Ep. 294 Keep Calm And Trade On: Measuring Post-Election Market Sentiment
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Hello and welcome to another episode of the Investing with IVD podcast. It's Justin Nielsen here, your host, and it is November 6th, 2024. We've got a post-election day special for you. And to help us kind of muddle our way through it, who best to have on the show than CMT? Of course, you know, when you talk about getting your emotions out of things, CMT.

you know, go with the technical action. And Katie Stockton is returning to the show to kind of help us out making sense of everything that happened today. And she, of course, is the founder of Fairlead Strategies and portfolio manager for the TAC ETF. You probably see her on CNBC a lot. You know, you got to make the rounds, Katie. So thank you so much for being on the show today. Happy to be with you. It was a very interesting day. It certainly was. So, you know,

I guess going into this, it was really, you know,

Of course, everyone has their favorite sources. Some sources were saying blowout. Some were saying razor thin margins. I just for myself, I felt like there was no way to know. And I really don't like going into something where I have no edge. And I am like, oh, well, this is just a coin flip. So maybe you can kind of start if we just rewind the clock and say, pretend like it was yesterday. How how are you kind of positioning yourself ahead of this week when you're

it was the election going on we've got the fed meeting that started today the announcement will be tomorrow and we've got a slew of earnings uh so how did you deal with all that in terms of your own positioning yeah i mean generally speaking with this type of event right whether it's an election or an earnings report or any kind of event that might instill this type of volatility we're more comfortable being passive right we will

generally hold our existing long positions that includes our TAC ETF. And in our recommendations, we generally say, you know, it's not the time necessarily to add exposure, maybe nor reduce exposure, but let's just see a reaction. Let's absorb it and then make a judgment on the back of it. So it is a little bit of a passive approach, but I think it's a

appropriate in this type of environment. This election was really quite different from past elections over the last 20 years or so, because except for the two that occurred during bear market cycles, we saw the market correct to a pretty good degree ahead of the election. Right. And you could say, well, that reflects uncertainty markets.

tend to not like uncertainty. And yet this time we just didn't really have that, right? We saw some consolidation from the major indices, but it really wasn't a meaningful corrective phase. So to me, that suggests that while we did actually call for a knee jerk rally higher, which we certainly got that to a very strong degree today, we were not looking for something sustainable because we just haven't had that pause to really

really kind of serve as the staging ground for a sustained rally from here. And I guess that's the tricky part here, because I think a lot of people were thinking no matter who won, there might have just been a sigh of relief and a rally to just say, OK, at least it's over. Right. And it's a decisive outcome. Right. Yeah. I mean, it's something that now we know. Right. And I think there was maybe Grisham

greater risk in not knowing. Right. So maybe if we had an indecisive outcome, well, that might have been poorly received by the market. But but indeed, we had rallies and it was really a very broad based rally for the equity market. But we had rallies in Treasury yields and in the dollar index and Bitcoin, of course. So it was really very explosive day.

And again, one of the things, you know, I guess the expectation was that this could have drug out for longer. I think it was almost a surprise to a lot of people that it was resolved so quickly. And so again, maybe part of the reaction there was due to that. But you mentioned a few areas of strength today. So not only was it the markets, but some very specific areas. You mentioned the crypto, the 10-year treasury yield. I mean, financials, you know, it's not...

it's not every day that you see the big banks, JP Morgan, Morgan Stanley, Goldman Sachs up 10% or more. And it seemed like today, if you were up 10%, you were kind of ho-hum. So that was kind of a real interesting dynamic that was playing out. So what do you do with some of these? I mean, it felt like if you were

If you were a little off sides and had gotten a little bit too cautious, it seemed like, could you chase things here? You know, going up so much, or is it better to just kind of sit on your hands for a little while if you were a little bit overly cautious and sitting on a lot of cash?

Yeah, you know, it really depends, obviously, on folks and how they invest in their portfolios, right, to give specific advice. But in general, we did see widespread gaps up on the charts today. So that includes especially the financial sector, which I feel like on average was up about 6%.

and really contributed to the gains in the Russell 2000 index in particular, which were oversized on the day. So those types of gaps up, especially in uptrending stocks like a JP Morgan for one, you know, you can't really trust them quite frankly, because a gap up that occurs after a strong up move

generally is seen as somewhat exhaustive, whereas a gap up that follows consolidation or that follows a corrective phase is more likely to be of the breakaway kind. So we feel like there is more potential for this to be an exhaustive gap. You've probably heard of selling climaxes, right? Well, there is an opposing sort of force to that, which would be a buying climax.

