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VRA Investing Podcast: Sentiment Remains Fearful Despite All-Time Highs – Tyler Herriage – June 17, 2024

In today's episode, Tyler breaks down another round of all-time highs for the Nasdaq, S&P 500, and semiconductors despite less-than-stellar performance from our market internals. He also covers the increasingly overbought nature o ...

Posted On June 17, 2024Episode 1406
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About This Episode

In today's episode, Tyler breaks down another round of all-time highs for the Nasdaq, S&P 500, and semiconductors despite less-than-stellar performance from our market internals. He also covers the increasingly overbought nature of tech names and the potential for a rotation to value stocks. Join us as we break down market movements, sector performances, and the future outlook for investors.

Transcript

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 Monday out there. A great start to your week this week in what will be a new holiday shortened week, I believe is two years ago. Now. This makes year three believe that June 19 has been marked as a national holiday. So our markets will be closed mid week for a Wednesday holiday this week.

So Monday, Tuesday, Thursday, Friday, business as usual. We’re right in the middle there. You’ll get a little midweek hump day, if you will. That doesn’t mean that it’s closing all over the world. We’ll still have global marketplaces open on Wednesday. We won’t have a podcast to comment on the european close. Possibly we won’t do that, though, this week. So hope everybody enjoys the shortened holiday week here.

[00:01:09]:
This is kind of probably the, I think this is the first floating holiday for the market like this, where we’ll continue to see these interesting midweek holidays out there. So we’ll see how the market reacts to it. There’s a whole lot of data and studies that have gone in to different holiday weekends. And depending on which one it is, sometimes you get a sell off up to the holiday weekend and then a rally the following day. You know, depends on a three day weekend, all of those things. Stock traders Almanac follows those closely and puts out data on them every year. So in the coming years, we’ll have another one to add to the list here. And so that we talk about here often, you know, maybe we need more stock market holidays here in the US.

We’re either going to go one way or the other here. We’re either going to start taking, getting more and more market holidays or we’re going to go the way of crypto, where everything’s trading 24/7 holidays, weekends, everything out there, which you can see the argument for this, right? Crypto is already doing it right now. And we have global marketplaces. Right. So you would have 24/7 trading to chinese stocks, to european stocks, to american stocks, south american stocks, australian stocks, whatever you want trading twenty four seven. And it really is, that is kind of the environment we already are in. There’s extended after hours trading. You know, the higher net worth individual is able to place trades outside of market hours.

Right. If they have more leverage in order to get a position. So you can see how we might just be headed towards that route. But if we do stay with the, you know, five day week kind of trading, why don’t we get a few more stock market holidays out there like China does, where they take a whole week off. Right. For Chinese New Year every year? You know, I think it’s an interesting idea. I think there’s arguments to be made for both sides. I’m not really biased in one way or the other here.

[00:03:20]:
Would love to get your feedback, though. What do you think? You know, I know we’ve got a great smart money audience here. Should we have more stock market holidays? Do we have too many already? Right. There’s both sides of that for sure. I’m interested, interested to see what everybody has to say here. All right. That being said, let’s take a look at our Thursday esque day of trading here for a Monday. As to, again, tomorrow will be open and then Wednesday close.

But another, another impressive day of resilience for our market today. The Nasdaq really didn’t go lower much of the day, but it did dip into negative territory earlier in the session today. So earlier in the day, there were times where we had all four of our major indexes lower across the board and didn’t really look like they were going to be able to gain traction about an hour into trading. If you looked at the market internals, you would not have been encouraged by what you saw. Right. That’s a big signal we look at. When you see a down market early in the day and we have rip roaring internals, that’s a sign from us that this is a market that is likely going to close lower or, excuse me, close higher on the day to day gives you a little more confidence in that early morning trading. Again this morning we did not see that.

And there’s no doubt as well lately that these internals have been subpar. It really, a large part of this market movement has been the generals, which, if you’ve tuned in with us here for a while, a lot of people say that as a negative. Oh, there’s only seven or eight stocks holding this market up. We don’t see it that way. The generals are doing their job right. The best companies are outperforming everybody else, and everybody else is playing a little bit of catch up. But we’ve seen this kind of a bifurcated market in a way we’ve been calling the rotating bull market, that when the generals get to extreme overbought levels and need to take a little bit of a pause, that’s when we’ve seen the rally and the other four hundred and ninety three s and p stocks. It’s when we’ve seen the rotation into value names as well.

