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Stephen Suttmeier on Chart Portfolio of Global Markets · Masters in Business

• 0:02
  Speaker 1: This is Master's in Business with very Rid Holds on
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  Speaker 1: Bloomberg Radio.
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  Speaker 2: This week on the podcast, I have a special guest.
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  Speaker 2: Steve Suttmeyer has been in the technical analysis game for
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  Speaker 2: a long time. He is chief Equity technical Strategist at
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  Speaker 2: be of A Securities, and he is a double threat.
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  Speaker 2: He has both a CMT and a CFA. Looks at
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  Speaker 2: the world from a very interesting perspective I get via
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  Speaker 2: a research. In particular, I really enjoy Steve's monthly chart
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  Speaker 2: blasts as well as his overview. Every now and then
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  Speaker 2: he'll do a deep dive into things like sentiment or
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  Speaker 2: sector rotation. I find his work to be very informative
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  Speaker 2: and very useful, and I think you will also. With
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  Speaker 2: no further ado my conversation with be of A Securities,
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  Speaker 2: Steven Suttmeyer, Thank you very much. All right, So yeah,
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  Speaker 2: I'm glad to have you. So, so let's talk a
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  Speaker 2: little bit about your background. So you get an MBA
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  Speaker 2: from Fordham. What was the original career plan?
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  Speaker 1: Yeah, so I went to Fairview University undergrad and it
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  Speaker 1: was right. I didn't put it this way. It was
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  Speaker 1: right right after nineteen em crash. I was there from
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  Speaker 1: not eighty nine to ninety three. Right, So instead of
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  Speaker 1: pursuing business, I pursued pre med and since my writing
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  Speaker 1: skills weren't all off the snuff, I just dove in said,
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  Speaker 1: you know, let me get a double major and do
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  Speaker 1: English writing. So I wanted to challenge myself improve my
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  Speaker 1: communication skills, you know, through through the writing process. Long
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  Speaker 1: story short, you know, get out of college. It was
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  Speaker 1: a tough time. You know, it was the early nineties,
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  Speaker 1: and you know it was hard to find, you know, jobs,
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  Speaker 1: and I was not a good standardized test taker, right,
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  Speaker 1: so my MCATs were bad, but I took them three
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  Speaker 1: times but I managed to jump my score, right, So
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  Speaker 1: I still was able to get a few interviews in
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  Speaker 1: med school. But I kind of changed my mind. I
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  Speaker 1: want I wanted to do so after So what I
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  Speaker 1: did was I was looking around for finance jobs and
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  Speaker 1: obviously you're not going to hire you know, a pre
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  Speaker 1: med bio major in English writing major, you know, right
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  Speaker 1: off the street. Right, So so I just answered ad
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  Speaker 1: from the paper and guess where I wound up. I
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  Speaker 1: wound out out of the boiler room right across from Strattonopemont,
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  Speaker 1: oh in nineteen ninety four.
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  Speaker 2: What were you doing there. I was one of those
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  Speaker 2: coal callers, no kidding, and.
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  Speaker 1: You know, quite frankly, it was a very interesting learning experience.
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  Speaker 1: I was only there for a year and a half
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  Speaker 1: because if you've see in the movie boiler Room, sure
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  Speaker 1: I lived it was.
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  Speaker 2: That was that accurate.
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  Speaker 1: I mean, their office was a lot nicer than ours,
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  Speaker 1: but generally speaking, was fairly accurate. And I remember when
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  Speaker 1: he was studying for the series seven. In the movie,
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  Speaker 1: He's like he's realizing, wait a second, you know, they're
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  Speaker 1: doing things that are not right. And I'm sitting there like, man,
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  Speaker 1: I'm glad I'm not licensed yet, because the last thing
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  Speaker 1: I want to do is, you know, get booted out
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  Speaker 1: of the business before I even start.
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  Speaker 2: So, you know, you know that scene in Wolf of
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  Speaker 2: Wall Street where where DiCaprio sits down the room and
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  Speaker 2: makes that first call. I worked with guys who were
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  Speaker 2: that good but came from that same sort of background,
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  Speaker 2: and they all seemed to be too impatient to get
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  Speaker 2: rich slowly. But a lot of these things really resonate,
• 3:15
  Speaker 2: really come across as that was a real thing in
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  Speaker 2: the eighties and nineties.
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  Speaker 1: It was, and you know, I just learned that, you know,
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  Speaker 1: I just just the antennas were off, and I'm like, this.
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  Speaker 2: Is not where I want to be, to say the
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  Speaker 2: very least.
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  Speaker 1: And then and then the funny thing about it was
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  Speaker 1: when when I see those movies, both Boiler and Man
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  Speaker 1: Walf of Wall Street, the script that they're reading from
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  Speaker 1: is exactly the script that they gave us.
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  Speaker 2: You know, whoever did their research, you know, they found
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  Speaker 2: a bunch of stuff and it was it was pretty amazing.
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  Speaker 2: So you work, you leave that world, and you go
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  Speaker 2: to a few boutique shops, that's right. You work at
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  Speaker 2: Capital Growth Financial and informer global markets before you join
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  Speaker 2: investing Giant Merrill Lynch in two thousand and seven. What
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  Speaker 2: was that transition like from smaller shops to a really
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  Speaker 2: big one.
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  Speaker 1: Well, I mean, that's that's a great question. Let me
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  Speaker 1: just spend thirty seconds before answering that. I was lucky
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  Speaker 1: to have a dad in the business, you know, so
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  Speaker 1: he didn't take me on, you know, initially, and I
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  Speaker 1: had to go through kind of like that that McDonald's thing,
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  Speaker 1: working the fries at the boiler room kind of thing, right,
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  Speaker 1: And then in nineteen ninety six I actually worked for
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  Speaker 1: him for a little while and we went down to
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  Speaker 1: a firm in Florida, and then you know, I made
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  Speaker 1: friends with some people in the research apartment there, and
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  Speaker 1: that's when I started to focus on research. So first
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  Speaker 1: it was a hybrid technical fundamental, and then and then
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  Speaker 1: you know, went to fundamental and then went back to
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  Speaker 1: technical full time. So the reason why I went on
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  Speaker 1: to Merrill Lynch was, look, I was, you know, entrepreneurial.
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  Speaker 1: I worked for small firms that that we could have
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  Speaker 1: built into a big business. But the problem was we
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  Speaker 1: were charging four cents a share, and you know that
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  Speaker 1: make a long story short. Everybody else was charging one
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  Speaker 1: or you know, even less than that, and you know,
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  Speaker 1: we weren't able to compete, and that makes sense. It
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  Speaker 1: was very hard. So I'm like, let me get to
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  Speaker 1: somewhere more stable, big mother Merril in two thousand and seven,
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  Speaker 1: right stable, Perfect, little that I know what was gonna
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  Speaker 1: happen two years later? Perfect?
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  Speaker 2: Well, let's talk later. Let's jump ahead to a question
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  Speaker 2: I was going to ask you later. You join Merrill
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  Speaker 2: in March of two thousand and seven, right on the
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  Speaker 2: you know, verge of an epic a cusp of an
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  Speaker 2: epic meltdown? What was that year at Meryll like that
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  Speaker 2: had to be kind of wild.
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  Speaker 1: Yeah, of course, I mean it's just I just remember
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  Speaker 1: because I was a little bit more season, you know.
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  Speaker 1: I've been in the business fifteen sixteen, seventeen, no, no,
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  Speaker 1: fourteen years, fifteen years when that hit, and I just
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  Speaker 1: remember the weekend of you know, the shotgun wedding, you know,
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  Speaker 1: in two thousand and eight. I just remember sitting down
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  Speaker 1: with some of my colleagues who are a lot younger,
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  Speaker 1: and they're like, what do we do. I'm like, well,
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  Speaker 1: you know what, you do your job until someone says.
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  Speaker 2: You can't because your head down keep working.
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  Speaker 1: I mean, you know, I've worked at other firms where
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  Speaker 1: they had LAO like every few months, and you know,
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  Speaker 1: we knew when they were coming, and just like, you know,
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  Speaker 1: you just do your job until you told you can't.
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  Speaker 1: And that's that, you know.
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  Speaker 2: I mean, I have a vivid recollection of what was
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  Speaker 2: his name? Thane was the CEO of Merrill at the time.
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  Speaker 1: Yes, I believe so.
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  Speaker 2: And I remember that Whenning comes off and people were
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  Speaker 2: like really upset about it, and I was like, what
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  Speaker 2: are you talking about? He just saved the firm. How
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  Speaker 2: are you possibly? Oh, I'm sorry, your stock options are
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  Speaker 2: worth a lot less as opposed to zero. Something is
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  Speaker 2: better than nothing, right.
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  Speaker 1: Well, I mean, you know, look at the news on
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  Speaker 1: the weekend that weekend seeing everybody taking boxes out of
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  Speaker 1: liman embarrassed. So it's like, yeah, it's it's a totally
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  Speaker 1: it's it's very different.
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  Speaker 2: Door number one was much better than door number three
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  Speaker 2: in the circumstance.
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  Speaker 1: Yeah, I mean, of course, you know obviously after that,
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  Speaker 1: you know, emerging the two together, you know, the redundancies
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  Speaker 1: and things like that, and and you know, they took
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  Speaker 1: the opportunity to you know, at least in you know,
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  Speaker 1: on on teams that were big, you know, cut them
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  Speaker 1: essentially in half, right, you know.
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  Speaker 2: To take the people who they think are the top performers.
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  Speaker 2: And but that's pretty typical. And that's the way finance
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  Speaker 2: M and A. Right, that's how it goes. This just
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  Speaker 2: happened to be done so rapidly. There was hardly any
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  Speaker 2: time for planning. It seemed like everything was on the fly.
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  Speaker 1: Yeah. So the biggest thing I was we were worried about.
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  Speaker 1: So I was working with Mary on Bartell's at the time.
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  Speaker 1: Oh sure, she was running the department, and you know
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  Speaker 1: the biggest thing we were worried about. We weren't worried
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  Speaker 1: in one regard because you know, b of A did
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  Speaker 1: not have a dedicated technical analysis team. But at the
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  Speaker 1: same time we were worried that b of A did
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  Speaker 1: not have a dedicated you know what I mean because.
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  Speaker 2: Me, they may not appreciate the exact value of it, but.
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  Speaker 1: But they did. Then they kept us, they kept you know.
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  Speaker 2: So let me roll back. I jumped ahead. What was
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  Speaker 2: it that you know, you have a background as both
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  Speaker 2: the CFA and eventually CMT. Giving your background and fundamentals,
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  Speaker 2: what was it that attracted you to the technical side.
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  Speaker 1: Well, I started off technical, which is unusual. Normally is
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  Speaker 1: the other way around, and it was you know, my
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  Speaker 1: first research boss. His name was Stefan Haber. He worked
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  Speaker 1: at Williamarr Huffing Company, and he encouraged me to take
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  Speaker 1: the CFA exam. And I remember that first level was tough.
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  Speaker 1: I had no finance background. Accounting was very difficult.
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  Speaker 2: So it's about a fifty percent fail rate something like that,
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  Speaker 2: maybe even more.
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  Speaker 1: I mean the level one was I don't remember at
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  Speaker 1: that time, but all I do remember was the first
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  Speaker 1: half of the test. I felt like you know, I
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  Speaker 1: failed it. So then there on lunch, I guess I
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  Speaker 1: pulled the Harlem glob trotters and regroups and was able
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  Speaker 1: to get through the second part pretty easily. So but no,
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  Speaker 1: it it's that's that's what turned me on to And
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  Speaker 1: then you know, we had a very fundamentally oriented research group.
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  Speaker 1: Now I was a technical analyst, so he kind of
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  Speaker 1: you know, brought me on as a hybrid analyst and
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  Speaker 1: it was good. I mean I learned a lot from
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  Speaker 1: when I worked there. You know, I covered you know,
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  Speaker 1: the first stock I guess I was jointly covering with
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  Speaker 1: another analyst was J Bill Be you know, which was
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  Speaker 1: based in Saint Petersburg, So you know, so that was
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  Speaker 1: kind of fun. Yeah, so I got to learn a
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  Speaker 1: lot there.
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  Speaker 2: So so how do these compliment each other? How do
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  Speaker 2: the fundamentals complement the technicals and does one sort of
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  Speaker 2: dominate the other?
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  Speaker 1: Or you.
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  Speaker 2: Are you a technical analyst with a fundamental sort of
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  Speaker 2: in your back pocket? Not what the key driver is.
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  Speaker 1: No, my my primary work is technical. In terms of
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  Speaker 1: fundamental I rely on our analysts ratings at the firm.
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  Speaker 1: You know, I look and see, you know what stocks
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  Speaker 1: they like, what they don't like, and I look at
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  Speaker 1: the charts, and if it melts with what they're saying,
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  Speaker 1: I go with it, or if it looks like it's
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  Speaker 1: going to turn in favor what they're saying, I go
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  Speaker 1: with it, and vice versa. Of course, there's other times
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  Speaker 1: where I have a really compelling chart looks bullish, where
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  Speaker 1: they have underperform on it, I'll publish on it. But
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  Speaker 1: I always say, hey, here's here. You know, fundamental view
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  Speaker 1: is different, here's the research. I don't to look at that,
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  Speaker 1: you know. So I respect the work that they do,
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  Speaker 1: and you know, I try to try to enhance it
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  Speaker 1: as much as I possibly can. So for me, though,
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  Speaker 1: technicals are always first and foremost because that's my role.
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  Speaker 1: But I mean, obviously you want to own something that
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  Speaker 1: has some sort of intrinsic value. So I think that's
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  Speaker 1: the way I would probably think about it, you know,
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  Speaker 1: more of a you know, of a can Slim type
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  Speaker 1: of approach, because I was always a whim O'Neal fan,
• 10:20
  Speaker 1: and he just passed away a few months ago, so
• 10:23
  Speaker 1: that was kind of sad because I was I have
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  Speaker 1: that book on my on my shelf, you know, as
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  Speaker 1: we all do. So yeah, I mean it's it is
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  Speaker 1: a yeah, I mean, I look, I mean, I know
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  Speaker 1: in another world, you know, if you know, if I've
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  Speaker 1: ever moved on to somewhere else where, I was, you know,
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  Speaker 1: doing you know, something in a smaller shop. I'm sure
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  Speaker 1: I would put that fundamental a hat on a little
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  Speaker 1: bit more often than I do now. But I don't
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  Speaker 1: have to now because I got a whole team of
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  Speaker 1: fundamental analysts that that we rely on.
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  Speaker 2: You're reminding me of the Ralph akampoor A quote fundamentals
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  Speaker 2: tell you what to buy. Technicals tell you when accurate.
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  Speaker 1: I mean, I love the quote, but I don't necessarily
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  Speaker 1: believe it's entirely accuarate. And here's why I think technicals
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  Speaker 1: can tell you what to buy as well. Oh really,
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  Speaker 1: because if you can see a price pattern, you know,
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  Speaker 1: you can see a trend, and if a stock's building
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  Speaker 1: a big base, and say the analysts are ninety percent
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  Speaker 1: cell ratings and a lot of volume is surged down,
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  Speaker 1: you know, when the stock first declined to say five
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  Speaker 1: dollars from twenty right, and then volume surge, and all
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  Speaker 1: of a sudden, you're trading sideways for a long period
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  Speaker 1: of time unless volume you know your fundamental works saying hey,
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  Speaker 1: wait a second, you know this seems to be undervalued,
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  Speaker 1: or or maybe the earnings are going to improve next
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  Speaker 1: quarter or something like that. You know, that's something I
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  Speaker 1: would look at to potentially buy, even though technically speaking
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  Speaker 1: it's not very strong, but it is building a big base.
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  Speaker 1: And if the relative chart could I do absolute relative work.
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  Speaker 1: If the relative start chart starts showing outperformance versus you know,
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  Speaker 1: when compared to the absolute, meaning the market's corrected a lot,
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  Speaker 1: but this stock is starting to lead, that tells me,
• 12:05
  Speaker 1: you know what, somebody may know something I don't, and
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  Speaker 1: I should, you know, maybe build a position in that name.
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  Speaker 1: So I think technicals are helpful with what and when.
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  Speaker 1: In fact, I'm probably more of a what to buy
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  Speaker 1: than a when to buy type of guy, because look,
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  Speaker 1: I have to put out a research node, and it's like,
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  Speaker 1: you know, I can't just say hey, buy this name
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  Speaker 1: here at this price. It may never hit it. So
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  Speaker 1: I just kind of say, hey, here's something that looks
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  Speaker 1: attractive technically. You know, our fundamental analyst has either a
• 12:30
  Speaker 1: buy or sell on it, But technically it's attractive. You know,
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  Speaker 1: I think it's a stock to buy. And you know what,
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  Speaker 1: I would put the levels in there. If it hits
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  Speaker 1: these levels, then then it becomes you know, more time
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  Speaker 1: to buy. But either way, you know, I'm building a
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  Speaker 1: position there, you know, based on my research.
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  Speaker 2: So your title is chief equity technical strategist. What is
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  Speaker 2: a day in the life of the chief equity technical
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  Speaker 2: strategist at a big shop like Merrill?
