Technically Speaking: Talking Charts With MRA's John Kolovos
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Visit us at pgm.com forward slash ETFs. This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now. On this podcast, we take you inside those conversations, the stories, the ideas, and the stocks to watch so you can invest smarter. Now, let's dial in.

Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast. I'm Ben Levison, Deputy Editor of Barron's, sitting in for Lauren Rublin, who is enjoying some well-deserved time off. Thanks for joining us today for a market update based in technical analysis, as well as a look at some earnings and Tesla and a bunch of other things. My guests are John Kolovos, Chief Technical Analyst at Macro Risk Advisors, and Barron's Associate Editor, Al Root.

Stocks are quiet today, and that's kind of how it's been for a little while here now. So let's welcome John and Al and get this conversation started. Thanks to both of you for joining Barron's Live today. Well, thank you for having us. Thank you for having me, Ben.

All right. So, John, ever since my trading days, I've been a fan of technical analysis, but it's still something of a reputation for being and I've seen this online, quote, voodoo nonsense. So let's start at the beginning. What is the point of technical analysis? That's that's fantastic. Great question. Great way to lead this off.

Well, technical analysis is not voodoo. Technical analysis is not chicken bones. Technical analysis is not magic. But also technical analysis is not about finding some sort of secret sauce or sort of black box into the systems. Really what technical analysis is, is the study of the balance between supply and demand for any asset.

It's really what it is. We're studying supply and demand of any asset. So if you took economics 101, you know about supply and demand, you already have a good step towards what technical analysis is. And the beauty of technicals and why people should start using technicals more and more is that it applies to every asset class that's freely traded. So it's not just stocks, bonds, commodities. It could be work. It could be done on Bitcoin, cryptocurrencies. As long as it's freely traded, you can do technical analysis.

But really, technical analysis, how I like to frame it with clients is this. It's a systematic and rigorous form of security analysis. It's really what it is. It's systematic and rigorous.

And what it does, it studies that gap, if you will, between intrinsic value and where market prices are. So what's intrinsic value? Intrinsic value is, well, the fundamental value that the company may be trading at. But as we all know, stocks don't trade at intrinsic value, hardly ever. They're either overvalued or undervalued. And it's in that gap is where technicians thrive.

So, yeah. Yeah. So, John, I was going to say, I mean, you have two sets of letters after your name. You have CFA and then you have CMT. And the CFA is one that I think a lot of people are familiar with. It's kind of the gold standard for your fundamental analysts. I know that for people wanting to move from journalism over to the finance world, getting a CFA is a great way to sort of help smooth the way.

but you have the cmt as well chartered market technician why both why both well you know it's it's helpful to know both sides of the coin and i firmly believe that technical things happen for fundamental reasons i was on the buy side for quite some time up here in boston fidelity and one thing that struck me while i was there is that they provide so many resources to their portfolio managers and

And it's not just fundamental. It's not just quant. It's not just macro, but also technical is a big part of their philosophy there. And the way that I interpret it is like it's almost it's very hard to beat the benchmark. OK, it's very, very difficult.

Why not use as many resources you possibly can to do that? So by having both charters, right, both the CMT and a CFA, it allows me to see things from both perspectives. Now, my process starts by looking at charts and using the fundamentals to confirm my view,

Most people start with the fundamentals and then hopefully look at the charts to confirm their view. So I think it's very helpful to have both charters in this day and age. It just really just shows also to future employers that you mean business. You went through a series of very difficult examinations and that you're a professional at what you're doing. That's really what the CMT really is all about. It's a professional designation for technical analysts.

Right. And so I hear about all these patterns, double tops, head and shoulders, flag and pennant, cup and handle. Then that doesn't even get into the candlestick stuff. Why do they sound so mystical? And can you use technical analysis without knowing these patterns?

Okay, so first of all, I hate those terms. It doesn't do us any good. Maybe it's just we had bad marketing people writing our textbooks, you know, years and years ago, but coming up with these names, no good. And we give you candle patterns like abandoned babies and stuff like that. Yeah, it doesn't do anybody any good knowing those things. But what is important, and do you need to know them if you're going to use technicals? To a certain extent, but what you do need to know is that these patterns, they are repeatable and they do happen all the time.

Technical analysis has been around for hundreds of years. Technical analysis has been around longer than fundamental analysis has been around. And these patterns have been around since the beginning of

people back in Babylon ages writing down, you know, the prices of currencies and whatnot back then. So these patterns are there. Do you need to know them? Sure. You need to know their silly names? No. But you need to know that they are a reflection of supply and demand. And these patterns, what they ultimately reveal to us, once you're trained and you see them, is that either they're going to be a continuation of the trend that you're in,

or potential reversal of that trend that we're in. That's all you need to know. Don't worry about those silly names, they're awful. But you do need to have them in the back of your mind or in your back pocket that when they're there, you want to be able to take advantage of it. - Great. Now, Al, I want to get you involved in this a little bit, because as a reporter, I know you've written about technical analysis a little bit. How do you use it in your reporting?