And when you get these gaps up and the big volume and this emotionally charged day, there is the potential for these to be buying climaxes for some of the stocks in question. So while we would always take it on a case by case basis, obviously looking at the individual charts in general, we're not really trusting of the gaps up at this stage in the uptrend. And what we'd want to see is that if there's a breakout that you're deciding whether you want to participate in or

you know, chase the rally, if you will. I think it just makes sense to wait for confirmation. It's something that we say a lot. It's part of our methodology or discipline in that we always make sure that breakouts are confirmed. And it depends on the nature of the breakout. But usually we want to see at least a few days of

above a resistance level. So if a stock had cleared a resistance level that had been enforced for some time, well, we want to see it hold up there for a few days and that confirms the breakout and makes it higher conviction and generally speaking, more likely to be real, right? Less likely to be a false breakout because the market, when it is emotionally charged like today,

it would be prone to a false breakout. So that's where we stand now. We're just in this wait and see mode, just like we were ahead of the election. We want to evaluate these breakouts and whether they confirm.

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Yeah, makes sense. So let's go ahead and switch over to some of the charts that you brought to share with the class today. A little show and tell on Katie's part. And we can start with the S&P 500 daily chart. And you've got a 20-day moving average line here. You've got a 50-day moving average line, a 200-day moving average line. But some things that probably our watchers and our listeners might not be as familiar with is the cloud support. And this is something that you did mention earlier

on your last visit to us on the podcast. But I don't remember if we went through as many examples, but maybe you could kind of walk us through this cloud that you're showing. Yeah, so what we've done is taken the charts that we publish in our weekly research report called Fairlead Tactics.

And every week we show a daily bar chart of the S&P 500, like you see here, with most of the same indicators that are shown. It's these indicators that really are the stuff of our methodology, and that includes the cloud model, which is the shaded area on the chart,

We're using it presently as a gauge of the prevailing trend, which you can see is to the upside, of course, and then also as a gauge of support or potential area of buying pressure for the S&P 500. Now we'll enhance it with all the other indicators that you see there. Arguably, it's a little bit of a busy chart, but the 20-day moving average, we wouldn't normally show on a chart necessarily, but we wanted to include it because it has sort of flattened out, right? And when you tend to see that,

it tends to be more than just a very blip, like pull back on the chart, just a blip. It ends up being something a bit more prolonged than that. I feel like we're seeing this loss of momentum up until today's gap up that would suggest that we see the gap up potentially fail and get filled fairly quickly. So that 20-day flattening now is something that we highlighted to our clients

And you can see also the cloud model flattens out, right? So if you look ahead of price, it projects forward and it goes from a pretty solid

uptrend to something that looks a bit more neutral. So we're holding sort of a neutral short term bias based on the combination of those two tools for one. And then one other thing that is on this chart is you have a measured move. And I know that this is, again, a lot of, you know, a lot of easy to plug in formulas where you can just kind of say, OK, this is kind of a measured move. Can you describe what that is a little bit and is

you know, a measured move up to just below 6,000. Is that, what are the odds that we're going to hit that? And what kind of timeframe are you looking at? Yeah. So I, you know, I don't have a real way to establish odds of it, but what it is, it's a

assuming that the prevailing uptrend will maintain itself with the same trajectory, right? So it's a good way to generate an upside objective in a scenario like for the S&P 500 where we're basically at new highs, right? So you don't have any resistance to reference as a gauge of upside potential. So we use these measured moves in that type of environment. And this is actually from an older breakout you can see on the chart. And it predicts

projected to about 59.35 which of course was in play today so you know we have this objective now effectively reached and what that tells us is that then you know this would be a natural place for some consolidation to ensue

really yet again after the consolidation that we already saw in october so it's a price objective the indicated time frame is generally speaking you know what uh sort of the time it took to get into that pattern and you would just kind of replicate coming out of it and um it's not scientific but it does give you a nice sort of visual sense of upside

Right. And again, I think it's important sometimes to know what you're aiming at, right? At least to have a target out there and then you can adjust based on as new data comes in. Oh, is that target maybe not something we're going to reach or, you know, do I have to adjust it down or, you know, worry a little bit more on the stop side? Yeah.

