The Weekly Trend
The Weekly Trend
Episode 243: Jimmy McGinty
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In this week's episode, David and Ian discuss the continued bearish sentiment among market participants, certain areas of the market that are still within uptrends, the VIX, the Put/Call Ratio, and how you need to look at recent market moves in terms of an overall bigger picture.
Welcome back to the Weekly Trend Podcast. Today is Friday, February 28th, 2025 s and P 500, currently sitting at 58 56. I'm David Ling. I'm here with Ian McMillan. I feel bad that a few episodes ago it was just Gene Hackman's birthday. Thought he had passed away at that time. Now.
ian_1_02-28-2025_140316It's tough.
david_1_02-28-2025_130313And now he has passed away.
ian_1_02-28-2025_140316Yeah, we lost a good one.
david_1_02-28-2025_130313Yep. Lots of good movies with that guy. What's your favorite one?
ian_1_02-28-2025_140316Hoosiers
david_1_02-28-2025_130313Yeah, it's gotta be right
ian_1_02-28-2025_140316Norman Dale.
david_1_02-28-2025_130313Norman Dale.
ian_1_02-28-2025_140316Golly, that was good. I mean, that's like an, I feel like most at least most boys had their dad watched that with him at least once or twice.
david_1_02-28-2025_130313Yeah, it's a, it's a good rule.
ian_1_02-28-2025_140316I need to do that with my boys this weekend.
david_1_02-28-2025_130313Yeah, it great movie. You know, I think an underrated one is Replacements.
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313He's Jimmy McGinty, man,
ian_1_02-28-2025_140316And
david_1_02-28-2025_130313I.
ian_1_02-28-2025_140316they had what's his face? Was the quarterback in that Keanu
david_1_02-28-2025_130313ke Reeves. Yep. Falco Falco kind of had to find himself. Makes sense. Just really good actor, but I mean,
ian_1_02-28-2025_140316And then things that were like before my time now, like, fringe connection. I don't think I ever saw fringe connection.
david_1_02-28-2025_130313no, I never saw that either. But did see, you know, behind enemy lines or like, I think he was, was he hunt for red October? No. Crimson Tide. Crimson Tide. Great movie. Denzel Washington. Gene Hackman probably should watch that again. I mean, that's 1990. That's 1995. You were like three.
ian_1_02-28-2025_140316Was eight.
david_1_02-28-2025_130313Okay.
ian_1_02-28-2025_140316Thank you very much,
david_1_02-28-2025_130313You probably could stand it'cause it, the pixels on that will be so Grady. It's not black and white. It's not black and white. But anyway, lots.
ian_1_02-28-2025_140316much younger than you.
david_1_02-28-2025_130313I know, I know
ian_1_02-28-2025_140316All right. So what happened, uh,
david_1_02-28-2025_130313this week, what happened this week?
ian_1_02-28-2025_140316Yeah. Well, last week the episode was
david_1_02-28-2025_130313Well,
ian_1_02-28-2025_140316Thesis.
david_1_02-28-2025_130313through from last week.
ian_1_02-28-2025_140316Yes. That's last week we kinda laid out well, yeah, literally the Bears thesis. Decent rollover so far seems to be playing out Not great, not great on a lot of indices. I mean, Russell. We can talk about the Russell and it is well below a 200. I think it was actually below a 200. Last Might have closed below the 200.
david_1_02-28-2025_130313Yeah, small caps still remain weak and still yeah, last Friday. Below at 200 day, and now here we're sitting on a relative basis versus the s and p at the levels we saw back in July of last year. So small caps remain, a weak spot. You know, if, if you were to think about year to date, and I told you technology was down. 4.8% and staples were up 4.8%.
ian_1_02-28-2025_140316Wow.
david_1_02-28-2025_130313I mean, that's, something that maybe should have you sit up and take notice.
ian_1_02-28-2025_140316It's information now. It's definitely something that I take notice with. It's. I mean, that's pretty clear, right? You've come into a brand new year. We've all had, at this point, eight weeks to buy stocks. People are buying more consumer staples than tech now. So the part of me says, okay, maybe an orange flag. But I guess at least they're, mean, maybe at least they're buying staples. Instead of everything just going down at a staples, just going down at a lower rate.
