Ep. 311 How Long Do Market Corrections Last? These Signs Show When To Get Back In.
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Hello and welcome to another episode of the Investing with IBD podcast. It's Justin Nielsen here, your host, and it is March 12th, 2025. We've been in the throes of a correction and that might be making a lot of people kind of scratch their heads and say, how long will this last? How do we know what to expect? And to help us walk through that is someone with a lot of experience. He's seen some corrections in his time. It's David Saito-Chung. He is our Deputy Markets Editor at IBD and welcome back to the show.

Hey, Justin, thank you so much. It truly is an honor and a pleasure to be here. And I hope I brought the right wardrobe, right? Am I still the hat man on this show, too? Yes, absolutely. You're the hat man everywhere on every show. So, yeah, of course, for those that don't know, on IBD Live, he became designated as the hat man because he was always changing his hats regularly.

I mean, he wears many hats at IBD as well because in addition to deputy markets editor, he's also co-manager of the leaderboard product. And, you know, really it's a model portfolio that has been doing very well over the last few years. Very, very heavily in cash right now because of the market. And that's one of the things that a market timing component is in there. Yeah.

But one of the things, Dave, that you and I talk a lot about is just kind of the study of history, right? Oh, yes. So in my tweet today, I was like, hey, couldn't have a better study partner for corrections and kind of understanding what to expect. And the last two times you came on, we got a little history lesson on the Fed.

first on the raising side and then on the cutting side. So let's kind of talk a little bit about what should we expect from corrections? How do you know when a correction is over? How do you know how long it's going to last? How deep it's going to be? What's your approach, Dave?

Yes. You know, I'm very proud to be a fellow market nerd on this show with you, Justin. And first thing is that we're going to look at some historical corrections and draw some interesting conclusions. And I hope that the

The checklist that we also go through will help everyone who's listening today and watching to get a better sense of what this current correction might evolve and how it might finish up. So the interesting thing is right now we definitely are in a correction, meaning that it's more than just a mild pullback within the

either a cyclical bull market or a secular bull run. And the reason I say that is, as we know, that the NASDAQ has fallen more than 10%. The small caps have fallen almost 20%. That's a healthy correction, right, Justin? Yeah, yeah, that qualifies. And I mean, really, the Russell 2000, the small cap index, just really never got going. So this was kind of like,

uh, it finally got back to old highs, uh, from 2021. And then it kind of rolled over. Um, exactly. But you wanted to put this in perspective. So, uh, what's kind of your, your, uh, your, your take on how this correction compares historically so far. Exactly. Right. And I, I think that that's, that's the biggest question people have on their minds. Uh,

how big could this correction be? We'll, we'll partially answer that through our checklist. And from there, maybe the two of us will maybe even, uh, stick our necks out and decide, Hey, this is the kind of correction we're expecting, uh, right now in 2025. But I think, uh,

as this is a serious topic, I thought it'd be kind of fun to actually start with a quiz, a pop quiz for everyone. Right. And we're going to use charts. We're going to go with the monthly charts. And, uh,

The good news for everyone tuning in is that no one will know how well you scored because we're not doing this online like we do on Zoom. You don't have cameras in everyone's house? No, I don't. No, I'm not interested. Good to hear. Yes. But basically, it's going to be a simple multiple choice game.

question. We're going to have four questions and they're going to involve three. The answers are all going to be always the same, multiple choice. Either the S&P 500, choice one, emerging markets in the form of the ETF EEM, that's the iShares emerging market, that's EEM once again. And then finally, a defensive sector of the market, the Dow Jones utility average. And on market surge, that is 0DJU.

So those are the four we're going to stick with monthly charts. And why don't you go to the NASDAQ or something else so people can't cheat by looking at your charts. Right. There you go. So those are just three multiple choice questions. We'll start with the first question. Which of the three indexes that we just talked about fell the most in 2022? First is S&P 500. Second,

Or answer B would be EEM, the emerging markets ETF, or C, the Dow Jones utility average.

And do you want to participate in this too, Justin? Do you want to prove your mettle? You did not tell me you were putting me on the spot. Otherwise, I would have looked ahead and cheated. Exactly. So I think we'll give you the exemption on this one. And I don't know, maybe MJ might shout out, say, well, Justin really thinks this. Yeah, right. Our producer. So anyway, so once again, answer A, the S&P 500. Answer B, the S&P 500.