That's right. It's a general guideline. And we always combine the measured moves and the support and resistance levels that we're watching with the indicators. As an example, coming into this week, we had a short-term oversold reading in the daily stochastic oscillator that you see on the chart. And that suggested that we would see a rebound, right, on the back of the election. And that rebound, of course, brings it up to new highs,

puts that target in reach where all of a sudden, then we'll probably start to see more stocks become overbought

So it's a matter of reconciling the support and resistance with those stochastics and also our momentum gauges. Now, I know that as a CMT, you had to study a lot of different indicators, right? You had to kind of know the stochastics, the oscillators, the MACDs, the clouds, the, you know, all sorts of different things.

measures. One kind of problem sometimes with all of these indicators is, you know, everyone kind of has their favorites, but if you have too many, sometimes it's like, oh, they give contradictory. So how do you kind of balance out knowing all of these signals? And I mean, as you said, you had a lot of signals just on this one chart. How do you kind of balance that out and kind of discover for yourself

this is what I'm going to pay attention to, these I'm going to ignore, or is there a matter of in this type of environment, I look more at these indicators and in this type of environment, I kind of switch to these. I do think that's the art of technical analysis, right? It's in how you're weighting the various indicators.

and tools that you use for certain environments, right? Theoretically in a trending environment, you should give more weight to momentum gauges and then the sideways or trading range environment, you should give more weight to overbought oversold metrics like that stochastic oscillator. But we have to then use judgment as to which one of those environments we're in, right? - It's always easy in hindsight to know, but when you're in the middle of it, sometimes not so much.

So I do think it's in how you combine the indicators so that that's where the real value is in technical analysis. It's in where you get that good takeaway as to, okay, well, we know what the trend is. We know that it still has, for example, positive long-term momentum, but where the indicators can add value is whether that positive momentum is likely to start falling off, right? So it's giving you a sense of not only the trend,

but whether the trend is maturing or approaching sort of a resistance level. So it's in how you combine them that you can get the most robust takeaways, but it is kind of the hard part. And we change in how much weight we're giving each of these tools.

Right now, we are giving weight to that stochastic oscillator, as you've heard in my conversation with the short-term oversold, somewhat rare for the S&P. So that does support a bigger bounce here, but then we're having to sort of, I guess, contrast that right with our momentum gauges, which have indeed started to roll over. And that includes the MACD indicator. It includes the cloud having flattened out and that 20-day moving average.

What that would tell us is that, well, maybe the stochastic oscillator won't get all the way back up to overbought territory before we see the market roll over again.

So one of the things when we were talking on Monday, kind of to prepare for today, you had mentioned some concerns with breadth. And this is something that I feel like we just had David Keller on who's a CMT. That was one of the things he was bringing up. I feel like breadth has been something that the last, you know, we've been talking about for a while here. So today, you know, there was...

There was decent breadth. There were a lot of different industry groups that were participating. Let's go ahead and go to your next slide, which is an advanced decline line. How are you using kind of this, you know, this measure, these measures of breadth to kind of tell you whether or not the market is healthy or, you know, how much of a stock pickers market, how, I guess, diligent you need to be about just picking the right stocks and staying where the strength is.

Yeah, and I love the way you put that, how healthy the market is, right? Because indeed it gives you sort of a look under the hood, right? We call breadth a market internal measure alongside market sentiment, leadership and volume. Breadth means market participation. And this market has been somewhat criticized for having weak breadth, but you can see in that advanced decline line, it's really not been a year that's characterized by weak breadth. There were times certainly last year that it was.

But this year there's been pretty broad participation. You can see that off of the sort of Q4 low for the S&P 500 last year. We've seen it expand with just only brief pullbacks.

We recently had one of these brief pullbacks and we feel that there's been enough of a loss of momentum behind the uptrend in breadth that bears some attention, right? It's not going to be an outright sell signal for us necessarily, but we're going to say, well, wait a second. When the MACD laid over this cumulative advance decline line for NYSE stocks rolls over in the way that it has done, it tells us that that uptrend in the breadth metric is

is maybe tiring out right so we're combining the trend with the the indicators to arrive at that conclusion and it suggests to me that it's going to be a harder tape at a very minimum right one that has less broad participation usually when you see breath start to falter a bit you get a weaker tape for the s p 500 too so not only more difficult to take advantage of

but usually a consolidation phase or some kind of corrective action for the S&P. So I would suggest that this AD line or advanced decline line is telling us just that, that some consolidation is in store. I was just kind of taking a peek at some of our YouTube comments because we do go live, as many of you know. We go live every, you know, 2 p.m. Pacific, 5 p.m. on Wednesdays. And

And one of the comments that kind of struck me was, Katie is amazingly sensible. So do you get that often? You just have to tell that to my husband. Okay. Well, you know, if you need me to write a note, I can. Or you can point to the YouTube comments. You know, you just pull it up and say, hey, look, here it is. There's proof. Okay.