It's funny. He said use the word voodoo. I thought those were fighting words. I think it's a tremendous tool. Listen, I think John laid it out almost ideally, but I say a couple of things. There's a lot of information in the charts and a lot of stock market history

embedded in those graphs. You know, it tells you where people have bought and sold stock in the past. And, you know, for me and I think for fundamentally minded investors or people who are not so familiar with technical analysis, you know, it's a check on what you think. Right. So you can be wrong in a couple of ways. You can just be stuck in a position or in a way of thinking. And you're like, no, this stock is the greatest stocks and sliced bread.

And the chart can be like, well, you know, it's showing a lot of weakness. Other people do not agree with you. So it can force you to think about things differently. And then it can also force you to think about, well, you know, this new product, it's just going to be the biggest thing ever. I'm just sort of convinced of it. And you can look at the chart and it can be like, you know what? Other people, like you might be overstating the case that the new Oreo flavor is going to send Mondelez to the sky. So you may want to recalibrate.

your expectations. So, you know, I just say it's a tool, right? You have fundamental analysis. It's a tool in the toolbox. You know, you don't want less tools. You want the right tool for the job. I'll say one more thing, right? And, you know, we'll get to Tesla eventually, right? But I think technical analysis does a way better job of helping fundamental investors figure out where stocks are going to go.

in the short and medium term on the up or the downside, right? I think fundamental investors say, oh, you know, it can go to 25 times earnings, bop, bop, bop, bop. And I just don't think that we, or fundamentally minded investors are really good at understanding market psychology and saying, oh, no, no, no. You know, when you've gotten above a key level or when you've gotten above,

a moving average or understanding resistance, you know, things will stall out here or no, there's no, there's this, this stock has tremendous momentum. It's going to keep going. It's just another tool that will help you understand the trading action of your favorite fundamental stocks. You know, Al, that's a fantastic point. If I could just elaborate on that one, one thing is that there's a difference between owning a company, owning a stock, like a fundamental,

manager wants to own the company. My job is to find the right stock for that. Their job is to find the best stock and company at the same time. There's two different things, right? Understanding a company is doing the fundamentals. I'm trying to understand the stock. Those are two different things. But at the end of the day, only thing that matters is price.

It doesn't matter. It doesn't matter how good your fundamental analysis is. And unless price agrees with you, right? You're it doesn't matter what it is. And same with the technicals as the fundamentals don't eventually confirm. It doesn't matter, but price that's how you get paid. So why not study price? And that's how I look at it from a very simplistic way. Why not just focus on that? So a technician does agree in the importance of fundamentals.

but really what we do is we hire the market to do the fundamental research for us so 95 of my clients are not technicians they're all fundamentally based i would starve if i had to sell my stuff to technicians so they come to me they already bought it fundamentally they want to know a lot of times where they're wrong or how they should build conviction in that idea

to buy more of it, or to notice when sectors are changing or whether or not they should be offensive or defensive in their approach to the markets. And that's really where the technicals help the fundamental analysts, because there's plenty of times when a company has terrible earnings, yet the charts ripping and vice versa. And that's where the technician can sit in there and be like, right, let's do some risk management here or perhaps some reward management as well. Yeah.

Yeah, I want to say one other thing, which I just love that line. I've outsourced the fundamentals to the market. You know, if you want to get into technical analysis, because you can have like a superpower, a cocktail party, you can almost look at any chart and say, well, you know, earnings have slowed down. The market's waiting for something. The product cycle isn't very good because you can just look at the chart and the price action. And then you can go look at a fundamental analyst who spends all his time diving deep into these things. And you say, yeah, that's basically right.

That's true. And a lot of times I do tons of screening for my clients. Like their research staff, fundamentally, they can't cover all 3,000 stocks in the US market, right? They only do the mega, mega cap ones and a couple of smalls. But I screen through everything. So there's a famous Dan Druckenmiller quote, something along the lines of, how long do you think it would take me to go through 3,000 annual reports?

It takes him forever to do it, but you can go through stock charts a lot, lot quicker. So oftentimes with my clients, I go, hey, did you see XYZ? He's like, no. Let me go talk to my analyst about this and I'll get back to you. Yeah. It's not to say we don't need fundamental analysis. No, you totally do. But it's definitely true that when you get right down to it, a lot of these same things are being reflected either in the analyst reports with lots of words or just the chart. Right. Yeah.

