Ep. 324 Why This Trader Says The Stock Market’s Party Isn’t Over Yet
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Hello and welcome to another episode of the Investing with IVD podcast. It's Justin Nielsen here, your host, and I am coming to you from probably the last time with this background. We're going to do a remodel. I'm going to be kind of in flux a little bit, so bear with me next week. But we're coming to you live at 5 p.m. Eastern as we do every Wednesday. Today is June 11th, 2025, and we've got a great show coming up for you. We've got Scott Bennett coming back to the show. He, of course, is the

founder of investwithrules.com, and he's a crowd favorite. I think one of the things that we really like about Scott's approach here is that he's so focused on where the institutions are putting their dollars. And we kind of learned from our founder of Investors Business Daily, Bill O'Neill, that following the big institutions is...

not a bad way to go. Why, why try and blaze the trail yourself, uh, or just follow along with a, a trail that's already blazed for you. So welcome back to the show, Scott. Justin, thanks so much for having me back. It's a pleasure to be here. Thanks so much.

Oh, absolutely. So let's get right into it. I think we have to kind of back up for folks that maybe aren't as familiar with, you know, some of your rules. And again, you make it very clear rules are very important to you. So I think we should maybe start kind of at the outset to make sure that people understand what your kind of philosophy is, you know,

Of course, the biggest thing is that you're getting this data that is publicly available, you know, so it's not like you're trading off of inside information. This is all information that's publicly available through 13 Fs and the like. And the difference is that you're just kind of doing all the heavy lifting for folks and

I guess the big thing is a lot of people think, well, isn't that late? It's not like ARC funds where you get a day-by-day, this is what Cathie Woods is doing. But how do you kind of reconcile that, that the information is late but still useful? Yeah. So I guess I'll start with the data and what the billion-dollar funds are doing. So rule number one, and rules –

are like vegetables. Not everyone wants them, but you probably need them. So rule number one. But they're good for you. They are great for you. Follow big money. And rule number two is follow the trend. And rule number three, follow risk management rules. That's the hardest one. It makes sense. It's kind of the backbone of the great William O'Neill's philosophy as well, which is great.

But if we start with follow the big money, that was obviously really part of the IBD methodology. So at InvestWithRules, the major difference. So if I start with 13 F reports, very simply, that's an enormous pile of money.

And the 13F reports, very simply, are going to take April, May, and June, and they're going to give that to you eventually in 45 days at the end of the quarter, so mid-August. That's when you're going to get it. The data that we collect...

is 30-day lag. So as an example, we are in June and the data was from the end of April. So at the end of April, at the very start of that next 30 days, we have the data, we cut it, we clean it, and we go as fast as we humanly can. Now, how I would think through that is there's still a 30-day lag. This is very ethical information. This is public information. It's just hard to come by, and I still am shocked that no one

has figured it out yet. But I would say that at some point down the road, I'm going to share and open the kimono. But as of right now, I honestly want it to work. I want it to continue to work. And I give away the results of what it says as we run both a newsletter and an advisory service. So the answer is 30-day lag. And today, I hope what I'm able to do is to share how we bridge that 30 days because I

This is about a trillion dollars of assets. So it's not the entire universe. It provides an edge that we love to use. Not every single time it works, but we have found it to be very helpful. And I hope we'll play a little game called bingo where I'll have Justin say in full disclosure, I own this position because we tend to come to the same positions at the end of the day and how we get to them is just slightly different. Mm-hmm.

Well, and to that end, maybe we go ahead and I'll pull up the slide for you here because I think this is such a – this seems complicated and scary. So for those that are watching this on our YouTube channel or aren't listening to it on – we're on Spotify and Apple and everything else, but the whole idea here is the funnel, which –

Again, that's really in line with what we do at Investors Business Daily. You've got so many stocks and ETFs now. There's more ETFs than stocks to choose from. You've got so many to choose from, so you've got to start somewhere. How do you narrow that down? And this is where we might differ in the way that we narrow it down, but a lot of times you find a lot of overlap with that.

Maybe walk us through your kind of process of your funnel. So you're starting with about 6,000 stocks. And so what's your first cut?

So we're starting with the same database as Market Surge, which is an incredible source of information and full disclosure. We do use Market Surge. We love it. So we start there and we have about 6,000 or so U.S. traded companies, and that includes ADRs. That includes different ways to get overseas as well. So from there, this is where our proprietary trillion dollars comes in. And the hard part is...

You can try to get the scope of how big the universe is, but the U.S. markets, if you include ETFs and hedge funds and ETFs and everything, it's around $30 plus to $40 trillion. If you include the international markets, you're close to $50. So we're a trillion, but the buying month after month is big enough where it does impact the float. So we are able to pretty much –

chop that by 90% and go from 6,000 down to 600 stocks, which is what they're holding and what they're buying. And anything that they're cutting by buy. And now we have a little bit of a focus list. Now that's still way too much and we don't enjoy FOMO and we don't want to be staring at things all day long. So in step number three, so step one is the universe. Step two is what are these specific billion dollar funds going after?

