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VRA Investing Podcast: Turnaround Tuesday. Tech and Semis Outperform – Tyler Herriage – October 08, 2024

In today's episode, Tyler breaks down today's strong market action, which saw our major indexes finish near their highs of the day, led by technology and semiconductor stocks. Tyler also discusses the current state of bond yields, ...

Posted On October 08, 20241476
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About This Episode

In today's episode, Tyler breaks down today's strong market action, which saw our major indexes finish near their highs of the day, led by technology and semiconductor stocks. Tyler also discusses the current state of bond yields, the comparisons to the booming 1995-2000 dot-com melt-up, and why we remain bullish on the market despite the upcoming November elections. Tune into today's podcast to learn more

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. If you’re watching the markets today, you know, it was a good day today following yesterday’s day down day where we saw the VIX rally over 18% today the VIX fell 5%. So big turnaround Tuesday here today. And if you’re a regular VRA listener, you know what this means to me, because Kip and I have a long, ongoing joke here that he always gets the big updates, the days where we’re hitting all time highs, and I end up getting the big down days here. So the fact that Kip started it off the weekend, this week, yesterday with the down day, you know, hey, we did a little pattern change here.

Kip did a few in a row for me here, and maybe the pattern change worked. Maybe I can keep getting a few of these big updates because they’re certainly more fun to do than the down days, although they’re all good days at the end of the day anyway. But wow, what a day today. Big update from the Nasdaq, and we had exactly what you want to see, the semis leading tech. It’s exactly, we talk about it here very often, but both to the upside and the downside, tech and the semis lead. So when you’re seeing the semis outperforming tech, that is not a market that you want to be short, right? Or at least a market even that you don’t want to be in. That is a market you want to be in. Now, when semis and tech are leading to the downside, the story changes there because tech does lead to both the upside and to the downside there.

[00:01:51]:
And not only was it a good day for tech in the semis today, but really across the board here, we finished at or near the highs of the day today, which is exactly what you want to see. And the real good news from this market. And one other factor that’s been really interesting, we’ve talked about this a lot over the last few weeks that we had hit heavily overbought levels. Now, in just the last eleven sessions or so, we’ve pulled back from those levels while still being in range of all time highs. Right. The S P is right there. The Nasdaq has a little bit more work to do after the summer pullback that we saw. But what’s interesting is that for the last eleven sessions now, the s and B 500 has just gone back and forth.

Eleven sessions in a row. Update down day, update down day. So let’s see if we can break that pattern tomorrow and get a couple of big updates in a row. But what we like about that is that our markets do remain near the highs while we’ve been able to work off the heavily overbought conditions. Now, we’re not near oversold levels here, but as we talk about here often as well, in a bull market, a structural bull market of size and scope, which we continue to believe that we’re in, we’ve only just not even. Just quite. We’re about five days away from hitting year two, from the lows of October 13, 2022. So we’re not even two years into this bull market yet.

And bull markets on average last four plus years. Our most recent bull market before this lasted ten years. So yes, we see this as having a long way to run into 2030, where you likely know our view is Dow Jones 100,000 by that time. And that remains our call here as well. And that’s regardless of what happens in November. I’ll cover a little bit more of that today as well. We’ve been covering it quite a bit here on the podcast, but again, a market that is heading sideways like this, not able to get hit by a big down day despite being at heavily overbought levels. We look at that as another bullish action here.

[00:04:12]:
Now, we have been getting a lot of questions about yields at these levels as the ten year has been moving higher and higher from the September lows, right? We peaked at 4.7 in April and it was almost just a perfect channel downward into the lows of September. Now, we’ve seen a big pop in yields since then. Now, when I say a big pop, we just got back over 4%. That’s the highest level in yields since July. But again, we’ve equated this period, the roaring two thousand twenty s to the nineteen ninety five to two thousand bull market. And during that time frame, yields averaged on the ten year above 6%. So no, yields at 4% do not concern us for this market here. And almost right on cue, we’re seeing bond prices, or, excuse me, bond yields starting to hit extreme overbought levels, while at the same time bond prices have hit extreme oversold levels here.

