In today's episode, we will dive into the rapidly changing landscape of interest rates after this morning's better-than-expected inflation data. Despite today's sell-off in tech, we see a healthy bull market underpinned by rotational sector performance, confirmed today by the impressive market internals. Tune into today's podcast to learn more!

Dont look back because the market is closed. Good Thursday afternoon, everyone. Tyler Herriage here with you for Todays VRA investing podcast. Hope you all had a great day out there today. It was an exciting day in the markets today and possibly not for the reasons you might expect. But first off here tonight, just a little heads up. Kip will be on Real America’s voice tonight on Wayne’s new hit show, the Root reaction. You can find it at Americas voice news, Google Real America’s voice.

You’ll find it there. They’ll be airing at 10:00 p.m. eastern time tonight. So hope you can join Kip and Wayne is what is always an exciting interview with Wayne. And Wayne, thank you for having me on previously as well. Looking forward to be back with you. Wayne’s a great friend of our show here as well. So thanks, Wayne and hope you can join us here tonight as well, or join Kip and Wayne tonight as well, where Kip will certainly be covering today’s exciting stock market action because it was a very interesting session today.

[00:01:18]:
And if you’re thinking to yourself, we talk about this here often, that Kip always gets the great all time high days, and then I, of course, always get the bigger down days. And you might be expecting, you know, it was an exciting day, but was it a down day? And it was for the Nasdaq and the S and P 500. I’ll give you some reasons why that doesn’t worry us at all right here. A quick little hint. We were just at extreme overbought territory, so we’ll cover some of that. And the really exciting part about today is this rotational theme we’ve been covering here for so much, some time now really playing out today. We’ll also cover the inflation data that we just got back from this morning. We’ll also cover the latest in earnings and what’s coming up next.

Also, big rally in gold and the miners today and much, much more here. So let’s just go ahead and jump right in, starting with this morning’s data as we got back the latest look at inflation with June’s CPI data. The consumer price index expectations going into this report were for an increase, a small increase of one 10th of 1% month over month. That consensus, consensus from big bank analysts was even higher at 210 of 1%. Again, wouldn’t be a massive number, but what we got back this morning could be considered a massive beat here as inflation actually finally came down. We’ve seen a lot of disinflationary trends taking place so far today, really the first look at a deflationary reading from CPI. This is the first negative print from CPI. You have to go all the way back four years ago to May of 2020.

So, yes, that’s a pretty big beat. First time in four, over four years there. Overall, the year over year still coming in hotter than the Fed would like at 3%, which isn’t perfect, means we do have some more work to do here. Of course, the Fed’s goal is to get it down back to 2%. The target should be zero. That’s a topic for another podcast, though. But we are getting closer and closer here to where the Fed’s goal is. We’ve been talking about these, the inflationary aspect of this market for some time.

[00:03:54]:
Earlier this week, Kip and I both talked about expecting a cooler than expected CPI print this morning. What’s so interesting here? We’ve said this for some time. Yes, this was a great print today, but we never really like to dig or take too much out of one report. We like to follow the trend. It’s what alerted us this year where we got a few really good, at least disinflationary, uh, readings from inflation. And then it was around the May, the March April time frame where we got a slight uptick once again in inflation. And all of the analysts out there said that the sky was falling, right? Oh, the Fed’s gonna have to rate, raise rates again. We’re gonna end the pause cycle and start raising rates again.

Now, the inverse is true here once again. Now the Fed’s got a rush to cut rates. We don’t think that it was that kind of a print where the Fed has to rush to do something that they otherwise wouldn’t have done here overall, just a good number. And we’ve said it from the very beginning, from when we peaked on inflation, we said it was never going to be a straight line down, and that continues to be the case. Just like the stock market doesn’t hit all time high after all time high overnight, right? Trees don’t grow to the skyd overnight. Just like inflation will not come back down to 2% overnight either. There will be more bumps along the way. But overall, you can’t look at today’s print as anything other than a win here.

