higher.

No, but this isn't it then. We haven't had it yet. But yeah, you ignore days one through three to let the rally prove itself. You want to hold day one. So sometimes it can come on day nine, 10, 11, usually in a real true bottom, it comes pretty quickly because the institutions are getting back in.

That point about the day should be, give you a feeling of an explosive rally. Today feels like it. Yeah, like the institutions, it's decisive, concludes like they're coming back in. I mean, is this good? That looks good to me. Yeah, but to his point, we've also

seen some of these in corrective markets, in higher volatility markets. They don't always work. So, Rob, this is to your point that you asked, which is a great question, Josh. They don't always work because roughly half of them will fail, but no new bull market has ever started without a fall through day.

John, let's do this chart from Mazdaq 2002. So walk us through what you're seeing in this. So all of those bullet points, this is why you ignore the first few days, one, two, three, to let it prove itself because if every little uptick in the market, I'm not saying we're good, this is a brutal bear market, this is like a whatever,

36 month bear market, but every little uptick, oh my God, we gotta get back in, and then it fails. Every two, three days, and then it fails. Every single, I pointed out, every one or two day snapback was met with a failure until you saw the follow through in October of 2020. I lived through this, I was 25 years old, and the distinguishing feature of that 01, 02 bear market

was the relentlessness of it. We didn't have days with massive sell-offs per se, it just never stopped going down. Every rally failed. And so I worked in 230 Park Avenue in the Helmsley Building, and one fun thing about the Helmsley building, which nobody calls it anymore, the elevators were they had a sky painted on the ceiling of the elevator and they had a hundred elevators in this building. You remember this right? Like a blue sky with white clouds. Nobody calls it the

Helmsley building? No. What do they call it? Leona Helmsley died like 30 years ago. They call it 230 Park. I don't know why. They just do. For non-New Yorkers, this is the building that's across from the MetLife building and Grand Central. It spans 45th Street to 46th Street, sits in the middle of Park Avenue. The cars have to go under it. So, but what I remember about this bear market is

every day you buy clients a stock, the stock will be down immediately. And then it would just go down three days, four days, five days. And I remember walking into the elevator, market is every day you buy clients a stock the stock will be down immediately and then it would just go down three days four days five days and I remember walking into the elevator I'll never forget this actually looking up at the sky that was painted on the ceiling the elevator like why God like why is this happening like I can't f**king take it anymore and that's exactly what your chart reminded me of, seeing all those false optics that were never the end of it.

It just would not stop. And I'm not saying that that's anything what we're going through now. No. I'm just showing the point of why you gotta have a little bit of patience, because again, if people are like, hey, you know, for people who actively manage portfolios

and you wanna try to have exposure when things are good, you gotta have a little patience, because at the end of the day, you need the wind at your back from the institutions. The big institutions control the markets, your hedge funds, your hedge funds, pension funds, mutual funds. I mean, Fidelity, T. Rowe Price, the big CalPERS. If you're buying a thousand shares, 10,000 shares, it doesn't mean anything. It's when they're coming in with a hundred thousand 10,000 shares, it doesn't mean anything. It's when they're coming in with 100,000

and two million shares, they can't hide their hands, so to speak, and they're not getting into the market in one day. They're doing it over a few weeks for longer term. So you need the wind at your back from the institution since they control the market. So this was just to show you the point about, you gotta let it prove itself.

Be patient. Be patient. Put up October, 1998, please, John. This is a perfect example. This is the follow-through day. So you gotta let it prove itself. Be patient. Be patient. Put up October 1998, please, John. This is a perfect example. This is a follow through day. Long-term capital, and then when the Fed came out and rescued long-term capital, Russian debt crisis, and I pulled up 98 for Batenik because he wanted something recent,

so I did that on purpose. But basically, we come off the lows, and you look for days four through seven, you have that snapback rally off of the lows off the October 8th low. And I don't even remember why I waited for dinner last night, but I remember like every round of date in the markets. And then you come off the lows, see how it didn't fail? It held.

And then now you have a bigger volume day, big, huge up day. The institutions are coming back in higher volume than the previous day and above average volume. That's at least a sign. We'll do one more of these, March of 09. Yeah, these are just really quick, just tips. Look for a follow through day. If you get through the 50 day, that's great.

If you get a second follow through day, that means the institutions came back in and to the point of it takes time to buy stocks, a couple days go by, they come back in again. Where do you usually buy stocks in the trading day? Do you always buy at the close or not necessarily? No, at any time. Yeah, I try to avoid the first half hour, the amateur hour, let the ranges settle.

