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VRA Investing Podcast: Navigating Market Pullbacks with Optimism, Why Dips Are Buying Opportunities – Tyler Herriage – April 19, 2024

In today's episode, Tyler covers the tech sell-off that took drove our major indexes to finish lower for the week. Despite the recent weakness, the VRA remains bullish over the medium/long-term, and now that bullish sentiment has ...

Posted On April 19, 2024Episode 1368
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About This Episode

In today's episode, Tyler covers the tech sell-off that took drove our major indexes to finish lower for the week. Despite the recent weakness, the VRA remains bullish over the medium/long-term, and now that bullish sentiment has been sucked out of the room we will be looking for buying opportunities. He also highlights the Bitcoin halving event this weekend, and what it will mean for crypto going forward.

Transcript

Don’t look back because the market is closed. Good Friday afternoon, everyone. Tyler Herriage here with you for today’s VRA investing podcast. Hope you all had a great Friday out there, a great end to your week this week, hopefully a little bit better than the markets. If you were watching the markets today, you had a mixed end to your week this week, finishing half and half here today. And I’ll get to our major indexes here in a minute. But this does bring another video for the Nasdaq. Four weeks in a row here of losses to really kick off the month of April.

We’ll cover today. Why we’re not, I won’t say not concerned. Right. Because you never want to see the market pulling back significantly. And we got a lot of that today as well. But why instead we remain optimistic. Why we look at this as a fantastic buying opportunity here. We’ll cover the latest earnings updates.

[00:01:06]:
We’ve got big weeks coming up here of earnings. And of course, we can’t forget that today marks the bitcoin having as well either. Today, I think it’s tonight, maybe at midnight, the start of April 20 here. And what that means for our big, for bitcoin, for our markets going forward from here and what has been, you know, rough month of April here so far. So let’s start diving into it here. But as Kip and I both covered, I covered this on Wednesday’s podcast. He covered here, is here yesterday as well, kind of kicking off with our markets. Is that, yes, we have seen a pullback that has turned into a little bit more of a pullback.

We’re not in correction territory. Technical correction levels take place, you know, 10%. It’s kind of an arbitrary level for what a correction is. Bear markets the same way that level is 20% there. What you see in a young bull market, a correction is not anything out of the realm of normal. It’s typical healthy bull market action. And that’s why we continue to see this pullback here as maybe one of the last really good buying opportunities ahead of our markets making their way back to all time highs. So we remain optimistic here.

Remember, we’ve come a long way here in a short period of time coming into the month of April, I think a lot of people have forgotten this. Coming into the month of April, we had just wrapped up five positive months in a row for our major indexes. That bodes very well for the next twelve months in this market. When you’ve gotten, we haven’t referenced this stat in here a long time. I don’t have it in front of me here in my notes, so feel free to correct me if I’m wrong, but we covered this a lot on our podcast at the end of March because that made a positive. November, December, January, February, March, 5 months of gains in a row. And over the next twelve months from there, the market, I believe has been, never been lower. Twelve months after that, kind of a start of those five months positive in a row there.

[00:03:22]:
So note this short term action here. Really, if you zoom out and look at a chart, look at the weekly chart here and you can see just how far we’ve come in our major indexes for all of our sectors. Now we’ve got commodities joining the fund here as well. So, no, this short term pullback is what we continue to see it as. And we continue to see a lot of bullish signs here under the surface of this market, namely in sentiment. This bullbag has sucked bullish sentiment out of the market so quickly. We went from just a month ago, the fear and greed index being almost at extreme greed levels, roughly a 70. That is firmly in greed territory today.

We finished up at a 31. I saw below a 30 at one point. Earlier today as well, we saw pullback in bullishness in the AAIII investor sentiment survey. And I’ve got a stat to share here when I get to our markets about short interest on the S and P 500, believe me, it will surprise you here and now. There is not that there hasn’t been a good reason, right. To get a little concerned about this market over the short term. Right. We’ve covered these concerns a lot this week.

Whether it’s the Israel Iran conflict and what could possibly happen over the weekend, nobody knows. That always is a little worrisome going into the end of the week for the market when you’ve got a geopolitical conflict like that. And then, of course, we’ve heard so much from the Federal Reserve over the last couple of weeks. We’ve heard it from economists. You know, hey, you know, no rate cuts anymore for 2024. We’re not going to see them until late 2025. I mean, it’s the same type of fear that was a few years, I believe it was going into 2022, 100% of economists called for a recession. Naturally, we didn’t get one.

So when we see, you know, 100% of economists, of Fed speakers talking in the same direction, we usually like to go the other way. Even earlier this year, when everyone before the year started, after Jay Powell’s FOMC December meeting, where he, you know, you know, kind of took off the brakes started to go with a little bit more of a dovish tone to the market, and all of a sudden everyone’s saying there’s going to be six rate cuts in 2023. There’s going to be seven rate cuts in 2023. At the time we said, you know, hey, we are still looking for rate cuts in 2023. Yes, but not six or seven of them. And that’s not what you want to see either. If the Fed has to cut rates six or seven times, that means something has broken and this market would be much, much lower than where it is today. We still remain in the camp that there will be rate cuts this year just below expectations.