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  Speaker 1: Look like yeah, so b of a when we you know,
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  Speaker 1: it's it's a combined hybrid world, right, So we service
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  Speaker 1: the global private clients. So the financial advisors are you know,
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  Speaker 1: a big part of what we do. We talk to
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  Speaker 1: them a lot. I do a weekly webcast on Wednesdays
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  Speaker 1: for them twelve noon. You know, you go on the road,
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  Speaker 1: you see offices, they ask you question about market stocks,
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  Speaker 1: things like that, and you try to help them out
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  Speaker 1: as much as you possibly can. You know, there are
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  Speaker 1: some financial advisor teams that have me do webcasts for
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  Speaker 1: you know, clients, you know, periodically, sometimes quarterly, sometimes monthly,
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  Speaker 1: and sometimes just internal you know, just so they can
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  Speaker 1: because one thing financial advisors say about the research that
• 13:40
  Speaker 1: we put out on the technicals is that I may
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  Speaker 1: not be a technical analyst, but when I read you know,
• 13:47
  Speaker 1: be of a technical research report. It gives me something
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  Speaker 1: intelligent to tell my clients, especially when times are tough,
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  Speaker 1: and even if they're not using it other than that purpose.
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  Speaker 1: I mean, that's a victory right there.
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  Speaker 2: Right, No, that makes a lot of sense. So let's
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  Speaker 2: talk a little bit about how technicals work. And I
• 14:04
  Speaker 2: want to start just by asking, how do you define
• 14:07
  Speaker 2: technical analysis? I've heard lots and lots of different definitions.
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  Speaker 2: What's yours?
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  Speaker 1: Yeah, it's a great, great question. I mean, I'm sure
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  Speaker 1: it's changing as days go by, But for me, I mean,
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  Speaker 1: we're we're you know, you're using mathematics quantitative methods to
• 14:24
  Speaker 1: identify and spot trends and patterns in the financial markets.
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  Speaker 1: I guess that keeps it pretty simple. So for me,
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  Speaker 1: it's really just trend following and pattern recognition. I will
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  Speaker 1: occasionally throw in second derivative type of indicators a price like.
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  Speaker 2: You know, an RSI or relative strength in that's right.
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  Speaker 1: Relistrate the indicator generate overbought, over soul, but also involves
• 14:45
  Speaker 1: things like breath sentiment. I do a lot of credit
• 14:49
  Speaker 1: market work too, you know, just looking at credit spreads
• 14:51
  Speaker 1: and things.
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  Speaker 2: So let's define our terms along the along the way,
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  Speaker 2: when you're talking about breath, we're talking about the numbers
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  Speaker 2: of advancers versus decliners. Is is it a broad markets
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  Speaker 2: in a narrow market?
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  Speaker 1: And that's one of bob Arrels ten rules. Remember, you know,
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  Speaker 1: markets are stronger when they're broad and weaker when they're narrow.
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  Speaker 1: So again, way us a measure market breath would be
• 15:11
  Speaker 1: the advanced of client lines you just mentioned, also new
• 15:14
  Speaker 1: fifty two week highs, new fifty two week lows. You
• 15:16
  Speaker 1: also use four week lows, twenty four week eyes and lows,
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  Speaker 1: things like that. The other things would be diffusion indicators,
• 15:22
  Speaker 1: like the percentage of stocks above moving averages. So if
• 15:25
  Speaker 1: you have I mean, you know, interestingly, if you have
• 15:27
  Speaker 1: the SMP, you know, above a two hundred day moving average,
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  Speaker 1: yet you know a few and the fifty percent of
• 15:32
  Speaker 1: the stocks are above it, and it kind of tells
• 15:34
  Speaker 1: just something about breadth of the market. You know, the
• 15:36
  Speaker 1: markets stronger, but more stocks are below the moving averages,
• 15:39
  Speaker 1: So I mean, I think that's something to look at.
• 15:41
  Speaker 1: So some of these indicators, like the percentage of stocks
• 15:43
  Speaker 1: above ten day movement averages, can also be used as momentum,
• 15:46
  Speaker 1: you know, so sometimes you can use breath as a momentum.
• 15:48
  Speaker 1: So the other thing I mentioned was sentiment, So that
• 15:52
  Speaker 1: basically is sentiment and positioning lump and positioning as well.
• 15:55
  Speaker 1: So if you're watching sentiment, it's a surveys, you know,
• 15:59
  Speaker 1: the the Investors Intelligence Survey, bullbear and correction, and then
• 16:04
  Speaker 1: you got aaii bowlbear and neutral you have. So those
• 16:09
  Speaker 1: are centiment indicators. What are they telling us what investors
• 16:12
  Speaker 1: are doing? Now? Hopefully investors are saying, I mean, what
• 16:15
  Speaker 1: investors are saying right right, not doing. Hopefully what they're
• 16:18
  Speaker 1: doing is close to what they're saying. That's what sentiment implies.
• 16:20
  Speaker 1: But then you overlay that and look at something like
• 16:22
  Speaker 1: a POOT call. You know, that tells you more what
• 16:24
  Speaker 1: they're doing. You know, the volume of puts are higher
• 16:26
  Speaker 1: in the volume of calls that goes above one, that
• 16:28
  Speaker 1: means investors are fearful. Another one I look at that
• 16:31
  Speaker 1: I find very useful for tactical lows in the market.
• 16:36
  Speaker 1: But sometimes more meaningful and tactical would be taking the
• 16:39
  Speaker 1: three month VIX the volatility index and dividing it by
• 16:43
  Speaker 1: the one month miix. So when that is high like
• 16:46
  Speaker 1: one point twenty five or above, investors are like I'm
• 16:49
  Speaker 1: not concerned about volatility in the immediate future. I'm more
• 16:53
  Speaker 1: concerned about it, you know, later on. But when that
• 16:55
  Speaker 1: goes below one, that means the VIX is higher in
• 16:57
  Speaker 1: the three month bix. So investors are more concerned about
• 17:00
  Speaker 1: volatility now, which means are more fearful. And when you
• 17:03
  Speaker 1: have that set up, the market is often closer to
• 17:05
  Speaker 1: a lot.
• 17:05
  Speaker 2: So everything you've just described as a loaded series of
• 17:12
  Speaker 2: follow up questions you've given me. I want to talk
• 17:15
  Speaker 2: about sentiment. But you mentioned Farrell. And for folks who
• 17:19
  Speaker 2: may not know who Bob Farrell is, tell us a
• 17:23
  Speaker 2: little bit about the legendary Bob Farrell.
• 17:26
  Speaker 1: Well, I mean he was the dean of technical analysis
• 17:28
  Speaker 1: at Merrill Lanch, you know, for a better part of
• 17:33
  Speaker 1: had to be forty fifty years right. He has his
• 17:38
  Speaker 1: ten rules to remember.
• 17:40
  Speaker 2: Which, by the way, have become you know, almost biblical
• 17:44
  Speaker 2: for a lot of people in markets, a lot of
• 17:46
  Speaker 2: tech technicians, for sure.
• 17:48
  Speaker 1: I mean, those are you shoes to Phil There's no
• 17:51
  Speaker 1: question about it. And if I mentioned any of these things,
• 17:54
  Speaker 1: any of his rules to follow my research notes, it's
• 17:57
  Speaker 1: like my readership doubles, you know what I mean, Like
• 18:00
  Speaker 1: forget about him. I mean, I mean, forget about me.
• 18:02
  Speaker 1: It's all about him, right, you know, I just kind
• 18:03
  Speaker 1: of have to invoke that presence, you know, in my job,
• 18:06
  Speaker 1: I guess because some financial advisors actually, when you know,
• 18:09
  Speaker 1: you see some of the commentary they write. The greatest
• 18:12
  Speaker 1: compliment I think they ever paid me was he he
• 18:15
  Speaker 1: invokes Bob Farrell pretty well. And I know that's not
• 18:20
  Speaker 1: one true because nobody can do that, But just to
• 18:23
  Speaker 1: have half of that, I think is is a compliment.
• 18:27
  Speaker 2: That's great. What other technicians do you admire? Who else
• 18:31
  Speaker 2: in the business do you think does a nice job?
• 18:35
  Speaker 1: I mean, look, I mean, I you know, I obviously
• 18:36
  Speaker 1: I compete with a lot of guys that do good work.
• 18:38
  Speaker 1: But going back to the day, some of the folks
• 18:42
  Speaker 1: that have influenced my work influenced my work the most,
• 18:46
  Speaker 1: I would say initially was John Murphy with the book.
• 18:51
  Speaker 1: I mean, I have the torn up, dog eared book,
• 18:54
  Speaker 1: you know, Technical Analysis of the Futures Market. You know
• 18:57
  Speaker 1: that was you know now it's called Technical Analysis of Financials.
• 19:00
  Speaker 1: So I got an old, dog eared copy at my desk. Still,
• 19:03
  Speaker 1: I would say Martin Praying I learned a lot from,
• 19:05
  Speaker 1: you know, through his pray, oh really, and you know,
• 19:08
  Speaker 1: some good cycle stuff there. Momentum. I got his book
• 19:11
  Speaker 1: on Momentum, which which I found very useful. And I
• 19:17
  Speaker 1: guess a third one I think that that impacted me
• 19:20
  Speaker 1: quite a bit was doctor Alexander Elder, who wrote Trading
• 19:24
  Speaker 1: for a Living, and what I liked about that was
• 19:28
  Speaker 1: a there's a lot of market psychology, investor psychology in there,
• 19:31
  Speaker 1: but also how to run a you know, trading systems
• 19:35
  Speaker 1: based on indicators. And I think that helped me out
• 19:37
  Speaker 1: a lot. And much of in that book has influenced
• 19:42
  Speaker 1: the way I thought about markets and picking stocks, you know,
• 19:46
  Speaker 1: as the equity technician, that's kind of what I need
• 19:48
  Speaker 1: to do is identify stocks that I think can go
• 19:50
  Speaker 1: up or down or at a minimum, you know, underperform
• 19:54
  Speaker 1: or outperform. And you know, I use some of the
• 19:57
  Speaker 1: techniques that he put in there, in particular, like a
• 19:58
  Speaker 1: triple screen trading system where you have your your you know,
• 20:02
  Speaker 1: your weekly time frame, but you you make your decisions
• 20:05
  Speaker 1: off the daily. But I managed to do it all
• 20:08
  Speaker 1: on a weekly chart because if you put three different
• 20:10
  Speaker 1: movement averages on a weekly chart, you can look at,
• 20:12
  Speaker 1: you know, a long term moving average and a short
• 20:14
  Speaker 1: term moving average and do it that way. You know,
• 20:16
  Speaker 1: where you decline below the shorter term one and hold
• 20:18
  Speaker 1: the longer term one. I generally can I generally view
• 20:22
  Speaker 1: that as a positive for a stock and look to
• 20:24
  Speaker 1: buy it.
• 20:24
  Speaker 2: So you're mentioning folks who've been around a while, like
• 20:27
  Speaker 2: John Murphy and Praying and Farrell and I took the
• 20:32
  Speaker 2: class with Ralph Akmpora. I know a lot of people
• 20:35
  Speaker 2: back in the day who used to do their charts
• 20:39
  Speaker 2: by hands every day, and now there's just so much
• 20:46
  Speaker 2: computing power around. How has the computerization of everything change
• 20:53
  Speaker 2: technical analysis? What do we do with all this horse power?
• 20:57
  Speaker 1: Well, I mean it definitely can allow for more rules
• 21:00
  Speaker 1: based signals. In some regard, it allows us to do
• 21:04
  Speaker 1: things with a greater universus stocks, and I think, I
• 21:09
  Speaker 1: think it is useful to have that. But when I
• 21:12
  Speaker 1: first join Merrill Inch in two thousand and seven, we
• 21:15
  Speaker 1: were still we still had point and figure charge that
• 21:17
  Speaker 1: we were updating by hand x's and o's.
• 21:20
  Speaker 2: You know, of course, Tom Dorsey, that crowd.
• 21:22
  Speaker 1: Yeah, I mean they they, I mean they, yeah, Tom Dorsey.
• 21:25
  Speaker 1: I believe investment intelligence also has a product on point
• 21:28
  Speaker 1: and figure I mean, very popular among the financial busor crowd,
• 21:32
  Speaker 1: but not so popular among the institutional crowd. You know,
• 21:35
  Speaker 1: the intuitional crowd probably looks at It's like I'm looking
• 21:37
  Speaker 1: at a letter from my grandmother with the x's and
• 21:39
  Speaker 1: o's on it, you know, and she gives me.
• 21:40
  Speaker 2: Huggs, and it's at precise. It's not as.
• 21:44
  Speaker 1: I mean, it depends.
• 21:46
  Speaker 2: It seems to be more general than I mean.
• 21:49
  Speaker 1: You can make it more precise if you want to,
• 21:51
  Speaker 1: but that requires a lot more effort and work, and
• 21:54
  Speaker 1: you know, with the computing power and a day, I
• 21:55
  Speaker 1: think the one thing that's changed is, you know a
• 21:57
  Speaker 1: lot of people can think they can pull up at
• 21:59
  Speaker 1: Bloomberg and all of a sudden call themselves a technical
• 22:01
  Speaker 1: analyst because it's just very easy to create these things.
• 22:04
  Speaker 2: I'm glad you brought that up because I recall when
• 22:07
  Speaker 2: I started on a desk in the nineties, if you
• 22:10
  Speaker 2: wanted to put charts on a computer screen, you had
• 22:15
  Speaker 2: to subscribe to a very specific package, even the terminal.
• 22:21
  Speaker 2: Back then, you couldn't do what you could do. Today's
• 22:23
  Speaker 2: light years ahead today kind of Now you go to
• 22:26
  Speaker 2: any website and have unbelievable access to all sorts of
• 22:31
  Speaker 2: technical studies. I'm curious what sort of impact does charting
• 22:37
  Speaker 2: software for free everywhere have on the practice of technical analysis.
• 22:42
  Speaker 1: Well, I mean it's again, it's still a market where
• 22:44
  Speaker 1: people will you know, trade and you know, make decisions
• 22:47
  Speaker 1: to buy and sell. I mean I do look at
• 22:50
  Speaker 1: stock charts dot com. I mean when I'm on the road,
• 22:52
  Speaker 1: that's very easy to pull up and work with. I mean,
• 22:56
  Speaker 1: does it make it more of a self fulfilling prophecy?
• 22:59
  Speaker 1: Who knows? I mean, but I think the general it doesn't.
• 23:02
  Speaker 1: It wouldn't negate. You know, the one major thing that
• 23:06
  Speaker 1: dominates financial markets, it's fear and greed, you know, and
• 23:09
  Speaker 1: maybe it accelerates that process a little bit more. I
• 23:13
  Speaker 1: mean the other thing, it's really not just technical analysis,
• 23:15
  Speaker 1: but the availability information and instant analysis, right, you know,
• 23:19
  Speaker 1: analysis can be done. I mean, just let's face it,
• 23:21
  Speaker 1: there's there's businesses built on that premise where you know,
• 23:25
  Speaker 1: they have high frequency trading where they calculate things and
• 23:28
  Speaker 1: you know, millisecond I don't even know, but you know
• 23:30
  Speaker 1: what I mean.
• 23:31
  Speaker 2: It's like really fantantly.
• 23:33
  Speaker 1: Yeah. Probably the more accurate way of saying that nanoseconds.
• 23:36
  Speaker 1: So I mean it just makes things very quickly, and
• 23:39
  Speaker 1: you know how I adapt it to it. I focus
• 23:42
  Speaker 1: more on a long term timeframe, not not like monthly,
• 23:46
  Speaker 1: but weekly. I you know that daily gets a bit noisy,
• 23:49
  Speaker 1: very noisy. Back in the day, it was inter day
• 23:51
  Speaker 1: charts that got really noisy. But now daily charts have
• 23:53
  Speaker 1: gotten noisy. You know. I hope weekly charts don't get noisy,
• 23:57
  Speaker 1: because that would complicate things even more.
• 23:59
  Speaker 2: I'm curious if the zero day options that expire every
• 24:04
  Speaker 2: single day have an impact on trading and have an
• 24:07
  Speaker 2: impact on charts.
• 24:09
  Speaker 1: Probably, you know, I'm not sure what the impact exactly is,
• 24:12
  Speaker 1: but but yeah, I mean I think just instant you know,
• 24:16
  Speaker 1: you know, instant what you know, whatever the term is,
• 24:19
  Speaker 1: I can't even know, but just instant information. I mean,
• 24:23
  Speaker 1: it just it just makes things more volable. Generally speaking,
• 24:27
  Speaker 1: you wouldn't know by looking at the fix, but it
• 24:29
  Speaker 1: looks like inter day price action, day by day price action.
• 24:31
  Speaker 1: It's like you got stocks that have multi billion market
• 24:34
  Speaker 1: caps that are moving like two to three percent, you know,
• 24:37
  Speaker 1: within the span of fifteen minutes. I mean, that's that's
• 24:39
  Speaker 1: that's a lot, you know.
• 24:41
  Speaker 2: I mean, you mentioned fear and greed, tell us a
• 24:44
  Speaker 2: little bit about how you can use technical analysis to
• 24:48
  Speaker 2: look at sentiment.
• 24:51
  Speaker 1: Yep, so a lot of different ways. First and foremost,
• 24:54
  Speaker 1: I mean, you got the surveys that we talked about earlier,
• 24:56
  Speaker 1: got the book call Ratios, you got the bill.
• 24:58
  Speaker 2: Let me interrupt you and ask you about the surveys
• 25:00
  Speaker 2: because I always find that what people say they're doing
• 25:04
  Speaker 2: and what they're actually doing on those surveys don't always
• 25:07
  Speaker 2: seem to line up right how how and they seem
• 25:12
  Speaker 2: to spend most of their time in a sort of
• 25:14
  Speaker 2: nomend's zone where there's no signal. It's at the extremes
• 25:19
  Speaker 2: when they're useful. How How useful do you find sentiment
• 25:23
  Speaker 2: surveys generally where we're asking people how bullsh are you?
• 25:27
  Speaker 2: How much equities do you have, how much bonds do
• 25:29
  Speaker 2: you have, et cetera.