Step number three is we're specifically looking for buying, specifically larger buying. We tend to go back two months, which gets us to collectively, if you include since on retrieval, about three months of information there. So two months of buying. We're looking for earnings growth typically above 10%.

That will get you names like that are maybe slower growers. Think that'll get a Walmart in there. That will get a Philip Morris in there.

It won't get things like a Coca-Cola in there. And for some people, that's right. But for us, we are looking for more growth. And then we're doing additional... Why wouldn't it get Coca-Cola, for instance, just to kind of show that contrast? Simply, earnings growth is low single digits, typically. Just too lackluster. It's one of those things where if you look back and...

I mean, don't get me wrong. If you're up 50%, you're thrilled. But the question is, how many years did it take you to get there? Right, yeah. And how much... Are you getting that 50% in one year or 10? Yeah, and it very likely could happen in 10 plus. And we know it's not as... You're not buying it at the same price point that Warren Buffett got it. So it's just a different business, significantly more mature. And what are they doing now? They're all buying the smaller...

slightly less sugar-filled sodas to grow, and is that what you really want? Or do you want to just go own...

those companies, if they're publicly traded that are growing really fast, that Coke and Pepsi are trying to acquire. And then finally, we do look at performance and we're also looking at relative strength. So now you had a great episode with Mike Webster about average true range, but we are looking at performance adjusting for volatility. And we're, we are looking at relative strength because we do want to own a

We want to own the strength. And that's where that little bridge comes up. So how do we go from the data at the end of April, and now it's the very first day of June, you have all this data. How do you figure out, well, is this still applicable? And is this actionable is really what we're trying to figure out. And we need to bring that down to about 10 to 12 positions.

which is a really challenging feat. So I'm going to stop there, but that's kind of, then we strictly go technical, which we'll get to in a minute. Yeah. And, you know, just one question, and this is definitely very applicable to right now. You just had this kind of

very sharp correction. I mean, the velocity with which we came down, I mean, it was kind of... kind of crashy, you know, and... because it came down so quickly. And like... like the COVID crash, it was very V-shaped in the recovery. There was certainly...

At least I thought we were going to see another leg down, and that didn't materialize. We kind of really snapped back very sharply. And so if you're kind of looking at data, you know, we have the follow-through day on April 22nd. If you're looking at data that's maybe from the end of April, was that enough time to kind of show that shift? Or do you expect –

Oh, it's really going to be next month that we really see where that money started moving, because you could imagine that there was a lot of a lot of wringing of hands, a lot of uncertainty, a lot of like, oh, maybe we need to get into the more defensive things. You certainly saw the staples doing a lot better there for a while. But, you know, now if we're looking at end of April, you know,

You know, how quickly do you start saying, oh, OK, this is where the institutions are really putting their bets now?

That's an excellent question. And I would say that me and my small but mighty team, we were expecting drastic changes in April, and we really didn't totally see it. And what I mean by that is they were... So April 7th was the absolute low on this V-shaped bounce. And we were expecting... Because, I mean, that's pretty early in the month where we would have expected maybe, okay, well...

the rhetoric went from tightening to spending and to the next bill, the next, are we going to lower interest rates? And the whole kind of theme changed. But if I had to kind of look through...

what these funds are typically doing. And I'm going point to point, month after month, not throughout the whole, I don't know what day they bought, but I know that they point to point what was the share difference in accumulation. But what was interesting to me, I saw what I would call more of a barbell strategy where they tend to be more growth at a reasonable price type managers. These men and women tend to go to the similar business schools. So there's some names that were showing up that I was interested by, like, okay, well, why are they buying...

slower growth names like a CVS or a Starbucks that we haven't really looked at in years. And then on the other side, we're seeing...

The names that are really at the helm of the IBD 50, which would be like Robin Hood and what would be another good like like Cloudflare. So these would be names that are so I saw the barbell. So my assumption is that at the end of this month, when we get the data from May, I would assume it's going to be a little bit maybe potentially changed because really what I saw was

I can look at the 93 tickers that I'm focusing my time on, and then that whittles it down. But if I kind of look at it, it was spread...

But if I go to the top tranche of who's doing the best, the leading industry groups clearly was software. Software overlaps in the market surge data between tech and communication services. So a lot of it was software and a lot of it was industrials. And they were still pushing the market in the direction that the market went. Mm-hmm.