david_1_02-28-2025_130313Yeah, that's, that's right. That's when you get a little bit, that's when you should be much more nervous or appropriately Risk averse is when. Staples are going down and just going down less than the other things.'cause you still have things like financials
ian_1_02-28-2025_140316Yeah,
david_1_02-28-2025_130313and energy and real estate. Some would argue those are value areas.
ian_1_02-28-2025_140316you mentioned the zero line last week.
david_1_02-28-2025_130313Yes.
ian_1_02-28-2025_140316Where are we at with that?
david_1_02-28-2025_130313So if we use the s and p, and that's a term I've come up with. I don't know if it makes sense, but I like the term
ian_1_02-28-2025_140316it's a good term because it's a mental, whether people realize it or not. It is kind of a, like an invisible line in the sand
david_1_02-28-2025_130313it is like how many times do you, yeah. I mean, how many times when you look at. Statements or whether it's for an ETF, A mutual fund or even a, a client statement. How much so, bias anchoring happens on January 1st and December 31st. And so now we're talking about an environment where s and p is below the zero line, zero line being 1231 closing price. And on s and p Cash, that closing price was 58 68. We're actually below that currently, obviously small caps more so. NASDAQ is as well. What's interesting is, you know, you could also point to international using something like VEU is positive. Year to date. It is interesting'cause, you know, invariably people look at, well, what, what was my performance last year? What was my January 1st to December 31st? Even though the, the market doesn't necessarily care about that. People do
ian_1_02-28-2025_140316People do
david_1_02-28-2025_130313and it's a behavioral mile marker.
ian_1_02-28-2025_140316I think it's a big mental conundrum for your average investor.
david_1_02-28-2025_130313Absolutely.'cause that's, let's, let's be honest, most investors, most advisors don't use charts. They just use tables,
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313they use, you know, percentage numbers on a sheet
ian_1_02-28-2025_140316And I
david_1_02-28-2025_130313without looking.
ian_1_02-28-2025_140316I think that leads back to a lot of behavior towards your high watermark. While I was at X in December and now look where I'm at. I'm already, now I'm already negative and it's only February. Whereas like it's just, if there was no calendar you want, like you wouldn't know the difference. It would just be another regular mid-summer correction.
david_1_02-28-2025_130313Something like.
ian_1_02-28-2025_140316this statement has these dates labeled and when you only look at it, right, I would say most, most people, if you've got an advisor, how often do you, do you think that there's statement, is there kind of one time a month that they look at like quote unquote how the market's doing or how they're doing?
david_1_02-28-2025_130313Think, I think that's fair. You know, like your, your best behavioral control for investors is not to be looking at on a day-to-day basis at maximum once a month. The really good investors clients are the ones who look once a year and typically that's a one, one to 12 one.
ian_1_02-28-2025_140316favorite clients.
david_1_02-28-2025_130313Yeah, those are, well, that's because they're able to understand that markets don't move in a straight line. And so the things that happen between two dates and we can really pick any two dates,
ian_1_02-28-2025_140316You
david_1_02-28-2025_130313it's just, you know, the world just loves one. One,
ian_1_02-28-2025_140316it?
david_1_02-28-2025_130313everyone.
ian_1_02-28-2025_140316we, we are so obsessed with December 31st and January 1st, or month to date. Year to date, and I get, it's kinda like the SAT, you gotta have some type of qualitative. You gotta like snap a chuck like somewhere so we can compare what people did.
david_1_02-28-2025_130313Yeah, it's nice and it's nice in the United
ian_1_02-28-2025_140316retirement plan, it's pretty insignificant.
david_1_02-28-2025_130313right. Because even though international has outperformed year to date, something like VU is still 0% return since 2007. So it's about context. It's about, okay, let's look at this snapshot. But then you gotta look at it within the bigger picture of where are we? And even something like VEU versus s and p. I mean, yes, positive year to date, but since 2007 down 75%, like that's, so it's still in a downtrend. And you have this reversion of something like VU to S versus s and p to a 200 day. There's a lot of. Mixed information currently. And what I mean by that is okay, we could look at year to date and we could say, wow, staples up for tech, down for, but then you also have to be honest and be like, but there's also demand for international year to date and there's demand for financials. That's typically not what you see in a broad bear market.
ian_1_02-28-2025_140316No.