And it's funny you said that because I know people who only focus on the first half an hour. So there's no- Or the last half an hour. Or they buy on the close. I've never heard that before, that's interesting. About what? That people are most active at the open. Well, the day traders.

Some day traders are, but I actually would rather wait for a European close because about 1030 to 11 is when a range forms. A lot of times, depending on which European market closes but with the time difference, but you usually get a low or a level to trade off of. If you're trading VWAP, you need enough time to go by for there to be a VWAP. Well, you use a prior date. But some people wait for the afternoon or wait for the close. So, yeah.

VWAP never sleeps. So, this is an example, March of 2009. And the reason I bring this up is that the recency bias of the 18-month bear market from October of 2007 to March of 2009, it's the end of the world. It's financial crisis. And the recency biases were all going to die and it's the end of the world. But you had two follow-'s the end of the world. But you had two follow-through days off of the lows and if you just shut out the noise and shut out everything

that was going on, I mean Obama told you to buy stocks around this time. I mean if there's anything, presidents usually don't do that. But the point is that you had the institutions coming back in and this shuts out the noise and the biases and the, it's, you know, financial crisis. You know, I think there was like TARP and TALF and all these different, you know, government programs that basically put a bandaid on the market and the institutions are like, okay, it's safe to get back in. And this is keeps you out of trouble. So you don't because you know how many people kept shorting this because they thought we

were going much, much lower. Yeah. So this keeps you out of trouble too. We wanted to finish with just some tips for traders during market corrections. Finish? I thought we were just getting started. Even though this one may or may not have run. What? He has 400 more charts to go. Alright let's do your last 400 charts. We'll come back to it because this is important what Josh is saying. Okay. Well I just want I know you guys are a big fan of the Little Aristocrats, so I wanted to bring one.

I do love those. I love them. I know. I know. Alright. What do we got? Slide number 29 there. What in the world?

What is this? This is... Just making stocks up at this point. This is Cactus, Inc. This is not a real company. Look at the Little Young Aristocrats with the mustache. How dope is that? I thought you'd like that.

Yeah. I'm not creative enough to do that. So let's back up. For people that aren't familiar with your work, so at All-Star Charts, you have a product called Young Aristocrats, where you're looking for stocks that fit certain characteristics as longer term investments potentially. Yeah, if you want to go to the next one, I'll just show you and then we'll come back to this.

But these are stocks... To grow in market cap. These are stocks that, right? So the way to make money in dividend stocks is not to buy stocks that pay high dividends. It's actually a great way to lose money in dividend stocks as it turns out. Growing dividends. You want to buy the stocks that they keep raising their dividends every year. So a dividend aristocrat by definition is a company that has been paying a dividend

steadily for a certain number of years. It's like a lot. 25 years. A dividend aristocrat has increased their dividend every year for at least 25 years. You have to wait forever. So these are before. So you're trying to get them earlier in the dividend aristocrat process. That's right. Which I love that. So these are the future aristocrats or the young aristocrats.

Why isn't this an ETF yet what are you afraid of? I feel like Wisdom Tree should do this because they're too busy coming up with ETFs for the top 30 NASDAQ honestly like why wouldn't you just go to a couple of ETF issuers and pitch them this they would do it in two seconds they're doing the dumbest shit ever the ETF business is a really shitty business no but you don't have to run it have you seen the margins in these ETFs? you're licensing your your IP you're not seen the margins in these ETFs? You're licensing your IP. You're not running the fucking ETF.

That's somebody else's problem. Yeah. You're licensing your IP. We'll talk at dinner. Okay. I like high margin businesses and this ain't one of them. How about businesses where you don't do anything? You like those too?

ETFs are like running a restaurant, Josh. What about getting a check in the mailbox? How about businesses that like literally you do nothing? License. Because that's pretty good too, right? Great idea. We'll talk about that. Now I need to be on the cap table for this.

We'll go at dinner. I want 10%. So I like stocks that have increased their dividends every year for five to nine consecutive years, right? That's that, is it perfect? Probably not, but it's pretty good. How big is that universe, US stocks? It's a good question.

Right now? 3000? No. Five to nine years? No, it's a few hundred names. It's a few hundred names. There's one stock that's raised their dividends for a hundred straight years.