• 25:30
  Speaker 1: I would say it's more useful in calling lows and
• 25:35
  Speaker 1: it is in highs because when you think about a
• 25:37
  Speaker 1: low in the market and fear in the market, there's
• 25:40
  Speaker 1: more urgency. Complacency by definition is not urgent. So that's
• 25:44
  Speaker 1: why I think that sentiment surveys work better when you
• 25:48
  Speaker 1: know bear surge about fifty five sixty percent, which is
• 25:51
  Speaker 1: where they stood September of last year.
• 25:53
  Speaker 2: You know, complacency is not urgent, It's not that's that's
• 25:58
  Speaker 2: a great sentence.
• 25:59
  Speaker 1: Yeah.
• 25:59
  Speaker 2: I always think of it as it's hard to identify
• 26:02
  Speaker 2: when people kind of get bored and stop buying. But
• 26:05
  Speaker 2: it's easy to see when everybody's panics sell exactly.
• 26:08
  Speaker 1: That's what sentiment shows you. Uh, you see it on
• 26:11
  Speaker 1: the book calls. You can see it also in futures positioning.
• 26:16
  Speaker 2: H what what are you looking at in futures positioning
• 26:18
  Speaker 2: in order to identify a bottom?
• 26:21
  Speaker 1: It's it's usually it is aggressive shorts from leverage funds
• 26:26
  Speaker 1: on SMP futures.
• 26:28
  Speaker 2: And are these professionals or these punters and amateurs.
• 26:32
  Speaker 1: No, they're professional. They're professional. But even professionals can form
• 26:36
  Speaker 1: a crowd and a hurd. I mean, that's that's the
• 26:38
  Speaker 1: point of the indicator. You know, that's the reason why
• 26:42
  Speaker 1: you know there's a hedge funk. You know, clients that
• 26:44
  Speaker 1: that you visit outside New York City they want to
• 26:46
  Speaker 1: you know, avoid the herd. Right. But the other factor
• 26:50
  Speaker 1: is asset manager positioning. Those are the smarter I think
• 26:54
  Speaker 1: I view them as smarter. So when they're over sold,
• 26:56
  Speaker 1: the market's usually down as well, but when the market
• 27:01
  Speaker 1: starts to bounce, they start to go with it, and
• 27:05
  Speaker 1: you know, they hit their lows two of them last year,
• 27:07
  Speaker 1: one in June and one October, and it was great.
• 27:11
  Speaker 1: It worked out really well using that sentiment indicator, So
• 27:16
  Speaker 1: I think there is still use for them, I will admit,
• 27:19
  Speaker 1: though sometimes I do wonder whether sentiment, you know, becomes
• 27:23
  Speaker 1: more of a momentum indicator, which which I think makes
• 27:26
  Speaker 1: sense because let's face it, I mean, if the market
• 27:29
  Speaker 1: rallies fifteen percent and the asset matters are still here
• 27:33
  Speaker 1: and not buying the rally, then something else is happening,
• 27:38
  Speaker 1: you know, So sentiment does need to turn into momentum,
• 27:42
  Speaker 1: meaning that sentiment needs to start to confirm price action.
• 27:46
  Speaker 2: Can can everything be charted? I mean we're talking about sentiment,
• 27:51
  Speaker 2: we're talking about trend What about things like fundamentals? Can
• 27:54
  Speaker 2: you chart the rate of change on earnings? Where do
• 27:58
  Speaker 2: you draw the line of Hey, technicals aren't going to
• 28:01
  Speaker 2: help you there?
• 28:02
  Speaker 1: No, I'm sure you can. I mean I haven't done
• 28:04
  Speaker 1: that much work. I mean, you know, a pe ratio
• 28:06
  Speaker 1: you can chart that, I mean pretty easily and do
• 28:08
  Speaker 1: analysis on that. I think I think it's probably more
• 28:13
  Speaker 1: useful in economic indicators like the unemployment rate or the
• 28:21
  Speaker 1: claims data. And you know, we actually did some scenario
• 28:26
  Speaker 1: analysis around that recently, just talking about, hey, what happens
• 28:29
  Speaker 1: if the employment rate rises versus falls? What environments does
• 28:32
  Speaker 1: the SMP work better in? And you know the obvious
• 28:34
  Speaker 1: the answer is the obvious answer, right, So, but it's
• 28:37
  Speaker 1: not necessarily true because there's some periods of time where
• 28:40
  Speaker 1: the unemployment rate does rise where the SMP actually does rally,
• 28:45
  Speaker 1: and there's other peerogs where the SMP does not. And
• 28:48
  Speaker 1: I really you know, it's it depends on what your
• 28:50
  Speaker 1: market tide is.
• 28:51
  Speaker 2: How do you think about intermarket analysis? So you're looking
• 28:54
  Speaker 2: at the stock market is doing this relative to what
• 28:57
  Speaker 2: the bond market is doing? How important are looking across
• 29:01
  Speaker 2: different Here's what the US is doing, Here's what's developed
• 29:03
  Speaker 2: x US, Here's what emerging markets are doing. How do
• 29:06
  Speaker 2: you consider different geographies, different sort of asset classes? Do
• 29:11
  Speaker 2: they do they interrelated? All?
• 29:13
  Speaker 1: I mean I think they do. I think we've seen
• 29:15
  Speaker 1: that over the last year or so. So so here's
• 29:20
  Speaker 1: here's a whay I'm looking at it in your term
• 29:22
  Speaker 1: not not making any sort of forecast or anything like that.
• 29:25
  Speaker 1: But last year where we stood, market was very nervous.
• 29:28
  Speaker 1: SMP around the two hundred week moving average finally started
• 29:31
  Speaker 1: bottoming out. But what was the ingredient to get that
• 29:34
  Speaker 1: low in the market. It was the.
• 29:38
  Speaker 2: Dollar topping peak inflation.
• 29:40
  Speaker 1: Yeah, that that, Yeah, that happened I believe in June
• 29:42
  Speaker 1: of last right, right, and that that's helpful. Also yields
• 29:46
  Speaker 1: topping out as well in September October last year. So
• 29:50
  Speaker 1: there's a negative correlation between the dollars and between stocks.
• 29:57
  Speaker 1: The dollar in bonds, so meaning you know, higher interest rate,
• 30:01
  Speaker 1: lower stocks, higher dollar lower stocks. That's been the trend.
• 30:04
  Speaker 1: So the SMP rally from last October ran into trouble
• 30:07
  Speaker 1: this summer, you know, and you know which is where
• 30:10
  Speaker 1: in the dollar bottomed out and yields started to really
• 30:13
  Speaker 1: rise again in earnest and now here we are.
• 30:15
  Speaker 2: Oh god, it was a massive surgeon yields from August
• 30:19
  Speaker 2: September October and stocks one's the exact opposite direction.
• 30:22
  Speaker 1: Yeah, have had a ten percent correction, and you know,
• 30:25
  Speaker 1: we'll see what happens going forward. But I would think,
• 30:28
  Speaker 1: you know, not that this is a prediction or anything,
• 30:30
  Speaker 1: but if that correlation holds, and if the S and
• 30:34
  Speaker 1: P gets a seasonal bounce, which normally is something that
• 30:36
  Speaker 1: happens around this time of year, one would think that
• 30:40
  Speaker 1: if this correlation continues to hold, that a seasonal bounce
• 30:43
  Speaker 1: for stocks likely requires yields to be stable to lower
• 30:49
  Speaker 1: or the dollar stable to lower. And you know, we'll
• 30:53
  Speaker 1: see how that plays out. But that seems to be
• 30:55
  Speaker 1: the correlation, the innermarket correlation that that seems to be,
• 30:59
  Speaker 1: in my mind, the most important one right now.
• 31:01
  Speaker 2: So what do you think generally people misunderstand about texting?
• 31:04
  Speaker 1: Yeah, I mean I think I mean sometimes I get
• 31:06
  Speaker 1: emails where they think I'm like a you know, a
• 31:08
  Speaker 1: magician trying to pull a rabbit out of a hat.
• 31:10
  Speaker 1: You know, they're asking for something technically didn't do right,
• 31:13
  Speaker 1: you know what I mean. They're like, they're you know,
• 31:15
  Speaker 1: I mean, look, I mean, if you give them a
• 31:16
  Speaker 1: few good calls, they think you can predict the future,
• 31:18
  Speaker 1: but we can't. You know, we're just gauging risk and reward.
• 31:21
  Speaker 1: And I think that's.
• 31:22
  Speaker 2: What's a really good way to express that. You're looking
• 31:25
  Speaker 2: at various patterns and setups to identify your best risk
• 31:29
  Speaker 2: reward set.
• 31:30
  Speaker 1: And I think that's a big misunderstanding because most people
• 31:34
  Speaker 1: are of the mentality in the DraftKings world that you know,
• 31:37
  Speaker 1: technical analysis is a good way to enhance their gambling habit,
• 31:40
  Speaker 1: you know, But what we're really looking to do is
• 31:42
  Speaker 1: manageer's reward. I mean, you know, I always tell like
• 31:45
  Speaker 1: hedge fund clients when I'm talking to them, you know,
• 31:48
  Speaker 1: they're I mean a lot of them along short. But
• 31:50
  Speaker 1: they're like, I'm like, here's how you identify. Here's how
• 31:53
  Speaker 1: I would identify a corelong. You first and foremost, you
• 31:57
  Speaker 1: identify what your benchmark is. How are you measuring your
• 31:59
  Speaker 1: before ormans? And you take your absolute price, and if
• 32:02
  Speaker 1: the absolute price is trending up along with the relative price,
• 32:05
  Speaker 1: that's where you look for core lungs. And if it
• 32:07
  Speaker 1: got good fundamentals there even better on this other side,
• 32:10
  Speaker 1: you know, weak relative weak absolute, that's where you get.
• 32:13
  Speaker 1: You call it core shorts. And I tell them, like,
• 32:15
  Speaker 1: you know, where it becomes really interesting is when you
• 32:18
  Speaker 1: have a stock that's been trending up for a while,
• 32:19
  Speaker 1: but all of a sudden, the relative ratio starts lagging,
• 32:22
  Speaker 1: meaning that if I'm a fund manager, at the end
• 32:24
  Speaker 1: of the quarter, oh my god, you know, Apple's up
• 32:27
  Speaker 1: fifteen percent. Oh wait, but the market's up twenty I'm lagging,
• 32:30
  Speaker 1: you know. Then they kick that out of the beforeil
• 32:32
  Speaker 1: and guess what happens. You know, the stock starts the
• 32:34
  Speaker 1: former top because of selling pressure and the same thing
• 32:37
  Speaker 1: on the other side. So it's like you and.
• 32:39
  Speaker 2: To be to clarify, you're not saying this about Apple, No, no,
• 32:42
  Speaker 2: you're just using as a example as.
• 32:44
  Speaker 1: An example, not not talking about Apple or a prediction
• 32:46
  Speaker 1: there at all. But you know what I'm saying is
• 32:50
  Speaker 1: it's like you can find a time using technical analysis
• 32:55
  Speaker 1: to say, you know what, I've been bullish this stock,
• 32:58
  Speaker 1: but it's starting to lag the market. Maybe it's time
• 33:01
  Speaker 1: for me to revisit my fundamental thesis. And that's and
• 33:04
  Speaker 1: that's good, that's useful information to somebody, because what I've
• 33:07
  Speaker 1: noticed is when a stock and an ups trend starts
• 33:11
  Speaker 1: underperforming the market, guess what they I mean, I haven't
• 33:15
  Speaker 1: tested this yet, but the theory is. And if I
• 33:17
  Speaker 1: test the hypothesis and the theory and this theory works,
• 33:20
  Speaker 1: the theory is a weakening relative often precedes fundamental information
• 33:25
  Speaker 1: that's less bullish than people expect. And I've seen it
• 33:29
  Speaker 1: happen a lot. And on the other side too, a
• 33:31
  Speaker 1: stock trending down all of a sudden, the relative ratio
• 33:34
  Speaker 1: is starting to improve. In fact, I mean this is
• 33:36
  Speaker 1: the environment now with the market correcting, where you look
• 33:39
  Speaker 1: for names like that, you know, where the relative charts improving,
• 33:41
  Speaker 1: meaning that, oh my gosh, you know the SMP's corrected
• 33:43
  Speaker 1: ten percent, this stop's only down five All right, why
• 33:46
  Speaker 1: is that? Is there something going on? Fundamentally I need
• 33:49
  Speaker 1: to look into And that's and that gets you know,
• 33:51
  Speaker 1: the fundamental analysts thinking. And if I was doing more
• 33:54
  Speaker 1: fundamental work, it would tell me, all right, I really
• 33:55
  Speaker 1: got to look at these companies to see, hey, what's
• 33:57
  Speaker 1: going on or estimates coming up? Or are the revision
• 34:00
  Speaker 1: improving or you know what I mean. So, and I
• 34:03
  Speaker 1: think that's how not only not only a good way
• 34:06
  Speaker 1: a to interact with some of the institutional client base,
• 34:09
  Speaker 1: but also and private client base as well, but also
• 34:12
  Speaker 1: just as a process because technical analysis is nothing, you know,
• 34:18
  Speaker 1: without fundamentals. I mean technical analysis somebody once coined it
• 34:21
  Speaker 1: lazy man's fundamental work, you know, and.
• 34:24
  Speaker 2: Free writing on other people's number crunch.
• 34:27
  Speaker 1: Because think about it. I mean, you know, if it
• 34:29
  Speaker 1: stocks rallying, it's doing it for a fundamental reason most
• 34:33
  Speaker 1: of the time.
• 34:33
  Speaker 2: I mean, and you may not know what it is,
• 34:35
  Speaker 2: but you can identify the footprints in the charts.
• 34:38
  Speaker 1: I mean, think about where we were a year ago.
• 34:39
  Speaker 1: One hundred percent of economists calling for recession in the
• 34:42
  Speaker 1: market rallies.
• 34:43
  Speaker 2: Two years, right, I mean, that's been ongoing, the calls
• 34:46
  Speaker 2: for recession.
• 34:46
  Speaker 1: And guess what I mean. Guess when the markets started correcting,
• 34:49
  Speaker 1: when people started taking those calls off the table and
• 34:51
  Speaker 1: calling for a soft landing. So, you know, as as
• 34:55
  Speaker 1: the market was rallying, it was telling us something, and
• 34:58
  Speaker 1: then as soon as the economists start confirming what it
• 35:01
  Speaker 1: was telling us, that's when it correct it. So now
• 35:03
  Speaker 1: we need to see what event that we're discounting now
• 35:06
  Speaker 1: and hopefully eventually, you know, we discounted completely and things
• 35:09
  Speaker 1: can get a little bit better.
• 35:11
  Speaker 2: Huh. Really interesting. Let's talk a little bit about what's
• 35:14
  Speaker 2: going on in the current market environment. We're recording this
• 35:18
  Speaker 2: Halloween twenty twenty three. Where are we today? Are we
• 35:22
  Speaker 2: in a secular bull market or bear market? Are we
• 35:24
  Speaker 2: in a cyclical bull or bear? What's the state of
• 35:28
  Speaker 2: equity markets and bond markets today.
• 35:31
  Speaker 1: Well, I mean, I keep it simple with those sort
• 35:35
  Speaker 1: of trends. So whenever we go on television, we always
• 35:40
  Speaker 1: pull up the same chart S and P. Five hundred
• 35:42
  Speaker 1: with a forty week moving average and a two hundred
• 35:44
  Speaker 1: week moving average. The forty week moving average for those
• 35:47
  Speaker 1: who look more at daily charts, can associate that with
• 35:49
  Speaker 1: a two hundred day moving average. So we gauge the
• 35:52
  Speaker 1: cyclical trend of the market using the forty week moving average,
• 35:56
  Speaker 1: and we gauge the secular trend as the two hundred
• 36:00
  Speaker 1: week moving average. So when you have a rising forty
• 36:03
  Speaker 1: week moving average, which we do now, and a rising
• 36:07
  Speaker 1: two hundred week moving average, which we do now, the
• 36:10
  Speaker 1: pattern is a cyclical uptrend or bowl market, and a
• 36:14
  Speaker 1: secular uptrender bowl market. Where are we now in the
• 36:18
  Speaker 1: context of that, Given the ten percent pullback that we've
• 36:21
  Speaker 1: gotten since the July highs, it is a correction of
• 36:24
  Speaker 1: that pattern. The we are below the forty week moving
• 36:28
  Speaker 1: average around forty two to fifty. So that's on the
• 36:32
  Speaker 1: that's on the S and P. Five hundred.
• 36:33
  Speaker 2: Yes, what about how does the NASDAK clock a little.
• 36:36
  Speaker 1: Stronger, stronger, stronger. Yeah, I mean, so when we look
• 36:40
  Speaker 1: at then the Nasdaq one hundred, for instance, it is
• 36:44
  Speaker 1: still I mean it just tested the forty week moving
• 36:47
  Speaker 1: average last week, so and well about the two hundred
• 36:51
  Speaker 1: week moving average, so still stronger. If you'll get relative
• 36:53
  Speaker 1: strength charts, you know, the the NASAK one hundred still
• 36:57
  Speaker 1: has a stronger pattern than the SMP at this stage. Technology,
• 37:01
  Speaker 1: you know, the sector itself a technology still has a
• 37:03
  Speaker 1: stronger relative chart patterns been sideways, but in a stronger trend.
• 37:09
  Speaker 1: And you know, you look at the r RG on
• 37:11
  Speaker 1: Bloomberg for instance.
• 37:13
  Speaker 2: Which is our lego yet, listeners, what what is that?
• 37:16
  Speaker 2: What does that show you?