EEM, the Emerging Markets ETF, or C, the Dow Jones Utility Average. Which of those corrected the largest from their 52-week or all-time high during the 2022 bear market, basically caused by rising interest rates? The answer is, in fact, B, answer B, the EEM, Emerging Markets ETF.

Maybe people might have thought that in 2022, the S&P 500 would have fallen the most because we're talking about a serious climb in interest rates from, yeah, a Fed funds target range of 0.25 to 0.5 percent, all the way up to 5.5 percent. But in fact, the S&P 500 fell from its peak 28 percent to 8 percent.

EEM was down 43%. It actually fell significantly more. The best performer, relatively speaking, was the utilities. The zero DJU, the utility average, was down 24%. Now, if anyone finds a fault in my math, please let me know. But in any case, I thought that was an interesting one. Now, so let's go to 2020.

which was, as we know, the global pandemic bear market. Didn't last very long, but boy, you can see it on the chart. Okay, go back, go to NASDAQ once again. I don't want people to cheat. Yeah, so here again, which index fell the most in 2020? Choice A, S&P 500, choice B, EEM, or choice C, the Dow Utilities. All right, so we'll pause a couple seconds. And the...

The correct answer, in fact, is C, the Dow Utilities. That actually surprises me. I would not have guessed that. Yeah. Okay. That's a pandemic that would have gotten the hardest hit. Not by very much, you know, compared to the other indexes. This was actually the closest, I guess, the closest in terms of the answers because in 2020, you know, from –

Its peak, I think it was in late 2021 until early April 2020. The utilities fell 38%. So that's much, much deeper than your light bear market, if you will. Bear market is officially defined as a 20% decline or more. But EEM and SPY both fell 35%. So the utilities were, in other words, 300 basis points worse.

All right. We're going to go to another one. 2008, 2009, that was the great financial crisis. Here again, which of the indexes fell the most? A, S&P, B, EEM, or C, Dow Utilities? So I hope everyone who's listening writes down their answers and be honest with yourselves. See if you get this one right. And

Justin, do you have a chance, if you'd like to answer, you want to guess which one was the worst performer? Well, I mean, I know that SPY was down 57% off its highs, but I could imagine EEM getting hit harder. I would think that the utilities would hold up a little bit better. Bingo. You nailed it. You nailed it. The correct answer is, in fact, B, EEM fell 67%.

So that is a, you know, you're talking about a serious two-thirds haircut of your value, right? That was in 2008, 2009, when all of the attention was clearly on Wall Street banks, like Bear Stearns being bought for like a dollar or two dollars per share by J.P. Morgan. And then we know what happened to Wachovia and Washington Mutual and KB.

how countrywide and Merrill Lynch went. I remember all the names that no longer exist, right? Exactly. But they're so fresh in my mind, at least Merrill Lynch, right. Being, being sold to bank of America and Lehman brothers, not being able to find a suitor. That was a, that was a big, big bear market in our lifetimes, or at least most of our lifetimes. I'm going to those listening. There might be some very, very young investors tuning in.

The S&P 500, as you said, Justin, fell 58% with or without dividends. The

Emerging markets fund down 67%, as I said, and then over the same period, the utilities down 48%, which I think only gives you cold comfort when you think about what do you do in a correction? Do you go into those dividend payers? Do you find some kind of safe haven within the stock market? Yeah, so those are the three things.

The 2000 to 2002 bear market I was considering looking at as well, but we won't make that into a quiz because just to save time, it's interesting that EEM was not traded during that period, during the tech crash. But the utilities, in fact, fell more than the S&P 500, 62% decline there.

Yeah. And that really kind of puts it up there with the Dow Jones Industrial Average.

plummeting 89% in 1929 from the 1929 crash. So it's very rare that you get up to those levels. Exactly. Thankfully. That's right. That's right. So that kind of sets the stage for a little bit of, you know, how different groups might get hardest hit.

hit in different market environments. But I think your numbers also kind of highlight the fact that a lot of times there is no safe haven. You know, a lot of people like to say, oh, well, you know, there's a bull market somewhere, even as bad as it gets. But a lot of times it's really hard to find those glimmers of hope when the market is coming in so sharply. Yeah.

