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VRA Investing Podcast: Insights From Today’s Market, Key Sectors To Watch – Tyler Herriage – May 07, 2024

In today's episode, Tyler dissects the market's mixed action on the day, highlighting the key indicators that tell us stocks want to head higher. He also discusses sentiment indicators, Fed Actions, and the historical data suggest ...

Posted On May 07, 2024Episode 1380
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About This Episode

In today's episode, Tyler dissects the market's mixed action on the day, highlighting the key indicators that tell us stocks want to head higher. He also discusses sentiment indicators, Fed Actions, and the historical data suggesting a continuation of the current bull market. Tune into today's podcast to see why the VRA Investing System is saying this is an opportune time for investors.

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. I hope you’re having a great start to your week this week. Yesterday was a very strong start to the week for our major indexes. We finished higher across the board, in some cases seeing the highest levels we’ve seen in a month. Good action all around as Kip covered yesterday and this morning.

That action looked to continue as we opened this morning. Our major indexes were higher across the board. The ten year was lower once again here and we were led by the small caps this morning. But in this morning’s trading, we also noticed that the semis weren’t quite positive on the day. They were really pretty flat earlier in the session, but just couldn’t get into positive territory and stay there. Ultimately, we did finish a little bit mixed on the day for our major indexes. Nothing crazy out there, nothing bad, that’s for sure. But we were led lower by the semis today, which is not what you want to see.

[00:01:17]:
They were down 0.87% for SMH, the semiconductor ETF, but really no major concerns there. The semis have been on a phenomenal run since their bottom in April, up over 11% since that time. The Nasdaq’s up over 7% since the lows of April, so no big concerns for us here at all in today’s action. It’s been a great move higher since the correction that we’ve had in this market, and our view remains unchanged. That dips need to continue to be bought as we’ll continue this year into later in this year of making all time highs for our favorite sectors and our favorite stocks and major indexes as well. That’s how we see this playing out here. But excuse me, after this morning’s trading, though, it really was a pretty dull day. I mean, I’ll get to our major indexes here in a second, but suffice to say, they’re all pretty much just playing flat on the day to day.

No big moves. But as the old saying goes, never short a dull market again, as we see it in this case, the lows are in from April. Those April lows should mark the lows and we want to see a series of higher highs and higher lows from here. That is our base case for the short term here. And you know, over the medium and long term, we remain extremely bullish on this market as well. It’d be tough to find somebody out there who’s more bullish than we are. We’ve been saying it since the October 2022 lows. Buy the dip has been the smart money move.

Nothing has changed in that regard. Now, if you want to see exactly how we’re positioned, what our favorite sectors are, what our favorite stocks are in this environment, because make no doubt about it, as we get into a more maturable market, it always becomes more of a stock pickers market. Doesn’t mean you’re not going to do well in the major indexes. You’ll still get great returns there, but you’re going to miss out on some of the individual names that do really well. And that’s when we love to use leveraged ETF’s. Now that sounds a little backwards, right? I did just say to focus on individual names. Now, I’m recommending ETF’s, but these ETF’s, we are very selective with what sector they’re in. And we love the leverage here because it gives us two things.

[00:03:43]:
It gives us the ability to get those outsized returns from the individual names without the risk involved in some of those smaller names out there, but still gives us exposure to sectors as a whole. So again, our view remains unchanged here, and especially the fact that we’re still so early in this bull market. Remember, I know we talk about this here often, but there’s so many bearish investors out there, and it is very interesting. Kip and I both have had similar experiences where we go out on a weekend or a week night, meet up with some friends, family, even people that we work with, right? Who will ask us our views on the market. We’ll talk about how bullish we are, and you just see blank faces, like, you don’t really think that, do you? You’re telling me with the Fed doing all of this and Biden in office and the immigration problem and inflation, that you’re bullish on this market right now? No one else is saying that, and I’m quoting from them, right? Like, I’ve been out of this market for two years now. We see that so regularly. And what we’ve seen at previous tops is those same people or acquaintances, other friends who are coming to us, hey, I’ll work in the financial newsletter space. What do you think about this stock? Would you recommend this stock? Or, hey, you should look into this.

That’s what you start to see at a market top. People buying ipos that are up 50% to 100% in their first day, and then they end up buying it the next day and become a bag holder on that position. That’s not what we want here. That’s emotional investing. That’s why we have the VRA investing system, so that we can remove our emotions most of the time, at least, right? Our biggest enemy in this game tends to be ourselves. But the key points here that we talk about so often, I won’t dive into all of them. I’m not even going to dive into the health of the american consumer, which would blow most people away. Kip covers it here often.