• 37:18
  Speaker 1: Oh, it's a great it's a great it's a great tool. Actually,
• 37:21
  Speaker 1: I think I use it a lot in my work.
• 37:23
  Speaker 2: RRG stands for.
• 37:24
  Speaker 1: Relative rotation graph And what it's telling us now is
• 37:28
  Speaker 1: that some of the cyclical sectors, like financials, materials, industrials,
• 37:33
  Speaker 1: they had a chance to rotate into a bigger leadership
• 37:36
  Speaker 1: position and failed where and technology and discretionary and comm
• 37:40
  Speaker 1: services had a chance to rotate into a more bearish
• 37:43
  Speaker 1: leadership position and did not do that. So looking at that,
• 37:49
  Speaker 1: it's like you just got to think about what is
• 37:51
  Speaker 1: the risk here? You know, to investors that are, you know,
• 37:57
  Speaker 1: looking to get more part in the not participation, but
• 38:01
  Speaker 1: more outpha in the market from a greater number of stocks.
• 38:04
  Speaker 1: The risk is that doesn't happen. If this pattern holds,
• 38:06
  Speaker 1: the risk is that tech can continue to lead, comp
• 38:09
  Speaker 1: services continue to lead, and the cyclical sectors can continue
• 38:13
  Speaker 1: to lag since they weren't able to take on the
• 38:15
  Speaker 1: mantle of relative leadership in the relative rotation graph, so
• 38:20
  Speaker 1: they were not able to move into an upshrend, and.
• 38:23
  Speaker 2: So industrials have looked like they've been on the verge
• 38:26
  Speaker 2: for a while. They have, hasn't happened?
• 38:28
  Speaker 1: Hasn't happened.
• 38:29
  Speaker 2: On the other hand, same with financial same thing looks like,
• 38:32
  Speaker 2: oh now there's some spread. Financials can make more money.
• 38:35
  Speaker 2: Hasn't really happened. On the other hand, energy seems to
• 38:39
  Speaker 2: really be cleaning itself up. What's going on in the
• 38:43
  Speaker 2: oil sector?
• 38:43
  Speaker 1: Oh yeah, so that's that's the one cyclical sector that
• 38:46
  Speaker 1: has started to work. In fact, it does look an
• 38:49
  Speaker 1: awful lot like the pattern that we had for that
• 38:52
  Speaker 1: on a relative basis, meaning outperformance off the low relative
• 38:58
  Speaker 1: low from ninety eight to two thousand, and that relative
• 39:01
  Speaker 1: uptrend continued.
• 39:02
  Speaker 2: Ninety eight to two, Like we're looking back twenty five years,
• 39:06
  Speaker 2: twenty plus years.
• 39:07
  Speaker 1: And it was a similar pattern that we have now
• 39:09
  Speaker 1: and it's it's maybe a third of the way through it. Wow,
• 39:13
  Speaker 1: because that if that continues, you know, energy should be
• 39:15
  Speaker 1: able to outperform if history rhymes, right, I mean the
• 39:21
  Speaker 1: oil chart, and it looks like it could be building
• 39:25
  Speaker 1: a base. You know, it broke out and moved back
• 39:27
  Speaker 1: and retested some some levels of support. But yeah, we'll
• 39:30
  Speaker 1: see how that pattern develops. I mean, you know, I mean,
• 39:33
  Speaker 1: but it does. It does have more of a a
• 39:36
  Speaker 1: look of building a base within an uptrend for that.
• 39:40
  Speaker 1: So if that does work in oil stays stable to higher,
• 39:43
  Speaker 1: energy should work to some extent. I mean, obviously this
• 39:47
  Speaker 1: week or last couple of weeks, there's been some m
• 39:51
  Speaker 1: and A activity where some from the bigger names start
• 39:53
  Speaker 1: to get hit a little harder, but it didn't derail
• 39:55
  Speaker 1: the sector at all. Huh.
• 39:56
  Speaker 2: Interesting, I couldn't help but notice that very quietly, a
• 40:02
  Speaker 2: lot of cryptocurrency, most specifically Bitcoin, hit new fifty two
• 40:08
  Speaker 2: week highs. Nobody's talking about that. Really, What does that
• 40:12
  Speaker 2: mean when not only a particular stock or asset hits
• 40:17
  Speaker 2: a fifty two week high, but it seems to be
• 40:20
  Speaker 2: off the rail, blow the radar. What do you what
• 40:22
  Speaker 2: do you make of that?
• 40:23
  Speaker 1: Well, I can't talk about bitcoin. I don't think I'm
• 40:24
  Speaker 1: allowed to do that at via a security of the course.
• 40:28
  Speaker 1: But yeah, I mean, look, I mean if that and
• 40:30
  Speaker 1: we're seeing that in you know, in other areas in
• 40:34
  Speaker 1: the market as well. No, it just means nobody's there.
• 40:38
  Speaker 1: Nobody cares.
• 40:39
  Speaker 2: And which is now? Is that bullish or bearish? If
• 40:42
  Speaker 2: nobody cares that something's making a fifty two week high,
• 40:45
  Speaker 2: that might mean a lot more people could come into
• 40:49
  Speaker 2: that space. Forget bitcoin, any type of any type of
• 40:52
  Speaker 2: quiet fifty two week high.
• 40:54
  Speaker 1: I mean it happened. I think it probably happened with
• 40:57
  Speaker 1: energy names not long ago, you know, coming off the
• 40:59
  Speaker 1: lows of twenty two twenty, you know, they they moved
• 41:01
  Speaker 1: up a lot. Oh it's already up thirty percent. Well
• 41:04
  Speaker 1: it went up another fifty percent after that, you know
• 41:06
  Speaker 1: what I mean, that's that's people People actually have that argument.
• 41:10
  Speaker 1: Oh I missed it, So I'm gonna wait for it
• 41:11
  Speaker 1: to dip. And it doesn't dip. I mean, that's what
• 41:14
  Speaker 1: happens in that sort of environment. You know when when
• 41:16
  Speaker 1: you start to see that happen. So I'm sure over
• 41:20
  Speaker 1: the next few weeks there's gonna be patterns developing in
• 41:23
  Speaker 1: other pockets of the market where things that have been
• 41:26
  Speaker 1: left I mean, I don't want to use the term
• 41:28
  Speaker 1: left for dead, but I guess that's the only term.
• 41:30
  Speaker 1: It's Halloween, so might as well, right, I mean that,
• 41:33
  Speaker 1: you know, though they can rally quickly twenty thirty percent
• 41:36
  Speaker 1: and people be like, oh, I missed it, and then
• 41:38
  Speaker 1: three months later it's up another twenty or thirty percent.
• 41:40
  Speaker 1: I mean that that's the path, that's the way those
• 41:42
  Speaker 1: patterns tend to work.
• 41:43
  Speaker 2: You mentioned Halloween. What's the scariest chart you've seen recently?
• 41:49
  Speaker 1: Well, I what I don't want. There's one breath indicator
• 41:54
  Speaker 1: and I don't like right now, and it's just I mean, hopefully.
• 41:57
  Speaker 2: What's the breath indicator.
• 41:58
  Speaker 1: It's the percentage stocks pepture movement averages. They had some
• 42:01
  Speaker 1: devilish divergences in the summer and they broke to new
• 42:05
  Speaker 1: you know, year to date lows.
• 42:07
  Speaker 2: Mm hmm. Now and you don't like that.
• 42:10
  Speaker 1: It just I mean, I don't know. I mean, we
• 42:12
  Speaker 1: have to let's see if they get back to you know,
• 42:14
  Speaker 1: over soul levels. But you know, yeah, that's that's something
• 42:19
  Speaker 1: that's a bit challenging, you know. But they again, I
• 42:21
  Speaker 1: think it all has to do with the fact that,
• 42:25
  Speaker 1: you know, the equal weighted index has been lagging the
• 42:27
  Speaker 1: cap weighted index pretty much all year.
• 42:29
  Speaker 2: You're anticipating my next question, what does it mean when
• 42:33
  Speaker 2: you have this divergence between the S and B five
• 42:36
  Speaker 2: hundred the way we think of it as market cap
• 42:38
  Speaker 2: weighted versus the what is an SPW the that's equal
• 42:42
  Speaker 2: cap weighted. Uh that that divergence is about as big
• 42:46
  Speaker 2: as it's ever ever gets.
• 42:48
  Speaker 1: I mean, and that is a scary chart when you
• 42:50
  Speaker 1: look at it, relever the S and P scary because
• 42:53
  Speaker 1: if the technicals work on this, there's still more underperformance
• 42:58
  Speaker 1: coming for that the powder meaning that if you look
• 43:02
  Speaker 1: at the pattern going back a decade or more, there
• 43:05
  Speaker 1: is a potential that the equated index is forming what
• 43:08
  Speaker 1: would be called a head and shoulders top versus the
• 43:11
  Speaker 1: SMP the cap weighted index. I hope it doesn't work
• 43:14
  Speaker 1: because in our firm, you know, we have strategists that
• 43:18
  Speaker 1: you don't want to see the equo weight to work,
• 43:20
  Speaker 1: and I think it would probably be healthier for the
• 43:21
  Speaker 1: market if it did work.
• 43:23
  Speaker 2: It suggests that the market is relatively narrow at present, right, right,
• 43:27
  Speaker 2: I mean if the cap weighted is radically outperforming the
• 43:30
  Speaker 2: equal weighted, it means the biggest twenty stocks are the drivers.
• 43:35
  Speaker 1: Yeah, that's where you're getting your alpha. I mean in
• 43:37
  Speaker 1: terms of market breadth itself, I mean the advanced the
• 43:39
  Speaker 1: client on the S and P went to at all
• 43:41
  Speaker 1: time high over the summer, should be bullish, right, it
• 43:44
  Speaker 1: should be bullish, and it gets warisomewhere in my world.
• 43:50
  Speaker 1: When this lack of performance for equal weight versus cap
• 43:54
  Speaker 1: weight leads to weakening breadth indicators, which is why that
• 43:58
  Speaker 1: percentage of stocks about two hundred tay MoveOn average, it
• 44:00
  Speaker 1: seems scary to me. Now, I will say, when you
• 44:04
  Speaker 1: look at the equate versus cap weighted ratio lagging equate
• 44:10
  Speaker 1: lagging cap weighted, Guess what period of time that happened
• 44:14
  Speaker 1: in the past where the equity market was really strong
• 44:18
  Speaker 1: nineteen ninety four to two thousand.
• 44:19
  Speaker 2: Yeah, right, that that that was all driven by the
• 44:23
  Speaker 2: biggest tech companies at the time.
• 44:25
  Speaker 1: And also I think pharma was involved in that too,
• 44:28
  Speaker 1: and other large cap stocks here's the other interesting thing.
• 44:32
  Speaker 1: You look at the S and P one hundred index
• 44:34
  Speaker 1: right now, it does appear to be breaking out from
• 44:39
  Speaker 1: a multi year bottom versus the SMP meaning megacaps leading
• 44:45
  Speaker 1: large caps. The last time I saw a breakout like
• 44:47
  Speaker 1: that was nineteen ninety eight. I find it curious that
• 44:51
  Speaker 1: it's half that's happening and the equal weight lagging the
• 44:55
  Speaker 1: cap weighted because in the late nineties or the middle
• 44:59
  Speaker 1: eate nineties, the FED did hike rates quite a bit
• 45:02
  Speaker 1: and then they took some off and then hiked into
• 45:04
  Speaker 1: you know, ninety ninet two thousand with this environment for
• 45:08
  Speaker 1: these particular names. So it just seems to me with
• 45:11
  Speaker 1: these particular you know, size fragments working better than others.
• 45:15
  Speaker 1: So megacap market potentially at this point, just looking at this,
• 45:20
  Speaker 1: if it changes, I'll change, you know, I'll change my
• 45:22
  Speaker 1: view pretty quickly if it starts to change. But right now,
• 45:26
  Speaker 1: you know, I know a lot of people really want
• 45:28
  Speaker 1: to see more alpha generated by more stocks, but the
• 45:32
  Speaker 1: DERISA doesn't happen. But I do think instead of being
• 45:34
  Speaker 1: the magnificent seven, maybe it's a nifty to fifty because
• 45:38
  Speaker 1: the oex is breaking out.
• 45:40
  Speaker 2: Well, well, we also know how the nifty fifty ended.
• 45:42
  Speaker 1: So but it takes time, you know, it takes time,
• 45:45
  Speaker 1: a lot longer than people think. I mean, I'm sure
• 45:47
  Speaker 1: people were calling for a bubble in nineteen ninety eight, right,
• 45:50
  Speaker 1: and you had a huge run up.
• 45:51
  Speaker 2: They said, a long time, a long way to go.
• 45:55
  Speaker 2: You mentioned the Fed raising rates. Let's talk about the
• 45:58
  Speaker 2: bond market. What do you see in in treasuries and
• 46:01
  Speaker 2: the fixed income half of the portfolio.
• 46:03
  Speaker 1: Well, I mean, obviously that's not my call, is the
• 46:05
  Speaker 1: equity strategist at BFA. But when you look at the
• 46:09
  Speaker 1: tenure yield, the view is a secularize and interest rate.
• 46:15
  Speaker 1: And if I'm putting on my equity hat, and I
• 46:19
  Speaker 1: have to say, all right, what was the last time
• 46:21
  Speaker 1: you had interest rates rising from you know, levels around
• 46:25
  Speaker 1: one percent? I mean here we went a lot lower
• 46:27
  Speaker 1: during COVID, obviously, but mid nineteen forty, so nineteen forty
• 46:30
  Speaker 1: six into sixty six, a twenty year rise from about
• 46:33
  Speaker 1: one and a half to about five seven five over twenty.
• 46:37
  Speaker 2: Years, it's about about this, maybe a little smaller than
• 46:40
  Speaker 2: the current range.
• 46:41
  Speaker 1: Right. You know. The interesting thing is, I mean, if
• 46:44
  Speaker 1: COVID didn't happen, where would your yield low be, It's
• 46:47
  Speaker 1: either twenty twelve or sixteen, you know what I mean. So,
• 46:50
  Speaker 1: I mean maybe this secular rise and yielded a little
• 46:53
  Speaker 1: longer than people think it is. But I mean again,
• 46:55
  Speaker 1: the market did drop on the ten year note yield
• 46:58
  Speaker 1: to like what point three on the ten during COVID.
• 47:01
  Speaker 1: So and this is when you look at the yield chart,
• 47:04
  Speaker 1: it's like the fastest rise we've ever gotten. So if
• 47:07
  Speaker 1: we are going to follow you know, that period in
• 47:10
  Speaker 1: the fifties, I mean, right now, I think we're probably
• 47:13
  Speaker 1: I mean, if I'm looking at stocks and overlaying it
• 47:16
  Speaker 1: with interest rates and just trying to think about how
• 47:19
  Speaker 1: most you know, where we are in that particular analogue,
• 47:23
  Speaker 1: it's probably late fifties, early sixties. In some regard we've
• 47:29
  Speaker 1: been secular bulls. But what is not a characteristic of
• 47:32
  Speaker 1: a secular bull Its interest rates above five seven five,
• 47:36
  Speaker 1: and it's inflation, you know, surging again. You know, we
• 47:39
  Speaker 1: can't have that happen. It's very interesting when I get
• 47:42
  Speaker 1: people asking me stuff like when is the market going
• 47:46
  Speaker 1: to get back to normal? I'm like, well defined normal?
• 47:49
  Speaker 1: Well interesting, its need to be lower, you know, one percent.
• 47:51
  Speaker 2: I'm like, well, that's not normal, and you know, I
• 47:54
  Speaker 2: find out right, five is pretty normal.
• 47:58
  Speaker 1: I mean the average ten you note, yell, going back
• 48:00
  Speaker 1: to nineteen twenty, if you know, looking at the data,
• 48:03
  Speaker 1: is around four points seven.
• 48:05
  Speaker 2: So we're a little elevated.
• 48:06
  Speaker 1: We're right there, right, not not terrible.
• 48:08
  Speaker 2: Right, We're kissing five as we record this. What's a
• 48:13
  Speaker 2: quota point between friends? Right, it's not that. That's a
• 48:16
  Speaker 2: couple of days of you know, whild trading action, right.
• 48:20
  Speaker 1: So I mean, I mean, look, I mean get a
• 48:22
  Speaker 1: return on your cash, which is great. A lot of
• 48:24
  Speaker 1: people have taken advantage of that. So you know. The
• 48:26
  Speaker 1: other factor is, I mean, when is that record level
• 48:30
  Speaker 1: of cash going to be put to work in stocks?
• 48:31
  Speaker 1: You know, I mean with people making five to six
• 48:33
  Speaker 1: percent of money market funds, it's it's going to take
• 48:36
  Speaker 1: a little bit more, which is by design. You know,
• 48:38
  Speaker 1: the FED a lot of people take on risk with
• 48:41
  Speaker 1: rates at zero. Now you know, they don't want people
• 48:43
  Speaker 1: to take on as much risk in some regard, so
• 48:46
  Speaker 1: it's going to take a little more confidence, you know,
• 48:48
  Speaker 1: and equities too, because you get your hurdle retire, you know,
• 48:52
  Speaker 1: So it makes sense. So I mean that's the reason
• 48:54
  Speaker 1: why I think we are moving into a more normal environment.
• 48:57
  Speaker 1: We're actually getting a really normal type of correction rather
• 49:00
  Speaker 1: than something that lasts only you know, three to five percent,
• 49:03
  Speaker 1: We're getting a normal ten percent plus type of pullback.
