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VRA Investing Podcast: The Rotation Continues as Tech and Semiconductors Lead – Tyler Herriage – June 25, 2025

In today's episode, Tyler covers an intriguing "Turnaround Tuesday" as we got a mirror image of Monday's market action. He dives into this bull market's rotational dynamics and focuses on the bullish signals emerging in the energy ...

Posted On June 25, 2024Episode 1410
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About This Episode

In today's episode, Tyler covers an intriguing "Turnaround Tuesday" as we got a mirror image of Monday's market action. He dives into this bull market's rotational dynamics and focuses on the bullish signals emerging in the energy sector. Additionally, we'll discuss how the Federal Reserve's mixed signals are impacting market sentiment and what historical data suggests about the upcoming month of July.

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. Before we dive into our market action on the day to day, just a quick heads up here that Kip will be on Wayne Allen roots new hit show tonight, the Root Reaction. Fantastic show. So hope you can tune into that with them as well. Coming out tonight will be in the 10:00 p.m.

Eastern time hour on Real America’s Voice again. That’ll be on the root reaction this evening. We’ll be sure as soon as we get the clip to get it up on our channel here as well for the VRA. So hope you can tune with, tune in with Kip and Wayne tonight as well, covering a lot of great topics here that will cover some of which on the podcast here today. So let’s go ahead and dive in to what we saw in today’s market action. It was an interesting kind of a turnaround Tuesday today. I guess the old fashioned turnaround Tuesday would be a down Monday followed by a big up Tuesday. And we got more of it a turnaround day than just that.

[00:01:24]:
It was nearly a perfect mirror image of what we saw yesterday. We’ve been talking about the bifurcated action of this market between tech and the semis and value names. Well, yesterday, as Kip covered in his podcast, we saw a clear rotation to value yesterday, while today tech and the semis led the charge and value names fell by the wayside a little bit today. It was interesting yesterday you saw a whole lot of headlines in the financial media about this rotation to value that we’ve been talking about here for really just about the last two weeks now and longer in this bull market, because this is overall part of a healthy bull market, is this rotational aspect when you have our generals, which is the mega cap, tech names, the semiconductors when you have them leading, and the rest of the market taking a bit of a pause. Then we get to extreme overbought levels for the tech and semiconductor names, and they’re able to take a little bit of a breather while value, and as people often say, the other 493 stocks in the S and P 500 can play a little catch up while they work those overbought conditions out. So we’ll dive into that a little bit more today. And one sector that bucked the trend today, showing some very interesting bullish signals here, and that is the energy sector. It led the way yesterday, along with the value names is considered to be a value name and was our only other sector really outside of tech on the day to day that was able to finish higher.

So stay tuned for the VRA sector watch. I’ll break it down in the opportunities that we’re seeing in the energy sector right now as well. But back to the market as a whole. Again, mirror image of yesterday, which again, very healthy bull market action overall. We’ve seen, just to kind of go back through it here, we’ve seen a phenomenal run from tech. It’s been our markets, our market leader, and what we’ve seen from the semis now pulling back to their 21 day moving average. So some good technical signals here as we’ve gone in just a few sessions from nearing extreme overbought on steroids, our highest level of overbought distillation distinction now in just three sessions into really no man’s land is not oversold yet, but we are out of overbought territory and in a new bull market, these pauses can be very short and very sweet. So again, appears to be a bit of a short term cooling off period like we’ve talked about here.

And now we’re getting to the point here that we are out of extreme overbought territory that soon here we could be back off to the races and getting back to our monthly dollar cost averaging programs here. So stay tuned. We’ll keep alerting you here to that as well. And keep in mind, like I said, this pause could already be done because the setup going forward from here is pretty fantastic. We’ve seen it already. We’ve talked about it here on the podcast. The historical data over the last ten years has really also bucked the trend of the old wall street adage, sell in May and go away. It just hasn’t worked over roughly the last ten years.

[00:05:08]:
And I’ll get some statistics on that as well. But already here, Friday is the last day of June, the last day of the second quarter. So we’re looking for a little bit of July front running here. We talk about this at the end of every quarter, because at the end of every month and the end of every quarter, you get fund flows from new retirement accounts, 401K plans, pension plans and buybacks as well. And then of course another quarter of earnings. And already before we even get there, it is looking like the July front running is taking place. It’s been a phenomenal month of June for our markets, even for the semis, which is typically not a great month for the semis. But as of today’s close I might be getting at it a little bit too early here.

We’re still three days away from the end of the month, but the Nasdaq is up 5.87% on the month. And even more impressive, the semis are even with their pause that we’ve seen again pulling back to the 21 day moving average, the semis are still, still up 8.85% for the month of June. Pretty incredible rally here. The S P is also up over three and a half percent as well. So really good action for this month here in July is historically an even better month than June. Over the last decade, July has been positive nine out of ten times with average gains in the S and P just slightly below where we are right now, 3.1%. But it’s even better for the queues. The Nasdaq 100 average gains of three and a half percent for the month of July.