It’s basically the fact that consumer credit scores all time highs, a third of Americans own their home outright right now. The consumer, at least for the more affluent consumer, really has not been better throughout history. We’re looking at corporate balance sheets in great positions right now, tons of cash on hand. We’re looking at it with companies like Apple doing these massive, massive share repurchase agreements, right? They’re telling us that their stock is more valuable than it is at these prices, or else they wouldn’t be buying it, right? So all of those things said, there’s even a few bigger points out there. And that is the fact that we are in a new bull market and we’re just 19 months into this bull market. It began in October of 2022. And remember, going back to World War two, every bull market that has lasted at least a year has gone on to continue gains in their second year 100% of the time. And going back to World War two on top of that, during that same time period, the average bull market lasts 60 months.

[00:07:10]:
That means that we have three times as long as we’ve been in this bull market still yet to go. We’ve still got another 40 months here yet to, yet to go if we’re only in month 19 right now of this bull market. So, yes, we do remain long and strong here. Today’s action, I mean, really mostly positive on the day, right? I’m kind of talking like it was a down 1% kind of day, only the Nasdaq was lower and it was lower by one 10th of 1%. You know, and still the bears are out there in full force. And that’s one thing that has us so bullish on this market. But first, we did see some good signs today. We saw the ten year down again here by 1.1% now at a 4.46, which is roughly the lowest level in the last month.

And now to sentiment because we’re continuing to see it every session. It seems like, as today, the fear and greed index, that’s like 16 days in a row now of fear readings. And it actually ticked lower today despite yesterday’s strong action. Despite this morning’s open is now at 39. It had been stuck at 40 for the last few sessions. Now moving lower again. It’s wild, especially, like I just said, semis up 11% in the last few weeks. Nasdaq up 7% in the last few weeks.

And yet bearish sentiment continues to abound here. And as Kip talked about yesterday, one other area, so we’ve seen it in aaiii, we got a little bit of a reading higher in bulls from last week. Still a large number of bearish to neutral investors. But the put call ratio we talk about this year pretty often. You know, the usual reading on the put call ratio is a 0.7. There’s usually more calls than puts being bought. So anything above that 0.7 level is seen as a leaning bearish type of indicator. Anything over a one is excessive bearishness.

[00:09:14]:
Yesterday, the put call ratio came in at the highest level since 2018. By some metrics, the highest level since 2017. That’s how much fear there is in this market. People putting on hedges. Right? That’s what put a large part of put buying can be so really interesting to see. Nothing material has changed here. Yeah. Neel Kashkari was out today, one of the Fed presidents saying that, oh, a rate hike is not off the table.

Whatever. They roll this guy out to talk about all kinds of stuff like this. I would love to see somebody go back and find how many calls Kashkari in particular has made that have been dead wrong. Not even close to right, really. Like put some effort in here. These aren’t even close to correct. And how do you still have a job? Any of us who work for companies that are not government run companies, we would lose our job if we were as wrong as these people are on a consistent basis. These are academics, no real world experience.

They are not worth your time to listen to. Somebody needs to tell Jay Powell this. Right, because last press conference is pretty good. You know, you showed some confidence in there. Go back to the humility. We don’t want to see you right. Go to go about your job. We should never have to hear about what the Fed is doing.

[00:10:39]:
Really. At the end of the day, the Fed should be shut down. But that might be wishful thinking. At the very least, he doesn’t need to go on 60 minutes ever again. No Fed chair should ever be given this much publicity. It’s absolutely crazy. That being said, though, I’ll step off of it here for a second, because really, we think the Fed for the rest of the year is going to be a non issue. I think that’s a pretty bold call.

We said two weeks ago, I said on the podcast, hey, hopefully you will look back on next week’s FOMC meeting, and all we’ll talk about from that week is the rally and earnings and jobs report. Right. And hopefully both the Fed and the jobs report really end up being a nothing burger. That’s exactly what we got. Right. So the next move from the Fed, in our view, will be rate cuts, just like everybody, and I mean everybody when I say this. So many people going into the year were calling for too many rate cuts, right? A lot of investors out there calling for six rate cuts. The people who were calling for a rate hike, now, I would put in the same camp as the people who called for six rate cuts at the beginning of this year.