• 49:07
  Speaker 2: You mentioned how COVID changed when what the lows were
• 49:11
  Speaker 2: in the bond market. It's a fascinating piece in the
• 49:16
  Speaker 2: Economists this week about in the post COVID world sentiment
• 49:21
  Speaker 2: data has you know, just gone off the rails. In fact,
• 49:24
  Speaker 2: if you look at the bottom of the sentiment data
• 49:28
  Speaker 2: in twenty twenty two, and I've been struggling with this
• 49:31
  Speaker 2: for a while, worse than the eighty seven crash, worse
• 49:35
  Speaker 2: than the dot Com implosion, worse than September eleventh, worse
• 49:39
  Speaker 2: than the Great Financial Crisis, and worse than the COVID lockdowns.
• 49:45
  Speaker 2: What do you make of this wildly noisy sentiment data?
• 49:48
  Speaker 1: So wait, which which data points were?
• 49:51
  Speaker 2: I believe it was the University of Michigan sentiment data.
• 49:57
  Speaker 1: And now it was the worse during COVID than any
• 49:58
  Speaker 1: other period.
• 50:00
  Speaker 2: Twenty two at a record low, worse than COVID, worse
• 50:03
  Speaker 2: than GFC, worse than dot COM's just unprecedented levels that
• 50:07
  Speaker 2: we've never seen. The economist is implying COVID just disrupted
• 50:12
  Speaker 2: our sense of the world.
• 50:14
  Speaker 1: It probably did. It probably did to some extent. And
• 50:17
  Speaker 1: I think, you know, in twenty twenty two you started,
• 50:20
  Speaker 1: I mean, I mean, you're already in a bear market
• 50:24
  Speaker 1: from peaks in twenty twenty one. You already had indicators
• 50:27
  Speaker 1: topping out in twenty twenty one, in the middle of
• 50:28
  Speaker 1: the year and then late in the year. So we
• 50:30
  Speaker 1: were well entrenched with economists looking for you know, you know,
• 50:34
  Speaker 1: a massive hard landing at that point. So it would
• 50:36
  Speaker 1: make sense the sentiment would be off the rails to
• 50:38
  Speaker 1: some extent, you know, give given that.
• 50:42
  Speaker 2: Outlook makes some sense. You frequently use a phrase that
• 50:47
  Speaker 2: cracks me up in your research. Let's discuss your indicators.
• 50:52
  Speaker 2: The Good, the bed, and the Ugly one of my
• 50:55
  Speaker 2: favorite movies of all time. Looking at the world that's
• 50:58
  Speaker 2: out there today. What's good, that's bad, what's ugly?
• 51:02
  Speaker 1: Right? So, yeah, we we just you know, wanted to
• 51:05
  Speaker 1: be a little tongue in cheek with some of our
• 51:06
  Speaker 1: stuff here. So so we noticed that the percentage of
• 51:09
  Speaker 1: stocks of a fifty day moving averages on the SMP
• 51:12
  Speaker 1: actually did not go to a lower low, as the
• 51:15
  Speaker 1: SMP went to a lower low just last Friday, so
• 51:19
  Speaker 1: that has the potential to be good, you know, maybe
• 51:22
  Speaker 1: triggers a seasonal rally. Another indicator we threw in there
• 51:29
  Speaker 1: was the I think they call it the NAAIM exposure Index,
• 51:36
  Speaker 1: that around twenty four percent versus over souls in the
• 51:39
  Speaker 1: low twenties. That's getting closer. So so exposure among asset
• 51:43
  Speaker 1: managers and market participants in equities is a lot lower
• 51:47
  Speaker 1: than it was. So a lot of the I mean
• 51:48
  Speaker 1: I always use the term a lot of the froth
• 51:50
  Speaker 1: has been blown off the cappuccino, you know, over the
• 51:53
  Speaker 1: last three months. So those are those are some you know,
• 51:56
  Speaker 1: better looking indicators. I would argue that when you look
• 51:59
  Speaker 1: at the Chicago Fed Financial Conditions Index, it's held in
• 52:03
  Speaker 1: like a champ. So that's not what does that mean, Well,
• 52:06
  Speaker 1: just means financial conditions aren't deteriorating, you know, to any
• 52:09
  Speaker 1: great extent based on that indicator, you know, which is
• 52:13
  Speaker 1: an indicator I like to use. Credit markets haven't blown
• 52:16
  Speaker 1: out either, you know, So that's that, you know, spreads
• 52:18
  Speaker 1: haven't blown out either, at least on.
• 52:20
  Speaker 2: And there are people were warning that that was about
• 52:22
  Speaker 2: to happen in the spring when Silicon Valley Bank and
• 52:26
  Speaker 2: First Republic blew up. This is it. You're going to
• 52:28
  Speaker 2: see credit markets turned go upside down, and that'll be
• 52:31
  Speaker 2: it for equities.
• 52:33
  Speaker 1: Not so much, not so much. I mean the corporate
• 52:35
  Speaker 1: BAA to ten year spread is one I look.
• 52:37
  Speaker 2: At a lot, meaning investment grade to just below investment grade.
• 52:42
  Speaker 1: It's the tenure spread versus that. So I look at
• 52:45
  Speaker 1: the lowest tier of investment grade versus the tenure yield
• 52:48
  Speaker 1: versus the treasure got Yeah, And what I'm trying to
• 52:50
  Speaker 1: say is, all right, when does stuff start to creep
• 52:53
  Speaker 1: into investment grade, you know, the lower tier, and it
• 52:55
  Speaker 1: hasn't happened. I mean that is well below two percent,
• 52:58
  Speaker 1: and when you get aboup two point five, that's when
• 53:01
  Speaker 1: things really start.
• 53:02
  Speaker 2: To Let's talk about your sector work. How do you
• 53:06
  Speaker 2: utilize different sectors and how does that work into your
• 53:10
  Speaker 2: overall approach to macro.
• 53:14
  Speaker 1: Well, I mean the sectors. I mean this is this
• 53:16
  Speaker 1: is I've been shying away from having bold sector calls
• 53:20
  Speaker 1: this year, and the reason why is you can find bullish,
• 53:23
  Speaker 1: embarrassed stock charts everywhere no matter what sector you're looking at,
• 53:28
  Speaker 1: even utilities.
• 53:29
  Speaker 2: What does it mean when a sector is strong and
• 53:32
  Speaker 2: an individual company is weak. Is it just reflecting that company?
• 53:36
  Speaker 2: How do you draw a conclusion from that?
• 53:38
  Speaker 1: No, I mean what you want to see. I mean, sure,
• 53:40
  Speaker 1: that's a good question. So you know, if you have
• 53:42
  Speaker 1: a bullish sector, I mean, I would argue tech is
• 53:44
  Speaker 1: still a tech and comm services are still in quite
• 53:47
  Speaker 1: bullish position. So if you have a stock and a
• 53:51
  Speaker 1: bullish sector is not acting well, jazz are it's an
• 53:54
  Speaker 1: idiosyncratic problem with that stock or chart, you know, probably
• 53:58
  Speaker 1: a fundamental reason for it too, more so than a
• 54:00
  Speaker 1: technical reason, because you know, the technicals are reflecting the
• 54:03
  Speaker 1: fundamental situation to some extent. So I mean, I think
• 54:07
  Speaker 1: right now, just looking at sectors and looking at you know,
• 54:10
  Speaker 1: the way things look on the relative price charts along
• 54:14
  Speaker 1: with the absolute price charts, it seems like, you know,
• 54:16
  Speaker 1: tech is holding in fine comm services, holding in fine
• 54:21
  Speaker 1: semi conductors, trying to hold their trend industrials, you know, trying,
• 54:27
  Speaker 1: but you know, not not really convincing energy holding in
• 54:31
  Speaker 1: just fine materials. It depends on the stock. You can
• 54:34
  Speaker 1: find some winners, find some losers, and financials. It's really
• 54:38
  Speaker 1: challenging because you know, you know two things. One, the
• 54:42
  Speaker 1: absolute chart looks okay as long as it can hold
• 54:46
  Speaker 1: those prior highs from two thousand and seven, which it
• 54:48
  Speaker 1: has done, but the relative chart not okay. But within
• 54:53
  Speaker 1: that group, you can find winners in things like exchanges
• 54:57
  Speaker 1: and stuff like that that look really strong relative to
• 55:00
  Speaker 1: the laggers of the group, which just happened to be,
• 55:03
  Speaker 1: you know, the sector near and dear to my heart, the.
• 55:05
  Speaker 2: Banks, you know, you know, just because you work for that,
• 55:08
  Speaker 2: just to set you up to really like right, I mean,
• 55:12
  Speaker 2: why not?
• 55:13
  Speaker 1: I mean it's like, you know, it's you know, you
• 55:15
  Speaker 1: want to see your companies, you know, Yeah, well of
• 55:17
  Speaker 1: course you know.
• 55:18
  Speaker 2: It's like so, so let's talk about the macro what
• 55:22
  Speaker 2: goes into what you look at most when you're doing
• 55:26
  Speaker 2: an overall view of the equity markets.
• 55:29
  Speaker 1: Yeah. So, I mean, one of my favorite indicators, and
• 55:32
  Speaker 1: I would lump it in with the good, would be
• 55:34
  Speaker 1: the seventy three country Index of market breadth. So the
• 55:38
  Speaker 1: advanced a client line for seventy three country indices. The
• 55:41
  Speaker 1: US is one of those.
• 55:43
  Speaker 2: So it's not just looking at the domestic equity markets.
• 55:46
  Speaker 2: You want to see the whole world doing well at once.
• 55:48
  Speaker 1: Yes, and that advanced a client line broke out during
• 55:51
  Speaker 1: the summer, and even though the market correction has taken
• 55:55
  Speaker 1: a lot of indicies below the summer breakout points, this
• 55:58
  Speaker 1: particular advanced to Client I remains above its breakout point,
• 56:01
  Speaker 1: meing that there are pockets of the world that are
• 56:04
  Speaker 1: working better than others, you know, out there. So yeah,
• 56:09
  Speaker 1: I think I think that's important to point out. And
• 56:12
  Speaker 1: and so global breath has a roll over, So it
• 56:15
  Speaker 1: tells us that we're in a corrective phase within what
• 56:18
  Speaker 1: could very well be a market that may yet have
• 56:21
  Speaker 1: another upleake to it, not just in the US, but
• 56:23
  Speaker 1: also you know, globally.
• 56:26
  Speaker 2: So since we're talking about global the world always is
• 56:30
  Speaker 2: kind of a scary place lately. You flip on the news,
• 56:35
  Speaker 2: geopolitics is everywhere. It's Russia and the Ukraine, It's the
• 56:38
  Speaker 2: things that are going on in Israel. It's the economy
• 56:42
  Speaker 2: in Europe and especially China seems to be falling into
• 56:47
  Speaker 2: its own problems. How do you think about all these
• 56:51
  Speaker 2: big geopolitical events or do you not? It's really either
• 56:55
  Speaker 2: in the charts or not.
• 56:57
  Speaker 1: No, I would say it's a latter, and the charts
• 56:59
  Speaker 1: are not. So I mean, put it this way. Market
• 57:03
  Speaker 1: is a discounting mechanism, and sometimes it discounts things in advance,
• 57:08
  Speaker 1: of course, but when things are surprised, it discounts things quickly.
• 57:13
  Speaker 1: And I think that's really the way to think about it.
• 57:17
  Speaker 1: And what's interesting I've noted. I mean maybe there's a
• 57:21
  Speaker 1: little bit of gold taking on to old fashioned.
• 57:24
  Speaker 2: Safe harbor, a little apocalyptic currency.
• 57:30
  Speaker 1: Yeah. I mean, if you look at the research that
• 57:31
  Speaker 1: you know, my colleague puts out, you know, policy on
• 57:33
  Speaker 1: I mean, there's like a huge base on gold. You
• 57:35
  Speaker 1: know that that if it ever breaks out, it can
• 57:38
  Speaker 1: go up a lot. And the events of the world
• 57:42
  Speaker 1: have enhanced that pattern a little bit.
• 57:45
  Speaker 2: So the question I have for your colleague is, Hey,
• 57:48
  Speaker 2: the past decades, so a lot of really crazy things happen,
• 57:52
  Speaker 2: and gold, you know, quote a little bit of a bid,
• 57:55
  Speaker 2: but never really could get out of its own way.
• 57:59
  Speaker 2: In fact, I don't think it got over the two
• 58:01
  Speaker 2: thousand and eight nine highs. What do we make of
• 58:05
  Speaker 2: gold sort of forming this long? Is this a base
• 58:09
  Speaker 2: or is this a top?
• 58:11
  Speaker 1: No, it looks like the mother of all cup and handles.
• 58:17
  Speaker 2: You know, coin and a cup and handle pattern looks like.
• 58:20
  Speaker 1: Yeah, I'm gonna define it because it's like it's it's
• 58:22
  Speaker 1: bill and Eel coined it right, right, So the cup,
• 58:25
  Speaker 1: the handle, the cup is this big rounding type of
• 58:29
  Speaker 1: base stock rally. Sometimes it goes to a new high,
• 58:32
  Speaker 1: which it did, so I did go above where it
• 58:34
  Speaker 1: was briefly, right, yeah, a few times though. Now you
• 58:37
  Speaker 1: have three probes up and then and the probe down.
• 58:40
  Speaker 1: So you got the cup and now you're forming the
• 58:42
  Speaker 1: handle and the handles a lot shalloiler in terms of price.
• 58:46
  Speaker 2: Decline, meaning buyers are coming in higher.
• 58:49
  Speaker 1: Prices, meaning that there's demand for gold at higher prices.
• 58:53
  Speaker 1: And if this technical formation works, I mean, and gold
• 58:58
  Speaker 1: can clear those hives that have heard over the last three,
• 59:01
  Speaker 1: four or five years, then you got the pattern and
• 59:05
  Speaker 1: you can go much higher than where gold is today
• 59:08
  Speaker 1: if we do complete that pattern. And gold was interesting too,
• 59:11
  Speaker 1: because if I put my equity hat on and look
• 59:14
  Speaker 1: at gold the way I look at a stock, it
• 59:16
  Speaker 1: tagged its two under week moving average perfectly rising two
• 59:20
  Speaker 1: under week moving average, which means secular uptrend. You know,
• 59:24
  Speaker 1: even though gold is consolidated, it just lends more confidence
• 59:28
  Speaker 1: that the pattern we're in now is more more likely
• 59:31
  Speaker 1: to break higher than breakdown, and you know, just looking
• 59:33
  Speaker 1: at just evidence based type of technical analysis.
• 59:37
  Speaker 2: And you mentioned towards the end of twenty one there
• 59:40
  Speaker 2: were lots of warning signs. What did the technical say
• 59:45
  Speaker 2: about twenty twenty two, And let's revisit the June and
• 59:50
  Speaker 2: October twenty twenty two bottoms. What were the technical saying? Then?
• 59:54
  Speaker 1: Sure, so we put out our year ahead for twenty
• 59:58
  Speaker 1: twenty two. Buckle up, it's going to be a rocky year.
• 1:00:01
  Speaker 2: That's a pretty good, pretty good call.
• 1:00:03
  Speaker 1: Yeah, I mean, you know it was. Yeah, I felt
• 1:00:07
  Speaker 1: good about it. I mean, look, when you're looking at
• 1:00:10
  Speaker 1: credit spreads peaking in the summer, you're looking at financial conditions,
• 1:00:14
  Speaker 1: you know, hitting their best levels in the summer twenty
• 1:00:16
  Speaker 1: twenty one and then deteriorating through the end of the year.
• 1:00:19
  Speaker 1: When you're looking at the percentage of stocks for two
• 1:00:21
  Speaker 1: hundred day moving averages diverging for six months, you know
• 1:00:25
  Speaker 1: a few other indicators I could point out, but it's
• 1:00:27
  Speaker 1: a laundry list. And the SMP going to a new
• 1:00:31
  Speaker 1: high in January, whereas the Nasdaq one hundred NASDAK comp
• 1:00:36
  Speaker 1: topped out in November. It's telling you something's going on,
• 1:00:39
  Speaker 1: and it just suggested to us that the rally that
• 1:00:42
  Speaker 1: we've gotten from the COVID lows was at risk and
• 1:00:45
  Speaker 1: we were entering into a corrective phase. And you know,
• 1:00:49
  Speaker 1: we were targeting levels like thirty eight hundred, and we
• 1:00:52
  Speaker 1: also throughout the two hundred week moving average, which you
• 1:00:55
  Speaker 1: know when it eventually tested, it was like thirty four
• 1:00:58
  Speaker 1: to ninety, you know, around thirty five hundred on the
• 1:01:00
  Speaker 1: two hundred week we would average. So that was the pattern.
• 1:01:03
  Speaker 1: And then we looked at twenty twenty throughout the year
• 1:01:06
  Speaker 1: twenty twenty two, and you did hit a nice low
• 1:01:08
  Speaker 1: in June and you were able to rally, and then
• 1:01:11
  Speaker 1: guess what happened. You stalled a declining forty week two
• 1:01:14
  Speaker 1: hundred day moving average in August, and then you went
• 1:01:18
  Speaker 1: down and undercut the June low I just by a
• 1:01:22
  Speaker 1: little bit. And I would say that was a nice
• 1:01:24
  Speaker 1: retest of that low. There were some indicators. I believe
• 1:01:28
  Speaker 1: the fourteen week RSI had a higher low, meaning price
• 1:01:31
  Speaker 1: momentum improved even though the SMP went to a lower low,
• 1:01:36
  Speaker 1: so it was so that was a positive. I believe
• 1:01:39
  Speaker 1: there are also fewer new fifty two week lows, and
• 1:01:42
  Speaker 1: the other ingredient was that we just talked about earlier,
• 1:01:45
  Speaker 1: you know, versus June and November. You actually started to
• 1:01:48
  Speaker 1: see the dollar peak and yield's peak in October, so
• 1:01:53
  Speaker 1: that helped the market stabilize and bottom out. So was
• 1:01:56
  Speaker 1: their capitulation, because that's what a lot of people, you know,
• 1:01:59
  Speaker 1: hung on. We didn't get the capitulation in October twenty
• 1:02:03
  Speaker 1: twenty two, and I would argue we did. The one
• 1:02:05
  Speaker 1: indicator I would point to to support two indicators. First, AAII,
• 1:02:10
  Speaker 1: Bears went to the highest level the most bears since
• 1:02:13
  Speaker 1: early two thousand and nine.