No, that totally makes sense. And, you know, let's shift gears a little bit because you mentioned how important it's, you know, once you've done all that work to whittle it down, your work is not done, right? Because you still have 100 stocks. And so that's where, as you said, you've got that bridge. And I like kind of how you approach it. And this is kind of, you know, just to your stage analysis here.

where are you at in the stage? And that can kind of really help determine for you how aggressive you are and which stocks end up making your list. You know, are you kind of getting things at the beginning of their move or is it, you know, at,

closer to the end or at the down phase. And so certainly I feel like what we, what we witnessed here in March, February, end of February and March was, was this stage four, um, for most stocks. And then, uh, what we were seeing kind of in April, uh, was, was this, so where, where are we now in, in this kind of stage, um, analysis? Yeah. So the beauty of this and

A lot of it, the simple stage analysis does pay homage to Stan Weinstein's great work. Underneath that, very simply, is our proprietary short-term trend, which is roughly about 30 days. I do a lot of listening to what's going on in the IBD world, and a lot of people are talking about the 21-day exponential moving average, making it shorter. That was one of the huge moves that we made at the end of last year was

how many more V-shaped recoveries do we need to see before we shorten our short-term signal? Because this is normal since 2008, and all it takes is a little bit of news out of Washington. And whatever you are worried about macro-wise, or you're at brunch with a bunch of families in there, like, why is the stock market imploding? And then on April 7th, it was like, we're going to pause things –

for 90 days, and then it was just off to the races. So having the short-term and a long-term signal, the long-term for us is roughly about a year. And this allows us to use computer power and say every single position can be like, when is its follow-through day or what's happening? So very simply, the market today, it actually went from

It went from a stage four break bear market, all red and awful. And then we had the April 7th low. And then we received our U-turn signal. So the short term was up and the long term was down. That was on the 24th. And there were a lot of tickers that were showing strength ahead of that.

So very simply, today they're all on gas signals is where the market is today. So everything –

The follow through day happened a little bit earlier on April 22nd right here. And then you're pointing out where that U-turn signal happened. That's your blue arrow. Yeah, that's a great point. So the S&P 500 and the NASDAQ, the QQQ had their U-turn signal short term up within a long term downtrend. That was on the 24th.

The SPMO, so the Invesco Momentum ETF, which is something that we've spent an enormously more time on. It's the S&P 500. It's only 100 tickers ranked for momentum shifted every roughly six months. That was the day before that on the 23rd. And it looked a lot different than the S&P 500 as...

Microsoft was lagging for a while and Apple was lagging for a while. So very simply, if I go, I apologize to make you keep jumping, but the, um, on the 7th was the low. If we use like, when were these U-turn signals coming about? And we received, uh, on the 9th of April, we received these U-turn signals for Spotify, uh,

for Robin Hood, for Duolingo, for GEV. And then a couple days later, on 4-14, we finally got Roblox and a few others. But we're just like,

as much as everyone's like worried and panicking and i'm talking to clients and it's a little scary we're kind of like just getting really excited for let's say this is another v-shape recovery and where are we going after and where are the funds and then where is this turn happening and this is what we want so we don't catch everything we're not perfect uh no one is but we want to say okay these are the 100 stocks we're going to focus our time on because we know that there's

There's big institutional flow that has to go slow behind them. And then simply we're applying a technical filter. And we know what we would love to own if the opportunity was there. And what does it mean, the gas? So you've got your U-turn, and maybe we have to go back to –

Back to the – let me just scroll real quick. Back to our trend roadmap of yours. So the gas is kind of when you're getting both the short-term and the long-term a little bit more in phase? Yeah. So you're going to get the U-turn first after a bear market, and then you're going to get the gas signal. Short-term, the 30-day trend is up roughly. The year-to-date – the year trend is also up. So you have this kind of –

super confirmation that, as an example, Bill O'Neill would always look for, as he would always write in his books, just the follow-through day is important, but it's what happens after the follow-through day as well. And very simply, we're trying to say, okay, show us of the 100 stocks, show us the U-turns, show us the gases, and show us the day one. Show us what's day one on a U-turn, what's day one on a gas, and that's what we're focusing our time on.

And then at some point, like right now, there's a lot of overheats. And whether we want to think about it or not, there's an awful lot of algorithmic trading happening. And at some point, they will flush a stock up higher than we ever think it will go. We'll take a core weave in a minute. And they will kind of...

They know what moving averages are more commonplace, and sometimes it will work in your advantage and sometimes it won't. But very simply, I wanted a mechanism to say stop trading and to say just be patient. It will most likely pull in at some point relatively soon. We call that an overheat, and that's a relative strength index above 68. And it's not perfect, but we backtested it, and it worked well.

And it helped us to buy things and then watch it fall a large percentage right in your face. We tried to minimize that as much as we can.

Yeah, no, that, that makes sense. And just out of curiosity, because I know, um, with, with something like an RSI and, and, and for folks that aren't familiar with this indicator, you know, this just to be very clear, this is very different from our relative strength rating. Um, this is, you know, our relative strength rating at investors business daily is comparing a stock versus all stocks. Whereas the RSI is really a comparison of that stock to its own, uh, price history. Um,

Where is it at in its own kind of trading history? But I know you can choose different timeframes for your RSI. Do you mind sharing what kind of timeframes you're looking at for that RSI?