So this is about when we would expect the reversal to take place and bond yields to continue their move lower. That remains our call on yields to continue lower from here. And no, this little pop that we’ve seen above 4% doesn’t concern us here again, think back to the 1995 to 2000 era where the Nasdaq rallied 575% and yields were above, averaged above 6%, even hit as high as 7% during that time period. So, no, these are not concerning factors here for us. What this looks like to us when you’re looking at a chart, might be most easily compared to a dead cat bounce. That’s all we see this as here, and we do expect yields to continue their move lower going forward. All right, so let’s take a look here at our major indexes on the day to day. As I mentioned, we were led by tech today.

[00:06:13]:
So exactly what you want to see. The Nasdaq up 1.45% on the day today to 18,182, while the semis lead up 1.6% on the day to day. Next up, the s and P 500 almost up 1%, 0.97% on the day to 5751. After that, we had the Dow Jones up three tenths of 1%. So a little bit less there, but still positive day today at 42,080. And what we like to see there, as well as transports leading which we got slightly today up half a percent for the transports. And finally here, small caps, just managed to finish positive on the day, up less than one 10th of 1%. But again, we’ll take it to 21 94 for the Russell 2000.

Bottom line here, though, our view on this market remains unchanged. Yes, there is a massive wall of worry in front of us here between, of course, the most obvious is the November election. It’s also been hurricane season and a particularly rough one. So our thoughts and prayers go out to anyone in the affected areas there and in the upcoming wake of Milton here as well. Hope you are all able to stay safe out there. But going back to the election, you know, we’ve talked about this here at length as well. Regardless of who wins in November, we will remain long this market. Again, we’re just hitting year two of this bull market, or ending year two, I should say, and going into year three for this bull market.

[00:07:53]:
And so we see this as a structural bull market of size and scope. Earnings continue to come in strong and now we’re about to enter Q three earnings. So now we’re in this share buyback blackout period, which can have some effect on stocks. Maybe that’s a bit of the sideways action that we’ve seen here, but we’ll kick it off on Friday with the big banks and then begin rolling into earnings season. The big weeks don’t come up for another couple of weeks here when you start getting into the big tech names, those are the biggest movers out there. But forward earnings continues to look impressive for this market. Really what the market keys off of there. So, again, going back to that, we are in a structural bull market here.

Even the sectors that have been unloved, these companies, how, are in phenomenal financial position here, looking at their balance sheet, looking at their debt to market cap ratios, these are all good looking signs for these companies, for our favorite sectors out there. So, yes, we continue to look for this market to head higher now into what we see in November. Yes, this bull market would be much better with a Trump presidency. Right? You’re looking at potentially lower taxes, definite deregulation, and hopefully getting some accountability for our government in there. Right. We look at what Elon has said now, Elon Musk has said about wanting to cut the size of our government dramatically. We hope that Trump takes a page out of that playbook, which is really Javier Malil’s playbook in Argentina. He’s absolutely slashed government spending and totally turned the country around there.

[00:09:41]:
You know, that’s what we want to see here in the United States, get rid of the bureaucratic state that this, that our government has really become where they’re hamstringing the actual doers of our economy. Right. If we can unleash animal spirits again, who knows? The sky is really the limit and likely beyond. You know, I heard a great point today that the space race was really not even about, you know, the US and Russia. It was capitalism versus communism, and only capitalism has landed somebody on the moon. So that’s the kind of fight that we’re in for here. But still, under Kamala, there will be a market that continues to head higher, but for a very different reason. It’s exactly why we wrote the book, the big bribe.

And the bribe being that when the market is doing well, people tend to assume that everything’s fine, right? You check your 401k, it’s near all time highs. All right. Things aren’t as bad as they might seem, right? It’s a bit of a psyop there. But the reasons couldn’t be further from each other. Here again, Trump being deregulation, tax cuts, unleashing animal spirits, Kamala being more government intervention, more of the big bribe, more financial engineering, more government employees. Right. We just saw it in the latest jobs report, which we certainly don’t put it past the BLS, the Bureau of Labor Statistics, to try to goose this market for Kamala, make the economy look stronger than it is. And when you just see the headlines, jobs number, you think, okay, the economy is growing.