Really? Yeah, it's like the Century Club, some crazy shit. Nevertheless, five to nine consecutive years, because if you raise your dividend every year for five straight years, like, I'm no fundamental expert. You're probably a very good company. You're probably doing something right.

Business is good. Like, you gotta be doing something right. So five to nine years, then we sort by relative strength, Joe Fami. So now you're looking at companies where fundamentally something's going right, even if you know nothing about fundamental analysis. And the chart's going up.

And they keep raising their dividend. So Cactus is a good example. Oil and gas stock from Houston four billion dollars. That's not nothing That's not I mean, it's Russell 2000, but it's it's not nothing mid cap now It's a mid cap. So you're gonna find a lot of Eddie Elfenbynes type names on these lists, right? You know random like, you know, yeah, what do they do? lists, you know, random like, you know. Yeah, what do they do? They design well. What's the cutoff for a small mid cap?

Is it two billion now? It depends who you ask, but two, 300 million to two billion is kind of the rule of thumb. I think that's bullshit. So we just dropped a new report. So if you go to, if you go to slide 31, so you go to get the charge.com. Anybody out there listening? New URL, get the charge.com. Get the charge.com and we'll send you the Young Arisocrats report for free. Okay, and how often are you updating? Once a month.

So every month you'll look at the existing... So this is definitely an ETF. What are you doing? Yeah. This is a billion dollar ETF. Mailbox money. Shitty business. No, you're not in the business. Someone else is in the business. I also didn't own my company until recently, so I had some restrictions. I got shit going on. But you are the IP owner. You license the IP.

Someone else does the shitty business, but we won't tell them that. The guy who invented this died, and it's like some young kid who does it. Like the dividend aristocrats, it's like some kid. Really? The guy passed away. Right. So the kid just picked it up. I'd say you could get two basis points for this business.

Ugh. I mean, but also have nothing to do. It doesn't matter. Uh, tips for traders during market corrections. We have a lot of listeners who have been through a million corrections. Um, we also have a lot of listeners who are learning to invest and trade for the first time.

And we have people that have been through a lot of corrections but haven't learned anything because they're not really thinking that deeply about what's happening to them. So I thought this would be a really nice place to end and just give people some ideas that are in your heads while you're watching an 8% drawdown in the S&P 500 materialized relatively quickly. So we didn't get all the way down to 10% yet. But like, what are you thinking when these things are happening? Higher volatility, smaller position size, I think is important.

I like that. Because you got to, you know, I love Druckenmiller and I've been inspired by so many interviews I've seen of him recently, like he calls it the fat pitch. He knows when to, he has this incredible ability to identify when that fat pitch is there to step on the gas. And then when it's not there, the second thing is to have the discipline to hold back. To basically say, okay, I'm trading 100 shares, I'm going to go back to 10 shares. Or I'm trading 10 contracts and I'm going to go to one or two, just using round numbers.

Because you still like the setup, but the environment is not rewarding. He admits, he said in an interview, I'm a junkie, just like everyone else. And I'm like, one of us. You can't get a feel for the market if you don't have money at risk. Yeah, you still have to dip your toes in the water, so to speak. So he's like, I still have this junkie side of me, but to have the discipline to not always, if you're always buying 100 shares, to pull back to 10 during the times when it's higher volatility and if you're a trader you're going to get chopped all over the place with two three percent daily

moves. The first thing you got to do is cut down your position size. But he will also step on the gas let's say he puts on a 10 share position it's Druckenbauer so 10 000 share position where he normally would buy a hundred thousand shares and then the stock starts to run and he's right. Or the commodity or whatever he's trading. So then he's like, well, I'm not big enough. He can always add to that position on the way up. It might not be as satisfying as having your whole position on lower,

but it's good enough. But when it's moving in your direction, at least you're trading from a position of strength. You're trading from a position of, you know, confidence. Confidence. Like clarity, confidence, everything, rather than buying the stock at 50 and then three days later at 40. It's confirming that you were right to begin with.

You talk about your mental capital a lot, and it is a really great example of preserving your mental capital. Absolutely, because, you know, all right, we have a correction now. I think it's a correction in a bigger bull market. Bull market started last year, they last three to four years.