I want to kind of drill down in this next segment a little bit because you mentioned kind of at the outset of the show some of the areas that were worth kind of keeping an eye on, you know, and we'll kind of go through through a few different areas. But maybe we start with the euro stocks 50 index. And you were you were looking at a monthly chart. And why is why is this something on a on a day when everyone's focused on the US? Why are you looking in Europe?

So, and this is important because it is a global marketplace, right? So we feel that the strength in the US, while it's been really impressive, and this goes before just today's action, there's some deterioration overseas that we want to make a note of. And we've known for a long time that both Europe, Japan, and even emerging markets collectively tend to underperform the US over the long term. So that's not changed.

But we've seen some real indications from the primary benchmarks in Europe, including this Eurostox 50 index of sort of a top of your setup. You can see it in the monthly chart there. It's entered consolidation phase or you could call it a trading range within its secular bull trend.

And that's healthy, it can be healthy long, long term. But with that, we have a weakened momentum situation that really is notable. And we have to just hope that it doesn't carry over to the S&P 500 or NASDAQ 100. But there are some indications that momentum is waning there as well on a long-term basis. So if you look at that MACD,

Rolling over for the Eurostoxx 50 on the monthly chart, you can see that that's brand new and it hasn't happened in a while. So it's something that has us paying attention. It certainly at a very minimum, it tells us we want to continue to underweight Europe versus US for one. It also tells us that this consolidation that we've seen has a bigger potential of resolving to the downside and bringing the Eurostoxx 50 back into that long term support level.

So we're just wary of that. We also see similar indications from Japan's stock market, for one. So we're just keeping an eye on this. And it's really a way to have an understanding, I guess, of global breadth, right? Is the global participation there? And the answer, unfortunately, is no.

Now, you know, something that we kind of talked about on Monday, and I just want to kind of get your thoughts on this as well. The market sentiment, because, you know, that was certainly going in.

a lot of concern that we were getting maybe overly bullish. A lot of indicators, whether you're using investors intelligence, fear and greed, there were a lot of indicators that were just kind of saying, hey, we're kind of at levels where you typically start running into trouble. And even some people have been looking at the length of the rally. I mean, if you kind of consider that

November 1st was kind of the start of this big rally that we've had. We've had some pauses. And I mean, look, August and September, the beginning days of those months were no cakewalk. But what are you looking at? How are you kind of measuring market sentiment, taking this emotional component and quantifying it?

Yeah, I mean, today was certainly a sentiment or a study in market sentiment, right? Because it's all anticipation. If you think about it, the trade that was put on clearly, right, by the marketplace in terms of these gaps up, especially in areas that would be considered more favorable in a Trump sort of environment, right? I think that that's a great case study and how sentiment can influence the market and can do so really dramatically.

So it really is all about sentiment because we feel like any bit of information out there boils down to a buy and sell decision made by a human being. Right. So it really makes a difference to have an understanding of what market sentiment is. And in October, we do reference the fear and greed index as one measure of market sentiment alongside the VIX as another.

the fear and greed index peaked around 75% mid-month.

So we already have that sentiment peak, and that to me is something that would suggest that we have a little bit more of a fragile environment. And again, it's not an outright sell signal in the same way that we don't have that from market breadth, but it has us wary of the sort of lack of upside potentially from here, but also if we see breakdowns, we're going to honor them in a way that maybe we wouldn't if we had a more conducive or favorable environment from a sentiment perspective.

We know that we look at these sentiment gauges from a contrarian perspective. So you don't want to see the greed in the marketplace. We did see a bounce back up in that sentiment metric today for one. And at the same time, we saw the volatility index come down to its 200 day moving average today with a gap down. It's really interesting. The VIX has what we think is the newer sort of higher volatility cycle underway, where the old floor for the VIX was around maybe 11 or 12.