What was interesting about this print is that this was not core CPI. This was as full a data set as the Bureau of Labor Statistics will give us. Now, we don’t agree with how these inflation metrics are calculated, or even how they’re used when the Fed looks at this data, there are plenty, plenty of aspects that are not in this. That’s why we’ve said also from day one, even when inflation was peaking at above 9%, we said then real inflation was closer, 1520, 25%. Have you really calculated everything into this? But, so what was interesting here today is that core CPI was actually a little bit hotter than overall CPI. So core CPI is excluding food and energy. Right, because who needs those things? But came in just barely above expectations, came in at one 10th of 1% higher, which again here did beat estimates. So it is a win.

[00:06:38]:
Not quite the sign of deflation that we saw in CPI, but another strong sign of disinflation here. The year over year reading for core CPI coming in at 3.3% again earlier this week, this is exactly what we were looking for. So we’ll see what we get back tomorrow. We’ll get one more look at inflation this week with the producers price index tomorrow morning coming out at 830 eastern time. So stay tuned. We’ll be reporting on that here on the podcast as well. When the news came out this morning, it was off to the races. The ten year yield fell below a 4.2%, closing down over 2% on the day at a 4.19.

Now, a move that we do expect to continue, but much like inflation, yields are not going to go in a straight line back to zero. And we, you don’t really want to see that either. There’s always going to be bumps along the way. But, you know, our view, if you’ve been with this here for a while, yields below 5%, we’d even go as high as 6%, we think probably would not derail this market. That’s the kind of strength that we’re seeing right now. But we don’t think that’s going to be the case. Our view remains the same the next. The path of least resistance for rates here going forward is lower.

[00:08:00]:
And on that note, the CME’s Fedwatch tool. Have you been with us here for a while? You know that this is a fun one to look at, right? You can’t put too much stock into, you know, a tool like this. It’s exactly that. It’s a tool meant to be one piece of your analysis, certainly not making up all of it. But what was so interesting here is the massive increase just today, since 830 eastern time this morning, how much the probabilities of rate cuts have gone up the market. Well, let’s start with the nearer term, right? So far, everyone’s talking about a September rate cut. Now, I will point out the probabilities, or, excuse me? Yes, September rate cut. Now, the probabilities are slightly increasing.

For a July rate cut, we see no need, no need for the Fed to rush here. That would likely panic the market more than anything. But they do need to telegraph this September rate cut. Well, and then on top of that, if this is a mid cycle rate cut, they need to telegraph that as well. Hey, here’s the plan. We’re going to cut rates three times over the next three sessions, and we’ll remain data dependent from there. But that’s our plan so far. And then stick to it.

Right. They have a problem with that though, as well. That would be one of the ideal scenarios for the market, because the market does not like surprise rate cuts. Anything other than what’s predictable, the market does not like. So here’s what’s interesting from the CME group’s Fed watch tool today. The likelihood of a September rate cut shot up today. Now, the vast majority position, 84% probability that the first rate cut will take place in September. That will be a 25 basis point cut.

[00:09:56]:
And here’s where it really gets interesting, is that a month ago, the consensus was pretty much tied for one to two rate cuts this year. But now the probability of a third rate cut is really starting to take hold here. Going back to just a month ago, the idea of having three rate cuts, 325 basis point cuts this year was just a 13.2%. That was a month ago. Today is now the majority view, narrow majority, but still the highest probability outcome is for three rate cuts this year with a 43.8% probability there. Again, a massive increase there. So the odds here increasing by the day and depending on which ones you’re looking at, overnight nearly doubled from where they are not even overnight since 7830 eastern time this morning. So again, all eyes will be on that print tomorrow.

We’ll see what it does for these probabilities as well. And then, of course, tomorrow we’ll also get the unofficial start of Q two earnings. That will be the big banks reporting tomorrow. As Kip and I talk about here a lot, no love for the financials here, especially the larger financial institutions, but we want to see them participating as part of a healthy bull market. So we want to get good earnings back tomorrow. And what we’ve seen already is some of these names, these individual names hitting either 52 week highs or all time highs. The financial sector itself is banging on the door right now of all time highs. So we look for that to continue we want to see that continue.