david_1_02-28-2025_130313week, LA last week we highlighted, you know, the zero line, you know where we closed last year, the 200 day. Gap also important, right? That's another,
ian_1_02-28-2025_140316Yes, election gap is a big mental I think from a technical standpoint, it's a big. That's a big move across 90% of charts out there.
david_1_02-28-2025_130313yeah. So, so where are we at in that? Where we, where we are compared to November 6th, if I have the.
ian_1_02-28-2025_140316So yeah, the fifth, so we're, we're gonna talk about the Tuesday close, right, that Tuesday. you get the election results, and then you have the Wednesday gap. Just so we're clear on how this works, obviously futures aren't gonna have as much of a gap, so we're gonna use cash. And p now we're gonna put an asterisk. It has filled this gap once. We have filled the election gap once in mid-January. So we have revisited this before. we are back in that gap as of yesterday's close. are back in that gap right now slightly. We're gonna call it flat the s and p as we're recording, we're down one basis point. So we are still technically in that gap. Um, IWM Russell has been through that gap for while. It did also fill it back. Actually went below it in mid-January and we are below those January lows. So 2000 small caps, we are definitely negative from the election results.
david_1_02-28-2025_130313Mm-hmm.
ian_1_02-28-2025_140316How much do you put into that considering it's been a laggard for so long? I don't know. It's a tough, I mean, you would wanna see it. It was definitely an outperformer, right for a bit, a little bit after election. Nasdaq never filled its election gap even in mid-January or basically back to those same mid-January lows. So nothing on the NASDAQ yet. We got back into the gap. But never filled it.
david_1_02-28-2025_130313Well, I think, I think that, oh, go ahead.
ian_1_02-28-2025_140316filled its gap mid January reversed pretty nicely. And right now it's not really even that. I mean, it's, it's the doubt. It's held up the best. Right. Growth has gotten crushed. Mag Seven's definitely taken a hit. So the Dao during this whole correction, the DAOs, you know, held up the best, quote unquote
david_1_02-28-2025_130313Think it's an interesting, the zero line, the election gap. Interesting. Behavioral market markers
ian_1_02-28-2025_140316yes.
david_1_02-28-2025_130313and it, we can use that as information too. So for example, you know, it's not even close to having filled its selection gap, financials,
ian_1_02-28-2025_140316yeah.
david_1_02-28-2025_130313communication services. So we can use this information to be like, okay, what? What is the market environment? Where is the strength, right? Because we've had weakness. We should really be paying attention to those things that kind of have bypassed any weakness. And so when you see financial strong since then, you see communication services strong since then and not even close to approaching those gaps. That's information.
ian_1_02-28-2025_140316So you like financial, so we're buying regionals.
david_1_02-28-2025_130313Hmm. You mean that, are you saying like if you're, if you're gonna be financials, are you talking about
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313versus regional banks, like that way?
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313Well,
ian_1_02-28-2025_140316Isn't
david_1_02-28-2025_130313beauty
ian_1_02-28-2025_140316because you would think so, right?
david_1_02-28-2025_130313right.
ian_1_02-28-2025_140316But the answer is like, no, I don't think I would be in regional banks. But you do wanna own financials. I mean, they're even today, so yesterday, year to date, relative highs, Continuing that today, Really grinding back through this whole March, 2023, banking crisis thing.
david_1_02-28-2025_130313No, you're, you're absolutely right. And you could even make an argument for European banks, right?
ian_1_02-28-2025_140316Ooh. Lloyd's, you're telling me I'm buying Lloyds. What are we buying in Europe? Barclays, can't believe. Yeah. Look at these. EUFN.
david_1_02-28-2025_130313There's there.
ian_1_02-28-2025_140316Financials.
david_1_02-28-2025_130313And that's just not something that has been in favor for such a long time.
ian_1_02-28-2025_140316Why do you think. That there's been this shift to right, because I don't pay attention to the fundamental aspects. I wouldn't say that in the last three months there's been some massive change in European economic policies. Why, why do you think we're gravitating towards. European financials
david_1_02-28-2025_130313I mean, that's a great question. Uh, It could be simply typically when trends change. So let's say you have an uptrend and that that shifts. To a sideways trend or downtrend, it's'cause you've run out of buyers. It's not'cause selling is picked up. In this case it would be vice versa. These things had been beaten to the ground so bad You kinda ran outta sellers and let's be fair, European financials U using UFN we're at, we're at the highest level since 2014. And really you can make an argument going back even further. So. We're talking about a 10 year return on European financials of 2%. So is it rotation, is it is there interest rate considerations there or there better margins on loan creation?