Well, now we feel like the new floor is between 14 and 16 thereabouts. So with that new higher floor, we have to pay attention when days like today occur because when the VIX gets low, it shows some complacency. Right. And I mean, certainly for a good portion of this year, as you said, I'm pulling up a chart of the VIX right now and

It just really was kind of in that very historically low range. And then, of course, you had the August 5th, which was a very large spike up to 65. But then when we came back down, yeah, I mean, you can really kind of see it on the chart that it was, oh, here's your new area where you're living. Completely. And there is on the VIX chart, if you look on a monthly chart, I don't know if you can do that there, Justin, but

If you look at a monthly VIX chart with a MACD indicator on it, you'll see that the MACD started shifting ahead of that August volatility spike. So we had some great insights from our momentum gauges on a long-term basis to suggest that indeed we were sort of moving out of this lower volatility cycle. Low volatility cycles tend to be great for the major indices. Higher volatility cycles are more challenging. And I would argue that even though we've seen the S&P log new highs,

It's not been the easiest environment for the most of us since that August spike. Right. Yeah. So you kind of mentioned a new floor for the VIX. For a while there, it seemed like everyone was kind of saying, oh, if we get above 20, that's where it gets, you know, a little tougher. Do you think that there's kind of a new ceiling that we...

need to adjust as well? Yeah, you know, it doesn't have the same characteristics as a stock does, right? We don't have necessarily a way to say, well, here's resistance. We do look for levels that have had importance in the past. And we do reference things like the cloud model to try to have a good understanding as to where the VIX is getting overstretched on the upside. But it doesn't have that same traditional sort of

resistance and support necessarily, certainly resistance at least. And so we look at it a little bit differently. And we're very inclined to use overbought, oversold metrics like the Demark indicators for one to understand if the VIX is becoming overbought or oversold on its own.

Well, let's go ahead and look at some of these DeMarc indicators. And we can start with the 10-year treasury yield. And so this is going back to a chart that you pulled from Bloomberg Finance, showing the 10-year treasury yield on a daily basis. And for those of you that aren't familiar, maybe you can kind of introduce them to the DeMarc indicators. It's really kind of a numbering system, right? Yeah, well, we love the DeMarc indicators. They're a Tom DeMarc's product, and he's

He's developed a suite of indicators of which we use two a lot. Those two are TD Sequential and TD Combo, and they're designed to gauge trend exhaustion. So they do run these counts of the various price bars looking for different characteristics. And ultimately, these counts culminate

with a 13. So you'll notice we have a 13 circled there for Treasury yields, and this is on the daily bar chart. And it suggests that the move, the up move in yields is overdone in the same way that it was overdone on the downside a couple of months before. And we've had pretty timely indications from these 13s in terms of PIPs.

of pivot points for yields in particular. We use them across asset classes and across timeframes, but this one just is like an enhancement, I would say, to suggest that this move, which is obviously explosive, could be another one of those sort of climactic moves that gives way to a retracement.

Yeah, excellent. And then also, I think you put some DeMarc indicators on the dollar. Dollar also had a very explosive move today. And so here's the dollar index on the daily chart, which I think that got to a 13 a couple weeks ago and now even higher today.

So now even higher, that's right. So we have ways to discern whether the signals from the DeMarc indicators in particular are negated. There's different thresholds that we adhere to. And indeed, for the dollar index, it has not been negated. So it's still a valid signal. And when you see those kind of gaps up, especially in such a

macro behemoth, something that doesn't often gap, you know, it does suggest that it's also overdone. And you can just see visually the correlation to Treasury yield. So the takeaway is the same. We've had some good timely indications in the past. And it would tell us that we should see the dollar weaken here, at least in the short term, and probably do so around that trendline resistance that's pictured.

And then, of course, a lot of eyes were on gold, which if you look at this monthly chart, a lot of people have been talking about how it was coming out of this long consolidation, this kind of cup with handle action on a monthly chart really had a strong move. And of course, on the short term today, it was it was it was taking a little bit of a backslide.

That's right. It was not in focus today as one of the winners, right? You can see on that monthly chart, it's really accelerated to the upside over the long term. So we've been calling for some consolidation, but healthy consolidation for the price of gold.

we have already seen some upside objectives reached and you can see another one there based on a very long-term measured move that they're still upside to and we do think it's achievable but first we're looking for consolidation as those overbought conditions are absorbed we have here too some signs of upside exhaustion based on our demarc indicators over different time frames

But we would encourage folks to remember that that long term momentum is not only behind gold, but it's still expanding or growing. And that's something that puts us more on the lookout for an entry point, a buying opportunity after some consolidation. And just to kind of orient people on the cloud here, because again, a lot of those cloud levels that you were looking at before were a lot closer. These seem, you know,

like a lot more distance. So can you maybe discuss how you would use the cloud indicator on the gold monthly chart here? - Yeah, so it shows the secular uptrend. For a monthly cloud chart, it's often going to be too far to be really helpful as a gauge of support, but it will remind you of the prevailing long-term trend. We use the cloud and all of our indicators across monthly charts,

weekly charts and daily charts of which you've seen pretty much all of those from us here today. And it gives us a sense of, I say respectively long-term, intermediate term and short-term action. And so we'll use the long-term charts primarily to understand, do we wanna be long?