• 1:02:15
  Speaker 2: That's pretty big level.
• 1:02:17
  Speaker 1: That's a huge level. So that's one, and the other
• 1:02:19
  Speaker 1: one is that three month miix versus vix went below
• 1:02:22
  Speaker 1: one late September early October of twenty twenty two to
• 1:02:27
  Speaker 1: suggest to us that the tactical medium term you know,
• 1:02:31
  Speaker 1: momentum of medium term sentiment did capitulate. So bears capitulated
• 1:02:37
  Speaker 1: from institution from retail investors h and the three month
• 1:02:41
  Speaker 1: versus vix moved below one to suggest, you know, capitulation
• 1:02:45
  Speaker 1: on that indicator. And the other thing that was very
• 1:02:49
  Speaker 1: interesting about October of last year was that entering the month,
• 1:02:53
  Speaker 1: we had two extraordinarily bullish breath days ninety percent up
• 1:02:58
  Speaker 1: days on the NYFC in a row, and that helps
• 1:03:03
  Speaker 1: slidify a bottom too, even though the first few sessions
• 1:03:06
  Speaker 1: after that it gave up all the rally from those
• 1:03:09
  Speaker 1: two days, but the market did find support, you know,
• 1:03:12
  Speaker 1: with those days. So it was a very complicated market. Normally,
• 1:03:15
  Speaker 1: when you get those two types of things, you just
• 1:03:17
  Speaker 1: rip to the upside. But huh, it's just so volatile now,
• 1:03:20
  Speaker 1: you know.
• 1:03:21
  Speaker 2: So let's sum up the secular view of the markets.
• 1:03:26
  Speaker 2: We had a thirty four percent downturn in twenty twenty
• 1:03:30
  Speaker 2: during the pandemic. The rest of the year from those lows,
• 1:03:34
  Speaker 2: I think we have plus sixty eight percent the following
• 1:03:36
  Speaker 2: year plus twenty nine percent, and then we come into
• 1:03:40
  Speaker 2: twenty twenty two. Where are we broadly? Have we been
• 1:03:44
  Speaker 2: in a cyclical correction within a longer secular bull market? Is?
• 1:03:50
  Speaker 2: Is that how you're describing this? And if we are,
• 1:03:53
  Speaker 2: how long could that secular bullmarket run for?
• 1:03:56
  Speaker 1: Yeah? So it's a great question. So first, the view
• 1:04:00
  Speaker 1: of the twenty twenty two correction was secular cyclical, cyclical correction,
• 1:04:05
  Speaker 1: secular bull market. We made comparisons with the year zone
• 1:04:10
  Speaker 1: crisis in twenty twelve very similar to that. Also twenty
• 1:04:14
  Speaker 1: sixteen Brexit and the election that year and trade war
• 1:04:18
  Speaker 1: in twenty nineteen, and one can even argue COVID twenty
• 1:04:22
  Speaker 1: twenty similar setup where you went down tested the two
• 1:04:25
  Speaker 1: hundred week m cross above the forty week and then
• 1:04:28
  Speaker 1: corrected to undercut the forty week. You did it twice
• 1:04:31
  Speaker 1: twice in twenty twelve, once prior to summer rally and
• 1:04:33
  Speaker 1: once prior to the year on rally twenty twelve. Twenty sixteen,
• 1:04:36
  Speaker 1: you hit it right when the brigs of vote happened
• 1:04:39
  Speaker 1: and then boom ripped into a summer rally fall correction
• 1:04:42
  Speaker 1: year end rally after Trump got e liket to president
• 1:04:45
  Speaker 1: of twenty sixteen and then tried to trade war. Two
• 1:04:47
  Speaker 1: similar type of dips, one in the right ahead of
• 1:04:50
  Speaker 1: a summer rally and one ahead of the year end rally.
• 1:04:52
  Speaker 1: So here we go. We had one in March, which
• 1:04:54
  Speaker 1: is a little early, but it happened. You rallied above
• 1:04:57
  Speaker 1: the forty week, then moved below it, and then rally
• 1:04:59
  Speaker 1: back up by the time you're in April, and you
• 1:05:01
  Speaker 1: got a nice summer rally and then right on. C
• 1:05:04
  Speaker 1: seasonality always says going back to nineteen twenty eight. Well,
• 1:05:07
  Speaker 1: you know, seasonality says, going back to nineteen twenty eight,
• 1:05:10
  Speaker 1: the worst three month period of the year is August
• 1:05:12
  Speaker 1: through October. And that's exactly what's going on right here.
• 1:05:15
  Speaker 1: We're getting that traditional correction which usually proceeds the best
• 1:05:19
  Speaker 1: three month periods of the year of November through January.
• 1:05:22
  Speaker 1: So I think that's where we are now. So we
• 1:05:25
  Speaker 1: could very well be ending this cyclical correction soon if
• 1:05:29
  Speaker 1: we follow seasonal patterns. Now, how long can the secular
• 1:05:32
  Speaker 1: bull market last? Well, there's a financial advisor who helped
• 1:05:38
  Speaker 1: me coin this term. I guess he was a Marilyn
• 1:05:41
  Speaker 1: Monroe fan. The seven year itch, So seven years after
• 1:05:46
  Speaker 1: the breakout of twenty thirteen was COVID and the marketer spike.
• 1:05:49
  Speaker 2: Low and thirty four percent is normally considered a pretty
• 1:05:53
  Speaker 2: substantial bear market.
• 1:05:55
  Speaker 1: I mean, the only only one in the secular bowl
• 1:05:57
  Speaker 1: trend that matched it was the eighty seven crash. And
• 1:06:00
  Speaker 1: guess what eighty seven, seven years after the eighty breakout,
• 1:06:03
  Speaker 1: So seven year itch there, I call it halftime. You know,
• 1:06:06
  Speaker 1: not everybody knows Marilyn Monroe is, you know, I mean
• 1:06:09
  Speaker 1: I did a Jaws reference in one of my Morning
• 1:06:12
  Speaker 1: call appearances, you know, talking about how the market needed
• 1:06:16
  Speaker 1: to build a bigger base. You're going to need a
• 1:06:18
  Speaker 1: bigger base, and sure enough, I bet you if that
• 1:06:21
  Speaker 1: trading floor, probably google what's jaws? Because no, think about
• 1:06:24
  Speaker 1: think of the average age down there. But bottom line
• 1:06:27
  Speaker 1: is this, and I just digress, So let me get
• 1:06:28
  Speaker 1: back to what I was talking about. So the seven
• 1:06:31
  Speaker 1: year low eighty seven will market lasted until twenty two thousand,
• 1:06:35
  Speaker 1: and then fifty seven fifty breakout in the SMP above
• 1:06:38
  Speaker 1: the thirty seven high, and then you rallied into you
• 1:06:44
  Speaker 1: know prior to nineteen fifty seven, had a correction in
• 1:06:46
  Speaker 1: nineteen fifty seven, which was recession and a pandemic, so
• 1:06:50
  Speaker 1: go figure. And then that lasted another nine years. So
• 1:06:55
  Speaker 1: I mean, if I'm just saying, hey, midpoint twenty twenty
• 1:06:59
  Speaker 1: from twenty thirteen, maybe it lasts until twenty twenty seven,
• 1:07:03
  Speaker 1: but some of these other bowl markets lasted longer. Maybe
• 1:07:06
  Speaker 1: I have to get a little bit of haircut. Given
• 1:07:07
  Speaker 1: where inflation interest rates are. I mean that's quite a possibility. Sure.
• 1:07:12
  Speaker 1: In fact, I mean for order for the secular call
• 1:07:14
  Speaker 1: to really work, I mean, let's face it, inflation does
• 1:07:17
  Speaker 1: need to come down and cannot spike you know, ten
• 1:07:22
  Speaker 1: twelve percent. I mean, if it does, that's not what
• 1:07:24
  Speaker 1: happens during secular bowl markets, you know what you know,
• 1:07:28
  Speaker 1: the nineteen fifty secular bowl market started with you know,
• 1:07:30
  Speaker 1: inflation high, and then it went down and stayed fairly contained.
• 1:07:34
  Speaker 1: You know, higher interest rates not what you want to see.
• 1:07:37
  Speaker 2: You know.
• 1:07:37
  Speaker 1: Nineteen eighty short started with interest rates double digits, but
• 1:07:40
  Speaker 1: our friend Vulker, you know, did what he needed to
• 1:07:43
  Speaker 1: do and solve that problem, or heights went down. So
• 1:07:47
  Speaker 1: you know, ten to to note yield is trending through
• 1:07:49
  Speaker 1: five and a half five point seven five, and inflation's
• 1:07:52
  Speaker 1: going back up. You know, I think it's going to
• 1:07:54
  Speaker 1: be very difficult for this secular bowl trend to be sustained.
• 1:07:57
  Speaker 1: Because it hasn't happened before. It doesn't mean it can't happen.
• 1:08:01
  Speaker 1: But I can't find, you know, you know, any history
• 1:08:04
  Speaker 1: to support that case. Huh.
• 1:08:05
  Speaker 2: Really interesting. So let's talk a little bit about what
• 1:08:10
  Speaker 2: follows the worst three months of the year. You mentioned August, September,
• 1:08:14
  Speaker 2: October tends to be seasonally the worst part of the year.
• 1:08:19
  Speaker 2: I've seen all sorts of explanations for why that is harvest,
• 1:08:24
  Speaker 2: people distracted with summer vacation, going back to school, whatever
• 1:08:28
  Speaker 2: it is. The last three months tend to be pretty good.
• 1:08:33
  Speaker 2: What are the odds that we're going to see Santa
• 1:08:35
  Speaker 2: Claus come to Wall Street?
• 1:08:38
  Speaker 1: I hope they're pretty good first and foremost, When you know,
• 1:08:41
  Speaker 1: we use traditional seasonality work, So traditional seasonality, what does
• 1:08:45
  Speaker 1: it tell you? You know, everybody talks about selling May
• 1:08:48
  Speaker 1: and go away, but do you ever see anybody go
• 1:08:51
  Speaker 1: on the media and say, hey, buy in October and stay.
• 1:08:54
  Speaker 1: They don't because that doesn't sell.
• 1:08:56
  Speaker 2: And it doesn't rhyme. That's you know, it's true, and
• 1:08:59
  Speaker 2: it runs. That's the key.
• 1:09:01
  Speaker 1: Yeah, that's true.
• 1:09:01
  Speaker 2: Buy in October trend as your friend. If there's no
• 1:09:04
  Speaker 2: rhyme there, it's no good except for the bend at
• 1:09:07
  Speaker 2: the end of course.
• 1:09:08
  Speaker 1: Yeah. But it's really what's really funny about it is,
• 1:09:10
  Speaker 1: I mean, November starts the best three and six month
• 1:09:13
  Speaker 1: periods of the year for the S and P, which
• 1:09:15
  Speaker 1: I think, going back to ninety twenty a is really
• 1:09:17
  Speaker 1: encouraging for those looking for the market to stabilize. But
• 1:09:21
  Speaker 1: when you think about where we are in the presidential cycle,
• 1:09:24
  Speaker 1: we're in year three, so year two to year three
• 1:09:28
  Speaker 1: has the best part of the cycle, from fourth quarter
• 1:09:32
  Speaker 1: year two, which was last year around this time, through
• 1:09:35
  Speaker 1: the middle of year three. So and we fought, we
• 1:09:37
  Speaker 1: did that perfectly. And now we're you know, we're doing
• 1:09:41
  Speaker 1: the getting ready for year four. We're getting ready for
• 1:09:44
  Speaker 1: year four. But right here, right now, it's tough in
• 1:09:48
  Speaker 1: year three August, September, October, November, so seasonality might be
• 1:09:56
  Speaker 1: pushed into December. We could struggle into November because that
• 1:10:01
  Speaker 1: can happen in the third year of the presidential cycle.
• 1:10:04
  Speaker 1: So in the third year of the presidential cycle, positive
• 1:10:07
  Speaker 1: Q four performance is typically a Santa Claus rally event.
• 1:10:13
  Speaker 1: So and then the next part of the cycle calls
• 1:10:18
  Speaker 1: for a choppy pattern into May of next year. But
• 1:10:24
  Speaker 1: then you follow traditional seasonal patterns summer rally, fall, dip
• 1:10:29
  Speaker 1: and correction and rally after the election, and it doesn't
• 1:10:32
  Speaker 1: matter who wins or loses. I mean, in twenty sixteen,
• 1:10:35
  Speaker 1: everybody thought Trump was a disaster. Everybody thought Biden was
• 1:10:38
  Speaker 1: a disaster, and the contested election was a disaster.
• 1:10:41
  Speaker 2: Market loth cases, market did well, market.
• 1:10:44
  Speaker 1: Did well, So I think, you know, granted, I mean
• 1:10:47
  Speaker 1: that we're into an interesting period of time here where
• 1:10:52
  Speaker 1: it may take a bit longer for the market to stabilize.
• 1:10:55
  Speaker 1: But I do think if we follow, you know, the
• 1:10:59
  Speaker 1: pattern were December should be good.
• 1:11:01
  Speaker 2: So let's talk about another sort of historical pattern, not
• 1:11:05
  Speaker 2: quite seasonal. I've seen a lot of studies that suggest
• 1:11:08
  Speaker 2: when the FED finishes its rate hiking cycle shortly thereafter,
• 1:11:14
  Speaker 2: we're off to the races and the equity side. It
• 1:11:17
  Speaker 2: almost feels like the market isn't sure if the Fed
• 1:11:21
  Speaker 2: is done, and once the market is comfortable, hey, we're
• 1:11:26
  Speaker 2: done raising rates, the next leg up can begin. Does
• 1:11:30
  Speaker 2: that sound reasonable or what are your thoughts on that?
• 1:11:33
  Speaker 1: I mean it does sound reasonable. I mean clarity around
• 1:11:37
  Speaker 1: when that final rate cuts happening probably would be helpful.
• 1:11:41
  Speaker 1: I mean, I think that's one reason why the market
• 1:11:43
  Speaker 1: is struggling a little bit, because there's that last hike
• 1:11:46
  Speaker 1: just sitting out there creating uncertainty.
• 1:11:48
  Speaker 2: Plus you have a lot of Fed governor's jaw boning
• 1:11:50
  Speaker 2: back and forth. It doesn't seem like there's a consensus
• 1:11:54
  Speaker 2: there yet.
• 1:11:54
  Speaker 1: Yes, I mean, my dad was a bond guy all
• 1:11:58
  Speaker 1: his life, and he point he told me FOMC stands
• 1:12:02
  Speaker 1: for Federal open mouth Committee, meaning they talk a lot
• 1:12:05
  Speaker 1: and sometimes confused markets. And back when in the day
• 1:12:07
  Speaker 1: when he was trading bonds, they didn't tell you what
• 1:12:09
  Speaker 1: they were doing either at the FED meetings. You had
• 1:12:11
  Speaker 1: to figure it out from price action.
• 1:12:12
  Speaker 2: They didn't even announce that. People don't realize when you
• 1:12:16
  Speaker 2: talk about some people who have only been in the
• 1:12:18
  Speaker 2: business for ten or twenty years, the FED didn't even
• 1:12:21
  Speaker 2: tell you were hiking rates. You would just have to
• 1:12:23
  Speaker 2: see what would take place in the in the bond market.
• 1:12:26
  Speaker 2: Suddenly it's like, hey, who's uh, who's buying all these
• 1:12:29
  Speaker 2: equities or who's selling all these bonds? You had to
• 1:12:32
  Speaker 2: figure out what was going on.
• 1:12:34
  Speaker 1: I mean, we are spoon fed, that's for sure. I
• 1:12:36
  Speaker 1: mean then, you know, I don't know whether that's a
• 1:12:38
  Speaker 1: good or bad thing. I mean, you know again, I
• 1:12:40
  Speaker 1: mean information just comes at us so quickly, quickly digested.
• 1:12:44
  Speaker 1: You got machines that help you digest the information and
• 1:12:47
  Speaker 1: do and make trading decisions. But yeah, the environment has
• 1:12:50
  Speaker 1: definitely gotten, you know, more complicated. I mean, my dad
• 1:12:53
  Speaker 1: taking the train back in the day, he wasn't getting
• 1:12:55
  Speaker 1: emails on the you know, he could he could actually
• 1:12:57
  Speaker 1: play bridge with a few other guys on the train,
• 1:12:59
  Speaker 1: you know.
• 1:13:00
  Speaker 2: So let me let me ask you a related question
• 1:13:02
  Speaker 2: to that about the Fed spoon feeding us. Say what
• 1:13:08
  Speaker 2: you will about Jerome pal and the Federal Reserve. He said,
• 1:13:12
  Speaker 2: we're going to raise rates, and he started raising rates.
• 1:13:16
  Speaker 2: In fact, he said we're going to raise rates aggressively
• 1:13:19
  Speaker 2: to combat inflation. Now we could say they were a
• 1:13:22
  Speaker 2: little late to the party. They should have started a
• 1:13:25
  Speaker 2: year earlier. But hold that aside. It seems like the
• 1:13:28
  Speaker 2: equity market didn't believe the Fed chairman when he said,
• 1:13:33
  Speaker 2: hold my beer, watch what I'm about to do with rates.