Yeah, we stick to the 14-day. So we're kind of looking at the two-week mark, roughly. That's where we could doctorate, but we found that that works well for us. Just a good barometer of where things are. Yeah, no, totally makes sense. And just before we kind of move on from this, talk a little bit about the coast side. Is this where you're just kind of waiting and watching, or...

Is this something where you have to actually do something because or is this where it depends on your trading style? Because I tend to be a little bit more short term. So am I going to have to take action when the short term trend is down, even if the long term trend is up? What does that mean for us?

Yeah, so great question. So it depends on the cushion of gains and the unit of risk that you're willing to deploy per position. So if I'll take an example, we've owned Axon Enterprises since last year. It's up 150 or so percent. There were times where it was on a coast. And what we simply do is it depends on the gain rate.

And depends on the trailing stop that we're using and how we're applying it. So there's many times where we will break a position into parts, let's say two parts, and we will take half down on a coast. If specifically, if we don't have a large cushion, if we have an enormously large cushion in that case, then we will tend to try to ride through it if both units are there.

But very simply, we really, in a perfect world, would love to own a leader and sit with it and be able to ride bases. But you just need a large, you need large gains. And the way that we have found that helps us a little bit, it's not foolproof, is we'll stick with the road analogies because...

We have to be cautious with compliance. We use gas and brake versus, as you can tell by himself. But in general, let's take our unit of risk, let's say it's 5%. And the moment we're up 15%, so three times our risk unit, then we'll loosen our trailing stop. So we're going to try to grab kind of like the catapult.

Kathy Donnelly's great book with her crew of that MCP, that mental capital preservation. So how much of that gain do you want to retain? Because we really wanted to sit back and try to grab the lion's share of the move. So I guess in theory, many times over, we're playing some defense on coast and then we're just running for the hills on a short-term and long-term downtrend, a break. So we got pretty defensive there.

during this last V-shape pullback. And simply because there was a two-day span where the market was down 10%. And I think collectively we were down around 1% during those two days. So, I mean, obviously I hope our clients and our newsletter, it's always a tricky one where no one wants to ever lose anything. And that's totally respectable. Which is not really...

Not really feasible, but realistic. What is goodness? But I listened to your and Mike Webster's review of Swing Trader, and it was like, you guys did a great job. I mean, pat yourself on the back. That was super... V-shaped recoveries and V-shaped down and backs are so hard. And this isn't... I think we all can...

kind of empathize that we're trying to hold what's great in our portfolio. And if anything's betraying us, this is where we just need to let it go quickly and play defense and just survive. And what if this was another, it went from 20 to 30, 30 to 40%, that could have easily happened if there wasn't kind of a change. So I think trying to protect your capital and stay in the game is paramount.

Right. And again, we were thinking, OK, this could be like 1998. We could see another leg down. It didn't materialize. So it's OK to have a thesis. But if people haven't caught on a number of times, you have used the term rules. And, you know, especially with something overheating. And I like that approach because.

Sometimes your emotional response is, oh, this is going up and I just want more of it because this could be the next big thing as opposed to, oh, you know, at what point do I start thinking about protecting the gains that I have? You know, it's a push-pull. And, you know, back to your point on Axon, just out of curiosity, like how do you handle something like Axon where, I mean,

And I was in this. I bought this on the reversal here. I bought more on this breakout. And then it was like, what the heck happened? This was kind of the canary in the coal mine before...

The market really took its dive. Axon and I'll say Palantir as well, and I do have a position in Palantir, but these were on the same day. I was in Vegas for a money show, and I'm like, what just happened? I was speaking to people for a little bit, and no news that I saw. So how do you handle something like that when it happens?

Well, specifically with Axon, we sold half down very fast. So on the short-term break, Axon half gone. And our other half were for those who were in the newsletter, you

a year ago, a year and a half ago, and those who were advisory clients a year and a half ago, you were still up around 100% despite that horrible cup formation. But for anyone who is new, you're out. So I think the hardest thing is

making these big, large binary all in, all out with a position where I know it's more of a pain in the neck to cut it in pieces, but I think it will keep you more sane. And I think it will help you play by your rules because...

We're human, and we were brought up in school this way, is learn as much as you can about a company, and you'll be one little level below the CEO and CFO in the C-suite. And then what actually happens is you know so much, and you're on –

you're reading about the great articles on IBD and you're on X and you're on Reddit. And all of a sudden what happens is, is you don't sell. And then you're like, well, it's going to come back because now Axon is doing surveillance in warehouses. It's going to work. And then you're like, what if you're wrong? And then you're like, Holy smokes. Like the sickness, the, the nausea when you have these like pullbacks, it's not worth it. So cutting it in pieces, um, surviving and,

And I'll share a really good story. I was talking to a friend who is in an investing club, which to me sounds like a polite nightmare, having 30 people agree on something. I like to just, I guess I'm a lone wolf. Just, um, I do this, I share the data, but having a committee sounds so hard to me. And he was sharing, I go, Oh, please tell me like, how exposed are you guys? Like, what's your exposure to the market? Our score is a 10 out of 10 right now.