All right. So let's turn to the market now. You know, we've had so much volatility caused by President Donald Trump's tariff policies. We almost had a bear market. We've had this major bounce back. But both the S&P 500, the equal weighted version of the index are up a little less than 1 percent. The down the Nasdaq, we're down a little less than 1 percent. So we're basically where we started the year. What are the charts saying now, John? I mean, are we going up or down? All right. So my view is, is that

i think the markets are going to go up all right i'm bullish and i at the end of last year my target for 2025 was about 6600 i said with a big gulp but i'm still holding on to that and and i got pretty close to stopping out on that idea and i didn't and i'll i'll talk to you guys about that in a moment but in a very very big picture sort of way of things this is a generational bull market meaning this is a secular uptrend it likely has

years and years and years and years to go before we have a lost decade. So I'm looking at this as this recent market

market weakness as a cyclical bear within a secular bull. I know that might sound a little confusing to folks, but this is really just a blip in an ongoing bull, a longer term bull market. And then on a very, very short term basis, as we are in the beginning of June, is that the markets are very much likely to enter into a consolidation, if not a pullback phase. And this pullback phase is going to be vitally important for the next six to 12 months for stocks.

right let's let's unpack that okay what do you mean by a this pullback phase and why is it going to be vitally important all right so when it comes to that is so one way to think about it is this i'm gonna i have this slide here showing on the live but those folks who are listening later you can see it in the notes is that this bull market what was quite sorry this bear market was quite interesting about it was that it

came down and found support at its 200 week moving average, which is approximately its four year average. That level of support down at around that 40, I think that's around 4,700 area on the S&P, pretty much the highs from 21. That was enough to say, all right, this was a shakeout. This was a cyclical bear mark. This is not the start of something like a loss ticket. We're going to be down for five to 10 or 15 years.

so that's number one you came down to a major support level two this was a self-inflicted bear market this was not one that was brought on by the economic cycle so as this decline was starting and my view at the beginning of the year was we would have a shaky q1 i don't think it would be this shaky for a q1 i don't think many people had that on their bingo card that would be down this much that fast

But the idea was to be cautious going into the first quarter of the year. There's plenty of cycles that had suggested that. There was a lot of complacent sentiment at the beginning of the year. There was a lot of reasons to be cautious. Even the presidential cycle said we should do that.

so we've come down we've done this uh self-inflicted bear market that reminded me a lot of how 1998 was with long-term capital you had a very sharp swoosh down to the 200-day moving average you briefly paused there you made another climactic low and then what happened at the low cooler heads prevailed somebody had to step in and say never mind or i got this that was the fed and long-term capital it was

the president with VIX above 50 saying, okay, hold on a second here. VIX above 50 almost equals VIX at 80 and VIX at 80 always equals liquidity drying up and financial systems, financial markets just kind of just falling apart.

cool heads prevailed we found support and off of those lows what did we have on those lows apocalyptic sentiment readings policy uncertainty at all-time highs everybody i spoke to was just like forget it like trump ruined everything the world's coming to an end we're going straight down but no what happened we had multiple breath thrust to the upside incredible momentum

You name it, it really just turned this into what should have been a double bottom, which is a classic sort of bottoming process, which we saw in 98 into what is commonly known as a V bottom. So the way things have played out, it's quite remarkable and it would be very uncharacteristic statistically in looking at history for those lows to not hold for the next 12 months or so.

but you do see a short-term pullback it sounds like i do i do and and that's that's that's the idea when it comes to the short-term pullback so for instance what happened on the way

out of this bottom, we have what I would call like a very, what I would call like a good overbought condition. We had these breakaway gaps above the 200-day moving average. So 200-day moving average, getting above it is a very simple way of saying, okay, we're back in an uptrend. That's level one sort of analysis. Level two analysis is like, but we gapped above it. We broke out above these 200-day moving averages. You saw it on the S&P, Q's, the MAC7 basket, a plethora, even individual stocks like Microsoft, all that, they gapped above it.

And what the statistics actually show is that once you have those sort of thrusts like that, the market does consolidate up to two months, maybe three months. But then looking one year out, the market's up anywhere between 80% to 90% of the time. So good overbought, its market needs to consolidate. And other reasons for the market to consolidate would be, of course, the proximity to resistance, right? We are dealing with basically where we were

at the beginning of last year, right? So 6,000 is one level to worry about. 6150 all-time high is always an important resistance level. So you have overbought momentum, proximity to resistance, and you also have complacent sentiment. What do I mean by complacent short-term sentiment? Complacent short-term sentiment would be something like the VIX dropping to, uh,

Dropping down to around the 17 level. To me, that is a bit of a worrisome sign, at least at a minimum. It says to me that the risk reward here isn't great to be buying new stocks or to be chasing breakouts, but perhaps to be risk aware of where we are in this environment, which is headlight driven, then maybe I want some optionality there too, just in case we get another headline that says, okay, the market's going to have

to go down six or seven percent because from a chart perspective, I'm going to bring it right back to the real simple is, is that I think we can hit 6600. But the support level that tells me I'm wrong is that we want to breaking 56. That's that's a that's a bit of a drop from here. So there's plenty of pain that could be had between now and then during this shakeout.

that argues having some protection here in the near term. So it's a delicate balance, I say, between being long term bullish and shorter term cautious. There's other reasons too. I can go into it if you want. But yeah, I think the market is more than overdue for some sort of sideways, if not downward price action. And the last thing I'm sorry, I'm rambling a little bit, but I just got to end and say why that is important. It's important because when I talk to clients, we look at the speed of this move higher.

