In today's episode, Tyler dives into the latest market action as we kick off the week with a mixed but promising start with Technology and the Semiconductors leading the charge. He also explores what the VRA expects from economic data this week as we lead up to J Powell's Jackson Hole symposium. Tune into today's podcast to learn more.

Dont look back because the market is closed. Good Monday afternoon, everyone. Tyler Herriage here with you for Todays VRA investing podcast. Hope you all had a great weekend out there and an even better start to your week this week. As for our markets today, a little bit of a mixed start to the week, but certainly not a bad day out there today as tech and the semis both led to the upside today. It’s exactly what we want to see from this market. So we’ll cover our market action here today and especially the bright spots that we saw here today, and we’ll cover what to watch for this week. We’ve got an important week coming up with some very important economic data coming out.

We’ll also cover the latest in our views on volatility here, specifically highlighting the VIX and how to protect your portfolio from any uncertainty really going forward from here, especially as we’ve got a lot of uncertainty coming out of the Fed, first of all. But then, you know, the added volatility of it being an election year now just a few months away from the 2024 election. And you really won’t want to miss that part of the podcast today because I’m going to share some fantastic work from Ryan Dietrich that shows what this recent spike in the VIX really means for this market. I’ll give you a little hint. It is not bearish. So stay tuned for that. I’m going to be a good podcast today. So let’s go ahead and jump right in here as will lead off with the economic data this week, because some of the action today could likely be attributed to a little bit of hesitancy ahead of the latest look at inflation data here.

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And now we’re just ten days away from the beginning of the Jackson Hole symposium as well, where Jay Powell will be speaking, and all eyes will be watching to see if this data this week will tell us anything about what the future holds for the Fed. And speaking of that, before I get into the inflation data, the market is a little mixed so far about what they expect from the Fed. The probabilities just one week ago were vastly in favor of a 50 basis point cut at the next Fed meeting, that won’t be until September 18 is when they’ll wrap up the next FOMC. Now, this week we’re looking pretty evenly matched here on whether it will be a 25 basis point cut or a 50 basis point cut. If you’ve been tuning in with us here for a while, you know our view. We think that the Fed is behind the curve here. They should have cut rates. To say that they should have cut rates at their last meeting is even probably an understatement.

It should have happened likely before. That is, the Fed is simply too restrictive here, and we’re seeing it in yields continuing to head lower here. The ten year yield, you know, off the lows that we saw recently, which I don’t want to misquote this, so I’m gonna pull it up real quick. Just last week, though, August 6, six days ago, we hit the low of 366. Now today, it’s bounced back a little bit, but looking like it wants to resume its move lower here now at a 3.9. And so again, we really kick off what will, you know, explain what we’re looking for from the Fed really kicks off tomorrow with when we’ll get the producers price index PPI coming out tomorrow ahead of the open. You know, that is a market moving kind of event there, really. Market likely looking for a bit of a Goldilocks number there that tells the Fed, yes, it’s fine to start cutting rates, but also not that they’re too far behind the curve.

Kip and I have our end of day podcast, our end of day calls ahead of the podcast. We were just talking about this as well. And in my view here, yes, the Fed is overly restrictive, but the biggest mistake they could probably make is freaking out the market here. Going and cutting rates too aggressively would send a signal to the market that the Fed is, is panicking. Right. And you don’t want to see that from the Federal Reserve. So, you know, again, looking for a Goldilocks kind of number and the way they manipulate this data, wouldn’t be surprised at all if they got it then. The real story continues on Wednesday as we’ll get the consumer price index, the CPI, coming out as well.

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So stay tuned. We’ll be reporting on this here and now. I’ll restate this. We talk about it here a lot on the podcast, but we try not to put too much emphasis on any one report and focus on the overall trend of inflation. And right now, that trend is showing that we are in a disinflationary environment, not all the way down to deflation like we’re seeing out of China, although we do expect China to continue to export deflation to the rest of the world. But what we’re seeing in the US here is good disinflation, especially from where we were even a year ago, a year and a half ago. This is improvement here. And if the Fed remains as extra, as restrictive as they are right now, then, yes, we are on the path to deflation here.

But if there’s one thing that scares the Fed even more than inflation, it would be a serious deflationary environment, just from so many points of view, from being able to pay off our debt. Right. The main goal behind the Fed’s 2% target on inflation is borrowing from the future to pay for things we’re doing today. Because if you learned anything about the future, it’s that there are no problems in the future to be solved. So they can solve the problems that we’re having today. Right. We can take money from our future generations here in the US to pay for the problems of today. That is the environment that the Fed exists in for whatever reason.