And we're on all gas signals, short-term and long-term uptrends. Like, where are you? And they're half in the market. Well, why? Because we don't trust it. Okay, well, what don't you trust? Like, is this your opinion? Is this based on fact? And I just think that

I actually presented to that, um, to that investing club a couple, maybe about a year ago. And I'm pretty sure it was like after dinner and I'm pretty sure I knocked all them out with my rules. And it was again, back to no one, no one wanted, uh,

People weren't ready for the rules. You're only ready for the rules after you've lost a good deal. But I would say that it was interesting where they're super underexposed and it's based on emotion. It's based on what you've read and you might as well just follow math and trend and, and then be proven wrong later versus why, why miss out? Mm-hmm.

Yeah, no, that totally makes sense. I can't imagine, again, building a consensus how difficult that must be for decision making. You know, sometimes it's I like that we have a community where we can kind of discuss things. But even that sometimes, you know, and Mike Webster has talked about this a little bit. Sometimes you have to be very careful that other people don't get in your head. And I've been guilty of this myself. You you hear too much one way and it's hard to like.

sometimes keep it, you know, keep it together, you know, and like, oh, no, that's their rules. I have to trade what's right for me, especially if it's people that you really respect. And, you know, and that's often the case. But the thing is, this happens on IBD Live all the time. We might be talking about something and we can be as bullish as all get out. But then,

30 minutes later, we're completely changed our minds because the stock looks different. So yeah, it can be very tricky for folks that are trying to follow that. Well,

Oh, go ahead.

And the only rule upon having a trading partner is you just can't go into the past and say, like, the woulda, coulda, shouldas. You just have to stop them because that will harm your friendship and your business partner. Well, if you're going to continue pointing out all my flaws, then, you know. Why didn't you buy this one? Yeah, totally.

Yeah, no, that, that, that totally makes sense. And, you know, at the, at the end of the day, it has to be very clear how decisions get made because, um, you know, and, and that's where I think if you're comfortable, okay, I'm the decision maker, but I'm, I'm getting advice or I'm getting, you know, a sounding board and, you know, but I make the final decision. Um, that makes, makes a lot of sense. I wanted to real quickly, uh, address one of the slides here that you have, um, uh, that

that shows kind of your market sector strength and this top 15 idea. And you kind of stuck with the road idea. You got your gauges, right? Just like you would in a car. Kind of describe to me what I'm looking at here. What's happening here? So I thought I would give you the busiest slides in the history of a slideshow, but the top left is our score. So our score is based upon the S&P 500, small caps,

tech and international. And we're looking at them from our trend roadmap. And they're all either on gases or overheats, and they're all doing really well. And so that makes it a 10 out of 10. So that we are 96-ish percent invested today.

Our beta, so our risk compared to the S&P 500, we're a 1.1. So not only are we exposed, but even though we're only 95.8% exposed, part of that could be because if you own, like we own some gold and we own some Bitcoin and we own some things that are correlated and some things that are not correlated to the S&P 500. So we want to know just generally how we are exposed to the market.

And then if everything hit their trailing stop losses, what's our exposure to everything? So negative 6.7. And we're always monitoring and analyzing that.

And down below, we have all the major sector ETFs and the broad-based ETFs. And they're all greens and blues. So they're all in either short-term, long-term uptrends or short-term uptrends within long-term downtrends. So small caps is like right there. But in general, you'll see international off to the far right. Yeah, it looks like small caps and XLE and XLV are your U-turns.

Everything else is kind of a little bit further along on their path, right? Yeah. So if we go over the last 14 days, what's the strongest? What's the weakest? So strongest would be international tech. The weakest would be staples, utilities, and healthcare, which kind of feels right. That's kind of what's been happening. The ST-VOMO, short-term VOMO, is what is the return divided by its average true range over 14 days. And that's how it's ranked.

And then the only major difference, if we think about what the market's trying to scream at us, if we take the largest market cap stocks, it's almost a sea of green. But it's what's the strongest right now based upon the return over the past 30 days? It's NVIDIA. It's Broadcom. It's Meta. What's the weakest? Unfortunately, soon to be retiring Warren Buffett, Walmart and Apple.