Spot on, Justin. I couldn't agree more with what you're saying. And I think the marketplace to our own desire to maybe beat the market, even in a down market, as you said, right, there's that old saw. There's always a bull market somewhere. Well, in a real bear market, it feels like there's a bear market everywhere. That kind of is...

one of the conclusions we can make based on our research of major declines, like I said, 20% or more bear market declines. And we're talking about that because, look, the small caps are very close to triggering that technical definition. Another big couple drops by the NASDAQ and we could get there. We do know that

Corrections are very healthy, though, and we're going to talk about a little bit later in the show where we might find some strength once the market shows signs of a bottom. One other thing I want to bring up because, again, like with the COVID, the 2020 that you mentioned –

how close everything was. And I think this is an important point to remember also that a lot of times in crises, you do get a higher correlation. You know, it's a correlation of crisis, right? And that can be on the upside too. We saw that in the NASDAQ's meteoric rise in 1999 or the late 90s. Everything was kind of going up. It didn't matter what

what it was. It just, you know, you could throw a dart and pick something that was going up. So it works both sides. You know, when you get kind of way, way far from your mean, you know, you can have higher correlations. So I'm glad you shared some numbers there as well. This IBD podcast is brought to you by Directions Daily Leveraged and Inverse ETFs. Whether you are a bull or a bear, you choose the direction. Visit direction.com.

Investing in the funds involves significant risk and should only be utilized by investors who understand the impact of leverage and actively monitor their portfolio. They are not designed to track the underlying index for more than a day. Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses contained in the prospectus available at direction.com. Read carefully. Distributor, Alps Distributors, Inc.

I want to kind of switch over, though, and you talked about having, you've alluded to it a couple times now, a correction checklist, a five-point correction checklist. So why don't you walk us through that and kind of tell us what you're looking at and the way you approach a correction. Thanks so much, Justin. This is the first time I think on any show or podcast that we give a concrete checklist like this. So very excited to share some thoughts there.

And as we watch the market on day to day and think about how severe this decline could be, hopefully we would go through all of these five points. The first point being, are we falling in the stock market because it's the end of a bubble? Or is there some kind of black swan event? Yeah.

when we think about obviously 2000 to 2002, that was the end of the dot-com bubble. When we look at 08, 09, we think of the great financial crisis. That was a black swan event driven by greed in subprime debt mortgages and huge leverage in the banking sector. That was a black swan event. Very, very, very few people spotted that and even fewer people profited from that, right? And

COVID, another great example where most of us weren't really aware of what that was until we started seeing the market fall, triggering big news headlines, which triggered even more falls and more fear. So if we think about that as one key element of a checklist, then let's think about 2025, right? Banking system is in good shape.

They've been helping the S&P 500 post-record profits. There's no pandemic. But right now, what's obviously hitting headlines right now is the great uncertainty regarding what our federal government is going to look like down the road and how that will affect consumer sentiment and confidence. So does that...

Does that grow into something that could be like a black swan event? I don't know. I don't know. But it is something new, and that's why it's interesting. And also, before I forget, obviously the threat of tariffs. We have that example back in the 30s, right, when the Smoot-Hawley tariffs on various imports was taken into measure. Now,

I don't know how much we can apply that part of history to

what is going on today, partly because one, you know, the economy and the global economy is much more complex and much, much bigger. When you go back to the 30s, the 1930s, and look at the Dow Jones Industrial Average in the later part of the 30s, boy, there were several declines of 50% in the Dow well after that peak in the fall of 1929. So for sure, yeah, I think scholars will say that the tariffs...

help lengthen that long period of malaise. I learned that from Ferris Bueller's Day Off. Ben Stein did go through that in Ferris Bueller's Day Off. Not many people remember when he was saying Bueller, Bueller, he was talking about the Smoot-Hawley and Ferris. That's what it was all about. And look, we do have a little bit of

tariffs with China from the first Trump administration to kind of look at. But even that, the environment was different. There were different, you know,

different gauges of inflation and where we were at in some of that and also recovery modes and supply chains. So some people are saying, you know, can we even use that as an example, you know, from, from the same president, just a few, a few years earlier. Exactly. Exactly. And, and,

Well said. I mean, when we think about 2017 being one of the calmest bull markets in recent times, in 2018, there was a little more volatility, and part of that was due to the Fed's reaction to the tariffs and inflation. Well, I mean, maybe there we can find a precedent by looking at the end of 2018. So in any case, regarding this first point of the checklist,

I personally am not sure whether we are at that sort of stage of saying, hey, something really afoot is occurring. One more thing I wanted to ask you. As part of that bubble consideration, are you looking at levels of extension in terms of – for moving averages or – what kind of gauges are you using? Because –

Look, it's hard sometimes when you're amidst a bubble to recognize it, right? Because it's just like, oh, well, everything's different now. And there's a reason why things are overvalued and still going to go up so much higher. I guess you could say the same thing on the downside with the Black Swan event. There's a lot of reasons to believe that it'll never get better.