New highs beget new highs. Looking at just one more quick report on earnings here, we did get Delta reporting this morning. We don’t talk about the airlines here all the time, but this was important today. Not necessarily Delta, but the larger ramifications for the transports as a whole. So Delta Miss, top and bottom line, very narrow miss, was immediately crushed after this report came out this morning. Ended up finishing well off the lows of the day today. Still reported pretty good adjusted revenue coming in, just barely missing on EPS, but net income is what fell dramatically and spooked investors here. But despite, despite Delta and a subpar report here today, the transport still managed to rally, really leading the way for our major indexes today.

[00:12:37]:
Up 2.19%, back above or closing back above the 200 day moving average today. We want to see this downtrend line broken in the transports. We think it’d be very healthy action. And again, this technical rotation that we’re seeing here. So as we began alerting you to here on the podcast last week, early this week, tech, specifically the Nasdaq, the semis and the S and P were hitting or right at extreme overbought levels. Now, that doesn’t mean that we’re due for a long term top, but in our view, means we’re due for a little bit of a short term pullback. And at the same time, we’ve got the Dow and the small caps, which have yet to really participate. They’re still dows getting close to all time highs within about 1% right now.

But the Russell 2000 has some work to do. So plenty of room to run on both of those indexes right now. And the timing couldn’t be better because this has been a very common theme for us, especially for 2024. Even before that, though. And here I’ll boil it down kind of quickly for our new listeners. And the theme has been that tech and the semis lead, and that’s what you want to see in a bull market. Tech leading and semis leading tech. And it’s exactly what we’ve gotten.

And then you also want to see the generals leading, right? They’ve got to earn their stripes as well. But what happens when they get overbought? And this is an important aspect of, to each market that you’re looking at. And specifically here for us, we’ve looked at this as a new bull market. And in a new bull market, you get these rotational aspects that allow the over the outperforming sectors, like tech, like the semis, to pull back a little bit, or even the megacap names, whether it’s Apple, Amazon, Google, any of those meta, whatever you want to say. When they get extreme overbought and they need to take a little bit of a break, you don’t see people rushing to the sidelines. You see a rotation into the value names, into the small caps, and that is exactly what we have seen. So as many people would say, it’s only been seven stocks holding up this market. That’s true.

[00:15:00]:
There’s nothing wrong with that to some extent. But now is the time when we want to see the other 493 names of the S and P 500 performing well. And it’s exactly what we got today. And we see all of that as part of a healthy bull market action. It’s these rotations that allow the overbought names to take a pause, work off those overbought levels, while the rest of the market is able to rally and keep our major indexes, if not above, right, at their all time highs. And again, exactly what we’ve been seeing here. And, but before I get more into this rotational aspect, I gotta touch on sentiment here for a second, because the timing, again, could not be better. After the CPI, CPI report this morning, as I mentioned, our major indexes took off.

But after hitting another round of all time highs this morning, the Nasdaq and the S and P began to lead the way lower. And Kip covered this yesterday on his podcast. The fear and greed index yesterday got back into a full on greed territory. Maybe not full on, but about a 57, which is slightly above neutral. Today, already we are back to neutral. And so here’s what Kip covered yesterday that I think bears repeating here, is that when you start to see the fear and greed index at extreme greed and you get a pullback like today and remains an extreme greed, that starts to worry you about this market. So that’s when we’ll start to be concerned, is when we’re at extreme greed levels and you get a pullback of 510 percent, not what we got today. But if we got a pullback like that and sentiment remains at extreme greed, that would concern us.

Instead, what we’re seeing right now from the fear and greed is that the so called hot money or dumb money started to get back into this market. And then today, at the first sign of any fear, they rush for the exit. They get cold feet really quickly capitulate. That is a bullish sign for us here. And seeing the fear and greed index going back to a neutral here is very bullish for us. And again, no concerns. Even if we were in greed territory here just a year ago, we were at extreme greed. We’re at a 78 one year ago.