Apple's on a break. It's kind of interesting where maybe that conference didn't go as smooth as planned. But then down below we have our rank. So not everything always works. And so even though Apple's a hold by the funds, I wouldn't go near it right now. But NVIDIA and Broadcom,

They look really appealing, and the market's screaming at you. There is some strength here. Yeah. No, absolutely. And just for folks that haven't maybe looked at Apple in a while, I mean, one of the things that just sticks out to me is this is something that has just been stuck below its 200-day moving average line. So it's really hard to get too excited about Apple.

about something that's been stuck there. And, and I mean, it, it seems to be struggling to get above its 50 day moving average line. So as much as we've, um, seen this strength in the indexes, uh, it, it did seem like it broadened out a little bit, um, because you have RSP and, uh, which is the equal weighted Invesco, uh, S and P 500. And if you look at either QQ, QE or QQ, EW, um,

These are also at highs. Do you look at any breadth indicators for your market component? We don't, but we look at roughly 65 to 75 ETFs every single day. So we do have some of the equal weight sectors and the equal weight ETFs. So we'll notice if they pop up, but we've been playing more of the momentum. But if I go back to just Apple, I would just say...

If you own it, you should be on alert. It's a short-term and long-term downtrend. But just why not wait until you get the short-term confirmation, whether whatever you want to use. It could simply be, let's take the 21-day exponential. Why not just simply wait or wait to the 50? You're just not getting that confirmation, despite that I pay them for...

a strange fee every month that's really small for my phone and for storage. But are you planning to get a new phone or a new MacBook pretty soon? And the answer is probably not. But I would say that why not just wait for more confirmation versus just sitting in downtrends?

Yeah, no, makes sense. I want to shift over to some stocks, if you don't mind. So we've taken the market. We've kind of gone through your filter. You kind of showed us how you narrow down

stocks to a degree. You know, we kind of talked a little bit about the market side of things. So how does that market on all the sector analysis kind of play into or does it your stock selection at all? So if you don't mind going to slide four, but the answer is we're we we break it down to three levels. So level one is these broad based ETFs. So we do want some beta exposure and

On level two, we have kind of a go anywhere ETF mentality. And we do own some silver. We own some gold, some Bitcoin, Ethereum. We own some industrials. So that affects our sector kind of need. The stocks, we don't want to be too exposed to one industry group necessarily.

But we really don't care. We just want to be in the best trends and the best names, which this is our rank as of today. So out of all the criteria we're looking at, so we're looking at what are the funds buying, all that momentum, all that relative strength. This is the cream of the crop of things that we would love to own if the opportunity was there. So here's the top 10.

And what's interesting is the top 50 performed really well today, 0.45% positive versus the market kind of pulled in at the end of the day. But Robinhood, and I'll show you a chart of that in a second, Cloudflare, the things that stick out to me is, I'm just going quickly, but six of the 10 are on our overheat. So that's a sign to us that we're a little bit extended, but a lot of this is software. Right.

And we're okay if the software is somewhat diversified. Mm-hmm. No, that makes sense. So you mentioned that you wanted to get into some of these stocks. And I think if it's okay, we can go through some of the slides that you created for us. And we can start with Spotify. I do have a position in this one. So for those that were on the bingo card checking that off, there's one. Yeah.

Walk us through what we're seeing, because again, this is going back to January and how this was getting the gas signal back then. And is this kind of showing how you played this through this latest correction?

So it's a great question. So in full disclosure, we have a position today in Spotify. But what we're looking for is the kind of the Venn diagram. Is it being accumulated by large funds? And is it an uptrend, whether it's short term or short term and long term? So I did go back just to kind of reiterate and show where it was a gasp before this latest pullback or the double bottom that appeared. So...

Um, we didn't own it back then at full disclosure and in hindsight, we would have loved to. Um, but we did get a gas signal on January 3rd. It, it, it showed extreme strength, um, up 27%. We did get the coast signal and then we were stocking this one for a really long time. And then four, nine, we got our gas signal and then we were up in here. I think we're up maybe close to double digits. Um, but we were in here on a continued gas signal, uh,

But 4.9, so very simply, the funds like Spotify. I like using Spotify. I think the whole world, this is quite meta because this is on Spotify and YouTube and wherever else it's on. But I think if you, attention is so hard to grab.

But when it comes to podcasts and investing with IBD, when you're in, you're in. And you're typically in for 45 minutes to an hour. And the advertisers, this is like their dream versus you flipping the channel on your TV or changing, like trying to figure out what to watch on Netflix. Like this is what you do on a dog walk for me.

And this is perfect. And you got me. If you're an advertiser, there's no, we're, I'm not flipping it. I'm just listening. So I just think they're in the right spot. Um, this is a, just an absolute true market leader. And, and the music industry is, is, is, is an absolute leader.

Yeah, no, absolutely. And certainly one that we've been talking a lot about recently is Robinhood. I don't own this one, but I'm kicking myself because I don't. It had this nice move out in May and I was just, you know,

I'll be honest. I wasn't doing buying myself on April 9th. The volatility was just too much for me. But a lot of these things started looking good at the end of April and the beginning of May. And Robinhood, this was just one of those because of that higher ATR.

