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VRA Investing Podcast: The New Highs Roll On with Tech & The Semis Leading The Way – Tyler Herriage

In today's episode, Tyler dives into the impressive performance of major indexes and sectors, breaking records and hitting new highs for the S&P 500 and the semiconductors. He discusses the perspective of overbought conditions, th ...

Posted On February 09, 2024Episode 1322
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About This Episode

In today's episode, Tyler dives into the impressive performance of major indexes and sectors, breaking records and hitting new highs for the S&P 500 and the semiconductors. He discusses the perspective of overbought conditions, the outlook for yields, and the improvement from our market internals.

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. We hope you all had a great week out there, a great end to your weekend. What a great week it was overall for our major indexes, for our sectors, for some of the largest names out there. Really impressive week. We didn’t finish higher across the board for our major indexes to finish off the week this week, but we did finish with some broken records here as well. So great week overall, our major indexes did finish higher across the board for the week, but the Dow was our laggard on the day today.

But we’ll dive in to some of the more positive factors here first, and namely the one I’m sure you’ve already seen, the SP making its first ever close above 5000 here. Closing day at 5026, officially now the SP 5000. And here is the broken record I’m talking about. This has been the best 15 week winning streak for the SP in history, up 14 out of the last 15 weeks with gains over 20% here. So, of course, you must be asking yourself, what does this mean going forward? If I haven’t been in this market, what does it mean for me? Is it too late now to get in? Well, it’s interesting here. We do have a little bit of data to back this up. This might be the largest 15 week gain, but there have been other massive 15 week periods. And after each of those, the S and P 500 has been higher one year later, 86% of the time, with median gains of 13.1%.

[00:01:58]:
So, yes, proof here once again, new highs beget new highs. And we think we’re in another one of those scenarios here where this market, of course, trees don’t grow to the sky overnight. There will be pullbacks along the way, but we will continue, as we’ve said, since the bear market bottoms of October 2022. The smart money move is to buy the dip, to buy those pullbacks. Nothing has changed in our view from here. So again, trees don’t grow to the sky overnight. But hey, we’ll use those as buying opportunities when we can. So a lot of stuff going on out there today.

Again, good day to end the week here. So we’ve got a lot to cover here today. We’ll jump right in as this morning we had a little bit of economic data, not new data, but we did get revisions from the BLS on inflation numbers today. And I bring this up because we do get January’s inflation print CPI coming in next Tuesday. So today, though headline CPI was revised slightly, lower core remained unchanged. The main theme here continues to be disinflation. We haven’t reached full on deflation like we’re seeing in China, which we continue to believe will be exported here to the US. Whether or not we get to full deflation remains to be seen, but we are continuing to trend in the right direction.

In 2023, PCE fell from a high of 4.9% at the end of 2022 to 2.9% at the end of 2023. Now, that’s still not at the Fed’s 2% level, but if you take out the last half of 2023, PCE annualized was actually just 1.9% again, if you annualize the second half of the year. So based on that data, we are at or below the Fed’s 2% target. Now, we’ve discussed this for some time here, and our view does remain unchanged. We’re going to continue to see disinflation here. The Fed is likely, we’ve said that for some time as well, behind the curve, just like they were behind the curve when everyone was saying inflation is here, and the Fed got up and said transitory, transitory is transitory, right. They were dead wrong there. We think they’re going to be in a similar situation here.

[00:04:25]:
Let’s just hope that it doesn’t end in any type of blow up in the Fed’s face, but we don’t fully expect that here. Although it is time for the Fed to begin cutting rates, we’ve said that for some time, along with saying that the last few quarter percentage point hikes were unnecessary from before. As our market still hasn’t fully felt the effect of those rate hikes. It takes twelve to 14 months for the market to really begin to feel the effects of those rate hikes. So we’re still in the throes of that right now as the Fed is already looking to cut rates. So stay tuned. We’ll report on January CPI as it’s coming out next week. Now, let’s get to the exciting stuff on the day today.

We continue from this market to get the late day trading that you want to see, which is our markets finishing at or near their highs of the day. And we got that everywhere today except for the Dow. But that’s all right as the Nasdaq hit a 52 week high today, now within one and a half percent of its all time high from 2022. I will point out the Nasdaq 100 did hit another all time high today. Nasdaq though up one and a quarter percent to 15,990. And along with tech, we want to see tech leading and we want to see semis leading tech. We got that again today with the semis up big here. Up over 2%, 2.22% today.

That is an all time high again here from the semis. No surprise as we got Navidea up over three and a half percent today. Also hitting another all time high here. But I got to point this out, the semis on the week up 6.6%. Incredible week from the semis here. And actually, let me go back here because our leader on the day was actually small caps. Got a couple of back to back nice days here from the small caps. Big moves.

