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VRA Investing Podcast: Breaking Down The Dip On A “Turnaround Tuesday” – Tyler Herriage – April 30, 2024

In today's episode, Tyler unpacks a tough "Turnaround Tuesday" for our major indexes, as our markets seemed to hesitate ahead of tomorrow's FOMC press conference. He also covers the latest earnings reports from companies like Amaz ...

Posted On April 30, 2024Episode 1375
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About This Episode

In today's episode, Tyler unpacks a tough "Turnaround Tuesday" for our major indexes, as our markets seemed to hesitate ahead of tomorrow's FOMC press conference. He also covers the latest earnings reports from companies like Amazon, 3M, and AMD. Tune into today's podcast to see what the VRA Investing System is telling us from today's market action.

Transcript

Don’t look back because the market is closed. Good Tuesday afternoon, everyone. Tyler Herriage here with you for today’s VRA investing podcast. Hope you all had a great day out there today. We got a bit of a turnaround Tuesday today and not the kind that you like to see here. Yesterday we finished higher across the board to start off the week. Coming into the week we were already had the week before last wrapped up four negative weeks in a row for the Nasdaq, three for the S and P. And last week we bounced back.

So it was good to get a strong start to the week yesterday. But today, again, turnaround Tuesday here as all of our major indexes finished lower here across the board as this morning we were a little bit lower and then we got a couple subpar economic readings and our markets continued lower from there. Some of those included the PMI this morning coming below estimates as well as surveys here, consumer confidence and consumer expectations coming in below expectations. That didn’t help the market out either as we tried to get a little bit of a rally this morning. The semis were positive. We were just right there looking like on the brink of a rally for our major indexes as well. And that marked the highs of the day, ultimately finishing lower across the board, as I mentioned earlier, and also near the lows of the day to day. And I’ll get to our markets here in a minute, but a little bit of why we might have seen some of this action today.

[00:01:45]:
Now, before I do that, let me just say market watchers who are big into the financial mainstream media, you know, the mainstream media in general always has to find a narrative for something. So every little sell off we get, they’re trying to give you the narrative on exactly why it happened. Really, it’s sentiment control is what you’re seeing and why we recommend not watching any financial mainstream media at all. Or if you do watch it, take anything that you learn there with a grain of salt, always do your own research. And that includes our podcast here as well. You know, we like to find the best sources. We like to find the raw data to look at. But hey, at the end of the day, you’ve got to do your own due diligence as well.

And it helps us here, too. We always love getting your feedback, whether it’s agreeing with something we’re saying or challenging us on something we’re saying. We’d love to get your feedback, so keep it coming. We know we’ve got a great audience here and thank you for being with us. You can reach out to us anytime@supportrainsider.com. Dot we love hearing from you. So with that in mind, not trying to give too much of a narrative to today’s action, but a lot of this is likely some hesitation, at least some of this, right? Maybe not all of it, but some of it is some hesitation ahead of tomorrow’s FOMC press conference. Today began the FOMC meeting, and then tomorrow we’ll get Jay Powell’s press conference at about midday, and we’ll see what this means going forward for the feds.

Higher for longer theme yields were up on the day today, the ten year up 1.5% to a 4.68. So still below recent highs. But depending on what Jay Powell says tomorrow, we’ll be watching the bond market’s reaction. You know, it’s not the news that matters. It’s the market’s reaction to the news that applies to earnings, economic events, big geopolitical events as well. It really applies across the board, because at the end of the day, only price pays. You can make up whatever narrative you want, bullish or bearish, but if you’re not making money, that’s why we’re all here, isn’t it? And that’s what we want to help you do here. So we’ll see tomorrow how much the Fed is committed to this higher for longer theme.

[00:04:10]:
Remember, they’ve missed out on just about every theme since Jay Powell has been in office, going back all the way, pre COVID, to the December from hell. I believe it was 2018. 2019, where Jay Powell was 2019, I believe 2018. I gotta go back and look at the charts on that. Um, but what happened that year? Jay Powell raising rates into an economy that was slowing. It was more of a get Trump thing, as we learned recently, thanks to James O’Keeffe’s media group, we just learned that the, that Jay Powell does not like Donald Trump. And so it makes sense looking back, you know, hindsight’s 2020, that that was another get Trump strategy there. So they got that exactly wrong.