• 1:13:36
  Speaker 2: Nobody seemed to believe him.
• 1:13:38
  Speaker 1: Well, I mean, I think it's good that the equity
• 1:13:39
  Speaker 1: market was able to you know, I mean, obviously at
• 1:13:42
  Speaker 1: first it corrected, but he will rally again because again,
• 1:13:46
  Speaker 1: I mean, you know, people say, hey, rates, they're increasing
• 1:13:48
  Speaker 1: rates drastically, and I'm like, no, I would I would not.
• 1:13:52
  Speaker 1: I would call it normalization of rates.
• 1:13:55
  Speaker 2: You know.
• 1:13:55
  Speaker 1: You know, I think it's a freely what's going on.
• 1:13:58
  Speaker 1: It's not. It's not I mean, as aggressively hiking they did,
• 1:14:03
  Speaker 1: but they got it to a more normalized level. So
• 1:14:06
  Speaker 1: I and you know, again I mean, is it normal
• 1:14:09
  Speaker 1: to get a return on cash investment? To answer that question,
• 1:14:12
  Speaker 1: I would argue is yes. So this is the most
• 1:14:15
  Speaker 1: normal environment we've been in a long.
• 1:14:17
  Speaker 2: Time, which is kind of crazy to think about the
• 1:14:19
  Speaker 2: previous two decades. We're abnormal. And think about everybody who's
• 1:14:24
  Speaker 2: you know, first started investing in these twenty years. You
• 1:14:29
  Speaker 2: had a ten year bear market right from two thousand
• 1:14:32
  Speaker 2: to I don't know, cold twenty twelve, twenty thirteen. Is
• 1:14:38
  Speaker 2: this normal or is this normalizing? We may not quite
• 1:14:42
  Speaker 2: be it normal yet.
• 1:14:43
  Speaker 1: Are we Well, we'll see. I mean, it takes time
• 1:14:45
  Speaker 1: to really figure that one out, but you know, I
• 1:14:48
  Speaker 1: think I think we're a lot more normal than we
• 1:14:50
  Speaker 1: were ten years ago.
• 1:14:51
  Speaker 2: You mentioned different market cycles in the fifties and the sixties.
• 1:14:56
  Speaker 2: Use a lot of historical references. How informative is going
• 1:15:02
  Speaker 2: back decades or centuries The world was so different, you know,
• 1:15:06
  Speaker 2: in an era of telegraphs and railroads. Can we really
• 1:15:10
  Speaker 2: carry forward lessons from that era from chart action to
• 1:15:16
  Speaker 2: the modern world.
• 1:15:17
  Speaker 1: I mean, I think you can. The primary reason you
• 1:15:20
  Speaker 1: can is because dynamics of human nature and fear and
• 1:15:23
  Speaker 1: greed haven't changed. Now people will say, well, there's more
• 1:15:25
  Speaker 1: mechanical trading this you know these days with high frequency
• 1:15:29
  Speaker 1: trading and things like that. I'm like, well, who created the.
• 1:15:31
  Speaker 2: Programs, who's running those algos?
• 1:15:33
  Speaker 1: It's human beings who created it. So I mean, there
• 1:15:35
  Speaker 1: is a human element touching all of that. So maybe
• 1:15:38
  Speaker 1: if we're coming back in ten years, twenty years and
• 1:15:41
  Speaker 1: the machines are creating things, then maybe we have a
• 1:15:43
  Speaker 1: different argument to talk about. But one would think if
• 1:15:46
  Speaker 1: the machines were working the market, it wouldn't be as
• 1:15:48
  Speaker 1: emotional as it is. And yeah, it is very emotional.
• 1:15:51
  Speaker 2: It very much is. You know, it's funny. I read
• 1:15:54
  Speaker 2: a book a while ago. I think it was published
• 1:15:57
  Speaker 2: in the nineteen twenties by Richard wa Cough How I
• 1:16:01
  Speaker 2: Trade Stocks, And what was so shocking was Okay, it
• 1:16:06
  Speaker 2: was about railroads and telephone companies, but you could swap
• 1:16:11
  Speaker 2: in internet and technology and nothing is different. It reads
• 1:16:17
  Speaker 2: as if it was written last month. It's it's really
• 1:16:19
  Speaker 2: quite fascinating. That is human nature, Isn't it exactly?
• 1:16:23
  Speaker 1: Progress? I guess is the term. I mean, maybe maybe
• 1:16:25
  Speaker 1: we fear greed and progress, and I hope progress continues.
• 1:16:30
  Speaker 1: I mean, look, I mean maybe this is maybe the
• 1:16:32
  Speaker 1: secular driver of this is the AI theme or you know,
• 1:16:36
  Speaker 1: things like that. I mean, because every secular bowl trend
• 1:16:39
  Speaker 1: has some sort of theme behind it.
• 1:16:42
  Speaker 2: You think, give us some examples. I like the concept
• 1:16:45
  Speaker 2: of that.
• 1:16:45
  Speaker 1: Well, well, I mean, you know, obviously, I think the
• 1:16:48
  Speaker 1: fifties was more of a build back after World War two.
• 1:16:53
  Speaker 2: Post war right, and for people who may not know
• 1:16:57
  Speaker 2: their history. You had the build out of the interested
• 1:17:00
  Speaker 2: highway system. You had the rise of suburbia, the rise
• 1:17:04
  Speaker 2: of automobile companies and the commercialization of passenger air travel
• 1:17:12
  Speaker 2: and the electronic insurt There were a lot of things
• 1:17:14
  Speaker 2: that took place in the fifties and sixties that drove
• 1:17:16
  Speaker 2: everything forward. Every time we have a secular bull market,
• 1:17:20
  Speaker 2: do you see something similar.
• 1:17:21
  Speaker 1: To this should be? Yeah, I mean I think so.
• 1:17:23
  Speaker 1: I mean because the eighties, you know, you know, I
• 1:17:25
  Speaker 1: guess acknowledge of birth out of the computer and thing internet, sure,
• 1:17:30
  Speaker 1: and then yeah.
• 1:17:31
  Speaker 2: Mobile, Yeah. You just that twenty year period saw a
• 1:17:35
  Speaker 2: lot of new industries pop into existence.
• 1:17:37
  Speaker 1: And then when it gets too exciting, such as the
• 1:17:39
  Speaker 1: tech bubble, that's when things change and it doesn't seem
• 1:17:41
  Speaker 1: like we're there now. Because we talked about these indicators
• 1:17:45
  Speaker 1: peeking out in advance of the market in twenty twenty one,
• 1:17:48
  Speaker 1: I don't really have that here, you know, as we're
• 1:17:51
  Speaker 1: on this corrective phase, except for the percentage stocks about
• 1:17:53
  Speaker 1: doing in a day movement averages that does have the divergence.
• 1:17:56
  Speaker 1: But credit spreads confirmed the rally. Financial addition confirm the rally.
• 1:18:01
  Speaker 1: You know, a lot of other indicators confirm the rally.
• 1:18:03
  Speaker 1: So you know, there's you know, a little different than
• 1:18:06
  Speaker 1: say two years ago at this point.
• 1:18:08
  Speaker 2: So I'm glad you brought that up. I want to
• 1:18:11
  Speaker 2: talk about what you called the Magnificent seven and compare
• 1:18:17
  Speaker 2: it to prior eras when you take the seven biggest
• 1:18:21
  Speaker 2: companies on the SP five hundred, their revenues collectively are
• 1:18:27
  Speaker 2: something like one point eight trillion dollars. Their profits are
• 1:18:31
  Speaker 2: a quarter of a trillion dollars. Put on your CFA
• 1:18:35
  Speaker 2: hat for a moment, and let me ask you, hey,
• 1:18:37
  Speaker 2: they're a disproportionate part of the S and B five
• 1:18:40
  Speaker 2: hundred with good reason? Is that a fair statement? We've
• 1:18:45
  Speaker 2: never seen any group of seven companies make so much
• 1:18:50
  Speaker 2: in revenue and so much in profits. How wrong is
• 1:18:54
  Speaker 2: it that these are? You know, the the Darling stocks it.
• 1:18:58
  Speaker 1: Might not be wrong, and quite frankly, I would argue
• 1:19:01
  Speaker 1: that could very well be a factor of a secular
• 1:19:05
  Speaker 1: bowl market. And here's why. During secular bowl markets, what
• 1:19:09
  Speaker 1: outperforms large caps are small caps.
• 1:19:12
  Speaker 2: Large caps, you know, they're international, they have a broader reach,
• 1:19:17
  Speaker 2: they have great access to capital. Small caps graduate, that's right,
• 1:19:23
  Speaker 2: graduate to mid caps. Mid caps graduates slash gaps, sluge gaps,
• 1:19:26
  Speaker 2: become big caps.
• 1:19:27
  Speaker 1: So you know, the interesting thing is like in the
• 1:19:29
  Speaker 1: equal weight, you know, had its best period during the
• 1:19:33
  Speaker 1: two thousand to twenty thirteen bear market for equities. So
• 1:19:37
  Speaker 1: one would argue that having a greater concentration, you know,
• 1:19:43
  Speaker 1: not not to the extent I mean, you know, maybe
• 1:19:45
  Speaker 1: it's magnificent fifty, maybe a magnificent one hundred going forward.
• 1:19:48
  Speaker 1: I mean that I would take that as a bullet
• 1:19:51
  Speaker 1: sign if if we went from the seven to the twenty,
• 1:19:54
  Speaker 1: maybe even more. But but you're rewarding the winners and
• 1:19:58
  Speaker 1: and you know, I guess that's capitalism for you in
• 1:20:00
  Speaker 1: some regards, you.
• 1:20:01
  Speaker 2: Know, so makes a lot of sense. Before we get
• 1:20:04
  Speaker 2: to our favorite questions, let me throw you one curveball.
• 1:20:09
  Speaker 2: You you you do both broad analysis and I don't
• 1:20:13
  Speaker 2: know if I would call them just outright market calls,
• 1:20:16
  Speaker 2: but you certainly share opinions about where we are and
• 1:20:22
  Speaker 2: where we could go. What were some of your most
• 1:20:25
  Speaker 2: memorable calls that have stayed with you? What do you
• 1:20:29
  Speaker 2: what do you remember most fondly and what are you
• 1:20:31
  Speaker 2: not so keen on prior calls?
• 1:20:35
  Speaker 1: Well, I mean, I think the Secular Bowl market call
• 1:20:37
  Speaker 1: has been a great one since that. What are the
• 1:20:41
  Speaker 1: dates of the twenty thirteen when we broke out and
• 1:20:44
  Speaker 1: twenty twelve we broke out in the S and P
• 1:20:46
  Speaker 1: and the Nasdaq.
• 1:20:47
  Speaker 2: I'm twenty thirteen on the S and P above the
• 1:20:50
  Speaker 2: two thousand and fifteen seventies yep, seven highs yep.
• 1:20:54
  Speaker 1: And you know that was that was that was really
• 1:20:57
  Speaker 1: the big call.
• 1:20:57
  Speaker 2: And a ton of pushback, right I remember remember twenty
• 1:21:00
  Speaker 2: thirteen people were like, no, no, no, this is just
• 1:21:03
  Speaker 2: a bare market rally and it's going to end.
• 1:21:04
  Speaker 1: So well, we did a radio show on that. I
• 1:21:06
  Speaker 1: remember back in the day, you and me talking about it,
• 1:21:08
  Speaker 1: and I was explaining, well, I mean, you know, a
• 1:21:10
  Speaker 1: big trading range you break out of it. You know,
• 1:21:12
  Speaker 1: this is like nineteen fifty, nineteen eighty, it should continue.
• 1:21:15
  Speaker 2: For a while, and it did for seven years until COVID.
• 1:21:19
  Speaker 1: I mean the call I want to forget though, is
• 1:21:22
  Speaker 1: being so bold up on value over growth entering this year,
• 1:21:24
  Speaker 1: because quite frankly, it looked like a classic double top
• 1:21:26
  Speaker 1: that supported the case for value to beat growth, and
• 1:21:28
  Speaker 1: obviously that didn't work.
• 1:21:30
  Speaker 2: That value did have a good cup of twenty one
• 1:21:33
  Speaker 2: twenty two, pretty good years compared to the prior decade.
• 1:21:36
  Speaker 2: In fact, that might be the longest run we've seen
• 1:21:40
  Speaker 2: of value underperforming growth until twenty one.
• 1:21:43
  Speaker 1: That is that a fair yes, I think so it was.
• 1:21:45
  Speaker 1: I think it bottomed out in two thousand and six.
• 1:21:47
  Speaker 1: So and you know, one would thought that you would
• 1:21:50
  Speaker 1: have seen a peak in that, you know, not that
• 1:21:53
  Speaker 1: you have to sell all your tech names and buy
• 1:21:55
  Speaker 1: all the value names, because you know that is obviously
• 1:21:58
  Speaker 1: not what you want to do. But but yeah, it
• 1:22:01
  Speaker 1: was surprising that that technical formation did not work, you know,
• 1:22:07
  Speaker 1: a nice classic double top formation on growth relative value.
• 1:22:12
  Speaker 1: A little bit surprising, and the NASDAC stall I'm not
• 1:22:16
  Speaker 1: the knavesac yet. The technology sector stalled at its two
• 1:22:22
  Speaker 1: thousand high relatively SMP entering this year. And then, of course,
• 1:22:28
  Speaker 1: when growth versus value didn't work. I mean, when value
• 1:22:32
  Speaker 1: beating growth did not work and growth took the mantle
• 1:22:35
  Speaker 1: leadership again, gets what happened? Tech broke out to all
• 1:22:38
  Speaker 1: time highs of relative to the SMP, going all the
• 1:22:41
  Speaker 1: way back to two thousand. I mean, maybe that's the
• 1:22:43
  Speaker 1: message we need to take here. As long as that
• 1:22:45
  Speaker 1: breakouts in place. You know, how is how is value
• 1:22:49
  Speaker 1: going to be growth?
• 1:22:50
  Speaker 2: Huh? Really really interesting? All right, let's jump to our
• 1:22:53
  Speaker 2: favorite questions that we ask all of our guests, starting
• 1:22:57
  Speaker 2: with what have you been streaming these days?
• 1:23:00
  Speaker 1: Give us your.
• 1:23:00
  Speaker 2: Favorite podcast or Netflix Amazon type of shows?
• 1:23:05
  Speaker 1: Sure? So, in terms of TV shows and things like that,
• 1:23:08
  Speaker 1: I uh, well, I've been watching Loki Disney plus a
• 1:23:15
  Speaker 1: big Star Wars fan, so obviously I watched the Mandaloria
• 1:23:18
  Speaker 1: and Ahsoka.
• 1:23:20
  Speaker 2: I'm way behind on Ahsoka, so no, I will not
• 1:23:22
  Speaker 2: say anything.
• 1:23:23
  Speaker 1: Yeah, but it looked really the.
• 1:23:24
  Speaker 2: First couple episodes looked really interesting.
• 1:23:27
  Speaker 1: Yeah, solid show. I mean I'm into all those superhero
• 1:23:30
  Speaker 1: shows like I mean even some of the gory and
• 1:23:32
  Speaker 1: vraunchy ones like The Boys.
• 1:23:34
  Speaker 2: The Boys was great, and the second season, you know,
• 1:23:36
  Speaker 2: there's a third season coming also.
• 1:23:38
  Speaker 1: I hope so and now I'm watching this v university
• 1:23:40
  Speaker 1: show or something like that with same same concept, same
• 1:23:45
  Speaker 1: same people, but young kids that are in school.
• 1:23:49
  Speaker 2: Oh okay, I saw a preview few. It looks interesting.
• 1:23:52
  Speaker 1: It's gory, you know, so as The Boys was totally gory. Yeah,
• 1:23:56
  Speaker 1: and then you know, of course I'm sitting this looks interesting.
• 1:23:59
  Speaker 1: It's about kids, you know. Splat, and I'm like, turn
• 1:24:02
  Speaker 1: it on, and all of a sudden, oops, it's turn
• 1:24:05
  Speaker 1: that off.
• 1:24:06
  Speaker 2: You know.
• 1:24:06
  Speaker 1: My son was in the room. He wasn't watching it,
• 1:24:08
  Speaker 1: but he was doing something else, right, And I'm like,
• 1:24:10
  Speaker 1: all right, this come right off.
• 1:24:12
  Speaker 2: So if you liked The Boys, there are two shows
• 1:24:17
  Speaker 2: that were on Amazon Prime that you might like. I
• 1:24:21
  Speaker 2: think everybody knows The Expanse was pretty popular.
• 1:24:24
  Speaker 1: I didn't see that one yet. It's a great sci
• 1:24:25
  Speaker 1: fi and that's right.
• 1:24:28
  Speaker 2: But something that's a little more eclectic and not well
• 1:24:31
  Speaker 2: known was Altered Carbon. It was only two seasons. Amazing.
• 1:24:36
  Speaker 1: Yeah. Last year I was into a Stranger I went
• 1:24:39
  Speaker 1: through I binged Stranger Things.
• 1:24:41
  Speaker 2: How'd you like that?
• 1:24:42
  Speaker 1: Oh? I love that show because I was in nineteen
• 1:24:45
  Speaker 1: eighties Dungeon and Dragons Kid. So now I'm playing it
• 1:24:47
  Speaker 1: now with my son, some of his friends. So COVID
• 1:24:50
  Speaker 1: actually brought a few things out. You know, he got
• 1:24:52
  Speaker 1: that into some old hobbies, you know, just kind of
• 1:24:55
  Speaker 1: a fight.