People got pulled back into this market kicking and screaming. I'm not convinced that it was renewed fundamental buying. ETF flows, they actually have been negative on the way up.

Pretty much. And that's kind of interesting to me. So it hasn't been a ton of fundamental buying here, but when you pull back and it's a benign pullback and it holds that 5,600 and they're willing to support it, that's the moment. I actually think that's when folks would be like, forget about it. I got it. We're going up and 6,600 will occur. So this pullback will be, like I said, critical for at least my bullish thesis and I think for equity markets for the next six to 12 months. Got it.

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So, Al, you know, we're watching this market. There are all these headlines, you know, about the tariffs and things like that. We're also getting economic data that is holding up actually just fine. Can you talk to me first about the tariffs and where you think that policy is heading, but also a little bit about the economy? I know you watch things like the ISM Manufacturing Index and how things are holding up there. Ah, yes. My goal in life is to care more about the ISM PMI than anyone else.

To tie tariffs and to marry the idea of fundamental and technical views,

So, the tariff policy, everybody was really, really worried. We got right down to about $5,600 on the S&P 500. And then don't forget, we made a deal with the UK early in May, and that sort of was like, okay, President Trump is sort of going big, and then he negotiates a solution that is less severe.

And so now, you know, we rebound. We're up about 4% from Liberation Day, I think, or maybe 300 points since Liberation Day. You know, now we're at 5,900, again, approaching that resistance John talked about. And investors are trying to now, we got through first quarter earnings. We got some tariff, you know, headwinds and can you offset them and can you maintain guidance? So people are just, we're still in this sort of holding pattern of like, all right, are

Are we going to see inflation? Are we going to see layoffs? Are we going to see real-world economic impacts to some of this policy uncertainty? And I just don't think we have the answer there yet. And I think that

you sort of break up or down depending on how things turn out. Now, on the downside, I do think, and I'm curious for John and Ben's point on this, you almost have like that VIX 50 or 5600 on the S&P. We can coin the term that Trump put when he'll say, okay, wait a second, maybe I'm overcooking this a little bit and I have to back off some of this policy because we essentially saw that to some extent.

when the market got really volatile. And then like you see on the S&P or excuse me, on the ISN PMI, it's an index of manufacturing activity. Reading above 50 means the manufacturing sector is growing. Below 50 means it's contracting. We've been below 50 for, I think it's now 29 of 30 months. I'm within one month of being accurate on that.

So again, it's like we're not booming. We're waiting for the boom to come. We're waiting for rates to fall, for policy uncertainty to drop. And then once we get through some of this, that AI trade and transformation of the American economy from automation and computers that are way smarter than me, but hopefully we'll never write an article, sends the S&P 500 to an all-time high.

All right. Yeah. Sorry, Ben. So I really like how you said that. And the way I'm looking at it, I like the macro and the fundamentals of tying into the equity market is one of two things. One is I think the S&P is really just a growth index at this point, an AI index. I personally don't think it's a great benchmark at all. It's more of a momentum strategy than it is a benchmark of how stocks are actually growing.

behaving instead, I would actually, the best one is the value line geometric average. And that thing hasn't done anything in like 15 to 20 years. That actually shows how hard it is to be a stock picker because really what the S&P 500 is, it's like it is a momentum strategy. It's exactly what I do. I'm a momentum guy. I only buy what works and I get rid of what doesn't. That's essentially what the S&P does. And now with the S&P being so concentrated towards only a handful of names, it's really an AI.

or a transformative technology sort of index. So when you think about the rest of the market, the broad market, the Russell 3000, and this is vitally important here in terms of whether or not we're going to see a sustained gains to new highs and put that in quotes, is that even though the major indices have reclaimed their 200-day moving average, and I said that before, the S&P is fine, less than 50% or above their 200-day moving average for the Russell 200.

And Al, you had said something about the ISM being negative for a long period of time. The small cap index hasn't done anything for that entire period. So to me, the small caps represent the macro economy.

And the S&P represents the AI and the transformative part of things. So you can be bullish the S&P, but not necessarily be bullish on the market of stocks. And that's kind of that needle that I'm threading here right now. I have no problem being along the S&P. I'm not quite sure I want to be buying small caps yet or a quote unquote, that average stock until I see them reclaim their 200 day moving average. And that way I know I have trend on my side. Got it.