Raised rates in the most illiquid month of the year in December, causing the Christmas Eve from hell. Massive sell off on the half day of trading for Christmas Eve. Come on, j pal, what are you doing? It’s Christmas, man. And then from there, after COVID telling the government they can print as much money as they want, going on 60 minutes and saying, yeah, we can just digitally create money now. We don’t even have to turn on the printing presses anymore. Saying it openly, right, things that we’ve known for years but now are coming out into the open. And then the legendary miss calling inflation transitory. Gosh.

So we’ll see if they’re able to stick with a higher for longer theme, actually or not. I mean, Jay Powell’s got to be due for getting one big call, right? Right. We’ll see here. You know, we’ve said for all year, we’re fine with the higher for longer theme. Rates at these levels don’t scare us. I won’t go into, I won’t bore you with all those details. We cover it here quite a bit on the podcast. But we came into the year expecting rate cuts.

[00:06:06]:
Yes, but not expecting six like the market was. And saying again, you know, we’re good with a slow and controlled rate cutting cycle. We don’t want to see six rate cuts in the year because it means that something is broken in the market. Now, looking forward, based off of where we are today, we’ve seen inflation come back a little bit, but we’ve seen a softening in the economy and what has otherwise been continued. Strong economy. Right. But we’re seeing softness and we think that that is something Jay Powell might touch on tomorrow, which we believe the market would interpret as very dovish. Now, what that means for rate cuts this year, we’re really getting to the point where if Jay Powell decides to cut rates the same summer, that people would say it was a politically motivated move.

But we know Jay Powell is a politically motivated animal. So that in mind, I don’t think you can rule out a rate cut potential in these other meetings. It’s not a good look. Absolutely it is not. But just saying it’s not outside of the realm of possibility here wouldn’t rule it out. But right now, based off the CME’s FedWatch tool, the market, at least market watchers in these probabilities, are pricing in just one rate cut this year. Now only one month where it is the majority view, and that is four days after the election at the Fed’s November meeting. That is when the first rate cut is now expected.

According to the CME’s Fedwatch tool, it has moved back significantly. Remember, going into the year, every economist out there was calling for a rate cut in Q one. When every economist is on the same side of something, we’re going to go the other direction. It reminds you a lot of 2021, which was a fantastic year for our market, not talking about 2022, the bear market there. But going into the year, every economist said we’re going to see a recession every single 1100% of economists said that, and yet it was a phenomenal bull market year in 2021. So we’ve got every economist saying they expect six rate cuts this year. We’ll take the other side of that one. So now all eyes are on Jay Powell’s press conference.

[00:08:25]:
Again. That will be at midday tomorrow. Kip will be reporting on that here after the close for the podcast. But as we talked about yesterday, kind of going, circling back here, if Jay Powell even says something remotely dovish, then it’s off to the races for this market. We’ve talked about all of the major reasons why, the macro reasons why here. First and foremost, we are in the roaring 2020s, which has been powered by the innovation revolution. The keywords out there, you’ve heard them. You know, the blockchain AI, just tech innovation in general, autonomous vehicles.

So many reasons why innovation out there and innovation leads to disinflation at the very least. Then we’ve got our big bribe. Mega trends, financial engineering. You’ll hear my earnings commentary here in a minute. Just how we’re seeing financial engineering hint, share buybacks after that corporate earnings expansion. I’ll also cover a little bit of that in our earnings report. That includes the innovation and AI revolution. Then we’ve got our long term housing boom that we continue to see rallying for the 2020s.

We also see the millennial generation, which is in the process right now of inheriting $70 trillion. And they’re a far underrated generation. As somebody who’s a millennial, maybe I’m biased, but I’d love to see it continue to be the case. And finally here, the red pilling of America. We see this time and time again. Look back to the last election, what was happening during 2020, BLM summer. Right now, leading up to the 2024 election. We’ve got this Hamas Israel conflict here.

[00:10:16]:
All of these things are serving to wake people up to the fact that our government doesn’t care about us. They just want to tax us and send our money overseas. Because once it gets over there, it is easier to launder it back in here to the US. That’s the game plan. Julian Assange, Edward Snowden laid this out for us, made it abundantly clear, and that’s why the US government is trying to put them in prison today. Now, I’ll step off of that. Wasn’t planning on getting to that here in the podcast today, but those there, the red pillar of America, millennials. Long term housing boom, innovation, AI revolution, driving corporate earnings expansion, and of course, financial engineering.