And along the way, you're gonna have corrections. But if you get killed during these times, when the turns and you have these amazing trends, you want to be confident when you're trading. You don't wanna get beat up because if you just get beat up and you're trading size and you're revenge trading, when the skies become clearer,

when you go to the elevator and the blue sky's actually nice. You know, I can't go back to that building ever again. I had an appointment there and I like a meeting and I can't. You're traumatized. Years later. Yeah, I just, you know, I don't feel like going there. Traumatic. Yeah. Jesse, what would you say tips for traders in volatility? So, I'm glad Fami's here because this is a very Joe Fami-ism, you know, market's shitting the bed, everything's red, look at the ones that are green. Ooh, I like that today. Relative strength.

Yeah. Look at the ones that are bucking the trend on Monday. We had Cinemark, uh, this trades up like 400% in a week for us. It was making new 52 week highs on Monday. Rocket mortgage was making new 52 week highs on Monday. Like rocket mortgage, a movie theater. I own two stocks that are doing that. on Monday like rocket mortgage, a movie theater. It's not like a consumer stable. I own two stocks that are doing that and those are the ones that I'm asking myself do I not own.

I own Nasdaq and DAQ. And CBOE's doing a nice job. It's at a 52 week high and it's hanging in there. I probably don't own enough. I don't know what the other one is. I own Intuitive Surgical, full disclosure, and it's near a 52 week high. Barely got, you know, barely got budged the last week. So look for the relative strength. Also take the VIX and divide by 60.

Wait, wait, can we back up really quickly? Because the instinct of most people who have not been educated about trading, the instinct is where are the stocks down the most? Because that's gonna be the biggest snap back. And I fall victim to that. It can work, it doesn't normally work that way. The whole point is if the market's getting killed and the big institutions are not budging,

it's because they've done the work and they believe in it longer term. And if they're not selling those shares and they're dumping other stuff, as soon as a little tension gets relieved off the market, those are- What they're doing is they're selling all that other shit that you're talking about, the ones getting killed the most, to buy these. Yes. That's why they're growing. Or the amateur would be like, this thing's down 25%.

I'm buying it. You're like, this thing's down half a percent. Why? It's all probabilities. It's a higher probability once tension's relieved off the market. Some people use the analogy beach ball underwater. Once it's just the tension's relieved,

those have higher probabilities of going higher. OK, what's the second thing that you're going to say? You divide the VIX by 6? Divide the VIX by 16. And that is what the market is pricing in for a given day. So in other words, if it's a 32 VIX, you're looking at a 2% move on the S&P 500 on a given day. Is it perfect?

No, but it's pretty damn good. What do you do with that information? Well, you position sizing what exactly Fahmy was saying. You could trade smaller because you're going to get the same move at a faster rate than you would in a boring market where you need larger position sizing to make the same transaction. Especially if you're trading, you don't want to get chopped up. So you trade smaller.

Do you look for less beta in stocks during a corrective market and maybe look for more defensive stocks that are moving less or not necessarily. I still like to stick with growth stocks longer term because you get your bigger bang for your buck. I'm not looking to rotate into utilities and this and then financials. A lot of people will do that. Some people do and if you can, that's not what I,

I'm not trying to chase what's the new high list. I'm just trying to stick with growthier areas, whether it's medical products and tech and stuff that have good growth. And when they're working, you'll long the shit out of them and when they're not, you'll sit on your hands. You know my biggest tip for trading in correction. Limit orders.

Limit orders. I look for like the best stocks and I come up with ridiculous prices that they should never trade at. And I just put those in GTC and I start rooting for the market to keep falling. It's weird, but it works. It works for me.

It's a psychological trick. So the rest of my portfolio is getting killed, but oh my God, I'm about to get executed on Netflix at $499. It was just $700. I do that shit all the time. I didn't do it this time because I didn't have time, but that's psychologically been like one of my- It wasn't much of a correction.

It was fast. The big institutions will write puts because that's an area that they're willing to buy. And if they don't get executed, especially in a higher VIX, they'll just collect a great premium. You know, my other rule is ABC. Always be cool. Yeah. We like this.

People were very upset with me on Monday because I was very nonchalant. You're kind of a dick. I mean, not for nothing. I wasn't being a dick. I just wasn't overwhelmed. I have you muted, so I have no idea what you're saying. Fami muted you. Michael, you still have him on you?

Fami literally doesn't return our phone calls. Straz has been trying to get him on the phone for like a month. Fair. Two out of the three of us have you muted on Twitter. So, people in bed. Why were they upset to finish your talk? There's a lot more behind that. No, I know.

Why were they upset, by the way? Because I wasn't panicking. Because I couldn't find a reason to panic. That's brilliant. It was actually surprising. I appreciate that. I might unmute you now, because I appreciate that. Guys.