So again, as we see it, July front running is underway here and we could continue to see this into the end of the week as well. It could be an impressive into the week for our markets. So we’ve got a lot to look forward to here. But when everything, whenever things are going well in the market, this is when the Fed really loves to roll out. The Fed talking heads throw a little cold water on the situation, if you will. And it’s exactly what they did today. So we had them chiming in this morning. We had the feds, Bowman sending more mixed signals to the market here.

[00:07:39]:
Despite Jay powell basically explicitly saying they aren’t even considering rate hikes. Right. Then they’ve telegraphed the next step is rate cuts. Right. Well, Bowman had to throw a little cold water on that, even saying that she expect or they expect inflation to remain elevated for some time and to not rule out raising rates even further. Well, the market has pretty much ruled it out. The ten year called their bluff today. The ten year was down a quarter of a percent, a 4.23.

Now, even if we were to get a little bit of a bounce back in yields here, it wouldn’t concern us. As we’ve talked about here often, we’ve compared this time period for the market to 1995 to 2000 repeatedly. During that time period, yields average well above where they are right now. We’ve still got a long way to go before we even get back to the highs of late last year. We don’t really see those kind of numbers in our sites here. So that being said, it does seem like on any given day when you have multiple Fed speakers, you get one or two saying something hawkish. And one or two, saying something dovish today was no different on that front. And the thing that really upsets the market is probably the wrong terminology.

I wouldn’t say upsets the market, but one thing the market does not like is uncertainty. And so when you get this kind of uncertain telegraphing from the Federal Reserve and an increasingly unpredictable Fed chair in Jay Powell, it doesn’t act, it doesn’t exactly inspire confidence in our Federal reserve. And again today, we had Mary Daley also saying that she didn’t explicitly say the Fed should cut rates, but said essentially what Jay Powell says, the Fed should be data dependent, they should be conditional, were her words, and ready to change if the labor market softens more than expected. So who you’re going to believe here? Both of these people are voting members on the FOMC. So that is where the market gets a little bit uncertainty from. But again, to finally cover it here to the main point of it is you’re going to see fed speakers out there is it’s not slowing down. They’re turning these people into celebrities. Why? It makes no sense to us personally.

[00:10:12]:
But when you see them talking, you know, take most of what they say with a grain of salt and don’t get too concerned about the, the individual comments of one fed speaker or another. If Jay Powell says it may be a little bit different of a story, but these kind of headline clickbaity, I mean, you couldn’t, all you could see this morning in the headlines was, oh, feds, Bowman, it talks about potential further rate hikes, right? That’s all you could see in the headline. So don’t get scared off by stuff like that. It’s just one person, although it is a voting member. It’s just typical kind of run of the mill for the Fed to double speak here. All right, again, back to our markets. Bifurcated day today, seeing the S and P and the Nasdaq finishing higher on the day. Not only that, finishing near their highs of the day.

The Nasdaq up 1.26 to 17,717. An even better day from the semis, up 2.34% for SMH. Also finishing just at or near the highs of the day today. Next up, SMP up just under four tenths of 1% to 5460. Next up here, small caps, which I will point out are our only major index. We like to talk about the four major indexes here. Most people just consider three major indexes, the Dow, Nasdaq and the S and P. We like to include the Russell 2000, mostly because these small cap names are very reflective of how the us economy is doing.

So if small caps are holding up all right, it inspires a little bit more confidence. We do want to continue to see the small caps performing well, but they were down today, four tenths of 1% to 2022 for the Russell 2000. And lastly, the Dow Jones was our leader yesterday, took a backseat today, down three quarters of 1% to 39,112. Next up here, looking at our internals on the day today, interestingly here, perhaps not surprising, right when tech and the semis are leading, it typically is, you know, the big names out there, even though under the surface we’ve seen, this is actually a prime example, under the surface we’ve seen the number of stocks above their 52 hundred day moving averages, increasing for everywhere except for tech, really. So that is the under the surface kind of correction that we’re talking about where the generals can take a little bit of a pause and we’ll get some good action from the other 493 names in the SMP. So it makes a little bit of sense that yesterday, with value leading, we had better internals than today. So we also saw a mirror image here today where again, value names leading, internals pretty solid yesterday. Today, tech and the semis leading a little bit weaker of internals.

[00:13:24]:
Again, the bifurcated action of this market. So today, declining stocks beating out, advancing stocks for both the NYSE and the Nasdaq. Interesting to see on a day when the Nasdaq was up one and a quarter percent, but no big two to one beats here or anything. So nothing. No red flags. And I’ll go ahead and say this now. Now, no red flags from these internals, but merely something to be aware of. 52 week highs.

The lows also negative for both here, just barely negative on the NYSE over two to one positive, two to one negative, though, for the Nasdaq. Lastly here, volume did manage to come in as our one bright spot on the day today. Coming in positive for the Nasdaq. No big beat here or anything, but we’ll take it. And the NYSE did come in just about two and a half to one negative. But no, again, crazy, 80% downside volume, kind of a day that would give you a bit of a yellow red flag, but none of that as of yet here. Next up, let’s look at our sectors on the day today. So starting with our leaders, we had communication services, which is a proxy for tech.