ian_1_02-28-2025_140316We will never know Dave Willie.
david_1_02-28-2025_130313No, we'll,
ian_1_02-28-2025_140316are
david_1_02-28-2025_130313yeah, we'll just stick to price.'cause typically what you see by the time, here's where you get nervous, if all of a sudden there's magazine covers or headlines all over the place about the new bull market in European financials or Europe.
ian_1_02-28-2025_140316we should be buying Banco Santander.
david_1_02-28-2025_130313That's, that's when you get, that's when you get nervous is, oh wait,
ian_1_02-28-2025_140316That's
david_1_02-28-2025_130313is.
ian_1_02-28-2025_140316I mean, and that's a great, I think that's such a great point because, and I, I mean, I'll be my, the first one to raise their hands about people who have pooped on European equities for many years. And if these things, which right. And we all know behind all that, uh. Teasing and trolling, right? We all know that there will be a time when financials outperform us financials or just ex-US. Stocks in general outperform US stocks. But it's gonna take a long time, I think before people jump onto that.
david_1_02-28-2025_130313Well, that's the beauty of, of where this is, where this stuff is at right now is it's not like anybody's missed the boat
ian_1_02-28-2025_140316No, no, no, no. I think that's a great way to surmise it. Yeah.
david_1_02-28-2025_130313and it, it makes, you know, when you look at. I'll bring up two relationships, Ian, when I look at European financials versus semiconductors, EUFN versus SMH, and I see that that's breaking a rate of trend that goes back well over 10 years, well over a decade, but I compare U European financials to US financials. It hasn't broken that same rate of trend. That's a clue. Oh wow. Like there's strength in financials overall and still in US financials and how, how big of a bear market can you get if financials are doing well?
ian_1_02-28-2025_140316Hmm,
david_1_02-28-2025_130313And so yes, we've had this corrective behavior, we outlined all the things last week, whether it was vs dispersion or. Really high levels of volatility shorting or maybe I should have you talk about surveys like the a A I I
ian_1_02-28-2025_140316yeah.
david_1_02-28-2025_130313whole bears. You know, you want to talk about some of that?
ian_1_02-28-2025_140316I wanna add one thing on the financials and then for the kind of global outperformance that we've seen. I would just say that I think it could be more evidence that where we are at for interest rates is gonna be kind of the new normal right. That's always been kind of the dig is that. The interest rates weren't, just, weren't there for banks. And we know that's, that's the big gorilla in the room, 800 pound gorilla in the room for banks is lending and making a spread on lending. much easier to do that at 7% than three to 4%. I kind of think, and I'm not trying to get on some macro fundamental soapbox, but maybe just maybe. That's the equity market telling you that? Yeah, I think these banks are gonna have a while with higher interest rates and they're gonna be able to make some pretty decent spreads. I.
david_1_02-28-2025_130313I think it's a absolutely fair way to look at it. Markets are. And this is what people forget. Markets are a future discounting mechanism, right? They, they're looking out six to 18, 18 months in the future on the prospects of that company in relationship to the economy. So another example that would be Nvidia earnings.
ian_1_02-28-2025_140316Yeah, there
david_1_02-28-2025_130313Right?
ian_1_02-28-2025_140316to be a big move over that.
david_1_02-28-2025_130313Right. And they blew it. They blew it outta the water. They had great earnings and you had a bullish engulfing
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313Does that mean the up trend
ian_1_02-28-2025_140316day
david_1_02-28-2025_130313below a 200 date, does that mean you're things are done for semiconductors in Nvidia? No, but it is good information about those earnings and their exceeding earnings estimates was something the market
ian_1_02-28-2025_140316new.
david_1_02-28-2025_130313it looks like at this point was already priced in. It's not looking backwards, it's looking forward. It's like what is the likelihood? That that continues. And so, you're right, you do have this dichotomy between semiconductors and financials. Do you, do you have a scenario where financials actually outperform semiconductors? And when you look at a chart of XLF versus SMH,
ian_1_02-28-2025_140316I have to put my money on financials.
david_1_02-28-2025_130313right?
