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VRA Investing Podcast: Market Highs & Lows, Investing Insights For An Overbought Market – Tyler Herriage – May 23, 2024

In today's episode, Tyler breaks down the market action leading into the long Memorial Day weekend, highlighting the dominance of the semiconductor sector, particularly after Nvidia's stellar earnings report. He also covers the si ...

Posted On May 23, 2024Episode 1391
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About This Episode

In today's episode, Tyler breaks down the market action leading into the long Memorial Day weekend, highlighting the dominance of the semiconductor sector, particularly after Nvidia's stellar earnings report. He also covers the significance of the Biden administration's recent shift in crypto policy and the passing of the CBDC Anti-Surveillance State act. Tune in to today's podcast to learn more!

Transcript

Don’t look back because the market is closed. Good Thursday afternoon, everyone. Tyler Herriage here with you for today’s VRA investing podcast. Hope you all had a great day out there today.

A quick little heads up here. We may or may not have a podcast coming out tomorrow. If we do, there’s a chance it could come out earlier in the session as well. So if you don’t hear from us tomorrow, we hope you have a wonderful long Memorial Day weekend here today.

In the markets, it looked like we got a little hesitation heading into the long weekend. You can get that sometimes people taking profits ahead of some time away from the market, maybe a geopolitical event over the extra day weekend. Right. People just want less risk exposure sometimes heading into those weekends. Not saying that’s exactly what happened today, but the timing of it sounds about right. But overall on the day, it continues to be the semiconductors show here. Following yesterday’s Nvidia report. Nvidia went parabolic today and it was just another fantastic earnings report.

[00:01:19]:
CEO Jenson Huang there really doesn’t miss in these investors calls either. Just gets everyone a little bit more excited and a little bit another piece of the puzzle of what the future of AI in the semi space really looks like from here. And not to jump around too much, but one of the interesting factors that I heard a little bit about today still deserves a little bit more research into is that some of their new chips, one of the big problems with whether it’s AI or crypto mining is the power consumption behind these products that they’re running off of. And their next generation is looking like it’s going to be able to drastically improve that prospect, the amount of energy it takes to do some of these things. So a little bit of speculation today is whether or not that was part of what hit utility stocks. Kind of an interesting thesis out there, something I bring up, really, to mark the note of it as much as anything else. If anybody out there has a little bit deeper insight into that, that’s something I’m very interested to learn a little bit more here about as well. But out of the gate this morning, Nvidia up big, got as high as up 11% at midday today, hitting an all time high today.

[00:02:40]:
The semiconductor sector as a whole as well, hitting an all time high today. Now, a lot of these sectors are weighted heavily into Nvidia, but hey, an all time high is an all time high here. And we talk about this often. A rising tide does lift all boats here. And so a day where we see the semis leading right. You want to see that our tech leading and semis leading tech. Well, today our major indexes finish lower across the board. Not just lower, but most of them at or near their lows of the day to day.

And so to see the divergence of semis, you know, able to hang on to those gains, that’s the kind of shrink that you want to see from your leading sector. So no all time highs here, we don’t look at that as a bearish factor. But going back to the short term here, one thing that we began alerting members to here last week was that we are at short term overbought levels and approaching extreme overbought levels here. Today’s pullback got us a little bit out of there, did its help a little bit. But we’ve said this since last week, and I think it bears repeating even at these levels that we’re not quite at the point yet here. To get back to buying dips when you’re at overbought levels, we pause our monthly dollar cost averaging. We’re always looking for rotational aspects, buying sectors that are not over at overbought levels, but keeping an eye on that here. So we began alerting clients to that late last week.

[00:04:17]:
The Dow was our first major index to really get to those levels. And funny enough, on Monday, and we talked about this a lot here as well, Kipp, especially Mike Wilson, one of Wall Street’s largest bears, threw in the towel and finally capitulated on Monday. Since that time, the Dow Jones has fallen over 1000 points since that call. So welcome back to the bullish side of things there. Mike Wilson literally top ticked the market with that call. You know, it’s just more of a funny thing than anything else. But it is interesting that right when he flipped just days before we said we were pausing our buying. Now, again, we remain extremely bullish over the medium to long term here.