Can I go back to Druckenmiller really quick? Please. I want to make this point that I've seen so many interviews because I believe that expression success leaves clues. And I mean, the fact that he had 30 positive years, I believe there's one word that defines excellence, which is consistency. Michael Jordan's not considered one of the best players ever because he scored 30 points once in a game.

It's because he consistently averaged 30 points per game over a 20-year career. You know, consistency is amazing. I give props to Mike for your podcast, over 370-something episodes. That's consistent. That's consistency is the key. And Druckenmiller going to finance 30 positive years, not a down year with an average of 30% returns. Like, it's unheard of. And only at two down quarters, I think? It's insane. And in the spotlight the entire time, like under everyone's microscope. Yeah, it's unheard of. It's unheard of. Only at two down quarters I think. It's insane. And in the spotlight the entire time,

like under everyone's microscope. Yeah, it's pretty incredible. And so that consistency, and one of the favorite quotes I have, he says one of his greatest assets over the past 30 years is his ability to change his mind. So he's not stubborn, he's not one of these guys coming on TV every,

to your point, every day for the last 10 years, bear market, bear market, bear market. He's flexible. And all the greats are flexible. Paul Tudor Jones flexible. You know what's funny? I've seen him super, I've seen him at his most bearish, like sitting at Irisone at Lincoln Center in 2010.

It's just, he's literally prophesying like apocalypse. But I've also seen him at his most bullish, where he's just, he'll come on TV and he's just like, you gotta buy him. And I've seen both versions of him, so he is flexible. All the greats are flexible.

Tepper, I can't think of a greater flexibility than being heavily short financials in 08, 09, and when we showed that bottom, and then the government changes things, or whatever, Tarp Telf, whatever was going on at the time. Not only did he cover his shorts, he went aggressively long financials. I can't think of a more flexible, like that's what all the greats do. Let me just put a cap on that by saying, and if you can't do that, you really should not

be trading as though you can. That should not be your investment strategy. That was Tepper's greatest trade ever in my view. You know what his worst trade ever was? Trading Christian McCaffrey. Or just how about buying the Carolina Panthers? I don't mind that. You have to be flexible is my point. No, as we wrap up the trade they did with the Bears. I mean, he gave them Caleb Williams. Yeah.

Yes? Yeah, with the number one pick. And DJ Moore, horrendous. Do you think he liked it on the off-season hard knocks? No, I don't think he liked it. Watching the Giants fleece his team? That was pretty bad. That was tough.

So, Joe Fahmy, ladies and gentlemen. Give it up. J.C. Perez! The best. The absolute best here. You guys are awesome. And I know the listeners and the viewers appreciate every time you guys are on the show. So thank you guys so much for coming. Thanks for having us.

Absolutely. We're going to have some fun tonight. We're going to dinner. Going to a new spot, Albert's Bar, which is like on 41st Street. You and I used to go to Happy Hour in this place when it was called something else. It's like changed ownership. 41st and what? 41st and Lex, right outside of Grand Central, east of Grand Central. Something I used to follow, accounters.

Like that one time that thing blew up, we're on 41st and Lex, remember? Yes, maybe, I don't know. We did a lot of drinking. It was like 2006 or seven, and so 9-Eleven wasn't too far off and Josh is like, holy shit We gotta go remember we saw I ran all the way to the upper east side. I ran home Yeah, a manhole cover blew a manhole cover, but it's right in front of it. I wasn't waiting, you know, you know

You know, you know, it's funny saw a rain cloud on the jet It's more than a rain cloud. We were in the water. It was raining two days ago I saw a lightning strike. It just takes the water. It was raining two days ago. I saw a lightning strike. It just takes off. I get 70 miles an hour out of Zach's bag. It just takes off. They're all sitting on the boat like,

I don't think he's coming back. Ha ha ha. Ha ha ha. Uh, favorites? Anything for the viewers, the listeners, that they should hear about? Anyone got anything good? Hard Knocks.

Hard Knocks is back. We did the Giants, now it's the Bears. Training camp, love it. Okay. It's fun. All right, very good. You got a favorite? Hard Knocks. Hard Knocks is back. We did the Giants now it's the Bears training camp. Love it. Okay. It's fun. Very good. You got a favorite? I got to tell you, I brought my family into the city for the first time ever.