OK, well, speaking of tech, we're going to get some earnings this week, including from Broadcom. You know, they're they're pretty exciting stock. People seem to love it. It's not quite Nvidia, but it's you know, it's up there with it. So, Al, tell me, what are you expecting for Broadcom? Broadcom. Oh, Broadcom. So this is an AI trade.

Right. So they are a leader in ASIC chips, which, of course, I know because I know everything application specific integrated circuits. So they make chips that help with AI.

It's a trillion-dollar company, right? It's one of the big ones that's driving the market and increasing the S&P 500 concentration. And you look at the growth, right? So we expect $1.57. We, FactSet, expects $1.57 in earnings versus $1.10 a year ago. Now, they do a bunch of stuff. They do semis. They do things that aren't related to semis. They do software. So, you know, semiconductor is a little more than half of their business. So you're looking for growth in that business. It's high-expectation stock. Fun fact.

It's up 80% over the past 12 months coming into Monday. NVIDIA is only up 20%. So this has done 4x NVIDIA over the past 12 months. So you want a good quarter, you want a beat, you want comments like, you know, demand as far as the eye can see and the AI trade is alive and well. And then we're all happy with Broadcom.

So, John, what does the chart say to you, the setup there? Does it jive with what Al's talking about? It's quite interesting how earnings is occurring just as the stock is testing its all time highs right now at this 250 area. So, yeah, this is a critical earnings report for this chart, for this company. A breakout above there would probably send to motion and move up to the 270 to 275 area. I mean, it's a good chart. It's a good trend.

Generally speaking, I like semis. My model portfolio is equal weight tech, but overweight semi. So I like how semis in general are behaving. But on the downside, if they disappoint, there's support down to that 220 to 210 area. So yeah, a critical time for these earnings to come out just as the stock is now testing its all time highs.

All right. Let's jump then to NIO, the Chinese EV maker. Al, what's going on there? So NIO, actually one more word on Broadcom. They're coming off back to back big quarters. Stock has moved a lot positively after the last two quarters. So that's a good thing or a bad thing. But just note that that has just happened.

Okay, so NIO. Now, NIO, I think, is like an EV story, right? And NIO is a Chinese electric vehicle maker. China is the largest market for new electric vehicles in the world. Plug-in hybrids and battery electric vehicles make up more than half of the new car market. About 30% of that, 50%, or 30%, yeah, 30%, 50%, 60% of the electrified vehicles are all electric, the kind of stuff Tesla sells.

And what you have in China is just brutal. You have decent growth and brutal competition, right? So unit sales are growing faster, essentially, than revenues because pricing is coming down. Lots of new models, lots of people shooting at Tesla for market share. Yeah.

And Tesla has, you know, seen slower growth than peers in China for just that reason. So, you know, I would when you're looking at NIO, I think you look at a couple of things. Look at their comments for market growth because Chinese market growth is important to Tesla. It's important for NIO if you hold that stock.

And then also look at things about cost control, right? So, you know, their sales are going to are supposed to rise from 1.3 billion a year ago in the quarter to 1.7 billion. They're supposed to lose 35 cents instead of 33 cents.

We're having pressure on margins. We want to see some level of cost control. We want to hear comments about price competition easing. It's unlikely to hear that. I'm saying what we would like to hear. Then you want to hear things like, Chinese EV growth is fantastic. That's good for NIO, good for peers, and then people will make that read through to Tesla.

All right. John, do you see anything in that chart? It looks pretty kind of yucky, but not really committal to me either. Yeah, it's been a solid downtrend for well over a year now, almost like the opposite of Broadcom.

earnings, you need these earnings here because if you want to make the argument that it put in its low in April through some sort of climactic fashion and the setback since then is a retest of those lows, these earnings really need to come in pretty solid and have it break out above its 200-day moving average. I mean, I don't like owning stocks that are underneath the 200-day moving average. And so this stock has resistance at four and a half. It really needs to get above that level to make this chart worthwhile on a longer term basis.

Yeah, on a NEO specific basis, their growth has decelerated. They've been hit by new models and competition. So the yuckiness in the chart is reflected in sort of struggling fundamentals, I'd say.

All right. Well, let's move on to CrowdStrike then. This one was getting a lot of attention, oh, just about a year ago now, a little less than a year ago. Had some outages. Delta had to cancel flights and things like that. But the stock has rallied back. Al, what are we looking for from earnings? You stole my intro. This is the one that took down the internet, July 2024.