You know, after things happen. I mean, like that was certainly the case in the great financial crisis where, you know, everything was freezing up and it was like, will anyone ever trust each other after all of this murkiness with counterparties? So is there kind of a quantitative way to identify this as opposed to just going by your gut or feel?

That's such a great question. I wish I had a little more time to give some proper numbers, but just... Volume two. Yeah, exactly. This is a big topic. It demands maybe another episode, but...

When I think about the just pure numbers, like let's take the NASDAQ composite. And if you would like to show a weekly chart of zero NDQC on market surge, it might be nice to do that, actually. I find it always intriguing that we have a NASDAQ that, obviously driven by tech, bottomed out near 10,000 during the rate hike campaign by the Fed last

and 2022, and then a follow-through that happened in November 2022. And look how we doubled as an index over the next two years plus. That is an incredible move, especially when you consider growth stocks that were leading engineered even bigger, bigger moves. It's also interesting to see how

NASDAQ is having its sort of like its Dow 10,000 moment back in 1999. And there were times where we hit these round numbers, 20,000 on the NASDAQ, or more recently, was it 6,000 on the S&P 500? Then we've stalled and then we've gone into a correction. Maybe everyone on their own could just go look at some of those other big, big moves up and

And then look at how far above these indexes got above the 40-week moving average on the weekly chart or the 200-day. And maybe we can quantify that. Yeah.

So I probably made you go a little bit long on your first point of the checklist because I had extra questions. But go ahead and move on to your next point if you don't mind. Yeah, of course, of course. So second on my checklist is looking for –

declines among key stocks or key sectors based on earnings news. And it's become, I think, a little easier to see that because of Reg FD. There's so much volatility in action that happens every three months, every 13 weeks when these companies report. Now, we also have the, I guess, warnings or pre-announcements that can give us some signs of

But right now, I think it's going to be interesting to see whether in the weeks to follow after this barrage of announcements and executive orders, how that affects corporate America's investing plans, sales outlooks, merger and acquisition ambitions and all that.

I will say, though, that right now the latest figures I got from John Butters over at FactSet, he's a researcher there, a really good guy. We've quoted him a lot in IBD. Currently, looking at the bottoms-up estimates for the S&P 500 companies,

Earnings are expected to grow almost 12% and as a composite $271.23 for the S&P 500 versus what I believe was a record $243.02 in 2024.

But 2026, interestingly, Justin, we could see an acceleration in earnings growth. Okay. 14% to $309.16. Now, I'm giving you a lot of numbers here. Why is that important? Well, Wall Street often...

puts a valuation, a price-earnings ratio based on forward earnings. And therefore, you know, on TV or wherever you're going to say, here's someone say, I've got this target for the S&P 500 based on this earnings estimate and a 20 PE ratio or whatnot. These numbers are important for institutional investors. And so let's see how these adjust. Let's see how the Apples and the Walmarts...

and the Johnson & Johnson's of the world, how they express their views regarding earnings forecasts. So that's, you know, the potential of an earnings shock, I think, has ramifications for the

for the size of a correction. And so that's kind of your third point, really, is kind of these economic shocks and surprises. And so how do you kind of do that monitoring? You know, you've got further earnings revisions and surprises. You know, you can use different methods. You've got your inside track on the research there. But what about on the economic side, kind of just macroeconomic ways?

Yeah. Well, we can start with what I like to do as a journalist is to look at interest rates. And we do that a lot on IBD Live. We talk about that in stock market today, I'm sure, and in other places. But, you know, on market surge, my go-to is the Xero TNX 10-year treasury bond yield. And

You see that chart there on a weekly basis, which is great there, and divide that number by 10 to get the interest rate for 10-year treasuries. So I guess one could call that the risk-free return on investing. And 4.31% really represents a return to normalization. You can see that

From 2021 to 2023, we had we had this gigantic, right, gigantic rebound in the cost of money, which really impacted how Wall Street set a valuation on on stocks and and how it impacted sales and earnings. And so, you know.

that was a big factor behind the bear market of 2022. Noticed in that chart there in the monthly that we see a ceiling at 5%. If we see, and I think many of us have probably heard someone, some market observers say, if we get above 5%, watch out. Watch out for stocks. Because keep in mind that...