[00:05:34]:
And so we expect that to continue here. When tech gets too overbought, which we’ve seen lately, both the semis and tech hitting heavily, heavily overbought levels here, then we can get that rotation into the value names. We’ll cover a lot of that in the podcast here. But what was good to see today, again, major indexes lower across the board for a brief period of time this morning. Yields were higher, the dollar was higher. Again, internals were ugly, and we were able to rally to finish close to the highs of the day today. Really in the last, I don’t know, 30 minutes of trading or so, we pulled back a little bit, but still another impressive day, day of gains here. And if the bears were going to take an opportunity to hit this market, there aren’t a whole lot of better opportunities than what they got this morning.

But the bulls keep showing up here. We saw that in volume today in the internals as well. Not a huge volume day, but when there was an opportunity for buyers to step up, they did. So, again, taking our markets up to the highs of the day and another round of all time highs here for our markets. I’ll get to our markets just here in a second. But this is an exciting time right now for the market. And here’s the key that we’re really paying attention to right now is that this year is flying by. I don’t know about you, but we’ve all been talking about it here at the VRA, how fast this year just seems to be going by.

And already here we’re about to wrap up. Q two, it seems like Q one earnings just got underway. We had Q, Q one earnings reporting after the bell today. Lennar, the home builder, which reported very good earnings on the way, looks like it’s roughly flattened after hours trading. But, you know, we love the home builders as a tell for the strength of the US economy. And, you know, a point that I don’t see a whole lot of people making right now. You know, I’m not going to dive into the immigration issue here in this country. I think you know how we feel about it.

[00:07:48]:
That’s been an absolute catastrophe at the border here. And we’ve had really, we do we really know how many people have come in from this wide open southern border. Almost all of the projections and estimates for how many people it is likely undersells how big of an issue that it has been. Right. And even if Trump gets into office and like he’s been talking about a mass deportation program. How well is that really going to go? Just think about the optics of it here, you know, splitting up families or taking kids, you know, back across borders. Right. It’s not, it’s just not a very good look.

You know, maybe just getting out the military, aged men who don’t have families here and getting them out, maybe that solves a large enough part of the problem. But regardless, there are a significant number of people who are now here in this country, and not to mention Biden might give them an amnesty deal before he gets out of office. But point being, even if you are able to remove a large portion of them, we still have a housing problem here in the US. We’ve been building at a rapid pace, but it has not been keeping up with what we need, especially with the high levels of immigration right now. So yes, we remain extremely bullish on housing for the medium to long term here. Absolutely. All right. So back to the key here, though, is that we are wrapping up Q two here, and what we get at the beginning of a new quarter and a new month as well is fund flows.

And now we’re seeing the front running of those fund flows. People have been keying on this, talking about it more and more. But when you’re expecting a lot of liquidity to come into the system at the beginning of next month and you know that they’re buying programs on this, and some of the buying programs take place at the end of the month, you start to buy early. This is the front running we’ve been talking about. We’ve talked about it here for a long time, but today could have been a little bit of that. And we really expect it to continue into this week as well because the front running, again, like I said, it’s been picking up speed. People are starting to do it earlier and earlier, and we want to catch these moves as early as possible here. And we expect Q three earnings, or sorry Q two earnings to come in in a big way here as well.

[00:10:20]:
We’ve seen expectations being raised, but still way undershooting what the reality of earnings have been. These earnings have been stronger than almost anybody has anticipated here. And leading up to this, though, we’ve seen it time and time again in the last few weeks. You never short a dull market when you have a market that just refuses to get hit in any kind of a meaningful way. Over the last, really, 2024, I think it’s been, I’m going to butcher this, but it’s been something like 180 or 200 sessions without a 2% down day in the Dow, I believe. I mean, that’s a long time. And, you know, I don’t want to jinx it here, but those, those days happen in bull markets as well. So if it were to happen, we wouldn’t like it.

But it may not even, we’d have to wait and see, but it may not even signal any red flags for us here. It’s just been so long since it’s happened. But again, that’s the speed at which this market has been moving at. And again, it’s a young bull market here. We’ve yet to hit even year two on this bull market. So, yes, we remain extremely bullish here. And what is so amazing about right now is how unloved this market continues to be here. We’ve been extremely bullish from the October 14, 2022 lows, and it appears that that message just has not gotten out quite enough.