Yeah. So that was a it was an update that they sent out to their cybersecurity software and then nothing worked. And you know what? It did almost nothing to the stock. I'm curious for John's thoughts because it's like undetectable in the chart now. Shares are up 53% over the past 12 months. They trade for 135 times earnings. Earnings supposed to be 66 cents versus 93 cents. So there is some

based on the prior quarter. There's some costs in for that outage that they're still enduring, but sales are still growing. 1.1 billion in sales for the quarter up versus 900 million. Cybersecurity is still a really good trade. People are very bullish on cybersecurity. You see that in the PE multiple. You see that in the share price performance.

Things are supposed to. So if you listen to the last call and they've had this outage and they're dealing with some of that, but the backdrop is still very good. They use words like things are going to get better in the second half of our fiscal year. So when they get on the call, we want to hear that, oh, the second half of the fiscal year is shaping up even better than we thought.

Yeah, and I would say on the chart, a fantastic looking chart, good uptrend there. So long as support holds around that 395, it's a constructive chart. Yeah, but also trading all-time highs, it makes you wonder how much of this has been priced in. But to your point, the cybersecurity stocks have been quite strong and the ETF HACK has been a good representation of that trade. So yeah, let's see if we can...

make us happy on the upside where we further resistance would be in that 510 to 515 area if they actually happen to surprise to the upside yeah i mean i'm amazed by you know you can hear people still talking about the uh that uh that outage and yet the the market seems to have clearly moved past it um it's pretty impressive all right let's move past earnings and i want to talk about al i can't have a call with you without talking about tesla yep um

it's been wild so no november election tesla stock takes off hits an all-time high 490 inauguration stock comes tumbling down drops below 220. now it's bounced again but today it's falling a little bit june is here a lot of stuff is going on what's going on with tesla how bad is the brand damage catch me up um yes i'm contractually obligated to talk about tesla anyone anytime anybody sees me

You know, this is a big month, right? So what is this? What was I going to say? This is kind of like as big a month as, you know, the Model 3 launch or the Model Y launch. You know, let's go back in the way back machine. Model 3 was the car that basically brought, you know, actually drivable electric vehicles to the masses. Outstanding car. I used to own one. And.

and just and then so that was a huge deal for the stock you know they can build you know a 30 40 000 car that people want to drive then the model y launched you know everybody loves suvs and crossovers why who knows but they're the number one sellers the model y became the best selling car in the world of any kind it's had that title for a couple of years and

And so just incredible. And then so but now, you know, Tesla sales growth is falling. They didn't grow sales in 24. They're not expected to grow sales volume in 25. The Model Y has been out since 2020 looking a little stale. No offense. But, you know, the Model 3 and the Model Y don't address all parts of the car market. So now, oh, my goodness, Tesla, the car company is ever going to sell two million cars. We're all worried about that.

And then Elon squirrels the debate and says, no, it's not about cars anymore. It's about AI. So now we're going to launch a self-driving robo taxi service in Austin, Texas, very slow, very measured way, according to Tesla, according to Elon. And that's supposed to send the next wave of growth through this stock. Right. So, you know, Tesla's worth valued at north of a trillion dollars.

Toyota is the world's most valuable car company next to Tesla. We're talking about a $300 billion valuation. If you just want to rule of thumb, just minus Toyota from Tesla, that leaves you with $700 billion. That's the embedded AI value in Tesla stock.

Now, I think as I transition to hear what John thinks, I mean, you know, sometimes we sell the news, right? So Tesla shares are up more than $100 since that April 22nd earnings call when Elon said he would step back from Doge and when Tesla said we're still on track to launch his robo taxi service.

So that's almost $400 billion. That's about 360, depending on the day, 400 billion in market value since the earnings call. So, you know, you might get a decent launch and then, you know, lots of cheering that Tesla has finally done it, solved autonomy, just like Waymo. And then, you know, you might not get the stock reacting like you would assume.

All right. So, John, what I mean, you were telling me a little bit about why you thought the stock would bounce when it did, but what's it going to do now? OK, yeah. So, yeah, when Ben and I were talking before the before this podcast, he told me we might talk about Tesla. And I was just like, oh, my God, what what what a great contrarian bicycle did we see?

back when folks were setting dealerships on fire because for political reasons, like that's like a classic example of, you know, just herd mentality where like, you know, like, of course that's a contrarian opportunity to buy a stock. I mean, people just went crazy over politics for, for a particular company had nothing to do, I think with, with the fund.

with the fundamentals of it. So the stock has since recovered to your point over 100 points from the low. Now it's dealing with resistance at this $400 area. Some backing and filling, sure. But structurally and longer term, this chart is still positive. Yeah, it does need to get above 400. But so long as support at 300 or make it real, real simple,

That 50-day moving average has been a great proxy for risk for this stock. It could be viewed positively from a chart perspective so long as it holds above that 50-day. So yeah, I thought that was quite a classic contrarian buy signal when people were just like attacking the dealership.