One big reason why stocks go up is because of stock buybacks and dividends and the cost of money. The interest rate has a big impact on both of those activities, financially speaking, for companies and therefore the S&P 500. I like the fact that – I'm just going to put myself on a limb here and say at this point right now, I don't see –

2025 yet going into one of those major corrections we've talked about and partly is because interest rates have gotten to more of a normal place and interest rates have not been as volatile at least so far over the past year or two when compared to the big swings that we see on that monthly chart. A second economic indicator that I think no one should ignore is oil and do you have a

I don't know if we have a slide of the oil futures market in the monthly chart available. Yeah, I don't have one that I can... Oh, okay. No worries. This is the U.S. Oil Fund.

So it's not going to really correspond to the price of oil. Not a problem. I mean, if it's not possible to share like a thinkorswim monthly chart of oil, that's fine. I can sort of just explain. I shut my thinkorswim down to make sure that I didn't have any taxes on my system here. No worries. If I pull it up, it's going to make me blurry. Yeah.

That's totally fine. I think just the quick point I want to make here is that oil is a great barometer for demand in the economy and activity, right? And oil is not just for cars and for boats. It really goes into so many different products, including a lot of clothing we wear, for instance, right? Polyesters and so forth. And so...

Right now, I think it's a boon for consumers that oil prices are lower. People aren't really complaining about gasoline prices like they are about egg prices now. Right, Justin? Right. Yeah. And so, you know, we've seen that we don't have to fill our cars with eggs. No, no, exactly. Yeah. And, you know, we've, you know,

Since, let's say, in the past several years, we had a peak in oil futures around $130. And we are currently around $67. So major deflation in the short term for oil. But looking at some of the past bear markets, for instance, in 2008, 2009, oil went from $147 at the peak down to below $40. That was a major deflation.

bear market just in conjunction with the U.S. stock market. In 2020,

Were you one of the lucky ones, Justin, to buy crude oil at minus $30 a barrel? Right, exactly. When people were paying you to get rid of it. Yeah, exactly. My thinker's swim chart shows the low for the near-term front-end futures on light sweet crude at $6.50. And then, wow, I mean, those who actually bought futures there could have done extremely well. Yeah.

I think it's still worth, though, even though we have more and more alternative energies out there that people are using and investing in and generating, just to keep an eye on oil because oil still is useful to gauge the economy and gauge inflation. And right now, you know, on my own chart, I use a monthly –

for slash CL on Thinkorswim. Slash CL is your crude oil futures market. And I'm seeing a very interesting level around $65 to $67 where...

Crude oil has tested that level many times over the past four years and has not gone below it. So that to me shows that there's some underlying demand for the economy. But if we go into a severe recession, crude oil might give us some hint of that. And then also in terms of your economic side, gold was one. So what is it that you look at here for gold? Well,

Right now, I consider gold as inflation hedge and also a hedge against uncertainty regarding America as an economic superpower and its ability to pay its debts. Lately, we're seeing continued headlines about whether the U.S. will avert a federal shutdown or at least a partial shutdown. It looks like

It looks like we might get a good deal that will extend that possibility until September. It's in the Senate's court right now, or the ball is, so to speak. But I find gold being also very fascinating because if –

It's interesting that gold has gone up together with the dollar. The dollar has weakened a little bit, but it's still really strong over a longer term. People like to say that gold tends to go up when the dollar goes down because it's priced mostly in dollars. But I think the use of gold is really as a hedge, and that kind of is a good indication of fear. Right. Mm-hmm.

So, speaking of fear, I mean, now you're kind of getting into investor psychology, which, as we all know, I mean, that is a very important point, both on the fear side and the greed side. That does tend to be where folks make poor decisions. So, how do you kind of, as part of your checklist, use investor psychology to kind of determine what's happening with a correction? Yeah.