Those are our five big bribe mega trends of why we remain so bullish. But in the shorter term, we’ve got a few more reasons here as well. I covered a lot of these yesterday that we’re seeing the signs here that were set up for a big move higher after the FOMC meeting and after the jobs report Friday. A lot of people will be watching that as well. But it’s not just earnings as well. So one factor I didn’t cover yesterday is the fact that our major indexes sectors are nowhere near overbought territory. In fact, we’re closer to oversold territory, especially after a day like today, which tells us there is so much room to run on days like today. We’re still looking for opportunities to add to our favorite positions here.

We’ve started doing that already and we will continue to buy the dip here. We think that’s the smart money move, and we can’t forget that now as we are really kicking into high gear here on earnings. I mean, trillions of dollars worth of companies reporting this week alone. And the good news here is that it doesn’t end with the earnings report, because after the earnings report, I believe it’s a few days, maybe a week, that ends the share buyback blackout period. And think about all of the companies that have already announced share buybacks in this round of earnings. We heard it from Google, which will now also be doing a dividend. We heard it from meta. Expect to continue to hear that share buybacks remain a major theme for us here.

[00:12:31]:
And that is, folks, financial engineering at its most basic level, really, that is legal financial engineering. There’s. All right, so speaking of earnings, we did get some big ones back today. A little bit mixed here. We got three m reporting this morning. They beat on top and bottom line estimates. The stock was up a nice 4.7% today. Exactly what you want to see.

Good news being good news. Then we got Amazon reporting after the close today, coming in better than expectations for both revenue and for earnings per share. But the big news here on the day that all of the tech watchers are noticing is that their cloud division, AWS, which no one expected to be a big part of Amazon if you did, you’re one of the only people out there who were like, oh, they’re taking a risk on cloud storage. This is really going to pay off. No one said that when they started launching the cloud division. And now, I mean, it’s their fastest growing division by far. And they just reported their highest margin in history, a 37.6% margin on cloud services at AWS, impressive numbers there. The stock has rallied after the last three earnings reports, and today looks like it will make four in a row.

The stock up now 2.72%. And after hours trading after that. We had AMD reporting today as well, coming in with slight beats here, you know, both earnings per share beats and slight revenue beats. And they upped forward guidance as well. The stock is now down in after hours trading. Let’s see. Excuse me. It’s down about 3% here.

[00:14:16]:
Now, AMD has had trouble in the past doing well after earnings reports, so no big concerns here, especially on a good report. But you don’t want to see good news becoming bad news. And we saw it with super micro here as well. They did come in just below expectations. This has been one of the hottest companies of the year, up just a massive number on the year, but is lower. And after hours trading, down 3.8%. I mean, when you have a run, let’s just do the quick math here. In 52 weeks, the stock is up 740%.

And that includes where it is today. If you were to even include where, where we were, I mean, you’re still up 700%. So, no, no big concerns here for us with a little bit of sell off from them. So stay tuned here. We still haven’t really hit the heart of the week this week. Of course, Amazon and AMD were big names today. Pinterest reported as well. I’ll only touch on this because it’s not a small company, right? I mean, this is a $22 billion plus business, and it is up, last I saw, like 20% in after hours trading, 18.5%.

That’s a massive move here for Pinterest. Again, not a no name company here with a $22 billion company. But coming up still this week, tomorrow, we’ll get back another chip name with Qualcomm. Then you’ve got Apple and Coinbase reporting Thursday after the close of. Stay tuned. We’ll continue to report on those here. And again, it’s not just the earnings that matter, of course, it’s the reaction and the announcements of, are they doing share buybacks? A lot of these tech companies that are starting to hit their maturity phase are announcing dividends now. You know, one thing that we’ve talked about here that we have not seen yet, and it gives us confidence that we’re nowhere near a bull market top is we have seen nothing, nothing at all like a red hot IPO market.

[00:16:18]:
Remember 2021, even 2020, after COVID happened, when we got the rally, after the v shaped bottom, we saw massive numbers of ipos, massive numbers of spacs coming out. Most of them were not ready for prime time, but still rallied 50% in their first day of trading. That’s the kind of exuberance that really marks. All right, we are in inning six or seven here of this bull market. Once this IPO market cools off, you know, and sentiment looks to be at elevated levels for weeks or months on end, that’s when we’ll be looking to take profits. We’re just not there yet, anywhere near it. We’re still in the early innings here as we see it. And in the shorter term, though, there are still very many reasons to be bullish.