It’s probably the same people. The sentiment swings so far. These are such emotional people, right? And you can’t see them all the time in the market because you don’t, you don’t know what trades they’re in on. I’m sure some people do. But, man, I would love to take the other side of those trades. If we just find a way to do that, I think that might strat. That strategy alone would produce a lot of winners. So that said, we love that the bearish sentiment remains high.

[00:12:24]:
It makes us even more bullish here going forward. We want to see it continue, really from here. We want people in disbelief of how well this market is doing today. Not so much the case as I’ve talked about a lot here already. Pretty much flat on the day for our major indexes. We did finish being led by the small caps, up just slightly, just under two tenths of 1% to 2064. After that, the S and P 500 up just over one 10th of 1% to 5187. Dow up just slightly.

Zero 8%, or 31 points, excuse me, to 38,884. And lastly here, the Nasdaq was down on the day, just flat down one 10th of 1% to 16,332. Next up here, looking at our internals on the day, much like our markets, they were stronger. Earlier in the session this morning, we had two to one beats almost across the board for the internals. We had two to one beats on advanced decline and significantly higher volume readings as well. We finished a little bit more mixed on the day, though. So first off here, we did have more advancing stocks than declining stocks on the NYSE just fractionally higher, though. No two to one beats there.

And after a refresh, it looks like Nasdaq did come in slightly with more declining stocks than advancing stocks. Next up, 52 week highs and lows coming in better here. After a refresh, roughly 366 stocks hitting 52 week highs to just 86, hitting 52 glows. That is combined NYSE and Nasdaq strong reading there. Lastly, volume was positive for the NYSE going into the close. Was negative for the Nasdaq going into the close. But after that last minute refresh year, it reversed. Finished just barely negative on the NYC for volume, just barely positive for the Nasdaq.

[00:14:28]:
So no real standout points there. Just continuing to put in work here for the internals and we want to see these continue to improve as always here. And they have over the last few weeks since the April bottom as well. So that’s good to see. Next up here looking at our sectors on the day to day, we finished with eight out of our eleven s and P 500 sectors higher on the day to day. What was really interesting here, I’ll start with the laggards. Yes, we got consumer discretionary lower. Yes, we got technology lower.

Right. And we want to see tech leading the way and semis leading tech. Okay, we didn’t get that today. They’ve been on an incredible run, though. What we liked today, well, one, we were led by materials after that, utilities, which just hit a 52 week high. Utilities have been a sleeper pick here really for the last couple of sessions. And I bring that up because it tells us one thing about this market. It tells us that rates are going to continue going lower.

The stock market is a forward looking mechanism. If yields were going to head higher, utilities would be being crushed because they’re the biggest borrowers of debt in the nation. So yields very much affect utility stocks. We don’t have any positions here, but that is a very bullish signal. We think a tell from this market that rates are going to go lower from here. For our other leaders on the day to day, we did have one other 52 week high with consumer staples. Again, a lot of people might look on that as a negative, but new highs beget new highs. That’s our rule of thumb here.

[00:16:10]:
Finally here for today, our VRA commodity watch. A little bit of red on the screen here today. Gold now lowered by four tenths of 1% to $2,321 an ounce. Silver down as well by about half a percent to $27.48 an ounce. Copper, doctor, copper. You’re still hanging around 52 week highs. Here. This would be interesting to see it find some support at this level.

We talk about Doctor copper here often as well as an indicator of global health when people are producing things, especially tech, copper goes into everything, so it tells you that people are producing, economies are working. So we don’t mind seeing continued increase in copper now at $4.59 a pound. And lastly here, oil hanging out below $80 a barrel here now really for the last about five sessions or so. Now down a quarter of 1% today to $78.28 a barrel. This is a group energy and oil that we do remain bullish on over the longer term here. And finally here for today, bitcoin now down half a percent to $63,000 of bitcoin. As you know, this is another one we’re looking for a big move in until or into year end this year. We think these are going to be great buying opportunities at these levels here versus what we’ll see by year end.

Folks, that’s 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@vraletter.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 Semiconductor ETF down but no major concerns.
03:43 Emphasizes bullish market sentiment despite bearish views.
07:10 Bull market has 40 months left.
11:07 Anticipating Fed's next move: rate cuts likely.
16:37 Copper, oil, and bitcoin prices are discussed.
17:45 Subscribe to VrA podcasts for daily updates.

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