So I don’t want that to, to be confused here at all. You know, we’re just waiting for these technical overbought conditions to alleviate before we resume buying position. So if you’re not in this market, you’ve got a little time, show a little patience here. If you are in this market, you know, the time to take profits was really earlier this week. And at the end of the day, if you are holding a position here, I don’t think you’re gonna be disappointed with that at all as we head into the latter months of 2024. All right, back to Nvidia here though for a quick second and then we’ll move on to a couple other topics for the day. I just wanted to give you some context of how massive of a move this company has had. I know we’ve been talking about it a lot here this week, so I won’t bore you with too many details.

[00:05:57]:
And for anybody who is more interested in more detail here, Kipp did a phenomenal update this morning with a lot of it geared specifically at Nvidia. So if you want to come join us to get all of that info, come and join us@vraletter.com. dot we’ve got a 14 day free trial going on right now, and we’ll show you our favorite pick in the semiconductor space right now. I’ll get the exact numbers for you here. I won’t tell you exactly what the position is. I want you to come and join us. We’d love to help you out on a full time basis year, but since going back, where’s my number here? Here we go to the October 13, 2022 bear Market lows, which we called here at the VRA. I’ll point that out as well.

Nvidia is up 837%. We get a lot of questions here. You’re so bullish on the semis. You talk about Nvidia all the time, but you don’t have Nvidia in the portfolio. But as I mentioned earlier, for many of these ETF’s, Nvidia is the largest holding there. And so you get the exposure to Nvidia, you get exposure to the group with a little bit more limited downside. Because if Nvidia is having a really bad day, but AMD ASML Marvell are having good days, you’re actually still doing all right. So again, Nvidia is up 837%.

[00:07:26]:
Our favorite pick is up 753% in the same timeframe. So anyone who tells you you can’t get that exposure to, like, individual stocks on leveraged ETF’s or ETF’s in general, you know, you could say maybe, I mean, 80% outsized return for the comfort of being able to sleep at night, not reacting to earnings reports on individual companies. That seems a worthwhile trade off there again. So come and join us. We’d love to have you with us here. But again, just to give you a little more context, go to VRA letter to read the full write up. But Nvidia again, up 11% at its highs of the day today, finished up 9.3%. Keep in mind, this is a $2.6 trillion company, is the third largest company here in the US.

Behind Microsoft and Apple. Apple so finishing up the day, 9.3% is approximately $250 billion added to their market cap in a single day. That is rare air, folks. It’s only happened one other time only. There’s only again, this is the second largest move in market cap gain for a stock in a single day. Well, Nvidia has the record already, which it set earlier this year, adding 276 $6 billion in value in February of this year. And Nvidia is in a firm first and second place here as Facebook comes in number third, which they added 26% less to their market cap. Still a big number, just over 200 billion to their market cap, which was also set just earlier this year.

[00:09:13]:
But this is one of those kind of records as we’ve seen. We’ve had it broken three times in a single year. We’re going to see this record broken a whole lot more before the roaring 2020s is over with. Right now in the US, there are six companies that are uS listed based companies that have a valuation of over $1,000,000,000,000.06 companies. That’s quite a bit, you know, just five years ago, I don’t think it was any, it might have just been apple at the time, you know, 2019, 2018, I forget exactly when Apple broke the $1 trillion mark. But now you see, once the threshold was broken, the floodgates really open up here. And if we’re at six right now, I think by the end of the roaring 2020s, that number could be two orders of magnitude higher than it is right now. Talking about, you know, hundreds of us companies that have trillion dollar valuations.

[00:10:12]:
2030 might be a little ambitious for that target. Kind of still working through some of these numbers. But we are in the innovation revolution where we’re going to continue to see companies that might even have a seemingly niche product offering, but everybody uses it, whether it’s an AI product or a crypto based product. And it’s going to create enormous amounts of wealth with a very small staff and it’s going to help increase everyone’s productivity. These are the kinds of innovations, I mean, happening at scale over the next five years that we see coming here. So it’s going to be a wonderful time, folks, stay locked in here when we’ll keep reporting on everything here every day at the VRA investing podcast as well. In other good news today in the crypto related field, the house, a little bit of a surprising turn of events. We’ve talked about this a lot this week as well.