Again, earnings continue to be strong, stronger than expected for Q one. And another one here might sound odd to you as we’re about to wrap up the month of April, but it is seasonality. We like to key off seasonality here a lot, but the old adage of sell in May and go away has just not been working. It’s been more of wait till the end of May and then go away. That was what we’ve seen lately. Over the last ten years, we have only had one negative. Maybe it was from 2019. And if I’m remembering correctly, I’ll check the chart.

It wasn’t even that bad of a month, if I, if I remember correctly now. I mean, it was down 6.6%, better than any of the up months, actually. So not a great month there in 2019, but it’s the only one. The median returns for the month of May over the last ten years, even including into this median, the down month of 6.6%. The average, excuse me, median gains are 1.1% for the month of May. So we’ll see if that trend continues here. And we think the setup tells us it wants to. All right, that said, let’s take a look at our market action.

[00:18:19]:
On the day to day. We were led by the Dow Jones down one and a half percent, or 570 points, to 37,815. After that, we had the s and P 500 down just over one and a half percent to 5035. After that, Nasdaq was down just over 2% on the day to day to 15,657. I will point out the semis were really trying to lead the way earlier today. They’re positive early in the session today, ultimately finishing down and at their lows of the the day as well, down 1.96%. And finally, here’s small caps, down 2.09% to 1973. Next up, looking at our internals on the day today about what you would expect.

Not pretty here, especially compared to yesterday’s positive across the board readings. Again, a turnaround Tuesday in the wrong direction here. Declining stocks, beating out advancing stocks. Stocks for both the NYSE and the Nasdaq roughly between three to one negative on the NY or, sorry, on the Nasdaq. Four and a half to one negative on the NYSE. 52 week highs. The lows had one of our only positive readings today, coming in just shy of two to one positive on the NYSE and just shy of two to one negative on the Nasdaq. Lastly here, volume.

We did see some big downside volume on the NYSE today, 85% downside volume. It was better for the Nasdaq, but you don’t want to see an 85% downside day. But it’s not by itself a sell signal. What you don’t want to see is a few of these days in a row, and especially not back to back days of 90% downside volume. We haven’t gotten there yet, not even close to it. So no, no massive concerns there. But we’re definitely keeping an eye on that. Next up here, looking at our sectors on the day today, we finished with all eleven sectors lower on the day, led by, if you want to call it that, some of our more defensive sectors.

[00:20:30]:
We had healthcare, consumer staples and utilities down the least on the day, while our biggest losers, energy, consumer, discretionary and technology. Finally here for today, our VRA commodities watch. More red on the screen. Really, the only flight to safety today was bonds. We also had the VIx up a little bit on the day today as well. But really it was just bonds out there and some individual names that finished higher on the day. But for our commodities, gold now down 2.5% on the day, below $2,300 an ounce at $2,296 an ounce. Silver down a big 4% on the day to $26.54 an ounce.

Copper after hitting roughly a two year high yesterday, pulling back today down 2.78% to $4.54 a pound. And oil also pulling back to 1.3% to $81.54 a barrel. And sorry to finish it with more red on the screen. Bitcoin down a big 4.6%, dipped below 60,000 earlier in the day. Now right at it at $60,063 of bitcoin. Again, we do remain extremely bullish on bitcoin as a group going forward here. But, folks, that is all that we have time for here today. Please be sure to subscribe to receive our VRA podcasts every day at the market close.

You can sign up at vra letter.com, click the podcast link at the top and we’d love to have you with us. Thanks again for tuning in. Until next time, we’ll see you back here tomorrow for the close.

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Time Stamps

00:00 Markets experienced turnaround Tuesday, finishing lower.
06:06 Economic outlook cautious, Powell's potential rate cuts discussed.
07:34 CME's tool signals significant reversal, defying economists.
12:54 Amazon's cloud division defies expectations, impresses investors.
15:30 Pinterest's $22 billion move, upcoming tech earnings.
19:50 NYSE downside volume, Nasdaq better, no sell signal.
20:30 Stocks down, bonds up, gold and silver drop.

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