Right, because we’ve been screaming it from the rooftops for almost two years now, and today the fear and greed index remains in fear mode. We’re at a 42 out of 100. We close on Friday at a 38. Folks, we just hit an all time high in tech, an all time high in the S P, an all time high in the semis. These are all of our leading areas that you want to see hitting all time highs, and yet we remain incredibly unloved here. It’s another reason we remain so bullish here. All right, that being said, let’s take a look at our market action on the day. As you might have figured, Nasdaq led the way today up just under 1% to 17,857.

[00:12:40]:
Again, an all time high. Semis leading tech, though, exactly what you want to see with the semis up over 1.7%. Also an all time high here. As I mentioned earlier, we are at extreme overbought territory for both the semis and the Nasdaq. We’re not quite at our most heavily overbought distinction here. And as we say often when we’re at these overbought levels as well, unless we’re just taking profits here, we’re fine with holding our positions, but it is when we pause our monthly dollar cost averaging programs here when we hit these level of extreme overbought levels. But if you have the risk, what’s the word I’m looking for here, if you have the risk appetite, if you will, to continue to hold these stocks at overbought levels like this. When we see we think this market has a whole lot higher to go, even though we are at overbought levels we know there will be a pullback and we’ll continue to buy those dips at that level.

Right. But a market that can continue to go higher in the face of extreme overbought readings, which we’re not at our highest level here yet, but a market that continues to head higher in the face of that is actually very bullish as well. So that’s why we like to hold positions. It’s a great time to use stop losses if you like that kind of trading. All right. So stay tuned here because we’ll begin to alert you when we do reactivate our dollar cost averaging programs. And if you want to be the first to know, come and join us@vraletter.com. dot right now we’ve got a 14 day free trial where you’ll receive access to everything that we have to offer, including our pre market updates every morning ahead of the open.

So come and visit us. Come and join us, at and our fantastic vra community at vraletter.com. next up here, small caps up 0.79% on the day to day to 2022 for the Russell 2000. Next up, the s and P 500 up 0.77% to, to $5,473 on the day today, also an all time high. And we are at extreme overbought readings there as well. And finally, the Dow Jones up just about half a percent, just below that level today. Was able to catch a little rally into the, after a rough close to the week last week, especially for the transports to close out. The week last week violated the double bottom that we’ve been talking about here.

[00:15:21]:
But good to see the transports were up 0.85% today, so outperforming the Dow on the day, we’ll take it. Still need to see some improvement there. But to wrap up on the Dow finishing at 38,778. All right, next up here, looking at the internals on the day, which I talked about quite a bit earlier. So I’m going to cover these quickly again this morning. These were rough, but just like our major indexes finished near their highs of the day today. And, you know, again, from where we were this morning and the internals that we’ve seen lately, I would call today a win. No big beats here, no two to one, three to one kind of beats, but a good day.

Overall, we had more advancing stocks than declining stocks for both the NYSE and the Nasdaq. Again, no massive beats, but pretty good 52 week highs and lows were our weak spot on the day to day and can be a bit of a lagging indicator. We talk about this here often, but it bears repeating that when you’ve had a pullback, especially under the surface, like we’ve seen of this market, our major indexes and the biggest names are hitting all time highs right now. We’re seeing a little bit more of that working off of overbought conditions. Under the surface, though, again, no red flags. But at those levels, when you’ve had a pullback, you expect to see more stocks hitting lows than stocks hitting highs. Doesn’t mean that all stocks are hitting new lows or even in the range of it, really, just that, you know, it’s going to take more than one day to get back to 52 week highs for some of these stocks. So again, a bit of a lagging indicator there.

So take with that from you what you will, although we don’t want to see these negative days continue. Lastly here, volume was again sharply negative earlier in today’s trading, but the bulls stepped up in a big way. We’ve seen this time and time again from recent action, never short a dull market when it’s looking like the bears are just starting to get a little bit of traction. Buyers step in and we finish with positive volume. Again, no big two to one beats, but positive for both the NYSE and the Nasdaq. And again, the internals have not been ideal as of late, but it hadn’t stopped this market from hitting all time highs. So maybe, you know, really we do want to see improvement here. I’ll just say that.