Yeah, great question. And we'll just focus on a few sentiment indicators. As many of us know that IBD doesn't use any psychological indicator as a primary indicator of the market. We'll always look at the daily action of the indexes as our guide. But I think when it comes to a major correction,

One thing I still look at a lot and I think is still very useful is signs that there is extreme fear. And so on investors.com, under market trend, we have a landing page of psychological indicators and we have the bulls versus bears. And for the past 20 years or so, we found that when we are near the bottom of a major correction trend,

The percentage of bearers surveyed by Investors Intelligence in its weekly surveys actually exceeds the level of bullishness. Bearers meaning investors.

These newsletter writers are expecting a 20% decline or more. Bulls expecting, obviously, a strong rise in stocks. And then the remainder is in the so-called correction territory. They're just not willing to call it out on the outright bull or bear and could have a healthy pullback, right? So right now, when you look at that chart that you're showing, Justin, we're seeing bullishness fade very, very fast. And in fact, the latest numbers...

today showed interesting change. Right now, we get the data on Wednesday, bulls came down to 27.6%, bears rose to 34.5%.

That is a bullish cross, if you will. So if you just imagine for those looking at the video right now, just imagine that this green line came up a bit. The red line came down a bit. And so we've got our first crossover since 2022. Yeah. And what happened in 2022? It was a tough bear market. Very, very hard to find any stocks going up.

But eventually that ended because we had new leadership coming in. We had new themes to invest in, particularly AI, right? And so, therefore, I feel that's a very important area to look. Now, one more thing that if you don't mind showing is on market research, we have the put-call volume ratio. And we haven't talked much about that because we've learned that

secondary indicators, mainly investor sentiment indicators, don't always give you a legitimate signal. And boy, look at all the noise on that signal with the put-call-volume ratio. But this compares bearish put volume divided by bullish call volume across all the major options markets. What I found interesting, though, is that when we have a...

the put-call ratio fall very sharply, it does indicate that there could be a little bit of excess investor optimism. And we should be aware of negative market action, distribution days, breakout failures, stocks reversing hard after hitting new highs and big volume. And just as a piece of history, before the March 2000 top,

during the dot-com crash, the SIBO, according to Google, put call volume ratio on the SIBO alone went down to 0.39, which is really incredible. I mean, we're talking only 39%

puts traded for every 100 calls. We are nowhere near that. And I just want to throw it out there because I think it's, it'll be interesting to see whether we see any period, you know, in the future of excess optimism in that put call, or will we see another spike in that that could also coincide with some of these other indicators of fear. So just keeping on those two.

And then your last point, I mean, this is kind of just a general reminder, I think, for folks is like when you're coming out of the correction, of course.

What is it that you need to see in addition to the indexes performing follow through days, which, you know, we've covered a lot on IBD Live or you, you know, you write the big picture often enough to where you've covered that in depth or investors corners. So what is that kind of final component that you need as you're coming out of the checklist?

Yeah, it's something that you have talked a lot on this podcast with many guests, and it's about the leadership. Is there market leadership in the form of dynamic growth companies with good earnings and sales, great fundamentals, great relative strength versus the S&P 500, forming good chart patterns and breaking out?

to new highs in heavy volume? Are you seeing stocks in some exciting industries that are breaking downtrends on their weekly or monthly charts? And are you seeing several stocks in those key industries moving together? Because that is really your best signal that the smart money and the best and brightest institutional investors are

are really deploying cash into the market and getting off the sidelines. If that happens and these stocks, yeah, break out, especially on or around the follow-through day, then you have that herd effect with other institutions that could help drive a real true bottom of the market. Mm-hmm.

Thank you.

Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses contained in the prospectus available at direction.com. Read carefully. Distributor, Alps Distributors, Inc. Well, and I guess that kind of leads us to our next section here in terms of looking at the current market. So while we are still in a correction, this is the time to do your homework, right? It's the time where you want to be building that watch list. You want to be observing. And as you've been

Again, very involved with, you know, screening for the articles that you're writing. Is there any areas that are kind of coming up front of mind for you that are looking interesting? Not necessarily to get into right now, but that are holding up well enough and look like they're potentially setting up for when we do come out of a correction.

Absolutely, Justin. And this is my little props of the latest copy of IBD50 in IBD Weekly. And I've highlighted some of the medical biotech names that appeared on this list. We're going to talk about a few right now very briefly. And I found at least 12 stocks in healthcare and medical that showed up in IBD50. So that's almost 25%. And

One of them also showed up on the IBD BCAP 20 screen. These are great screens in which to begin your research of emerging new market winners. But before that, yeah, you wanted to look at XLV and show how this one is. If you could go to a weekly chart, Justin, I think it would be interesting to note that

Of course, this is a small collection of health care stocks. But if you look at the top right corner in red, it says off 52-week high, 9.4%. So it's been a tough week this week.

