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VRA Investing Podcast – Tyler Herriage – December 15, 2023

It was another strong week for our markets as the S&P 500 just wrapped up 7 positive weeks in a row. Tune in to today's podcast to see what the markets are telling us today based on the VRA Investing System, and more importantly w ...

Posted On December 15, 2023Episode 1298
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About This Episode

It was another strong week for our markets as the S&P 500 just wrapped up 7 positive weeks in a row. Tune in to today's podcast to see what the markets are telling us today based on the VRA Investing System, and more importantly what we see looking forward for investors.

Transcript

Don’t look back because the market is closed. Good Friday afternoon, everyone. Tyler Herringcher with you for today’s Vray investing podcast. We hope you all had a great week out there this week. It was certainly a good week for our markets this week for our major sectors, for a lot of our major names as well. We saw a lot of 52 week highs, all time highs, and in the areas that we wanted to see, multi month lows as well, like the dollar, like the ten year yield. We’ll get into all of that here today, but it was a little bit of a slower into the week. We finished mixed on the day today.

We got two out of our major indexes higher on the day still and fresh all time highs and 52 week highs there as well. As we’ve been saying for over a month now, we are looking at Fed front running here. Kip covered this in great detail on his podcast yesterday. So go give that a listen if you haven’t already. But that’s been our call for about the last month that we are looking at the front running of the Fed’s final come out and say it, that they’re done hiking rates and now we’re looking into rate cuts. And that’s what we got this week. It’s what we saw from the Fed. Even though two weeks ago Jay Powell was saying they weren’t thinking about rate cuts, we saw a completely different version of him.

I covered this on my podcast Wednesday as well. So the action that we’ve seen is the front running of the Fed announcing those comments. But what was funny and why I bring it up again here today is that there are certainly some wires crossed at the Fed right now. It’s probably intentional for them to speak with such mixed messaging the way that they do, but they’re certainly not on the same page as far as the Fed presidents go. At least some serious conflicting of messages going on here this morning. New York Fed President John Williams really did his best to kind of walk back Jay Powell’s dovish tone from Wednesday, saying that the central bank really isn’t talking about rate cuts right now. That’s a direct quote, really isn’t talking about rate cuts right now. That seems very different from Jay Powell’s tone on Wednesday and other Fed presidents as well.

Just a couple of hours later, Fed President Atlanta Fed President Raphael Bostic said that he sees two quarter percent cuts, so 225 basis point cuts in 2024, saying it will likely begin in the third quarter. So push back a little bit. But again, think about what Jay Powell said two weeks ago, then coming out this week talking about three rate cuts, the market’s already pricing in at least four, with some estimates as high as six for 2024. But that’s exactly why we listen to the market instead of the Fed, because the Fed never leads, they always follow, which as Kip covered yesterday, that’s why Jay Powell had to get out in front of it this week. The market was already pricing in major rate cuts. So for the Fed to be that far behind on their messaging compared to the market would not have been a good look going into the new year. So Jpowell at least got it right this week. And I’m sure some of the conflicting messaging there is intentional to kind of talk back this market, talk down this market.

We have come a long way already from the October lows, not only in our major indexes, but we’ve come a long way to the downside as well for the ten year yield for the US dollar on inflation as well. And the estimates for inflation in 2024 continue to be lowered as well. So while we may not want to see rate cuts too quickly, right, it usually means something has gone wrong for the market after rates have peaked. The market usually does really well the following year. But once rate cuts begin, it gets a little rocky for the markets, at least in the short term. Right? It doesn’t change anything about our long term view. If there are cutting rates early, even next year, we still remain long term bullish. It just might be a period of patience where we want to be adding to or buying new positions on the back end of that.

As Kip talked about yesterday, we have taken some profits here. I’ll get to that. More on our market watch here because we are at extreme overbought levels, so I’ll cover that here more in a second. But kind of just wrapping up here on the Fed after John Williams comments. Again, New York Fed President John Williams the tenure tried to rally a little bit, but it was unable to. Finishing really pretty much flat on the day, but down 0.5% now at a 3.92% on the ten year yield. But on the week, wow, what a week here. The ten year down almost seven and a half percent on the week.