Well, the S and P has only rallied 25% since that time. There was a slight pullback in there. But if you would have bought any time in that range today, you would be very, very happy with that purchase. So we’ll begin to alert people when that time comes. It will, that day will come where we see fear and greed. We’ll see AAII at 60 plus percent bullish investors for weeks, potentially even months on end before this market tops out. And right now, the AAII did hit its highest level today, coming back since March of this year. Again, no real concerns for us at this level.

[00:18:14]:
And we wouldn’t be surprised at all if we get a little bit of a sell off here to see the AAIII survey begin to get more bearish here as well. But one last point here on sentiment, and perhaps one of the most important ones, is that we’ve been seeing a lot of bearish talking heads in the news. We’ve seen a lot of bearish headlines in the news. Right? Just today, investing.com had a piece talking about a blow off top of the market here, folks. Those aren’t the kind of headlines you see at an actual market top. I could go through example after example of these mainstream media sources calling for a top at bottoms. Right? Really, when you look back on it in hindsight, for example, here in 2020, everyone, every economist, 100% of economists agreed that there would be a recession in 2021. Here we are three years later, and the closest we’ve gotten to that recession was one instance of back to back quarters with a negative GDP print.

Now, a lot of people would call that a recession, sure. But it wasn’t like we got three, four, five, you know, multiple percentage point contractions in GDP. It was a brief dip below. And we’ve been back off to the races ever since. That’s just another example of how bad these economists, these analysts, these copywriters, how bad their predictive powers have been as of today. Another example just happened today. The consensus estimate that I mentioned earlier among big banking analysts, the people who supposedly have more data than anybody else, and they have this proprietary models to predict all these things. Their median forecast was for an increase of two tenths of 1%.

Again, we came in at negative one 10th of 1%. That is way off, way off for these people who are supposed to have the best predictive powers in this industry. Again, we had that investing.com piece today that adds to our bullish belief. But the economist is really one of the best for it. In November of last year, just to give you another recent reference, their headlines ran in ruins. Crypto’s downfall. Well, bitcoin has rallied over 50% since that cover ran. It was roughly in the $37,000 range for bitcoin when that headline ran.

[00:20:50]:
Today, bitcoin sits at $57,000. So when you see headlines like this as contrarians, that tells us we want to look for buying opportunities, not opportunities to run for the exit. And that perfectly takes us to today’s market action because we did get a sell off in tech. But in a moment, you’ll see why we think this is such a fantastic opportunity here right now. And again, it’s this rotational theme and a very healthy sign of a bull market. So let’s take a look here at the market action on the day. We were led by the small caps, one that we’ve wanted to see leading here for a while, and we’d like to see continue while tech and the semis work off and the s and p work off their overbought conditions. Russell 2000 up 3.57% today to 21 25.

Next up was the Dow finishing just slightly higher on the up 0.08% to 39,753. Excuse me. And I have to point out again here, just like we want to see semis leading tech, you love to see transports leading the Dow and the transports were up a big over 2% on the day today. Then to our laggards on the day. The S and P 500, which did hit an all time high at the open today, could not finish at those levels, though lower by 0.88% to 5584. But the bearish analysts out there got a sign they did not want to see today. And it was that the other 493 stocks that they love to hate on so much did their job. The equal weight s and P 500 finished up on the day, 1.21%.

Compare that again to the down nearly nine tenths of 1% on the S and P 500. That is some very big outperformance there from the equal weight, and that’s a trend we do want to see continue. Lastly here, the Nasdaq did get a sell off. Here again, the mega caps. The generals taking a little bit of a break. A lot of red on the screen for the big names. Nasdaq finishing down just below 2% at 18,283. So again, you know, not the action you love to see on a sell off day, but again, this is the action that the bears have been asking for.