I had some other high ATR stocks and it was like, okay, I can't have a portfolio full of them. But walk us through Robinhood. Yeah, this is the one that I will kick myself off.

All day long for this one, when I do my post-analysis, we had this one right after the April 7th. We had this gas on 4-9, and then we got shaken. And part of it was our rules were a little too tight with this ATR, so maybe you were in that one too. But if I go back to just the Peter Lynch mentality...

I worked at Fidelity for 16 plus years. And right before I left, I started noticing this really interesting trend. This was, we'll call it like six years ago. A lot of these super tenured Fidelity managers were getting pulled over to Robinhood.

And that should have been on my radar. Like, I should have been like, these are some of the most... I wonder why. These are some of the most talented people in management. And they're probably foregoing their internal share package, which means Robinhood needs to pay them well. And they are great humans and great leaders. And...

Everyone was getting out of one boat and into the other boat. And lo and behold, Robinhood's a product that people really, really adore. And they're growing fast and the assets under management are growing fast. And very simply, the funds are there. And I always wonder, like, I was never privy to the inner sanctum of like, what does a Schwab or a Fidelity think as...

Most of their clientele will possibly leave their heirs money that might even be possibly a Robin Hood. And it's an interesting phenomenon of they're doing a lot of things right. And you can kind of see where the gas signals were. And my only takeaway that I'm saying this out loud, but it's really for myself, is when you think you own something special and the earnings are there and the sales are there,

Just be really cognizant of that. Go back last week to listen to the ATR special and the episode. And I would just say that maybe your stop is too tight in some cases. And don't be afraid to buy back even if there is a wash sale because the absolute true market leaders are not going to be kind. They're going to shake you out as much as they can. Yeah.

And it's funny that you mentioned that because you brought up the lifecycle trade and Kathy Donnelly. And we just had E. Bobak on, who was also one of the authors there. And she was talking about CoreWeave. And to your point, she was saying, yeah, I got in this. I got shaken out. I got back in. I got shaken out. And then she nailed it and had this really nice run on this. Do you treat...

I mean, how much data do you have on funds when something just comes out? And, you know, so how do you make a decision, I guess, on something as new as CoreWeave? It's hard. They actually so CoreWeave today was a great day for sale, S-A-I-L. And it's one of those things where it's so hard because I know they're in.

The question then is, okay, well, there's no long-term signal. There's barely even a short-term signal. So it was on our May report, meaning that they were in on the IPO. They were in in March on the IPO.

And what threw me off was sometimes I want to see how it acts. I've read the lifecycle trade that many of these IPOs don't work. Very few of them look like this. So, you know, like there's so many that it takes two to five years for it to fall apart and then come back. And then when you have the Bill O'Neill all-time highs, it's

or that you get out of that turbulence zone, that's when you go for it. Like hood right now. So, but Corweave was a tricky one. So we didn't own it. It was on our May report. We got the gas signal. I'm pointing to where it is. It got extremely overheated. And that was on May 1st for those that are listening.

and need to go back. So that was on May 1st, you got the gas signal on CoreWeave. Yeah, May 1st. And then May 14th, it went to overheat. So it was just like, you know what, maybe just be patient. But then we actually saw them, the funds were selling. And they're...

As much as we think things will go to the moon and back, to them, it probably became a little expensive. If it's a super high multiple off of revenue, they're going to sell into that. So maybe they're going to wait for a better opportunity. But in this example, they're not going to get a better opportunity right now. So they were selling. So that kind of took it off our list. But I'm always shocked. And IPOs are the hardest to play. So worth a good read to read the lifecycle trade.

No, absolutely. And I think I was buying on that day, and I think I sold the next day, and then I bought back two days later. I think I sold for a slight profit as it reversed down to 50, and then I've been watching –

watching from the outside looking in sense. So that's tough. I think we have time for one more, if you don't mind. And I wanted to kind of use this one. This was one that you recently talked about on your IBD Live appearance not too long ago. And this is an example of a break. So kind of

Tell us what's happening here and what you're seeing. So if you're not familiar, TBBB, BBB Foods, is out of Mexico. And the funds were buying. And I was like, you know, that's really interesting. This is a really interesting time where there's tariffs. Who knows what the level would be?

And this is a fast-growing consumer staple grocery store. It's a really small footprint, fast-growing grocery store chain that's incredibly small footprint in Mexico. So there's almost no tariff overlay. So I could see why the funds would like something like this.