[00:06:18]:
You know, not buying in to this hype right now of no rate cuts this year, especially when we have so much of the year left to go, is this not the time to be making predictions like that? But we’ll see, you know, we’ll see how Q one earnings come in. And right on that note, just a fantastic time here, a fantastic setup we’ve got heading into Q one earnings. We’ll see how that comes in, see how the latest inflation data comes in and what the Fed has to say in their next couple of meetings as well. But back to the point here. As contrarians, we love to see this bullish sentiment falling. We see it instead of a market that wants to continue heading lower from here, we see a fantastic buying opportunity setting up and we want to be ready for it. You know, it could be a lower open on Monday. Right on.

Again, geopolitical issues get a big lower open, and then all of a sudden we’re back off to the races. We finish higher across the board that day. And then that’s when you look at the market, you say, all right, the low has been set there, but it may not be that day. We’ll follow where the market takes us. That is our discipline here. We listened to the VRA investing system, which continues to tell us that pullbacks must be bought here, dips must continue to be bought. And right now, again, we’re setting up for a fantastic one here. And again, the timing couldn’t be better.

Earnings coming in hot next week. Again here, let me pull up this chart. All right. So this week we saw the beginning of tech earnings. Next week we kick into high gear on Tuesday, got Spotify, followed Wednesday with Meta, IBM. We’ve also got some auto names, Ford, and they got Boeing in there as well. And on Thursday is the tech day. You got Microsoft, Alphabet, Intel, Snapchat and more there.

[00:08:12]:
And then a few more energy related names on Friday and then same the following week right back into tech earnings. So this will be the last week in April, the 30th or, sorry, the 29th through the third. You’ve got AMD, Amazon, Apple, Coinbase, a lot of names coming in there. We expect it to be a good quarter here. We want to see a change in pattern from what we saw this week where we got not bad earnings reports. Saw beats, right? Even if we did see. If you’re nitpicking in there, you can find some issues in this week’s earnings, but nothing that should have sent our market this much lower, right? That’s not what we want to see. We don’t want to see the market reacting poorly to what seems like good news on the surface.

That’s the market usually trying to tell you something. And for us here, maybe it’s just to wait for the turn. Impatience is the key. And keeping some powder dry so that we’re ready to add to positions and put on new positions when the time does come. All right, so taking a look at our major indexes now on the day to day, as I mentioned earlier, we finished mixed on the day today. We were led by the Dow Jones up half a percent on the day. So pretty good day here. Up over 200 points to 37,986.

We also saw the transports finishing higher on the day as well. That is a trend change there. They had five down sessions in a row leading up to that. We want to see the transport start to act better here. Those JB Hunt earnings this week also didn’t help the transports after that. Excuse me. We had small caps up about a quarter of 1% to 1947. Next up here, the S and P 500 down just under nine tenths of 1% to 4967 today.

[00:10:06]:
This was interesting, what I referenced earlier about short interest for the S P 500. Today we learned that short interest as a percentage of market cap just hit a new high for the S and P 500. The highest level we’ve seen in the last two years at least. As contrarians, you love to see that, you know the majority getting into that short mindset. That’s when we set up for short squeezes and big moves to the upside. But we did. Seeing the s and P close below 5000 today was less than ideal. That’s the first time it’s done that since February as well.

Finally here, the Nasdaq was our laggard on the day, so also not what you want to see. Down over 2% to 15,282. And what you don’t want to see with this is semi’s lead leading the way lower. So I had to point it out today because the semis led lower in a big way, down four and a half percent on the day to day, almost getting back to their 100 day moving average here. Of course, it didn’t help that Nvidia was down 10% on the day today without really seeing any big news coming in there. But there is a bright side to this. And of course, the first one you already know, the fantastic buying opportunity. But also we are now hitting extreme oversold territory, one for our major indexes, but two really for the semis here.

This is the most oversold the semis have been since the bear market lows of October of 2022. Folks, this is a massive shakeout taking place to get all the way back down to those levels here. And in new bull markets, when you get to these levels, they, you look back on them as fantastic buying opportunities as well. Like we look back on October of 2022 and we’re seeing it across the board here for our major indexes. If we’re not there yet, we are almost at extreme oversold levels just about across the board here. So I can’t emphasize enough, you know, yes, the short term can be scary. I believe it was Peter lynch who said, though, when the time comes to buy, you won’t want to. So that’s what we’re looking at here, you know.

[00:12:37]:
So will it get worse before it gets better? Possibly. But stay tuned here with us. You know, we’ll keep you alerted to what we’re doing here and when we start to see the event that could mark the turn or if it’s just a market that wants to get back off to the races. But now getting into some of the positive sides of today, looking at the internals, and that might surprise some of you when you’ve got the Nasdaq down 2%, how could the internals be a positive factor on the day? And you’d be right, because Kip and I were on the phone throughout the day today just asking each other, hey, have you seen these internals yet today? It would shock you, right? They were even better earlier in the day. We did finish off the lows of the day. Let me point that out just slightly for some of our major indexes, more so for others. But even at the lows of the day today, we saw positive internals, at least on some of our metrics here. Advanced decline and volume really didn’t go negative at all today were two to one positive here earlier in the session and finished strong as well here.