[00:23:22]:
But what they didn’t want to see was this under the surface rotation, like we’re seeing the rotation into the other 493 names that make up the S and P 500. They didn’t want to see this rotation into value names. And what they certainly didn’t want to see was the impressive internals that we saw today. An hour into trading, when the Nasdaq and the S P were beginning to head lower, the internals were stellar at midday. Nasdaq down 1.77%. Nasdaq internals positive across the board. We finished down nearly 2%. Still finish the day with the internals essentially at their highs of the day today.

So that is not what the bears wanted to see. But we look at this as confirmation of an extremely healthy bull market here now exhibiting broadening action that is textbook bull market action here. And big beats for the internals today. Advancing stocks, beating out declining stocks. Just shy of six to one positive on the NYSE and just over three to one positive on the Nasdaq 52 week highs. The lows coming in with single digit 52 week lows. On the NYC, just nine names, hitting 52 week lows to 279, hitting 52 guys. That’s some serious outperformance.

They’re also coming in over four to one positive on the Nasdaq for 52 week highs. Lows. Lastly here on volume. Big beats here. Coming in with a big 80% upside volume day on the NYSE. We’d love to see some follow through on that tomorrow to get a bit of a bullish thrust here and what technicians look for on upside volume. Days would be very good to see here. Nasdaq also coming in well over two to one positive for the internals.

[00:25:18]:
So again, this is the action you want to see when our major index is Nasdaq down almost 2%. Internals positive across the board. This is the improvement that we’ve been talking about here for weeks. We want to see that continue from here. Next up, looking at our sectors on the day to day. Again, the rotational aspect. Yesterday we had four out of our eleven sectors hit all highs. Today, not a single one of those sectors was in our leaderboard.

That’s the rotation we’re talking about here. But now we’re getting some of the value sectors back to banging on the door of all time highs. For example, here, real estate has some work to do to get back to an all time high, but jumped up in a big way today, hitting a 52 week high, its highest level since January of 2023 and home builders, which we like to look at more than the real estate sector as a whole. But the home builders, based off of XHB is the ETF. There were up a massive 5.87% today. Just what you want to see after that. We had utilities rising on the day, followed by materials, industrials and energy. I also point out that the financials were after that right at all time highs here.

We did have one all time high today. That didn’t make an all time high yesterday. And that was healthcare. Again, another defensive sector here. So good to see again this rotational aspect. We also have no love for a lot of these healthcare names, but you do want to see them participating as well. Much like the financials, our laggards on the day were pretty much our leaders yesterday. Tech, communication services, consumer discretionary and consumer staples all finishing lower on the day to day.

[00:27:08]:
Similar story here though, either at or approaching extreme. Overbought levels on steroids there for a lot of those sectors. So a little pause here again doesn’t concern us. We will look to that as a buying opportunity. Finally here for today, our VRA commodity watch where we also saw gold taking off this morning after the CPI print. Gold now up 1.73% to 24 20 an ounce. Also right at all time highs. The all time high there is just $44 an ounce away at $2,464 an ounce.

That’s the bogey that we’re looking for to get us back to all time highs. This is a group that we remain extremely, extremely bullish on here. And we got the bullish action that you’d like to see again. You want to see semi’s leading tech. There’s a similar comparison for gold. You want to see the gold miners leading the commodity. It’s what we got today. GDX gold miner ETF hits a two year high today.

Very good to see. Up a big 2.81% on the day today. Silver also approaching a 52% week high, up 2.29% now to $31.72 an ounce. Copper now lower on the day by 1.74% to $4.52 a pound. And lastly, oil up nine tenths of 1% to $82.84 a barrel. And lastly here for today, crypto got a nice little pop this morning as well. Tried to get back above the $60,000 mark. Still positive on the day though after a slight little midday pullback here.

[00:28:53]:
Up 0.17% to 57,498. Also another group we remain bullish on here, folks. That is all that we have time for here today. Please be sure to subscribe to receive our VRA podcast every day the market close we’ll have Kip’s interview from tonight up there as soon, soon as we can as well. So check our website to learn more. And while you’re there, subscribe to receive our daily VRA investing podcast every day at the market close in your inbox when it comes in. You can do so 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.