I’ll also point out the dollar down 1.3% on the week as well. That’s a big move for the dollar, certainly not something to scoff at there. And again, multi month lows for both of those where we finished up the week. So we think we got a good game plan going into 2024. Looking at our markets, we have hit extreme overbought levels. Again, it’s been an incredible run, but about when we hit extreme overbought levels is when we use patience. We’ve taken some profits here, and I’ll get to all of that in a second as well. But let’s cover our major indexes first.

Leading the way today, just what you want to see, the Nasdaq up zero point 35% to 14,813. Now, the Nasdaq is still roughly eight to eight and a half percent away from its all time high from 2021. But the Nasdaq 100 just closed at an all time high today. Now, it didn’t get to its intraday all time high, which was from November of 2021, but is the first time that the Nasdaq 100 has closed at an all time high since November of 2021. So over two years here, since we’ve closed at a fresh all time high from the Nasdaq, folks, that happens at the beginning of bull markets. That usually doesn’t signal the, this is, we’ve talked about this for weeks as well. We really weren’t into the early innings of the market, of a bull market until we get to all time highs. Then we’ve got blue sky territory from there.

So we look at new all time highs as the beginning here of what’s to come and the fact that we have 8% more to run on the Nasdaq itself before we get an all time high. We look at that as a gift from the markets. Again, early innings here. Still a lot of gains left to be had. I’ll also point out good, exactly what we want to see on the day. The semis leading as well. The semis were up more earlier in the session. They finished up just under half a percent on the day.

But big week this week up over 7% for the semis. That is another all time high there. So as we say here, often new highs beget new highs. It’s only a matter of time until the Nasdaq gets there as well. But we did see it in the Nasdaq 100 today. So good to see after that, the Dow Jones also record day today, hitting another all time high, up just zero point 15% or 56 points to 37,305. Also point out for you Dow theory fans out there, the transports are playing some catch up now, while the Dow was up 2.92% on the week. So good week for the Dow.

The transports up a big 5.29% on the week and quickly getting back or trying to get back at least to 52 week high levels, all time high levels as well. We want to see the transports continue to act well. Next up here, the S and P 500 down on the day, really flat. Call this flat on the day, down 0.1% to 4719. And the small caps down. Our biggest loser on the day, down just over seven tenths of 1% to 1985. Still a group that we look to outperform here in 2024. They’ve been outperforming large cap stocks for the last few weeks now, a trend that we think will continue.

But overall, again, good week for our major indexes this week, across the board finishing higher. So getting back to what I was talking about earlier, that we are at extreme overbought levels. So this is not when we want to be putting on new positions. As Kip covered yesterday. We took some profits in housing yesterday. It doesn’t mean we’re any less bullish, that group, just an opportunistic trade. Lock in some gains there. And when we get a pullback out of extreme overbought territory, we’re going to be ready to add to positions again or put on new positions in housing, specifically add to positions in other areas.

Big fans here of monthly dollar cost averaging. If you don’t take much more away from this podcast other than that monthly dollar cost averaging, big believers in that here for your favorite positions. Just get on a monthly buying plan for those. So now that we are at extreme overbought levels, it doesn’t mean, again, that we’re any less bullish. And it doesn’t mean that the market can’t continue higher at these levels. Because a market that’s at extreme overbought and continues higher is actually extremely bullish. It just gets tougher to time your positions there. So that’s why it may seem a little paradoxical when we talk about not buying new positions at extreme overbought.

But what it means really here is that you want to have already had an existing position. So if you don’t have one, you don’t want to chase at these levels. You want to be patient, wait for that next pullback out of extreme overbought territory. And then what we said has been the smart money move for all of 2023, and we believe continues into 2024, is by the dip. So if you’re not already positioned at this time, again, time to use patience and wait for a pullback on new positions. So two things for this podcast so far, monthly dollar cost averaging and buy the dip. We think those two themes are going to play well going into 2024. Just saw Dan Ives, I’m going to misquote this now because I literally just saw this right before I went on the podcast that he’s talking about.