[00:17:50]:
Next up, looking at our sectors on the day today, we finished pretty good here. Eight of our eleven sectors higher on the day to day. And I’ll start with the losers because they were defensive sectors. So no big concerns here. Utilities lower on the day, not a huge shock. Yields were higher and yields also, I’ll point out here, like our major indexes are at extreme overbought levels. We’re starting to see oversold readings from yields as well, so you can get a little bit of a bounce back. We think we’ll stay below the recent highs and continue this trend of lower highs and lower lows from yields.

That’s been our call even when yields were on the rise. Nothing has changed there in our view, after that. Real estate, which, if you’ve tuned in here for a while as well, you know, we don’t follow the real estate sector as closely as we do the home builders. The real estate sector is made up of a lot of reits. What we key off of is the home builders, like I mentioned earlier. So no big concerns that real estate was lower. Home builders were up over seven tenths of 1% here today. So again, defensive sectors finishing lower.

The final one, healthcare there. Then the other eight positive on the day. Consumer discretionary up big, leading the way today. Then we had the tech sector hitting an all time high, as you might expect. After that we had the industrials, followed by the financials and materials. One other sector I wanted to highlight here today though, was energy, which just barely managed to hang on to positive territory today, up just two tenths of 1%. But on a chart here is starting to look very good. It’s holding above its 200 day moving average on this recent pullback, and now hitting heavily oversold levels as well.

[00:19:43]:
So again, with these mini rotations, energy is another very attractive value add here. Think about what the energy sector has done despite oil prices really being sideways to lower for the what the last, when did we peak here? I wish want to get a quick look at that chart since peaking in September of last year. Yeah, I mean, oil prices have been flat to lower, right? We’re down still 17% from the highs of last year. And the energy sector has managed to hang on a little bit better than that, peaking earlier this year. And so again, we want to see it hold above the 200 day moving average. We like it a lot here. We’ve remained very bullish on energy despite this pullback as well. All right, finally here for today, our VRA commodity watch.

Let me get a quick refresh of my screens here. Bear with me. All right, a little red on the screen here today. Gold now down just over six tenths of 1% to $2,333 an ounce. I also want to point out here another that rotation devalue Nate type of concept here, struggling over my words here a little at the end of this podcast, but another one we like here are the gold miners, excuse me, which have been pulling back here a little bit as of late. Now hitting heavily oversold here. And a tool that we don’t always use but applies to this situation is a Fibonacci retracement here, which just pulled back to a 38.2% pullback here. Hovered right in those levels today, although we did make a slight new low today.

We closed above it, but it lines up perfectly here. And again hitting heavily oversold levels here. We do remain bullish on the miners, and we want to see them outperforming what we expect gold to do, which is bullish as well. Next up, silver, up two tenths of 1% now to $29.53 an ounce. Copper now down eight tenths of 1% to $4.45 a pound. Oil now up 2.43% on the day. Big day for oil at $79.95 a barrel. If it gets above 80 here and closes there, it’ll be the first close above 80 since the end of May as well.

[00:22:27]:
So not quite a month there. But the price of oil right now has dipped below just about all of its major moving averages. On its recent slight move higher has managed to get above its shorter term moving averages. We’ll see if it can take out the others here as well. We’re not too far away from a golden cross here as well. It’s right in between, actually, between the potential for a golden cross or a death cross or right in the same range. So we’ll keep you posted on that here for the price of oil as well. Finally.

And lastly for today, bitcoin now flat on the day, still up by one 10th of 1% at $66,599 a bitcoin. Unfortunately, GameStop did not announce that they were adding bitcoin to their balance sheet today. We’ll stay tuned on that story here, and if you want to see how we’re playing GameStop again, go and join us at vra letter.com. 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 at vra letter.com. you’ll see that podcast link at the top there. You’ll find our transcript in comments on the podcast as well, all of our notes.

So thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close. Bye.

Podcast Newsletter

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Time Stamps

00:00 New midweek holiday could impact stock market.
03:48 Market resilient, but internals signaled potential decline.
08:33 Potential solutions for immigration and housing issue.
09:31 Anticipating fund flows, front running and earnings.
12:40 Semis at all-time high, extreme overbought.
16:03 Market shows mixed performance, with some lagging.
19:43 Energy sector resilient despite oil price fluctuations.
23:02 Bitcoin flat, GameStop didn't announce Bitcoin addition.

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