But that's actually doing a little bit better than small caps, a little bit better than some of those other sector indexes. So if we see like the XLV cut that, you know, start to rebound further and get closer to, say, like 3%, 4%, 5%, 6% off the high indexes,

That would indicate to me that there are some good medical names that we might want to look at. Let's start from the bottom up. I want to look at Viva Systems. V-E-E-V is a ticker. This used to be a really great winner, then went into...

the bear market wilderness of its own, if you will, because growth had slowed down. That weekly chart of market search showed that many years ago it was really clocking excellent earnings growth and then slowed down. The company is now a large cap, so the numbers aren't as exciting as they once were. But it's interesting to see that this stock to me has clearly broken downtrends.

Relative strength line recently hit a new high and it hasn't really broken out yet. You got that trend line that Justin just highlighted there. And

The earnings showing a better arc higher, good earning stability factor on a scale of 0 to 99, lower the factor, the more stable the earnings, great return on equity. And now also you see the number of mutual funds has slowly started to pick up again. So I think this is one that even if you don't think is –

enough or big enough a growth company to consider buying, maybe use this as a bellwether for medical software. The next one would be option care...

OPCH, this is a small cap in the home care space, pharmacy management, home-based infusion therapy. 99 composite rating. Very, very strong there. As that weekly chart shows, a very nice gap up to recovery.

return back above the 40-week line, that's a super deep base. And I'm not sure how well this breakout will succeed, but maybe if it starts to trade a little more tightly and produce some good earnings surprises, this could be an interesting one that could generate a nice short-term profit from a breakout. Another one that I'm more interested in actually is EXEL.

So after Option Care Health, which was O-P-C-H, let's look at Excellesis. E-X-E-L is the ticker. And they develop small molecules to find new cancer treatments. Very, very nice technology.

growth in recent quarters. And this year, it looks like earnings aren't expected to grow as fast as the prior year. That's partly because you had earnings tripling in 2024. That's a tough year of your comp.

But if you scroll down on the fundamentals section there, yeah, at least right now we can see that the next quarter of earnings is expected to be explosive and sales still in the double digits. We'll see whether those future estimates are conservative or not. Technically, you know, Justin, this chart is one of the stronger ones we see right now. I wouldn't be trying to buy this one

as it's pulling back because, you know, it could even test that 10-week moving average. Yeah, I mean, just, you know, to your point, earlier this week, it was actually at all-time highs with the market off as much as it was. Yeah. That was absolutely astounding. But, you know, it did take a hit yesterday just kind of showing how, okay, sometimes things can look great and, you know, the market does pull down a lot of things. So you've got to be careful. Yeah.

Exactly, exactly. So that's a mid-cap that could grow into a large cap when you think about it. $10 billion in market cap. If the company continues to grow sharply, let's think about the potential there of it becoming a large cap. A few more names to consider would be a leaderboard name. It's under our model portfolio, TG Therapeutics, TGTX. I do have a position, full disclosure, in this stock myself.

Look at the nice breakout that happened last week on earnings. This company is a leader in treating relapsing forms of multiple sclerosis, which is a serious chronic disease.

And the fundamentals are impressive. They're competing against the likes of Roche, which owns Genentech, as well as Novartis. And they're trying to develop a better subcutaneous treatment. In other words, like an injection that will be easier to administer versus current infusion therapy that it offers.

But it's a proven product. You can see, if you can scroll down once again, please, Justin, on the quarterly sales and the earnings, you can see that these numbers are really picking up steam. For instance, in Q4, earnings of 15 cents versus a 10-cent loss a year ago, first quarter of 100 million or more in quarterly sales. And if you scroll back up, the earnings estimates are really fabulous, and you can see that in the quarterlies. So this is one that I think...

Our viewers might want to watch, especially as the stock has broken out, made a new high, and also is Relto's strength line looking just absolutely strong. Two more, and then we can let our producer hopefully get some dinner.