So, yes, even on a day when the Nasdaq is down 2%, you can find some positives in the market. And that’s a serious divergence there as well, showing underlying strengths here for us. So let’s take a look. Advancing stocks beating out declining stocks for both the NYSE and the Nasdaq, it was remained over two to one positive. For the NYSE, it was close to it earlier for the Nasdaq. Nasdaq finished just barely positive. But again, on a day where you’re down 2%, we will take it. 52 week highs and lows were negative for both the NYSE and the Nasdaq.

Very light numbers here for the NYSE, 13 new highs to just 39 new lows. So really nothing to write home about there. Nasdaq a little bit worse. But I gotta say, day after day this week compared to Monday and Tuesday, we have seen an improvement in all of these readings, including 52 week highs and lows. So, yeah, not great number today, but better than what we’ve been seeing. Lastly here, volume was maybe one of the more surprising ones coming in. It was well above two to one positive earlier in the day for the NYSE. Dwindled a little bit into the close.

[00:15:03]:
Still coming in just shy of two to one positive, though, and also coming in just barely, but positive on the Nasdaq as well. Again, I can’t overstate how good that is to see on a 2% down day. Next up here, looking at our sectors on the day today, we finished with six out of our eleven sectors higher on the day today. A little bit defensive leaning here. Absolutely. Utilities led the way as yields did fall today, down just under seven tenths of 1%. Now, at four point, you know, our view here, yes, we yields on the rise might be a little concerning, but at these levels, nothing that we see that could derail the market after that. The financials had a really good day today, as well as energy stocks.

Oils up a little bit, but not significantly. Nothing that would make us more worried about what’s happening in Iran and Israel right now than our laggards on the day. As you would expect, tech leading the way lower, followed by communication services, which is a proxy for tech. So makes sense here. After that, consumer discretionary and industrials. Finally here for today, our VRA commodity watch. Gold making some moves here, getting, you know, trying to stay above $2,400 an ounce. At $2,406 an ounce.

That’s up just over three tenths of 1%. And once again here, the real story continues to be in the gold miners, which have just continued to head higher in the face of the rest of the market uncertainty. Right now, gold miners on the day today were up. Let me give a final read here. We’re up almost 1% on the day, 0.95%. So almost three to one out performance, as we say here often. It’s exactly what you want to see from that group. Just like in energy, you want to see in a big commodity bull market.

[00:16:59]:
If you think oil is going a whole lot higher, it would validate your thesis if you see energy stocks moving even faster. Next up, silver, up 1.3% on the day today to $28.74 an ounce. Not far away from its recent 52 week high there. Let’s see how far away 29.91 was the intraday high. But we’re right there at the closing 52 week high. Copper now up 1.3% as well at $4.49 a pound. And at that price, that is another highest level for copper this time the highest level since June, early June of 2022. Finally here, oil, as I mentioned earlier, up slightly on the day, but nothing that really makes you concerned about geopolitical tensions.

If that were the case, you know, you’d see oil hitting 52 week highs, or at the very least we’d be up, you know, three, four, maybe even 5% on the day to day if these concerns were really that this was going to the next level. Instead, slight move today here, up six tenths of 1%, still only at $83.25 a barrel. Finally here for today, bitcoin. Last big news here of the day is that we are on the eve of the bitcoin halving here. Takes place, I believe, at midnight tonight. And if you’ve been tuning in with us here for a while, you know that this is a bullish event for bitcoin. So a few stats for you here on just how bullish it is. I’m just going to cover really high level stuff because we do cover this here pretty often.

But zooming out here, I’m trying to think of how I want to say this. So, typically ahead of the having, the price in bitcoin does rise. Although this is the first time we’ve seen an all time high going into the having. Usually they take place afterwards. Right. And in the follow in the. Excuse me, the previous year before the having, the average gain for bitcoin is 185%. We are almost that to the book.

[00:19:16]:
A little bit off of it, but still you’re right in the range. And then over the next year after the halving, the average gain for bitcoin is 3224%. So again, interesting here hitting it that we hit an all time high ahead of this event. Sometimes the month after the event too can be a little sluggish. But really the action where you want to be is over the next twelve months from here. So again, we’re just on the eve of this move and bitcoin now up nine tenths of 1% on the day at 64,152 a bitcoin 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@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 hope you have a great weekend. We’ll see you back here on Monday for the close.

Podcast Newsletter

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Time Stamps

00:00 Market had 5 positive months, predicts growth.
05:24 Economists and Fed speakers go opposite direction.
08:12 Upcoming energy and tech earnings, market expectations.
12:37 Stock market may worsen, but positive signs.
15:03 Stock market remained positive despite some dips.
19:16 Bitcoin halving leads to significant long-term gains.

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