• 1:24:56
  Speaker 2: During COVID, we broke out all of the kitchen appliances
• 1:25:01
  Speaker 2: and winning gifts that just had not been touched. Like
• 1:25:05
  Speaker 2: that's literally like the Jonana things like that where you're
• 1:25:09
  Speaker 2: putting frozen fruit into this device and turning it into
• 1:25:12
  Speaker 2: that's so cool scream and the air fryers and it's
• 1:25:17
  Speaker 2: really funny. Everybody went to the basement or garage or
• 1:25:20
  Speaker 2: were at storage room and pulled out the stuff that
• 1:25:22
  Speaker 2: had been gathering dust for years. It was that was
• 1:25:26
  Speaker 2: the best part of COVID.
• 1:25:27
  Speaker 1: I found. I found, yeah, my dungeon master's guy, my
• 1:25:30
  Speaker 1: player's handbook with the duct tape holding it together. And
• 1:25:33
  Speaker 1: you know by the time, yeah, I mean, you know,
• 1:25:35
  Speaker 1: my son taught my son. My daughter played for a
• 1:25:37
  Speaker 1: little while, but wasn't her a thing. But right, and
• 1:25:39
  Speaker 1: now now we're continuing a uh. I started a little
• 1:25:42
  Speaker 1: club in town, so we got a few people playing
• 1:25:44
  Speaker 1: every other Saturday. So it's fun. It was a good
• 1:25:46
  Speaker 1: thing to do.
• 1:25:47
  Speaker 2: That sounds like fun. Tell us about your mentors who
• 1:25:50
  Speaker 2: helped shape your career.
• 1:25:52
  Speaker 1: Yeah, sure, I mean, you know, obviously all the people
• 1:25:54
  Speaker 1: I mentioned earlier in the podcast. Of course, you know
• 1:25:57
  Speaker 1: my dad, Marriyan Bartel's uh uh, you know my boss
• 1:26:02
  Speaker 1: at Whereamar Huff, Stephan Haber, very very you know, helped me,
• 1:26:06
  Speaker 1: you know, steer again into the fundamental side of the business,
• 1:26:09
  Speaker 1: you know, as far as like technical analysts and things
• 1:26:12
  Speaker 1: like that. Books I've read, I mean, mostly influential by
• 1:26:15
  Speaker 1: John Murphy, Martin Bring, and doctor Alexander Elder. I mean
• 1:26:19
  Speaker 1: that's those are my go tos as far as uh yeah,
• 1:26:23
  Speaker 1: the Norman Farce back too. I have that book Stock
• 1:26:26
  Speaker 1: Market Logic. I love that book. I open.
• 1:26:28
  Speaker 2: I have that book. I've had that for a long time.
• 1:26:29
  Speaker 2: It's very really an interesting book. So since you mentioned books,
• 1:26:33
  Speaker 2: what what are you reading currently? What do you read
• 1:26:36
  Speaker 2: for fun?
• 1:26:37
  Speaker 1: Well, I mean right now, yeah, it's a I don't
• 1:26:41
  Speaker 1: want to sound too dorky, but it's really it's a
• 1:26:44
  Speaker 1: dungeon and dragon. It's what's the name of the book,
• 1:26:48
  Speaker 1: Water Deep Dragon Heist, Water.
• 1:26:51
  Speaker 2: Deep Dragon Heist. So that doesn't sound dorky at all.
• 1:26:56
  Speaker 1: Now, it's a part of the adventure and stuff like
• 1:26:58
  Speaker 1: that that you know, running the running the campaign through.
• 1:27:02
  Speaker 2: By the way, I know guys in our industry that
• 1:27:07
  Speaker 2: you would never in a million years. Guess still do
• 1:27:10
  Speaker 2: a weekly d Dungeons and Dragons and have for like
• 1:27:13
  Speaker 2: twenty thirty years.
• 1:27:14
  Speaker 1: Geez, sign me up. I'd do that in a second.
• 1:27:17
  Speaker 1: It's fun now. But other than that, I mean, obviously,
• 1:27:20
  Speaker 1: when I was in college, you know, part of the
• 1:27:22
  Speaker 1: English writing major is you had to take literature classes.
• 1:27:26
  Speaker 1: And my favorite literature classes was the epic hero So
• 1:27:30
  Speaker 1: it was The Hobbit, Lord of the Rings. You know.
• 1:27:34
  Speaker 1: Of course I read the Hobbit prior to that class,
• 1:27:35
  Speaker 1: but I read it again. I read some of the
• 1:27:37
  Speaker 1: Lord of Rings prior to that class. It was a
• 1:27:39
  Speaker 1: lot of intense reading. I mean, it's Lord of the Rings.
• 1:27:41
  Speaker 1: I can't even say it, this Summarian, I can't even
• 1:27:43
  Speaker 1: say it. But and then also the Odyssey and the Iliad. Sure,
• 1:27:47
  Speaker 1: and in high school I read the Iliad in Latin.
• 1:27:54
  Speaker 2: You're not fluent in Latin, no, no, no, no, that's
• 1:27:58
  Speaker 2: it was high school.
• 1:27:59
  Speaker 1: But it did help me out with the English language,
• 1:28:01
  Speaker 1: so which was what you know, a lot of the
• 1:28:03
  Speaker 1: words get derived from Latin, and you know, and obviously
• 1:28:09
  Speaker 1: German too, so I did take some German in college.
• 1:28:12
  Speaker 1: Unfortunately forgot most of that as well.
• 1:28:15
  Speaker 2: But that's really that's really interesting. So let's let's jump
• 1:28:19
  Speaker 2: to our final two questions. What sort of advice would
• 1:28:22
  Speaker 2: you give to a recent college grad interested in a
• 1:28:25
  Speaker 2: career in either finance or technical analysis?
• 1:28:30
  Speaker 1: Well, I mean finance, I think, believe it or not,
• 1:28:34
  Speaker 1: specially we are now. Creativity is very important. Also, curiosity
• 1:28:40
  Speaker 1: is very important. When I was looking for a job
• 1:28:44
  Speaker 1: in finance, coming from a different background, it was tougher,
• 1:28:49
  Speaker 1: you know, and I just didn't I really, I didn't
• 1:28:54
  Speaker 1: really start making headway until I was up on the news,
• 1:28:59
  Speaker 1: you know, the Wall Street Journal and consistently reading that
• 1:29:02
  Speaker 1: for like a month. Then I was ready to go
• 1:29:04
  Speaker 1: in and talk to people about careers to some extent,
• 1:29:06
  Speaker 1: you know, obviously not an expert on anything, but just
• 1:29:09
  Speaker 1: expressing the interest.
• 1:29:10
  Speaker 2: But I would say not meaning not not professionally relying
• 1:29:14
  Speaker 2: on the media for information, but to be able to
• 1:29:17
  Speaker 2: have interview an intelligent conversation.
• 1:29:20
  Speaker 1: Because that comes up. I mean, because when we interview people,
• 1:29:23
  Speaker 1: you know, there's always you know, there's always Hey, did
• 1:29:27
  Speaker 1: you read that story in a while? And Most of
• 1:29:29
  Speaker 1: the time people say, no, I don't do that, listen
• 1:29:31
  Speaker 1: to podcasts, but they still get the same information, you know,
• 1:29:34
  Speaker 1: similar information.
• 1:29:35
  Speaker 2: Not quite as in depth, not quite as you know focused.
• 1:29:39
  Speaker 2: But that's a good advice. Going prepared and be able
• 1:29:43
  Speaker 2: to talk about that you're up to speed and ready
• 1:29:46
  Speaker 2: to start knowing what's happening.
• 1:29:49
  Speaker 1: And whenever I interview people, I always want to know
• 1:29:51
  Speaker 1: what they're doing outside of business and finance. Could I
• 1:29:54
  Speaker 1: find that more interesting in some regards? You know, it's like,
• 1:29:56
  Speaker 1: you know, if you have like I think, let me
• 1:29:59
  Speaker 1: think the last like if they were professional cross player,
• 1:30:02
  Speaker 1: not professional, a college Division one lacrosse prayer, that's kind
• 1:30:05
  Speaker 1: of interesting. You know, it's like they know how to
• 1:30:07
  Speaker 1: be part of a team. You know, you know some
• 1:30:09
  Speaker 1: of those intangibles. So I would say, you know, some
• 1:30:11
  Speaker 1: of the intangibles and things outside you know, you know,
• 1:30:15
  Speaker 1: are interesting. I mean, somebody looking to get into technical analysis,
• 1:30:18
  Speaker 1: I mean I would say, probably avoid that, like the plague,
• 1:30:21
  Speaker 1: why not? I mean, are there a lot of technical
• 1:30:26
  Speaker 1: analysts on the street these days? You know? Probably not.
• 1:30:30
  Speaker 1: You know, you can count them on maybe two hands.
• 1:30:32
  Speaker 1: But I would say, if you want to get a
• 1:30:36
  Speaker 1: role in finance or as an analyst or as you know,
• 1:30:43
  Speaker 1: financial advisor. Learning technicals will save you, it will help
• 1:30:49
  Speaker 1: you a ton, but you're not going to be getting
• 1:30:51
  Speaker 1: a role as a technical analyst. It's just that there's
• 1:30:53
  Speaker 1: just not that many of them, and often they're just
• 1:30:57
  Speaker 1: placed at the back of the bus. And as Ralph
• 1:30:59
  Speaker 1: affanpoor Or said, that's where they have the beer is.
• 1:31:01
  Speaker 1: So I'm perfectly happily being in the back of the bus.
• 1:31:04
  Speaker 1: But still, I mean, I would say, you know, again,
• 1:31:07
  Speaker 1: here's another quote. I don't remember who I heard this
• 1:31:09
  Speaker 1: one from, but it says the CFA designation will get
• 1:31:13
  Speaker 1: you a job, but the CMT designation will allow you
• 1:31:15
  Speaker 1: to keep your job. So I look, I mean, if
• 1:31:19
  Speaker 1: you want to become a technical analyst and work at
• 1:31:21
  Speaker 1: a Bowls Bracket research firm as a technical analyst, it's unlikely.
• 1:31:26
  Speaker 1: You know, I'm very lucky to be sitting where I'm sitting.
• 1:31:28
  Speaker 1: You know, it's like and who knows how long it's
• 1:31:30
  Speaker 1: gonna last, you know what I mean, It's like, you know,
• 1:31:32
  Speaker 1: I mean the business is tough.
• 1:31:34
  Speaker 2: I mean, yeah, I know, it's definitely and it's gotten
• 1:31:36
  Speaker 2: tougher on the institutional cell side because of the advent
• 1:31:41
  Speaker 2: of either free or practically free trading.
• 1:31:44
  Speaker 1: But it's very interesting though, because you run into a
• 1:31:46
  Speaker 1: lot of folks on the institutional side that aren't technical
• 1:31:49
  Speaker 1: analysts but use technical analysis, and some of them, you know,
• 1:31:53
  Speaker 1: even pursue the CMT designation, which is Charter market technician,
• 1:31:57
  Speaker 1: the credential that's the equivalent of the the CFA Charter
• 1:32:01
  Speaker 1: financial analyst, and you know they do it. I would say,
• 1:32:05
  Speaker 1: if you're interested in a career where you're going to
• 1:32:08
  Speaker 1: be doing some technicals, I mean, obviously a trading desk
• 1:32:10
  Speaker 1: type of role might be suited for that. An equity
• 1:32:13
  Speaker 1: analyst would be suited for you know, I know a
• 1:32:16
  Speaker 1: few equity analysts that do not that they're making fundamental
• 1:32:20
  Speaker 1: views based on technicals, but if they want to upgrade
• 1:32:24
  Speaker 1: a stock and they look at a chart saying, wow,
• 1:32:26
  Speaker 1: I love the fundamentals on this company, but the chart
• 1:32:28
  Speaker 1: looks like it can break below fifty and head to
• 1:32:30
  Speaker 1: forty five, maybe I should wait for that to happen.
• 1:32:32
  Speaker 2: Let me ask you a question that I love asking
• 1:32:36
  Speaker 2: people who use both fundamentals and charts. If you're going
• 1:32:40
  Speaker 2: to buy a stock and in our hypothetical you can
• 1:32:45
  Speaker 2: only either read a fundamental research report or look at
• 1:32:49
  Speaker 2: the chart. Which do you do?
• 1:32:51
  Speaker 1: Yeah, that's obvious because it's look at the chart, no
• 1:32:54
  Speaker 1: question why, Because the chart reflects fundamental information. I don't mind.
• 1:32:59
  Speaker 1: I mean, look what is the price reflect It reflects
• 1:33:01
  Speaker 1: you know, you know, a little bit of the funny
• 1:33:04
  Speaker 1: money from the high frequency trading, which we have no
• 1:33:06
  Speaker 1: idea what that's all about. But it also reflects people's
• 1:33:10
  Speaker 1: opinion on price action to summary some extent. But it
• 1:33:13
  Speaker 1: actually reflects what fundamentals are to some extent too, you know,
• 1:33:16
  Speaker 1: So it's psychology and you know what actual factual information is.
• 1:33:22
  Speaker 1: I mean, it's discounting what the fundamentals are or will
• 1:33:25
  Speaker 1: be in the future. So you know, I would say,
• 1:33:30
  Speaker 1: you know, you could have an analyst note saying sell
• 1:33:33
  Speaker 1: this stock like it's you know, it's unholdable or you know,
• 1:33:37
  Speaker 1: hard sell on this name, but you look at a
• 1:33:39
  Speaker 1: chart and it looks like it's forming a double bottom.
• 1:33:42
  Speaker 1: I may look at the chart more so on the
• 1:33:44
  Speaker 1: fundamentals because you know, if the chart works, guess what
• 1:33:47
  Speaker 1: that analyst has to do.
• 1:33:49
  Speaker 2: We'll eventually you have to change that sell to a hold,
• 1:33:52
  Speaker 2: and that hold to a buy.
• 1:33:53
  Speaker 1: And if there's forty of these analysts doing that over
• 1:33:55
  Speaker 1: a period of time, guess where that stock's gonna go.
• 1:33:57
  Speaker 2: Do you look at you know, the analysts collective ratings,
• 1:34:01
  Speaker 2: how many buys, how many sells, how many holds?
• 1:34:03
  Speaker 1: I do say, yeah, there's there's a feature in n R. Yeah,
• 1:34:07
  Speaker 1: exactly an R. And also there's like I have this
• 1:34:10
  Speaker 1: recommendation ratio line on my Bloomberg chart I pull up
• 1:34:14
  Speaker 1: every once in a while. Sometimes I find it really informative,
• 1:34:17
  Speaker 1: other times I don't. But but there are times when
• 1:34:20
  Speaker 1: when I can, when I can see a chart like
• 1:34:22
  Speaker 1: bottoming out and everybody hates it, and then it breaks out,
• 1:34:25
  Speaker 1: and it's like, it's amazing how the analysts start. And
• 1:34:29
  Speaker 1: you know, you've got a lot of time when that happened.
• 1:34:31
  Speaker 1: So I would I would always gravitate towards a chart,
• 1:34:33
  Speaker 1: and I would say, it's really funny, like even even
• 1:34:37
  Speaker 1: folks that consider themselves fundamental investors do the same thing. Huh.
• 1:34:42
  Speaker 2: Really really interesting. And our final question, what do you
• 1:34:45
  Speaker 2: know about the world of investing today? You wish you
• 1:34:47
  Speaker 2: knew twenty five years or so ago when you were
• 1:34:50
  Speaker 2: first getting started.
• 1:34:51
  Speaker 1: Yep, I think the biggest thing I wish I knew
• 1:34:55
  Speaker 1: when I was first getting started is and you can
• 1:34:58
  Speaker 1: say it in technical mumbo jumbo and fundamental mumbo jump
• 1:35:02
  Speaker 1: with the same thing a stock. An oversail stock can
• 1:35:05
  Speaker 1: always become more over sold, and an undervalue stock can
• 1:35:08
  Speaker 1: always become more undervalued. And when I learned that, I
• 1:35:12
  Speaker 1: think things improved a lot. You know, I wish I
• 1:35:15
  Speaker 1: knew that early on.
• 1:35:16
  Speaker 2: I learned that as cheap stocks can always get cheaper,
• 1:35:18
  Speaker 2: and expensive stocks can always get more expensive.
• 1:35:20
  Speaker 1: Right, Yeah, that's right. That's probably a better way of
• 1:35:23
  Speaker 1: saying it.
• 1:35:24
  Speaker 2: Really interesting, Steve, Thank you for being so generous with
• 1:35:27
  Speaker 2: your time. We have been speaking with Steve Soutmeyer. He
• 1:35:31
  Speaker 2: is the chief equity technical strategist for b of A Securities.
• 1:35:36
  Speaker 2: If you enjoy this conversation, well check out any of
• 1:35:39
  Speaker 2: the previous five hundred interviews we've done over the past
• 1:35:43
  Speaker 2: nine years. You can find those at Apple Podcasts, Spotify, YouTube,
• 1:35:49
  Speaker 2: wherever you find your favorite podcasts. Sign up from my
• 1:35:52
  Speaker 2: daily reading list at ridolts dot com, follow me on
• 1:35:56
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• 1:36:00
  Speaker 2: podcast on Twitter at podcast and be sure and check
• 1:36:04
  Speaker 2: out my new podcast at the Money, coming January first
• 1:36:09
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• 1:36:13
  Speaker 2: not thank the Cracked team that helps put these conversations
• 1:36:15
  Speaker 2: together each week. Rich Subnati is my audio engineer at
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• 1:36:25
  Speaker 2: Sean Russo is my researcher. I'm Barry Rittolts. You've been
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  Speaker 2: listening to Masters in Business on Bloomberg Radio.