And when you purchase it, I'm not totally sure why, even though you select e-delivery, so you ask Fidelity politely, please don't mail me anything. They send you the largest book in the world about how great the supermarket is. So you're like, oh my goodness, I just chopped a tree down for the supermarket that I might not hold for very long. And so 4.9 was the gas and we got in. It was on two reports. So clearly there's something going on. This is kind of like your

your growthy, safer section of your portfolio. And then we got a break signal. And instead of just trying to

the break signal and watch it fall apart on you. We just simply exited. So we sold it in two pieces. And then lo and behold, it's not on the June report. So we feel better about it mentally. But again, I just would say that part of this process is that you're going to have positions that just don't work and just it's better off just probably just to exit or get small quick.

versus just be too stuck in the mud. And we're not perfect. And then what we really want is those axons to pay for something like this. Yeah. No, and look, I've done a lot of portfolio analysis, not just of some of our lists like the IBD 50. I was Bill O'Neill's assistant for 15 years. I did a lot of looking at his portfolio and

There were a lot of, some of his best years, you wouldn't believe how many losses there were. You know, there were all these tiny, tiny losses. And it was just, you know, a couple, you know, stocks that, you know,

I mean, he made a fortune on and, you know, by, by taking, you know, by keeping those losses very small, um, and, you know, taking some profits on the way up, uh, on, on others, uh, he could really kind of afford to really give those other ones room. And I would say probably 8%, 8 to 10% of the stocks is where the money was made, you know? Um, and that, that,

It, I think, strikes people as a little odd sometimes to realize how wrong you can be, really, and make a fortune. Because people think that, oh, if I'm going to be good at this, it means I'm going to be right a lot. Whereas most of the best traders I know, they're wrong a lot and they accept it very quickly so they can move on to try and be right on the next one because it's about getting right.

getting that axon or getting that big, big winner. And just out of a, for, for folks that are wondering, you know, what, what the three B stand for. I had to look it up. I had to know it's bueno, bonito, barato. So good, nice and affordable. So for, for those that are also using your Duolingo app, you probably knew, knew that already. And any closing thoughts that you had Scott before we go?

It's a great, well, first, thanks for having me on. It's so good to see you guys. It's a pleasure. I could do this for another hour easy. And, you know, then the producer has to like, you know, skip dinner, skip sleeping and gets cranky, you know, so. Yeah.

Yeah, we wouldn't want that. So yeah, I would just leave you again. Thanks for having me on. Again, if I can ever be helpful, invest with rules and very simply having big money come behind you. So follow big money, follow the trend, follow your risk management rules. I'd say risk management rules, which we didn't cover today, but probably your most important.

But the market is, despite how you feel, try to come to some mathematical equation, whether you're on market surge and you're looking at moving averages or something as simple as that. Whatever can help you kind of stay clear headed. And I would love nothing more for you and your audience to be wildly successful. So, again, thank you for having me. And I appreciate it.

No, definitely appreciate you being on the show. And remind us again, there's a number of places to follow you. And if I'm not mistaken, you have some, you know, great educational videos in addition to your market trends newsletter. So people can find that at investingwithrules.com, right? Invest with rules. I do. Sorry. It's totally good. I do own investing with rules. So we'll forward you over. Yeah.

Perfect. Yeah, because too many people made that mistake. So investwithrules.com. And then also, are you fairly active on X? I'm getting better since my last. I'm trying to. I'm trying to spill my weekly email on to X. So I will do better and I will try to be helpful with trends for people.

Yeah, no, perfect. And then anything else that you want to end with? Again, I really appreciate you being here. And, you know, folks should check your stuff out because it's, again, very in line with what we do. So, again, really appreciate it. I would say just be open. So our trend roadmap, we use it for ETFs too, or cryptocurrencies. We actually, interestingly enough, we were doing some risk management today. So that was kind of of interest where...

we were up nicely and chewy. Maybe we're still up nicely, but not as nicely. And we used some of that capital to Ethereum. So just be flexible and follow trends. And you can totally do this. And we hope that we can follow rules. Follow your rules. Yeah, great. Well, thanks again, Scott. Pleasure having you.

Okay, that's going to wrap it up for us this week. I hope you join us for next week. We're going to have on two repeat guests, but we're doing them together. It's going to be Jay Woods. Of course, he was a floor trader for decades on the New York Stock Exchange. He's now with Freedom Capital Markets as their chief global strategist.

And we're also going to have Ralph Acampora. He is known as the godfather at the CMT because he is one of the co-founders of that CMT Association. We have so many of those charter market technicians on our show, including Jay Woods, who's a CMT and

If you've ever heard Jay Woods on the show, he sometimes talks about Uncle Ralph. That's Ralph Acampora that is, again, the co-founder of the CMT Association. So we're going to do a little tag team action. I saw them both when I was at that Las Vegas Money Show and said, hey, you know what?

They did a section together, and I thought it would be great to have them on the podcast together to kind of share their wisdom. And, I mean, Ralph has been at it for a lot of years, and Jay Woods, he's no spring chicken. He's been doing the trading for quite a while, and he has that floor experience. So it's going to be great to talk with them. So I hope you join us for that. Thanks a lot for watching, and we'll see you next week. Take care, everybody.