The whole family. We brought my daughter to see the Rockettes back in December. Took her to Del Frisco. So we did that. You brought the boys too now? Brought the boys too. How old are they now? They're one.

Okay. Don't remember this forever. Don't treasure these memories. But hold on. They're one. Okay. Don't remember this forever. Don't treasure these memories. Hold on, but this is good for people to hear with young kids because we started at, this isn't something I do a lot, it's the first time we ever do it, we started at the Museum of Natural History to see dinosaurs. They love dinosaurs and bears and lions and tigers and all that. So we started there, then we walked to the city, went through Strawberry Field, smells a little funny in that part of the park, right?

All that. And then we went to the boath went through Strawberry Field, smells a little funny in that part of the park, right? All that. And then we went to the Boathouse, had a nice little lunch, went to the little lake there, played with the turtles, right? Feeding the turtles, little turtles swimming up, went to the Central Park Zoo, right? That was a big day. You should do tours.

You got an ETF idea and a New York City tours idea. No, but you know what? I remember doing all those things with my kids and it doesn't matter if they remember them. The point is that we did them. It was awesome. Yeah. We all had a good time. The kids were well behaved.

We got to... We went to playgrounds, multiple playgrounds. You have the double stroller and the girl was walking. Triple stroller. Triple stroller. Shout out to that. Shout out to the Zoe. That's the name of the stroller.

That's the stroller. So that's like the dope stroller. So we had in my day, it was the bugaboo. The bugaboo. Remember my stroller I used to have? That's so obsessed. Shari would like wheel it into the office. No.

Yeah. It's still a thing, right? Alright, shout to that. Joe, any favorites? I got nothing. You got nothing? What's going on in Vegas right now? What do we need to know? I don't know.

Where should I go for dinner? I find it hard to believe that you don't know what's happening in Las Vegas. Yeah, Vegas Joe. I'm trying to think, I don't know, same old spots. Where should we go for dinner when I come in October? Should we go back to SW? Oh yeah, I've got some new magician friends. So we got some...

Shout out to that. You know who I did meet? Joe is very influential in the magic community. I met David Copperfield and he had a three hour sit down with a bunch of my magician friends and I was invited. Absolutely epic. I really. I had no idea he was a billionaire by the way.

What? David Copperfield's a billionaire. How old is he now? 68 I think, something like that, 67. That's wild. And he was like unbelievable, like just held court. And I was like. Wait, is it from investments?

It can't be just from magic. Yeah, because when he did all those things when he made like the Statue of Liberty disappear and the Lear jet and all that stuff years ago. He said it was people say it was a 747 But he's going with the myth because it was a Lear jet apparently But anyway, he invested a lot of those in land and investments Yeah, he's still doing those like big epic stunts still does his shows. I well they don't do TV specials anymore But he I love David Blaine kind of ran those into the ground.

He's like, I'm going to freeze myself. And everyone was like, all right. Yeah. But... I feel like those have kind of lost their appeal. I just love learning and listening from fascinating people and stories because that's... I just love a great story, a great... Just everything. Learning from like people who are just a great experience. That's why we're such good friends. Yeah. Yeah. That's... Is it such good friends. Yeah. Yeah.

Is it bullish that we didn't talk about crypto once? Yeah. Did you have any in the deck? Solana made new all time highs relative to ETH today. Oh, Charlie Dow said you want to keep an eye on that Solana ETH correlation. All right. We're going to wrap. We're going to wrap.

We have dinner. We have things to do. Guys, thank you so much for listening for watching Please make sure to leave us ratings and reviews. I want you all to follow my friends JC and Joe Fami Joe What is your Twitter handle your at J? Fami first initial last name? Yeah. All right, and you are at all star charts Okay, unmute JC. He's changed. I'm gonna unmute him. He's gonna be less of a dick the next time the market's down. This isn't our problem. I will be not less of a dick.

It could go to zero. All right, great job this week. All right, guys, let's work with the credits. Shout out to your amazing crew. The crew is ridiculous. What an unbelievable job. John. Nicole just leave? Sean Duncan, Nicole, Daniel, Graham,

Rob Passarellollo ladies and gentlemen. Some of the best. Some of the best. Some of the best. Thank you guys. Thank you. Matt, Char Kidd Matt, just an amazing crew. Alright guys, that's it from us this week.

Thanks for listening. We'll see you soon. I would drink it seltzer. I know, I brought the... By the way, Lebanese pastries, if anybody wants to partake.