Number five in the IBD50 is Axome Therapeutics. I regret to say I have not been able to research this one, but according to IBD, the company is expected to become profitable. What is interesting is that fund ownership is growing, sales, it has substantial sales, and look at that, yeah, right there. And you can see that on a trailing 12-month or a trailing 4-month, 4-quarter chart,

uh, basis, uh, this company could hit 500 million in annualized sales. So that's, that's very impressive to me here. Again, another mid cap stock. You know, these are, these are names that most people haven't heard of. Number five in the IBD 50, uh, TGTX was number 10. And then finally, let's look at ADMA biologics, which is number two in the IBD 50, uh, really impressive numbers all around. And we just added this to the watch list of, of IBD leaderboard because, uh,

after a grand move, rising sixfold from a prior breakout out of a couple of handle, now has finally succumbed to profit-taking and trying to bottom out. I like the last couple of weeks of action. You see that there are buyers coming in to support that stock. Yeah. Well, these are all very interesting stocks to look at. I'm sure these are things that for those that

aren't members of leaderboard. When these do go on, it should be noted that you guys do a great job of kind of giving extra information. The leaderboard take on not only the fundamental side, but the technical side, what's going on with the chart,

markups on the chart as, as well as links to articles that are elsewhere, you know, across, across our properties, mostly investors business daily, but every now and then you'll throw a wall street journal or Barron's article link in there as well. So yeah. And, and again, XLB, you know, looking at that, you know, it's,

it's not really participated for a while. So, uh, some might say that it's, uh, it's due, um, a couple of questions that I want to kind of throw at you, uh, before we, before we say goodbye, um, uh,

Well, one is a clarification because sometimes with closed captions, it was noted that you were using gold as an infant hedge, but it's an inflation hedge. So you're not trying to hedge on infants. And just in case people are reading closed captions too closely, we –

We should just note that. And then also, do you ever use like XLP versus XLY, that ratio to kind of give you a sense of how defensive people are? Absolutely. I, I,

Why don't we look at the daily charts of both, please, Justin? And, yeah, I know we are not the only ones who look at this. There's, for instance, I guess some research and commentary from R.W. Baird up in the Midwest, great investment bank, and they've got some great analysts there. Look at XLP showing some real choppiness after rebounding, you know, for two months and then getting –

getting smashed in the last three days, wondering whether, is this a signal that

investors want to go back into high growth stocks or is this a signal that we have more of a, uh, more of a higher risk of recession and therefore a bigger correction. Yeah. So looking at that and then compare that, compare that with X, Y, right. Consumer discretionary. Is that the one that you want to look at? Yeah. The, the, the, the, both charts don't look healthy at all. Right. But, uh, uh,

I think less healthy, right? Yeah. A little less healthy. And, and, and it's sort of, it's a great, it's a great pair pair to look at because, uh, it is, as we mentioned, risk on versus risk off, uh,

optimism for growth, uh, in earnings in, in the economy, uh, versus, um, you know, just looking for companies that have ample cash flow in a lower risk of going bankrupt. Right. Um, but technically speaking, I think, uh,

I think we need to continue to just gauge how far these indexes go down. The NASDAQ, the NYC Composite. Today, we had the NASDAQ lead. The NYC Composite was flat, and the Dow was down 0.2%, and the small caps lost a lot of their gains. So there's still a lot of uncertainty being reflected in the stock market regarding...

what's going to happen in Washington and, and how, uh, how corporations are going to, uh, navigate through, uh, a new, a new era in, in, uh, us politics. Well, Dave, as always, uh, a pleasure having you on, uh, going through the history and, uh, you know, I mean, we had a quiz, we had a checklist, um, and then we had six stocks, uh, that, that, that you went through. So really appreciate all the, all the insight that you gave us today.

So much fun, Justin. And thank you for filling in the many gaps in my knowledge with some of your own commentary as well. It's always great to be here. Yeah. So that's going to wrap it up for us this week. Thank you so much for joining us. And don't forget, if you are watching this on YouTube or whatever your choice is in terms of how you watch or listen to podcasts, don't forget to like and subscribe. That really helps us out in terms of getting the word out. We'd appreciate it.

Appreciate that. And then also, don't forget to join us next week. We're going to be live at five on Wednesdays, as we always are. We're going to have a new guest on next week, Joe Mazzola, Director of Trading Services at Charles Schwab. So we're going to get some of his insights and can't wait to have you join us for that. Thanks a lot for watching. We'll see you next time. This IBD podcast is brought to you by Directions Daily Leveraged and Inverse ETFs. Whether you are a bull or a bear, you choose the direction. Visit direction.com.

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