You know, we talk about it here often. The Fed’s goal should be 0% inflation. And if they aren’t able to get to that goal, then whoever’s on the board at the FOMC should immediately lose their jobs. Warren Buffett’s, you know, talking about the federal deficit, you know, I could, he said I could solve the federal deficit with one stroke of the pen. Say anytime that we run a deficit, everyone in Congress is up for reelection. If we run a deficit, it’s that easy. Right. And that’s the environment we should exist in.

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But that’s a bit of a fantasy compared to where we are today. So we’ll react in a way that exists within reality here, which we do think is, is still bullish for stocks. We think the Fed is on its way to a rate cut cycle. And like we’ve said before, they’re behind the curve on that now. So stay tuned. We’ll be reporting on both of these reports here on the VRA investing podcast this week, every day at the market close. And if you want the first look at our analysis of these numbers, come and join us at vra letter.com. that’s vertical research advisory vraletter.com, and you’ll receive our daily VRA letter updates each morning before the close.

So come and join us. We’ve got a great community here. I know we’ve got a lot of listeners who are members as well. So thank you for being here with us. And as always, thank you for your feedback as well. So no doubt here. It’s going to be a very interesting week. And as we have said often, now is the time to remain locked into this market.

I know it’s summer. It’s an illiquid time of the year. People are wrapping up their summer vacations school’s just getting going now, but there is so much serious opportunity in this market right now to be buying, to be adding to your favorite positions at discounted prices after this pullback that we’ve seen, which as we’ve said as well, this has really been a run of the mill pullback so far. You know, we get 10% corrections roughly every twelve to 18 months. Yet every time they happen, they come as a complete surprise to most of the market, when in reality they should be looked at as opportunities to buy your favorite positions at discounted prices. We think over the next six to twelve months, you’re going to be very happy with that decision. I’ve got a great stat coming up here in just a second that really shows that, so stay tuned. Another reason here before I get to our market action that we remain so bullish on this market continues to be investor sentiment.

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We had seen sentiment climbing into greed levels over the last really couple of months or so, but now that we’ve had a shakeout in this market, we’ve seen a investors running for the exit. And folks, that is just not the sign of a market top. At market tops, you get corrections like this and sentiment remains at extreme greed levels for, you know, weeks to months on end. Everyone’s thinking it’s another buy the dip opportunity. Everyone’s all bulled up. You know, your Uber driver is telling you what stocks they’re buying right now, we’re just nowhere near that environment. And we see it first off here, the fear and greed index ticking lower today. Got down to a 23, now at a 24.

So about where we were. Still, that is extreme fear mode. Next in the put call ratio we’ve been talking about. We’ve seen elevated readings here. Anything above a .7 from the put call ratio is seen as bearish sentiment. Anything above one is excessively bearish. Well, today we’re above a one just about all day today. And we finish just about right at.

Yeah, at the highs of the day, 1.04. So again, excessive bearishness in this market right now. So as contrarians, we continue to like the fact that this market has gone from being loved to quickly unloved here. It makes us like it even more. That said, let’s take a look at our market action on the day to day. Again, a bit of a mixed day here, but we saw tech lead exactly what you want to see. The Nasdaq up two tenths of 1% to 16,780. And we had the semis leading the way higher.

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They did finish off their highs of the day, but up nearly 1% still on the day today. And one other analytic piece that I’ll share with you here comes from the QS, which is the Nasdaq 100 etfeminal. The Qs were up two tenths of 1%, much like the Nasdaq on the day to day. But they just hit their most extreme oversold levels on relative strength of basically the last two years. In the last two times that we’ve hit these levels of extreme oversold on RSI, the ETF went on to hit an all time high within one month. Now that would be a very big move higher from here. So not saying, you know, we’re going to be back at all time highs in a month, but to say that we’re going to be back at all time highs by year end, that doesn’t faze us at all. That sounds right to us.

All time highs and blue sky territory before year end is what we’re seeing right now. And if we were to get a little bit of a pullback on inflation data, it wouldn’t shock us to get a bit of a double bottom. You know, some of what we’re seeing in the market action right now a lot of technicians would refer to as backing and filling, which is just a healthy part of bull market action here. So again, we do want to see the lows from early August here hold. But if we got a double bottom, we’d use it as another opportunity to buy the dip. We’re often, we talk about this year, probably not enough, honestly, but we do talk about it pretty often that we are big believers in monthly dollar cost averaging. Every month you take whatever portion of your paycheck that you put into your savings, put into your investing accounts, and add to your favorite positions. You know, one of the best ways to do this, especially if you’re invested in index funds, you almost don’t even want to look at the price.