Right. Do we want to be long this security? The intermediate term will be more for sort of timing, market timing entries and exits and trying to capture those quarterly swings that are so prevalent. And then for the short term, we often use the daily charts to help us manage risk, looking for those sell signals, looking for deterioration, something that should soon manifest itself on the weeklies. Mm hmm.

Now, one area that we also should discuss is crude oil. You know, the oil has been certainly in a downtrend. It's been not the place to be for a while. The relative strength has been very poor on it, but it did kind of have a setup.

where you could see it breaking a line of potential, a downtrend here. And that's certainly what happened today. I mean, it really popped up. XLE, at least, was up three and three quarters, I think. So there's still, I mean, look, there's still fighting in the Ukraine. There's fighting in the Middle East. There's a lot of things that could be going on on the global side. But

You know, you also have, you know, Trump Trump's mantra of drill, baby drill. What is what does this mean for for oil in your in your mind?

Well, oil is like an exercise in frustration on the chart, as you can see, because it is really range bound and very, very volatile from a short term perspective. So overall, long term, you can see a trading range characterized by lower highs. So it's sort of like a cyclical downtrend within a secular trading range. And if you find yourself frustrated by something on the charts, it's often exactly that, some kind of trading range environment with a lot of backing and filling.

I'm treating the short term action right now in crude oil as just that backing and filling. The long term momentum is still to the downside. And yet you can see there is pretty strong support in the mid 60s. So within kind of the confines of that downtrend line pictured in that long term support, we can really only take sort of short term stances. Right now, I'd say probably neutral to positive within that context.

So if somebody had exposure, you know, they might want to wait for a bigger bounce to reduce it. But if you look at the energy sector and its relative performance, it's really among the worst in terms of sector relative strength. So we're not keen on adding countertrend exposure in general in relative terms to energy. But it doesn't mean you can't find occasional short term trades there. Mm hmm.

So to kind of put a little bow on the market, and again, there's a lot to kind of consider today with all the movement that we had, resolution, but still kind of a market sentiment. So what's kind of your takeaway? Because you kind of started out with, yeah, this might not have been as impactful as you would have thought. And again, a lot of gap ups, a big change, it seemed like, but what's

But why so nervous? Yeah. And I don't know if nervous is the right word for it. It's really more we feel that the range that has unfolded in the likes of the European benchmark could soon unfold in the US. So it's not so nervous. It's more like not that excited about it. Okay. More neutral. Yes. Or more neutral. And that is indeed our bias short term and long term right now for equities.

And we're neutral based on the combination of indicators that you've seen. We apply those again across timeframes. And that's our takeaway from the collection of our indicators. But indeed, we've had this great run. If we do see more breakouts confirmed, remember, we want to see a few days above. Well, those would be actionable. We're very willing to act on breakouts because they tend to be

really the best sort of indications of follow through, you know, they remove resistance from charts, right? So if they're confirmed, and they're in made more decisive, we do think breakouts are actionable, but we don't have a breakout right now. In the the large cap indices, we have a

potential breakout in the small cap Russell 2000 index that definitely bears watching and that's going to require essentially that we kind of hold on to the gains. We could see a little bit of a retracement but we need to definitely do pretty well over the coming days. If your business needs a new application then developers will have to write code, a lot of code. If an application needs to be modernized

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5.8% that it was up today. I should mention that I've been trying this a number of times. I mean, it seemed like the 2000 level was such an important level. And every time it got above it, it would spend a little bit of time and then back below. Then 2200 seemed kind of like the level. And then now it just blasted through 2300 in a big way. Didn't look back this time.

But I also do remember, I'm just going to change the date here. I remember last time Trump got elected that there was this really strong reaction in the Russell 2000. I'm going to go to January 2017.

And yeah, this is the weekly chart. Here was the election. We had a really strong initial reaction, and then it was kind of like done pretty quickly. Yeah. And I guess that's the concern from my perspective is that we have this great move, but it's not worth chasing it because we should see digestion.

And also, I mean, we're anticipating things that will take months, if not years, to really sort of manifest themselves in the fundamentals of these small and mid cap companies. So I would just caution that maybe, you know, it's a little overdone in the short term. And we also have, you know, treasury yields are certainly an influence, especially on financials and small caps.