Yeah, and I didn't actually answer the question. I forgot to answer the question about brand damage. I think that what I tell people when they email me angrily, as you all can imagine they do, some of you on the call probably have emailed me angrily.

There's definitely brand damage that has been done. Tesla has admitted to this themselves. And, you know, I think that it is too early to tell, like, it's never going to be fixed. Right. I think that's probably too negative of you. I think over I know people don't like to hear this. I think over a year, 18 months, you'll get a sense to see how people feel about the brand. If they launch new cars, they have self-driving robot taxis. If Elon gets back to running his companies primarily versus politics, then

I think a lot of it goes away. The bears don't like to hear that. The bulls think I'm still too bearish and that's just my life. All right.

Well, good. So we're quickly running out of time. So let's turn to some reader questions. I have two that are almost, I think, the flip side of the same question. Kevin asks, how can technical indicators assist investors in times when headlines and events whips up market prices? But Douglas asks, it seems that technical analysis is more appropriate for short-term traders rather than long-term investors. Is that correct? John?

Can you make those make sense? Yeah, make sense for sure. As I mentioned earlier, 95% of my clients are not technicians. 95% of those clients, I would say no. I would say 80% of those clients are long term investors. They are not day traders. They're not hedge fund folks at all. So technical analysis works very well on long term.

For sure. It's really about knowing the trend and riding that trend and having the conviction to ride that trend as long as you possibly can. Being able to put aside your biases, political or not, fundamental or not. You got to remember one thing that the fundamentals lag, lag price action. So if you can hold on to that trend for as long as you possibly can and not get shaken out,

That's where the long-term and the volatility component of things can help you with charts. It keeps you objective and it keeps you honest. I can't tell you how many times I go into a client's office, even though I was on the buy side, they go to me, "Oh, here comes John. John's the truth serum. He'll tell me exactly what is going on, whether or not I'm right or wrong."

Technicals, yes, they can help in your timing. They can identify support and resistance levels. They can tell you what your risk may be on a particular position. Absolutely. I use that all the time and I advise clients all the time on that. But remember that technical things happen for fundamental reasons and that the long-term trend of a security is often reflected in the long-term fundamentals as well. So I will side with trend in situations like this, because at the end of the day, we don't know.

We don't know. We think we know, but we don't know. So what we know is what we see in front of us, which is price. And this world and this environment, everybody, this is general wall of worry, consistent wall of worry. That's great. I love that. I love that volatility. When people stop worrying, then I start to worry. So be mindful of trend.

Be mindful of your levels. Be risk smart in a situation where we are right now. We still haven't broken out to all time highs. We still don't have enough stocks above the 200 day moving average. You need you do need to be pragmatic here. I don't think it's going to be a straight line to 6600. But if you be smart and you manage your risk and respect your trends, that's where technicals can really, really help you.

Just to add one thing or a couple of things, like short-term versus long-term investors, I disagree with that largely. You can think of it like this maybe, technical traders are those really honest friends that will tell you, do you like this suit? And they'll actually answer honestly, no, that suit's ugly. They're a way to get out of your echo chamber and say, hey, listen, I think all these things.

What does the chart say? Or, you know, to that first point, you know, when the world is falling apart, hey, honest friend, technical analyst, you know, where do you think this bottoms out? You know, because you're going to feel like the world is ending. You're going to start planting soybeans in your backyard. And John might come and say, you know what, you know, you may want to nibble away, you know, worry about 5600, you hold 5600, you know, hey, it'll be okay. You don't have to plant the farm just yet.

All right. So let's we got about five minutes. So let's do a couple like let's do a speed round through some different asset classes. So, John, what about bond yields? Do you watch the charts there and what are they saying? Yeah, absolutely. So when it comes to interest rates, vitally important, I think interest rates, like say the US 10 year

That to me, in my opinion, is in a structural uptrend, meaning the COVID lows were the secular bottom for the 10-year. I do think the 10-year is going to be going up over time, just like it did during the 50s and 60s and 70s.

on a shorter term basis, that 5% level, I think is very, very important. I think market is keenly aware of that level. I think the market narrative right now is if it breaks above 5% on the 10 year, oh, that's too much inflation. Whereas if we break below the trading range, call around that 375 to 350 area, folks might tell us, oh, okay.

the economy is slowing down, interest rates need to be cut. But over time, I do think interest rates are going to be climbing. That is just a general trend that we're in. We're in a reflationary trend for interest rates, just like we were, like I said, in the 50s, 60s, and 70s. But that 5% level on the 10-year, I think, is very, very important as a resistance level to kind of keep things hunky-dory for the time being, at least from a macro standpoint.

okay um all right we have two questions about kamikos ccj is the ticker uh from david and from john um what do you think that uh stock uh what's the chart telling you well it's another stop that's trading up against all-time resistance call it call it 62 to 63 great momentum on all those names those rainy names have had fantastic momentum i would put this in the category of a good overbought um

I want to see how it does pull back, but I would say the chart remains constructive so long it holds above that $52 to $53 area.