ian_1_02-28-2025_140316That JPM relative
david_1_02-28-2025_130313JP Morgan?
ian_1_02-28-2025_140316Yeah,
david_1_02-28-2025_130313Yep.
ian_1_02-28-2025_140316chart. I mean, it's breaking back. I mean, I know. I feel like that gets brought up a lot in our workbook conversations.
david_1_02-28-2025_130313And so you do have an environment, I get it. Right. When you look at, you know, let's just look at the makeup of the s and p. Get it that technology stocks are at 30% waiting and financials. I. Are Minuse, right? Meaning they're like four. They're half of that,
ian_1_02-28-2025_140316but, and didn't, we always know it was gonna be a pain to get outta this.
david_1_02-28-2025_130313right? Because you have such big names that are so large.
ian_1_02-28-2025_140316Yeah, I mean, how do you get out? How does, how does an industry transition out of a sector that's 30% the most important index without it doing damage?
david_1_02-28-2025_130313Right, and it makes it really hard if you're, if you're magnificent, seven, if you're seven largest or struggling. But that doesn't mean there is an opportunity. And so it's interesting, you know, and, and I'm sure there's some listeners that are like, Hey, you guys brought up this bearish thesis last week. The market did decline since that episode. Aren't you more bearish this week? Well, maybe, but some maybe. But some of these other lines in the sand have to be broken. We're still above a rising 200 day on something like s and p. Yes, we're below a 200 day on small caps. There's so many areas that are still in technical uptrend, and we know that we get three and a half to four 5% drawdowns per year. We know that we typically get one 10% drawdown per year, and I understand,
ian_1_02-28-2025_140316and how far are we off the highs, Dave?
david_1_02-28-2025_130313I believe we're only like
ian_1_02-28-2025_140316Four and a half,
david_1_02-28-2025_130313four and a half. Let's take a look. Four and a half, like 4.25.
ian_1_02-28-2025_140316Yep.
david_1_02-28-2025_130313And here we have bearish sentiment through the roof,
ian_1_02-28-2025_140316Yeah, I, so we have that on our list to talk about, and I think we discussed it last week.
david_1_02-28-2025_130313and it's even more bearish this week. We, we discussed it last week, but it's even more extreme now.
ian_1_02-28-2025_140316But I wanna go. So I want, and I wanna make sure I have these stats right as far, and we're talking specifically about a a i I. I've still, I've still, as an active investor, I've still never been asked to participate in this survey.
david_1_02-28-2025_130313I, yeah, we're active investors. We manage money,
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313never, I've never gotten a phone call.
ian_1_02-28-2025_140316Yeah. I
david_1_02-28-2025_130313never gotten an email.
ian_1_02-28-2025_140316pretty considerable amount of money, but never gotten, no one's ever asked me why I position. Anyways, I digress. So, according to Dietrich,
david_1_02-28-2025_130313Ryan, do you trick? Great, great.
ian_1_02-28-2025_140316very common name. I mean, we probably quote Ryan.
david_1_02-28-2025_130313Yeah. At least,
ian_1_02-28-2025_140316At
david_1_02-28-2025_130313at least every week.
ian_1_02-28-2025_140316a month. Yeah, I mean, probably at least once an episode. So we've got the largest spread. So these are people reporting to a survey, whether they're bullish or bearish. And this is the largest spread since the. October, September, 2022, Lowe's, is that correct?
david_1_02-28-2025_130313Yeah, the largest spread since the 2022. Bottom of the bear market.
ian_1_02-28-2025_140316And,
david_1_02-28-2025_130313I mean, that's pretty incredible. We're 4% off the highs.
ian_1_02-28-2025_140316and there will, and it is To your point, Dave, and there's a little bit of data money that was going on. So Ryan Dere has 55%. If you do 55%, you do get the oh eight top right. People started getting embarrassed in oh eight. For the most part, these readings marked at bottom. If you move that to 60% spread, which we did also hit this week. It's basically all bottoms. Think it was, I think it was Sentiment Trader that maybe had, that had moved it to 60% spread. Don't quote me on that, but either way, I think and absolute, and I, I tell you how, it's as fascinating. My friends have texted me. I have friends that follow Ryan Dietrich that are not involved in finance, but they love Ryan Dietrich. And they text me about like, they'll, they'll text me and like his tweets. And this has been a decent topic of conversation this week
david_1_02-28-2025_130313Okay.