We do have a Fed announcement for tomorrow, right? So we have more data to get through. Obviously, it's not as big of a deal, perhaps, as the presidential election, but it certainly has the potential to influence the market and

And really across all the charts that we've looked at together today. So I think it enhances the need to wait for that confirmation. Don't feel like you need to chase anything. And if we do get the confirmation, well, then let's regroup and maybe get a little bit more constructive, at least into year end. Yeah. And I guess that's one of the things that's a little interesting that you've had this

you know, major run in the 10 year Treasury yield, again, kind of coinciding with the rate cut that everyone was waiting for the 50 basis point, you know, kind of that we had had in September. And, you know, you've had this really strong run. And usually, that does kind of put a damper on

the small cap indexes. But again, they've really kind of fought through that. Yeah, it's funny if you look at if you try to fit correlations right now with yields and anything that should have some level of sensitivity one way or the other, none of it makes sense. And it's I think it's partly just a function of the incredible volatility that we've seen in yields over the past year or so. I mean, we've had massive upswings and massive downswings.

And the equity market reasonably can't make sense of it. Right. There's almost over time, it's been a lack of a real directional bias right over the long term. Yeah. I mean, even one of the things we were kind of joking about the home builders for a while there is because they were continuing to look strong and go up despite the ten year Treasury yield going up. And it was like,

It seemed like it didn't matter until it did. It got to a certain level and then it's like, oh, yeah, that's right. Now that's why. Yeah. So and listen, you know, home builders were not too happy today so that it was interesting because and you can't, like you said, attribute it all to yields either. So so we have some deterioration there from momentum and relative

strength perspective. I want to go back to JP Morgan. You brought that up before and you were talking about this concept of the kind of exhaustion and climactic action that happens kind of on the buy side. You know, a lot of times I guess I would look at this as, you know, JP Morgan having a consolidation that it was coming out of. So how are you kind of viewing this? Was this a breakout from a consolidation or...

a little bit too much. I think I think we watch it and see if it confirms, in which case it does close on the outside of that consolidation without filling the gap or coming deeply into the gap. Well, then that would be a bullish catalyst for the JP Morgan chart for sure. So we'll be evaluating it over the coming days just to see if it can kind of hold on to that breakout and those gains.

In general, for folks that feel like, well, gosh, I've held this stock, whether it's JP Morgan or otherwise, and I have a gap up to take advantage of, potentially on the sell side. One way to do that without feeling like you're going to miss some additional upside is by simply using the gap itself for a stop loss. So at the top of the gap, you can say, well, I'd be uncomfortable seeing it dip back into that gap.

So we've been recommending that for some folks that are really sort of attuned to the short term setup right now and have exposure to higher beta stocks, which, of course, when they do retrace, it can be significant. Yeah, makes sense. And then also, I want to kind of go back. You mentioned in our pre-show huddle a little bit about Boeing as a stock of interest. Maybe you can walk through Boeing. I mean, this is something that has been interesting.

you know, gosh, I mean, just really suffering for a while.

What what is it about Boeing that interests you? Well, I think it's interesting just because it is counter trend. Right. We have a market environment that we've seen some rotation out of the leadership. And that includes the mega caps, the likes of Microsoft and Apple or even Eli Lilly into some of the more beleaguered areas of the market. I would encourage folks to look at the cable stocks, look at Charter and Comcast as ones that were previously unloved.

So sometimes we will see that dynamic to the marketplace. And Boeing, to us, has very strong long-term support based on a gradual uptrend line very close by. It's basically testing that support level. And our DeMarc indicators suggest that from a long-term perspective that Boeing is finally

overdone on the downside. So that's what's intriguing to us. We're watching the momentum gauges improve to a slight degree, but not quite to the degree with which we have a decisive buy signal. But it is on our radar as one that should show some improvement off of those signs of downside exhaustion.

And then, you know what, just because everybody is talking about it is NVIDIA. I do know a lot of people are wondering about, again, semiconductors in general. So you can pick your semiconductor of choice. It doesn't have to be NVIDIA. I do have a position myself in NVIDIA. But

This is one of the areas that with all of the AI discussion, could this be the next internet? What are kind of your thoughts? Because this certainly seemed like it was capturing the imagination. Some people are saying, well, gosh, these have been running for so long. Others are saying, well, look at the internet. It was just getting started. Where do you kind of fall on this in terms of the technical action?

Yeah, so NVIDIA has been a very, very strong uptrend and we still do have exposure to technology in our TAC ETF. So we're there, we're exposed.