You want to set it and forget it. You know, that is more so in regards to a retirement account kind of approach. Not as much of what we do here for the VRA, but we do highly recommend in our VRA positions monthly dollar cost averaging. So if you’re not familiar with that concept, there’s some great educational videos out there. And come subscribe again with us here@vraletter.com. we’ll teach you all about it next up. The S and P 500 did just manage to finish in positive territory really flat on the day up to 5344. After that, we had the Dow Jones down three tenths of 1% to 39,357.

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And lastly, the small caps, which have had, you know, very good year, really, so far. Let’s take a quick look at that. IWM is the small cap ETF, you know, not up a ton on the year, but still higher on the year, over 6%, and has been on a good move for the summer here. It has pulled back with this decline, but no concerns for us here, seeing them down nine tenths of 1% at $2,062. Again, though, we’ve had a nice move off of the lows to get a little backing and filling. No concerns for us here. We see this as the market getting ready for its next big move higher. All right, so, to what I talked about at the beginning of the podcast with volatility, these are just some fantastic stats here.

But as Kipp discussed on his podcast last week, you use something like the VIX as insurance here on your portfolio, as always with insurance, whether it’s car insurance, home insurance, whatever. In this case, we’ll call it wealth insurance. You always hope you never need it, right? You honestly hope that it’s lost money, right? That just. It’s gone. But in case you do need it, you’ll be very glad that you have it. So we recommend it in this environment, especially with all of the wall of worry items going on in this market right now. But as we look at it, the market needs a wall of worry to climb on its way back to all time highs. So here’s the piece I was talking about from Ryan Dietrich today, showed that when the VIX goes above 50, it can happen multiple times, right? So if we got a pullback here below 50, we’re already 20.

Now, on the VIX, it was higher on the day, just barely, though. Still at a 20. But when you get a VIX over 50, the really interesting part here is asking the question, what does this mean for the market going forward? Well, as he pointed out, in the 92 scenarios, when the VIX breaks above 50, it’s actually a fantastic long term signal, as twelve months later, the S and P 500 is higher in 91 out of 92 times. First of all, wow, that’s impressive, right? And then listen to the average gains one year later. The average gains when the VIX breaks above a 50 for the S and P 500 is 33%. Just wow. You know, that is an impressive move higher after something like this. And again, that’s the kind of analytics that we like to share with you here.

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All right, next up here, let’s take a look at our internals on the day to day. You know, not bad readings here, nothing terrible. But at midday today, only Nasdaq volume was higher. But we were unable to hang on to those gains as we had declining stocks beating out, advancing stocks. Just under two to one negative on the NYSE. Just under two to one negative. Excuse me. A little bit better though, on, excuse me, let me get some water here.

All right. Yeah, a little bit better than the NYSE for the Nasdaq today. Still negative. More declining stocks than advancing stocks. Next up, 52 week highs. Lows, still negative here, but showing some improvement coming in just shy of even on the day for the NYSE. A little bit worse on the Nasdaq. But as we talk about here often as well, this is a lagging indicator.

So no big concerns for us here. After a pullback like this, naturally you’re going to have more stocks at 52 week lows than 52 week highs. It’s going to take some time to get back to those levels. Then. Lastly here, volume again was positive at midday today for the Nasdaq, coming in just slightly negative and similar on the NYC, no two to one beats no, three to one beats no 80, 75% downside volume kind of days today. So no big red flags from the internals here today, although we would have liked to have seen better readings looking at our sectors on the day today, we finished with just three out of our eleven s and p 500 sectors higher on the day were led by just what you want to see, the tech sector followed there by energy. I’ll get to oil here in a second, which had a big day today. And then finally, utilities likely starting to capitalize on some of this move lower in yields.

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As the biggest borrowers of debt in the nation, they are a rate sensitive group. Finally here for today, our VRA commodity watch, gold looking to take out its all time highs right here at just $10 shy an ounce of an all time high. Gold now over one and a half percent at 20, 512. The all time high, 25 22. But we got exactly what we want to see from this group today, and that is the miners leading the way higher. GDX, the gold mining ETF, up over 3% on the day today. Just like you want to see semis leading tech, you want to see the miners leading the precious metal. Next up here, silver up a nice 1.6% today as well to $28 an ounce.

Copper up 1.88% to $4.06 a pound. And oil, as I mentioned earlier, up big today, over 3.5% trying to get back above $80 a barrel at $79.64 a barrel barrel. And finally here for today, crypto bitcoin. Worked hard to get back above 60,000 recently here. Still struggling to hang on to that level, but higher on the day, up six tenths of 1% at 58,928 a bitcoin. A group here. We do remain very bullish on folks. That is all that we have time for here today.

Please be sure to subscribe to receive our VrA podcast every day at the market close. You can sign up@vraletter.com click the podcast link at the top. You’ll also find our transcripts and comments there as well. So thanks again for tuning in. Until next time, we’ll see you back here tomorrow for the close.