And then, as you might expect, the tech sector. And then our one sector that bucked the trend of this bifurcated market that was up yesterday and up again today and again, finishing right at or near its highs of the day today. Just below yesterday’s highs, though, I will point out. But this is a group we’ve remained bullish on for some time, and it is energy. So if you just want to track the energy sector, check out XlE. If you want to know our recommendation for a leverage ETF, come and join us at vra letter.com and our other oil and gas positions as well. We’ve got a 14 day free trial going on right now. Again, you can find it at vra letter.com.

[00:15:24]:
so what’s looking so interesting here for energy, right, has really been unloved. You see it in the weightings for the major indexes where energy every year really takes up less and less space. Space in these major indexes. Well, XLE just bounced almost perfectly off of its 200 day moving average and is now broken. This recent downtrend line that we’ve seen from the all time highs in April. Add to that, we’re nowhere near extreme overbought levels here on this bounce back, maybe approaching so on some of our shorter term indicators, but the money flow here has really been impressive. We haven’t gotten to extreme overbought on steroids levels in the semis solely because of money flows, but XLE continues to attract funds here. And I thought this was an interesting note from Brian Rich, fantastic writer as well.

We referenced him here often. Now, kind of paraphrase here, but we’ve talked a lot about value names, and he says that the energy sector clearly represents the best value. And I’ll stop there because we’ve said that here a long time on our podcast as well. This is not a 2014 kind of scenario for the oil and gas companies, where they are levered, leveraged to the max, you know, all kinds of acquisitions, massive space in the space. Well, it led to a massive round of layoffs, massive expenditures, cuts from these companies, and now their balance sheets are better shape than they’ve been in for a long time. While at the same time, and I’ll go back to Brian Rich here said it’s expected, the energy sector is expected to contribute almost 7% to the s and P 500 earnings in Q two. Now, you might be listening and say, tyler, it’s just 7%, right? I mean, what’s the big deal here? It’s supposed to get. Well, I’ll take a step back.

The energy sector as a whole only contributes to three and a half percent of the s and p by market cap here, and it’s going to contribute 7% of the gains. That is impressive. And these are historically low representations of the energy sector as a whole in the s and P 500. So you can tell how unloved this sector has been for some time now. And we think it’s just a phenomenal place where there’s a ton of value right now. We’ve seen Warren Buffet has continued to add to his energy position, acquiring another $434 million of Occidental petroleum over the last, just the last month. I believe that it’s just in the month of June. He’s also continued to add to that Exxon position as well, although I don’t have the numbers on that here.

[00:18:31]:
But the fact is that energy stocks have been so unloved make up such a small portion of these major indexes, that has us even more bullish on this sector going forward from here then to our lagging sectors on the day to day. Again, kind of the reverse of yesterday, the value names lagging here. We were led lower by real estate. Again, we like to use the home builders as opposed to the XLRe ETF, which most closely tracks the real estate ETF. That or, excuse me, real estate sector, but that ETF XlRe mostly tracks reits, so we prefer the home builders also were actually down worse in the real estate sector on the day, followed there by materials, utilities, and industrials. One other chart I want to run here. All right, just looking at the financials briefly, we talk about this here often. They did not participate today, but it is the sector that you want to see participating as part of a healthy bull market action.

And you really don’t want to see the regional banks collapsing here. And we’ve stayed above the recent lows. So no concerns, no red flags here as of yet in these sectors. Finally for today, our VRA commodity watch, a little bit of red on the screen here. You know, I was just talking to Kip about this as well, that we haven’t seen a whole lot of action from commodities. We’ve seen a little bit in oil, but since gold hit an all time high, it’s really kind of moved sideways from there. A little bit of a consolidation period, which we think is healthy as well. A new base for it, right.

New support level that we’re seeing being built right now in commodities. So again, these are groups that we remain extremely bullish on as well. Gold now down half a percent to $2,331 an ounce. Silver down bigger 2% on the day to $29.24. An ounce, copper down one and a quarter percent to $4.37 a pound and oil hanging on here to $80 a barrel, down 1% on the day. Now at $80.77 a barrel. Now an interesting one here finally for today, bitcoin, big bounce back today. Got below $50,000 briefly yesterday.

[00:21:00]:
And you know, a lot of kind of buy the rumors, sell the news topics here that Kip covered on his podcast yesterday. But a big bounce back today, up 3.9% now back above $60,000 of bitcoin at 61,835. Again, we look at this as a consolidation period on bitcoin here as well, and we remain extremely bullish there, too. Folks, that is 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 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 Market sees rotation between tech and value.
03:15 Tech market is cooling, ready for turn.
09:03 Fed uncertainty affects market, speakers raise doubts.
11:55 Small caps holding up but facing fluctuations.
15:24 Energy sector shows impressive money flow. XLE rebounds.
16:27 Energy sector represents best value, contributing 7%.
21:00 Bitcoin price bounces back and consolidates.

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