And then, of course, if it were to break out above that, that 62 to 63, you would have to assume that so far since I would say the past year was a bullish consolidation pattern, one gigantic bull flag. That's a pattern that would portend even higher prices. So trend is favorable. Just need to see a breakout to reaffirm that view. But I would say that this is a overall a longer term decent chart.

All right. And then we have Jeffrey asking without real fundamentals to look at it crypto, it seems like technicals are the only alternative. Would you agree with that? And what are the technical saying? Yeah, for me, I would say that the Bitcoin chart

moves very nicely to the technicals. And if you even want to get technical with the technicals, works beautifully with the Elliott Wave stuff, but that's for another call. And if you really want to get glazed over and go to bed on that. But I do think Bitcoin has a place in somebody's portfolio for two reasons. One, as a risk-on asset.

I do believe it reflects the risk on nature of folks. But also, as of late, I feel like it's starting to gain some sort of credibility as being a risk off asset. And what do I mean by that? With treasuries selling off, not giving us diversification benefits, Bitcoin is kind of hung in there.

I like it for both reasons. Also, it's been outperforming the S&P 500 for a couple of years now. I like that. So from a relative performance standpoint, I think Bitcoin has a place in your portfolio. And same with gold. Gold also has been outperforming the S&P 500. It's been buoyant as well. But Bitcoin, I like it. I think so long as it holds, let's say, above that 92 to 93,000 area, I think next resistance is about 130. Longer term,

I'm thinking 300 or so, 300,000 on Bitcoin. Very, very bullish. All right. One last stock. How about Apple? Oh, the old Apple chart. That is one of the mag sevens that needs to...

figure out what it wants to do. It's kind of gotten a little bit sour, if you will. It used to be a darling. It's no longer. Google would be in that same category as well. I really need to see Apple kind of get back above its 200-day moving average for me to really want to endorse. I think there are better names within the Max 7 universe to play. But from a level standpoint, it really needs to reclaim that 220 to 225 area for it to be...

within the bullish column of charts these days. It's made a relative low as well. I don't like buying stocks that are underperforming the benchmark. So it needs to prove itself here by breaking out above that 220 to 225 area. We'll call it as 200-day moving average for it to get better.

kind of sitting tight on apples, so to speak. All right. John, I want to get, we had a bunch of questions here from people who want to learn more about technical analysis. I know you're involved with the CMT, if I'm not mistaken. That's right. Yes. Is that the place to start? Of course, it's the place to start. Thank you. And I'm going to talk my book here for a second. Yeah, I'm incoming president of the CMT Association. So thanks for asking that.

Yeah, that's the first place to go. It's the leading credentialing association for professional technicians. But you don't have to be like a full-fledged professional. You can become an affiliate member to start. What I recommend folks to do is go to the website, sign up, use the resources that are there to learn about technicals, learn from the greats over the years from technicals as well. We have tremendous resources.

events and symposiums. We have our global symposium in Dubai in end of September, early October. So be there or be square. But no, the CMT Association is the leader, the ethical leader as well within technical analysis. It's very similar to the CFA. We get three levels of examinations from very basic stuff like trends and patterns to quantitative testing, trading strategies and whatnot. So it covers the gambit.

But yeah, definitely go to the CMT website, google.cmt.org. Go there. Yeah, sign up at a minimum. Try to become an affiliate member. And if you really want to take the exam, which I highly encourage anybody starting out in the business, at least take level one. And then if you get the bug, go for two and obviously go for glory. Because I think once you get the bug, you're going to want to go for all three levels, which I highly encourage everyone to do.

And John, what's the website address? I think it's actually quite long. It's cmtassociation.org. What I do, because I'm lazy and I'm getting older, I just Google CMT space org and it's the first one up there.

I certainly agree with John. I gently disagree. Maybe the second thing you should do, Barron's.com is probably. Oh, sorry. Yes, yes, yes. My bad. My bad. My bad. Just keep it in order. That's okay. That's all the time we have today. So Al, John, thank you for being here. And to our audience, thank you all for being here and listening. I hope you enjoyed the conversation. Next Monday, June 9th, Lauren will be back and I'll return to my position as her trusty sidekick.

We'll be joined by Michael Reed, Senior U.S. Economist at RBC Capital Markets to discuss the U.S. economy, the impact of tariffs, and the impact of all that on the stock market. Thanks to everyone again and happy investing. Isn't home where we all want to be? Reba here for Realtor.com, the pro's number one most trusted app. Finding a home is like dating. You're searching for the one. With over 500,000 new listings every month, you can find the one today.

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