[00:11:12]:
The Biden administration’s quick 180 on their crypto policy after they found out that everyone saw Trump as the pro crypto president, they panicked. Right? They’re doing everything in their power. Called up the SEC, get them to approve Ethereum, ETF’s. And this is somewhat on the same page because most of the crypto community, I would say all of the crypto community who doesn’t work for the government, right, outside of regulators, no one wants a CBDC. I don’t think there could be more pushback for just about anything else. We’ve seen what has happened with electronic currencies in these other societies like China, institutionalizing a social credit score where you’re locked out of your digital money if you don’t cross the street the right way. Right? No one wants that here in the United States. And the House has now just confirmed that, at least to some extent, with passing a bill that they’re citing as the CBDC Anti Surveillance State act.

[00:12:17]:
If you’ve tuned in with us here for a while, you know that we also have been outspokenly against the creation of cbdcs, right. And talked about how they can track people through these and really how crypto might not be quite as anonymous as you think as a whole anyway, right? But the point remains, even if it’s not as anonymous as you want, you still want a decentralized currency, right? So this bill specifically, I won’t get into all of the details, but it stops the fed from participating in creating a CBDC or instituting monetary policy with a CBDC. You know, I’d have to look into all of the sides of this argument to really tell if this bill is a sideshow kind of thing, because the Fed has already said, Jay Powell, I believe it was three FOMC meetings ago, could have been two, where he was asked a question about cbdcs. And he said at the time, and I reported on the podcast at the time as well, that they currently have no initiatives going to look into a CBDC. He said they don’t even have anyone at the Fed actively working on a CBDC. So, you know, who is this bill really for? You know, I love the anti surveillance part of this act. We’ll see how far it actually goes. And does it, it doesn’t seem, it only talks about the Federal Reserve in this act.

[00:13:43]:
You know, could another federal institution potentially look into this type of technology, or is this type of a bill going to bar the entire federal government from looking into it? You know, it’s going to be interesting. You think the crypto space would be reacting more positively to this news. But that has not been the case, which is one of the things that has me skeptical here at the moment. So stay tuned. We’ll continue to report on this as this story, story goes on. I’ll cover bitcoin more in a minute as well. But quickly, let’s look at our market action on the day to day. I won’t sugarcoat it, not the kind of day you want to see.

As this morning, futures were looking good. Everyone’s right in the high of Nvidia’s earnings yesterday. Again, tremendous number, incredible growth from this company. But in hindsight, it does look like that might have marked a little bit of a buy. The rumor, sell the news eventually as the S and P and the Nasdaq both opened today at all time highs. But that opened mark the highs of the day to day, ultimately finishing at the lows of the day for our major indexes. Nasdaq led the way, hitting again, hitting an all time high this morning. Did finish lower on the day.

[00:14:59]:
This was not one of our major indexes that finished at the lows of the day, though, down just about four tenths of 1% to see 16,736 after that. Oh, sorry. Well, I do want to point out one more time here, the semis did hit an all time high today and managed to finish positive. So you want to see tech leading and semis leading tech. We got both of those things today, even if we finish lower on tech. Next up, the S and P 500 hit an all time high at the open today, ultimately finishing down three quarters of 1% to 5267. The Dow here did not participate in really any of the excitement today, lagging out the gate this morning. And one more factor that is interesting here.

You know, as I mentioned earlier, the Dow was our first major index to hit overbought levels on our major indexes. It was also our first major index to really top out here. Like I said, the S and P and Nasdaq both hit all time highs. The Dow hasn’t hit an all time high since Monday, not long ago by any means. But so, yeah, an interesting point to watch here for is, would be a reversal in the Dow. This is the biggest loss we’ve seen in the Dow in 2024, down over 600 points today, down one and a half percent to 39,065. Now, we have gotten out of those extreme overbought levels with this little bit of a pullback. You know, this is something we’ll be watching for here of the Dow reversing this trend, they peaked first and fell first.

[00:16:42]:
Will they lead the way out again? Very often in a bull market, you’ll see first in, first out. You know, it’s not always the case, didn’t always happen that way, but it is a signal we’re watching for here right now. We don’t always get back to oversold conditions before the dips are over. In a new bull market like we’ve seen, we’ve seen it a lot this year. Yeah, we’ve seen a few dips. We’ve also seen a couple of more dips that were very, very short lived. Lastly here, small caps leading the way lower. So lagging on the day to day, down 1.6% to 2048.