[00:06:33]:
Rust 2000 up one and a half percent today to 2009. After that we had the S and P 500 again, finally closing above 5000 for the first time ever today up zero point 57% or 28 points to 5026. So congrats to everybody who’s long out there. If you bought the SP at any point before today, no one has a loss. That’s always a good feeling and a good feeling to be in blue sky territory as well. So lastly, the Dow Jones was our laggard on the day today, down fractionally, zero point 14% to 38,671. I will point out one bullish factor here for the Dow Jones. If you’re a subscriber to Dow theory, the transports were up today, hitting their highest level of 2024 so far, up just about half a percent.

But again, good to see one of those recent highs. I believe that’s the highest level since August of last year as well. So good to see multi month highs there from the transports which have lagged a little bit as of late. Now, one quick pause, I should say is that we got to point out we’re beginning to approach extreme overbought on steroids. We aren’t quite there yet. We are hitting extreme overbought levels depending on which index you’re looking at here. Now, you know our view, we remain long and strong this market, I just said it earlier, our view remains unchanged, that we will buy pullbacks, we will buy dips, because we are still in the early innings of a bull market here. How early are we? We’re just in the second year of this bull market and going back to 1950.

Every single new bull market that’s gone on for at least one year has followed it up with a second year of gains as well. So we’re still in that second year. We’re not past it and each bull market lasts on average of four years, again with the second year being higher every time going back to 1950. So that’s the kind of early innings that we’re talking about here. However, in the short term, this is when you want to use patience. Kip talked about this on our members podcast today. If you’re not already a member, come and join us. We’ve got a free trial going on right now@vraletter.com.

[00:08:59]:
Get full access to everything that VRA has to offer. But he also mentioned on his podcast yesterday as well. At these overbought levels, it doesn’t mean that we have to be selling positions because we still want to be long. We remain long or bullish going forward, right? So it doesn’t mean we have to sell positions. But this is not when we’re aggressively adding to positions, we’ll wait for that right. Remember, new all time highs is not a bearish occurrence. As I stated earlier, after big gains like this, the S and P 500 is higher 86% of the time, one year later as well. So we’ll wait a little bit for new buys or monthly dollar cost averaging until we’ve alleviated some of these overbought conditions.

But the reason why you don’t want to sell right away is that a market that moves higher in the face of overbought conditions is also a very bullish scenario. I just saw a piece from Stanley drunken Miller actually talking about the.com melt up. He sold at one of the all time highs, then thinking, all right, we’ve come too far. And then he missed out on another 30% move higher in his portfolio that he would have had had he not sold those positions, ended up getting back into the market, trying to chase the top. He said it wasn’t a very good decision. That’s why we want to hang on to those positions here. So point being, if you’re not in this market, you may want to use a little bit of patience. But if you’re still long this market, we’ve continued to hold most of our positions through these overbought levels as well.

Now, one other factor to point out here today, yields, yields do continue to move higher here. The ten year up four tenths of 1% today. Now at a 4.18 on the ten year. That is right in line now with its highs of the year, which was a 4.19, we were just fractionally below those levels of the recent peak here today. Now, this is one area we would like to see it continue its trend lower from here, even if it does get above that level. Excuse me. Even if we do get above that level, our view remains unchanged that yields will continue to move lower on the year, especially as we continue to look for the Fed to cut rates this year as well. But even near the peak at 5% a few months ago, we were saying then that we weren’t too concerned about high yields, impending returns for this market.

[00:11:33]:
And our market has continued to head higher in spite of higher yields. Right. We’ve seen it over the last year and a half. So going back again to 1995, to 2000, the.com melt up yields are still below the average of where we were there. Right? So it didn’t stop the rally then. We don’t expect it to now. But it is one factor we want to see head lower from here now back to the bright spots on the day. Looking at our internals, this has been one area of caution.

You’ve probably seen a lot of people talking about it over the last few months. That breadth has deteriorated a little bit. We would look at it as kind of an under the surface correction in this market that some of these names aren’t at extreme overbought levels. When we have our mega cap names at those levels, we’ll look for a little bit of a rotation that might help keep our market higher while those names take a break. So I just want to point that out as well. But this is another factor that we’re seeing a whole lot of improvement in this week, and we got that improvement here again today. And, sorry, one other thing with the internals is much like our major indexes finishing at or near their best readings of the day. So also what you want to see here.

So advancing stocks, beating out declining stocks. Over two to one positive on the NYSE and over two and a half to one positive on the Nasdaq. 52 week highs to lows. Strong readings here today. I’m going to list these out individually so you can see how strong they are. The NYSE 188 stocks hitting 52 week highs to just 20, hitting 52 week lows. Similar story for the Nasdaq 316 stocks hitting 52 week highs to just 86, hitting 52 week lows. And then volume, our strong point on the day, at least for the Nasdaq.