We’ve just entered a new tech bull market. Well, yeah, we did just hit our all time highs in the Nasdaq, 152 week highs in the Nasdaq. But yes, we’ve been talking about this tech bull market for a while now at the VRA at least. And so it’s good to see some big names coming in and piggybacking off of that as well. And we do agree it should be a phenomenal 2024 as well. So next up here, looking at our internals on the day today, not the numbers you want to see to close out the week, we did see some weakness, but similar to our major indexes, still a strong week overall. So we’re at extreme overbought levels. Not a huge surprise here.

So today we did see more declining stocks than advancing stocks on both the NYSE and the Nasdaq. Over two to one negative on the NYSE, slightly better for the Nasdaq, 52 week highs. The lows did continue to come in positive here. It is a bit of a lagging indicator to the upside and the downside, but in a big way. Coming in positive on the NYSE. Coming in over 15 to one positive, roughly two and a half to one positive on the Nasdaq. So that was our bright spot for the internals on the day volume week, though today, over three to one negative for the NYSE, slightly better than two to one negative on the Nasdaq. So again, not the numbers you really want to see, but we are at extreme overbought levels.

So if we were to get a pause here, it wouldn’t shock us, although we would be surprised if we got back to extreme oversold levels before continuing higher in this market. That’s the kind of strength that we’re seeing in individual names, sectors and our major indexes right now that people are waking up to the fact we’re in a new bull market. So the dips should be short and sweet. We think that’ll be the case, although sentiment has rallied in a big way here. Let’s take a look at the final fear and greed index on the week. We are at 67, so we’re not at extreme greed yet, but it is at a greed level. There any pullback? I’m sure that a lot of that would shake out pretty quickly, but we’re seeing an AI as well, elevated bulls. So this is again, kind of extreme overbought readings there as well.

Next up, looking at our sectors on the day today, we finished with three out of our eleven s and P 500 sectors higher on the day and one unchanged. Our leader on the day was the tech sector. That is another all time high from XLK. Consumer discretionary after that 52 week high. And then communication services up slightly on the day. Consumer staples, unchanged on the day. Our laggards on the day here, utilities, followed by real estate, which we’ve talked about a lot this week. Now, the real estate sector isn’t exactly what we follow.

We prefer to follow the housing index, which just hit an all time high yesterday. Hit an all time high earlier in the session today before pulling back and finishing negative. But we are at extreme overbought levels here. Home builders, excuse me there, home builders also hit an all time high earlier in the session before pulling back on the day to day. Our other laggards on the day healthcare, energy and financials. I will point out energy. Interesting to see it lower on the day. It took a little bit of a pause this year after being the best sector of 2022, and I believe the year before that as well.

So it’s not uncommon to see a leading sector turn into a lagging sector in the following year. This is a group that we do remain bullish on here as we head into 2024. So finally for today, our VRA commodity watch. Let’s get a refresh on the screens here. Gold now lower on the day by half a percent to $2,033 an ounce. Been a good run for gold on this week as well. Not quite back to the all time high levels that we did see recently. But again, one group we really love here is the gold miners.

Just such an unloved sector really, for years now. Could be a great, we think it will be a great 2024 for the miners. Next up, silver down zero point 88% to $24.17 an ounce. Copper down less three tenths of 1% now to $3.87 a pound. And oil now bringing in three positive sessions in a row. Back above $70 a barrel at $71.79 a barrel. Then finally for today, crypto down 1.8% to 42,199. Folks, that’s all that we have time for here today.

Please be sure to subscribe to receive our VRA investing podcasts every day at the market close. You can check them out@vraletter.com click the podcast link at the top. You can see our transcripts there as well on the podcast. So folks, thanks again for tuning in. Until next time. We’ll see you back here on Monday for the close.

Podcast Newsletter

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Time Stamps

00:00 Fed estimates rate cuts, market expects more.
03:38 Stock market outlook positive despite potential rate cuts.
09:32 Believe in monthly dollar cost averaging strategy.
12:33 Market remains strong, expect short dips. Greed increasing.
14:03 Housing index at all-time high, other sectors lagging.

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