Next up here, looking at our internals on the day to day. Well, I’ll cover real fast. Yields were up slightly again here on the day to day. You know our view, we’re still below 4.5% on the ten year. Anything below five, really still no concerns. And as we’ve talked about here often during the.com melt up that we’ve compared this period to so much, yields averaged a far higher rate on the ten year, up 6% plus on average during that time period. So, yeah, rates at this level, no big concerns for us here. All right, so looking at our internals on the day, I wish I had better news for you here, but similar to our major indexes, these readings continue to deteriorate throughout the day today.

[00:18:06]:
But let me tell you real quick why this isn’t a terrible thing, is that we just had our major indexes hit all time highs today. But we’ve seen our internals showing weaker readings for the last week. For the last week and a half or so now. So that means a lot of these smaller names under the surface have likely already worked off any overbought conditions there. One bogey that we look for here is the 21 day moving average, and a lot of those have sunk back to those levels where they have bounced many times going back through this, the origin of this new bull market. So, you know, our major indexes don’t always have to get to oversold levels. If we were to see someone like Nvidia and the other mega cap names taking a little bit of a break, and the smaller names are not anywhere near overbought conditions, you can get a little bit of a rotation that holds our major indexes at all time highs, while the larger names can cool off just a little bit. We’ve seen it time and time again from this new bull market, while all the while our major indexes hold up much better than the average name out there.

[00:19:21]:
So today, again, ugly at midday got worse into the close. Declining stocks beating out advancing stocks on both the NYSE and the Nasdaq. Coming in five to one negative on the NYSE. Over. Three to one negative on the Nasdaq. 52 week highs and lows. Had one of our positives here today. NYSE had more 52 week highs than lows today.

 

Slightly negative for the Nasdaq. And lastly here, volume disappointing on the NYSE side. Coming in between 85 and 87% downside volume today. And again, the day over day numbers here are getting weaker. Again, no real, you know, this is a bit of a yellow flag. Certainly we’re watching it closely, but no massive red flags. But this is where you would watch for 1187 percent downside volume. Day like today in and of itself is not too bad.

We just don’t want to see a string of these days together. You know, you get a few ups or downside volumes of 80% plus. I need to check in with Walter Diemer on this one. He’s the old school technician who really is great about covering this so closely. I want to say it’s two back to back days. It could be three, though, of 80% plus is typically does not bode well going forward. Again, not always, but typically does not bode well for the market. We’re not there yet, though.

[00:20:50]:
Just letting you know, things we’re watching for here. Next up, looking at our sectors on the day, just one out of our eleven sectors finishing higher on the day today. It was our tech sector, as you might expect, which did hit an all time high today. Our laggards were real estate, utilities, and consumer discretionary. Finally here for today, our VRA commodity watch. Some gold on the screen here as well. You know, I wish I could give you a little bit better of a reason for this one today, but we do remain long and strong in this group. We’ve seen it in the miners had been on an incredible run.

Gold has been on a good run as well. The miners, though, were at extreme overbought territory going into this little bit of a pullback that start this week. No big concerns for us here. This is one we’ll also use as a buying opportunity once the time is right. Gold now down 2.6% on the day to 23 30%. Next up here, silver down bigger, 3.7% on the day, still above $30 an ounce at $30.33. Copper down one and a half percent on the day to $4.77 a pound, and crude oil also down on the day, the least so far, 0.77% to $76.97 a barrel. Finally here for today, bitcoin, as I mentioned earlier, thought it might be up a little bit more on, you know, this news of the ethereum news this week, and also this new bill from the house that hasn’t been quite reacting that way, though, down 1.69% to $68,264 of bitcoin.

[00:22:32]:
I will point out ethereum is higher on the day today, though, and right in the range of, you know, a multi month high here for Ethereum as well. Folks. That’s 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 in that area as well. So thanks again for tuning in. Until next time.

We might see you back here tomorrow for the close. If not, hope you have a great Memorial Day weekend, and we’ll see you back here then on Tuesday of next week. Thanks again, everybody. Have a great weekend.

Podcast Newsletter

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Time Stamps

00:00 Nvidia CEO excites investors with future plans.
03:17 Watch divergence of semis, pause dollar cost averaging.
09:13 Record broken 3 times, trillion-dollar valuations rising.
12:17 Bill aims to stop Fed from creating CBDC.
15:44 Dow was the first to hit overbought levels
18:06 Stock indexes at all-time highs, smaller names balanced.
21:27 Gold and other commodities down, buying opportunity.

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