[00:13:34]:
NYSE volume coming in positive, but not by any big margins or anything, but still positive Nasdaq volume back to back days here with 74% to 75% upside volume, exactly what we want to see. Good to see back to back days of that kind of action. So good internals overall for us today. Again, higher across the board, exactly what you want to see. And improvement continuing to improve here. We want to see that continue. Now, let’s take a look at our sectors on the day today where we got some new highs here as well. The tech sector hitting an all time high today, much like the Nasdaq was kind of hanging out below their 52 week high or all time high levels.

Now. Tech roaring back in a big way. Up 1.3% on the day today. Again, just got to point out, semi is up over six and a half percent on this week. What a week. Next up here after tech, we had consumer discretionary and communication services. Real estate was on our leading sectors of the day. Now, as we say here, often we don’t look at the real estate sector.

We like to watch the home builders. And the home builders based off of XHB hit another all time high today as well. Really good to see our laggards on the day. Three laggards. We finished with eight out of our eleven sectors positive on the day. Our three laggards were energy, consumer staples and healthcare. So some of those defensive sectors, not bad to see those three heading lower on the day. No real concerns for us there.

[00:15:09]:
Finally here for today, let’s take a look at our VRA commodity watch. A little bit of red on the screen here. Gold down less than half a percent now to $2,038 an ounce. Folks, this is a group that we have remained bullish on here for some time. We think it’s going to be a very good year for gold. And another area where we want to continue to buy the dip. And we’re really not that far away from the all time highs in gold either. Next up, silver, up 00:15 percent to $22.67 an ounce.

After that, copper down four tenths of 1% to $3.68 a pound. Oil, slightly higher on the day, up half a percent to $76.61 a barrel. And finally here for today, the new superstar on the block, bitcoin, continuing to impress. Up 4.79% to 47,501. I got to point this out here. Once again, another huge miss by the best wrong way indicator, Jim Kramer. Whatever the opposite of the Midas touches, this man’s got it. And at this point, you really have to wonder if it’s on purpose or not.

Is he signaling to us when he says to sell something that we need to be buying it? When he’s saying that we need to buy something, we need to be selling it, it almost appears on purpose. It’d be like getting I just said this earlier today. It would be like getting every question wrong on the SAT. You ever hear those old rumors that if you get a zero on the SAT, it’s automatic admittance into some of the most elite universities in America? I have no clue if that’s true or not, but think about it. In order to get a zero on the sat, you would have to be incredibly intelligent. You couldn’t do that by guessing. You have to know the right answer to get every wrong answer. Sure, you could get a few guesses in there, but you probably accidentally get one right somewhere along the way.

[00:17:09]:
So it really takes a smart person to get so many calls wrong. And there’s no doubt about it that Jim Kramer is very intelligent. Right? I mean, watch some of his shows. He is an encyclopedia of corporate knowledge, of stock market knowledge, specifically individual names. Right? No doubt about it. I’m not trying to throw shade in that direction. He’s an incredibly smart guy, but these picks that he’s gotten wrong in a big way just seem to happen over and over and over again. Not to mention the fact that I can never watch him again after saying that people should be forcibly vaccinated by the military.

That’s a no go right there already. I mean, that should have alone should have gotten him taken off air. Of course, I won’t dive into the politics of it today, but that is incredibly wrong, a human rights violation. So back to stocks here, though, this is just what Jim Kramer has done. And here’s another case scenario of it. On January 22, just a little over two weeks ago, he said in a tweet that bitcoin was unlikely to find its footing here and now. Bitcoin at the time had pulled back, right? We had pulled back. We had hit a 52 week high, over 49,000.

Bitcoin had fallen to 38,000 or so, 39,000 around this time. I just said bitcoin now at 47,462. Bitcoin has rallied over 20% since that tweet. So again here, really impressive how often this happens. And here to close out a Friday, why not end it on a little bit of humor? So, folks, that is all the time we have here today. Please be sure to subscribe to receive our VRA podcasts every day at the market close. You can also take a look at our transcript and sign up@vraletter.com click the podcast link at the top and we’d love to have you with us. As always, you.

[00:19:10]:
Your feedback is much appreciated as well. We’ve gotten a lot of that on our podcast this week, so keep it coming. Thank you so much for being here with us. And we’ll be here with you on Monday after the close. Have a great weekend, everyone. Bye.

Podcast Newsletter

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Time Stamps

00:00 SP 5000 closes, 15-week record winning streak.
03:28 PCE fell to 2.9% in 2023. Below Fed's 2% target; disinflation expected.
07:27 Positive outlook on the stock market's future.
09:45 Holding positions in overbought market can benefit
13:34 Positive NYSE and Nasdaq volume, sector highs.
16:26 Contradictory signals create confusion in financial advice.

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