Fine. Until you find out that what was off the top of my head is roughly 700, 5800 thousand jobs created that were just government employees. That’s what we can expect more of under Kamala, again, more of the bureaucratic state coming into our lives. So again, we don’t see the election here as a major reason to not be in this market. Either way, you’ve got to be long this market right now. And that’s been a major theme of ours for the first two years of this bull market. And we see it continuing. And that is that the smart money move here continues to be to buy the dip tech and the semis will continue to lead.

[00:12:03]:
That’s what we want to see leading at least. And we think that they will continue to lead from here. And don’t look now, but Nvidia already approaching another all time high here as well. All right, next up, looking at our internals on the day to day, a bit of sideways action here. We got a little bit of improvement throughout the day from this morning’s reading, but mixed performance overall on the day. We did have more advancing stocks than declining stocks on the NYSE. Just barely, but we’ll take it. And then on the Nasdaq side, just barely more declining stocks than advancing stocks.

So no real red flags here. You know, just again, a little bit of sideways action, 52 week highs and lows. Similar story came in positive on the NYSE, slightly negative on the Nasdaq. And then volume is where things shifted, where we did have negative volume, more declining volume than advancing on the NYSE, but managed to come in positive on the Nasdaq today. So overall, you’re not a great day for the internals, but not a reason to get concerned here either in our view. Likely a lot of it, a lot of people factoring in this hurricane season that has been so devastating here. And again, kind of still working through some of these. We were at heavily overbought levels not long ago at all.

So sideways action doesn’t concern us here. Though looking at our sectors on the day today, this was likely our bright spot. We finished with nine out of our eleven sectors higher on the day today. We were led by technology, followed by communication services, which is essentially a proxy for tech names. After that, consumer discretionary and consumer staples. Our laggards. On the day was the energy sector. You know, after hitting its highest level since April yesterday, it had hit extreme overbought levels.

[00:14:03]:
And as we say here often, that’s when bad things tend to happen. And the energy sector was down over two and a half percent on the day to day. But remember, it has rallied even now over 12%, but it had rallied as much as 14.5% or so from its September low. So it’s been a great move. Likely a little bit of short covering here, especially with the reaction to hurricane season, might be attributed to a lot of that big move higher that we’ve seen. But I mean, we’ve talked about this here as well. If we do get Trump back in office, we expect oil prices to head lower. But back to the individual company side of things.

If you remember back to 2014 when I, energy companies were just extremely leveraged out there. Huge M and a deals were happening, you know, oil at over $100 a barrel. They were printing money then and they were using it a little bit irresponsibly. Since then. These companies balance sheets look very healthy from here. So we may not be as bullish on the price of oil at these levels, but it doesn’t necessarily mean that we’re bearish energy stocks here rather than we think that other sectors will continue to lead from here, especially again, if we get Trump back into office. But not a bad thing for energy companies necessarily, just means their profits won’t be as high with if we can get back to a drill, baby, drill kind of environment, which we really haven’t exited too much, you know, we’re still producing a ton of oil and gas here in the US. But if we can get back to unleashing these companies and to do what they do best, then, yes, we can continue to expect lower energy prices, which also does help with inflation quite a bit.

[00:15:53]:
Trump has made that point very clear, and we agree with him 100% on that. Energy prices are a big key to keeping inflation prices low. All right, next up here are VRA commodity watch. Let me get a quick refresh of my screens here. There is some red on the screen here today. Gold now down 0.95% at 26, $40 an ounce. Silver down a bigger nearly 3.5% at $30.88 an ounce. Copper down 2% at $4.47 a pound.

And oil here now down 4.2% on the day to day to $73.81 a barrel. Finally here for today, bitcoin kind of been in this sideways range, but has been managing to stay well above $60,000 of bitcoin here lately. Now down eight tenths of 1% at $62,455 of bitcoin. Folks, that is all 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 dot click the podcast link at the top. You’ll also find a our transcript there, videos there as well, and some notes from the podcast. So thanks again for tuning in.

Until next time. We’ll see you back here tomorrow for the close. Bye.

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Time Stamps

00:00 Semiconductors lead, indicating strong tech market.
04:12 Yields rising, not concerning, bond yields overbought.
08:42 Strong financials signal optimism, favorable conditions ahead.
10:29 Market perception affects views; policies influence interpretation.
14:42 Energy companies healthier; expect stable energy prices.
16:36 Avoid oil; prefer bonds due to yields.

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