And yet we do have on sort of to count contrast, I should say what we saw on Boeing. We actually have signs of upside exhaustion on the monthly chart of NVIDIA per our mark indicators. So it's not an immediate sell signal, but you see the steep up move there and it suggests that the up move is probably a bit overdone for the coming months. So we're at this place where we feel like it could be due for more consolidation, more than what we already saw after the summer peak.

And yet, listen, there's nothing bearish about new highs. So, you know, if we see a breakout above this 141 resistance level that's prevalent for NVIDIA, if we can see it confirm that, well, maybe you can get a little bit more upside potential before that sell signal takes its toll again. But we think limited upside in the coming months, but something that, you know, is more of a cyclical range within a secular bull trend. Mm-hmm.

And any other areas that you are kind of taking particular interest now? Was there anything that you saw as a shift or again, too early to say right now?

Well, we're watching Bitcoin naturally. We do publish research on Bitcoin on a weekly basis. And of course, technical analysis is a great way to understand Bitcoin and cryptocurrencies more broadly. And with the big move today, it has the potential to really sort of solidify the breakout from the downtrend channel that had characterized it up until a couple of weeks ago. So we're watching for confirmation of a breakout towards the end of this week.

Bitcoin, of course, doesn't actually close, but we use sort of the Finnish print on Sunday to discern whether it's going to confirm the breakout. And that would be a nice positive catalyst. Intermediate term, long term momentum is probably best described now still as neutral, but could certainly improve with this breakout. So we're sort of encouraged by this breakout. It's a different type of breakout than we're seeing largely in the equinox.

equity market because we have had a downtrend Channel there it's it's hard to find a stock of course that's in a downtrend Channel

Now, one thing, and again, it's great. I'm just throwing stuff at you and you're bobbing and weaving with the punches. So another question here is with a lot of these miners and the energy that they require for Bitcoin and Ethereum and all these cryptocurrencies and blockchain, plus AI, the chips, you know, are requiring so much energy. It was interesting to me that

you know, kind of what you were saying before, these correlations just weren't making sense for a little while. You had utilities, this is XLU, utilities going to new highs along with the S&P 500, which is not normally what happens. You know, is this kind of another example of those correlations getting skewed out of whack? And then do you normally expect, okay,

what I expect is they might be disjointed in the short term, but they're gonna kind of go back to their norm. - Yeah, it's funny because utilities used to be interest rate sensitive, remember that? And you can see that there are always other influences on market sentiment and utilities is a great example of that. So I don't think, we don't depend on correlations in our work.

we're aware of them in the same way that we're aware of seasonal influences, but we don't depend on them because they can change, right? So they add value from a historical perspective. So they give you context.

But they don't really give you sort of investable takeaways necessarily. In fact, they can really steer you the wrong way at times, whether it's the gold price versus the dollar or yields versus REITs, that type of thing. So I think there's risk in depending on these correlations, especially over short-term timeframes. But with all of the inter sort of play between these groups,

What I think is awesome is that we have a lot of products that we can use to get exposure to the groups and sort of, you know, you can create almost a trade around that with all the thematic products out there. In fact, I know that for Bitcoin with now ETFs out there available, there are some ETFs that will actually give you sort of exposure that that counters the impact on the environment.

So there's some really creative strategies around managing through those challenges from more of a macro perspective. So bottom line, Katie, you're again, who hates a gap up, right? I mean, nobody hates a gap up, especially if you've got enough participation that it makes a difference in your account. But you're really kind of looking for that next step, right?

Right. So we want to make sure breakouts are confirmed. We want to make sure that stocks, especially the high beta ones, don't dip right back into the gap from today. That's a great way to sort of manage short term risk. And we actually with our biases on Treasury yields and the dollar, we wouldn't be afraid of picking up.

some fixed income exposure here, especially if you agree with us that we could see more consolidation from the equity market on the back of this gap up. So it's a little bit of a more intriguing setup to us right now in terms of new exposure.

Awesome. Well, Katie, thank you so much for coming. I think, again, no better person to have on a post-election wrap up than a technician. Really appreciate you sharing your thoughts on cloud, on the DeMarc indicators, and again, just kind of maybe tempering the enthusiasm that we saw today.

Happy to join you, Justin. Okay. Take care. That's going to wrap it up for us this week. Thank you so much for joining us. Don't forget to like and subscribe on that podcast of your choice. Thank you for joining us live as well. And I hope you join us next week because we've got Joe Fahmy coming back to the show. He's of course, one of the, one of our podcast regulars.

one of the managing directors of Zor Capital. And I think Arusha is probably going to pop in for that one. So you can expect a triple whammy. So hope you join us for that. We'll see y'all next week. Bye now.

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