ian_1_02-28-2025_140316because it's kind of right we're you're telling me. And so we also have to think this survey was taken when last week. So did we actually have the sell off, or was this taken on like Tuesday and then the results came out Wednesday? Don't
david_1_02-28-2025_130313Yeah, I think it, I think it was during, I think it's during this week.
ian_1_02-28-2025_140316Okay, so we are, let's say two to 4% from all time highs. A very, very, very basic event that happens multiple times a year. in a strong bull market, and it's the same amount of, if we can use the word fear or skepticism or whatever you want to call it, that we had at the 2022 bottom that we had at oh eight, then we had at the oh three bottom that we had at the 1992 bottom, or 91, I'm sorry, 91 bottom. That is absolutely fascinating to me.
david_1_02-28-2025_130313And you know, like we covered last week. There's this juxtaposition between that survey, so what people say
ian_1_02-28-2025_140316Yes,
david_1_02-28-2025_130313versus what they're doing.
ian_1_02-28-2025_140316that's a
david_1_02-28-2025_130313So. Record, record level lows in ca holding cash last week based on Bank of America Global Fund Manager survey, they're holding like three and a half percent cash. And to your point, going back to oh 8 0 9, they were holding close to 6% cash. Now those two numbers seem very minuscule to me because when we take our foot off the gas, we, we.
ian_1_02-28-2025_140316driving is a little different.
david_1_02-28-2025_130313We, we definitely get very aggressive, but then also in periods like this, where we take our foot off the gas, you know, one of our models, for example is more like 20% cash. But anyway, point being you don't have fund managers as of the data, the past two weeks doing what they're feeling. So it's gonna be interesting to watch. Do they actually act on their feelings at this point based on what happened in the market this week? That will be, that'll be interesting to see if, if now we did see hedge funds. We talked about this two weeks ago. Deleverage pretty aggressively. But we do have fund managers who are sitting with record little amount of cash. Do they start to. Raise that cash. Do we start to see put call ratios rise, which they have between last week and this week?
ian_1_02-28-2025_140316gonna be my next question is what's going on with PC ratios,
david_1_02-28-2025_130313Yeah. Put call ratios risen. Nothing crazy.
ian_1_02-28-2025_140316but not, no, like Spike, like we had probably what, back in August? Don't have the put call chart in front
david_1_02-28-2025_130313Oh yeah. So like if you, if you look back to like, you know, you're talking about July, August last year where we did have a,
ian_1_02-28-2025_140316yeah.
david_1_02-28-2025_130313a, a bull, a bull, bull market correction. You know, you were sitting, don't know, north of 0.8 in that, and when you were in the depths of the bear market, you were. Above one in that relationship and in some cases above 1.3. So really aggressive hedging, which typically happens during bottoms and then puts become future buyers, right? Because when you got a cover, you actually have to buy the thing that you were shorting. We haven't seen necessarily put call blowout to the upside. And it's really interesting'cause you have, right, you've got the sentiment, you've got the positioning. You don't have hedging against that positioning crazy at this point,
ian_1_02-28-2025_140316Yeah,
david_1_02-28-2025_130313yet you have the VIX at 20,
ian_1_02-28-2025_140316which
david_1_02-28-2025_130313is is there one more flush? Do we have.
ian_1_02-28-2025_140316what I vix at 20, which is nothing compared to, mean, we've been here multiple times from the October 20, 23 bottoms bottom. We had the yin whatever thing, August 5th.
david_1_02-28-2025_130313When Vix Vix shot up to like. 60.
ian_1_02-28-2025_140316yeah, and that was the whole, it was, I remember I thinking sentiment Trader said if you have a 50% move in the VIX or something over like one day or two days, that the next month or two months is always positive, which that panned out again. go figure. Yeah, I.
david_1_02-28-2025_130313Well, and last, last week we highlighted how. We have the same amount of positioning, short volatility, so, so making a, a pretty large bets on volatility actually falling, which we've had the opposite so far since July of last year. And so you do, you do the, the, how would I put this? The environment is set for some type of sharp move to the downside if it wants it, if the market wants it.
ian_1_02-28-2025_140316If it wants it.
david_1_02-28-2025_130313And what's interesting is that would then most likely doesn't have to set up the sequence for the next six to 18 months higher
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313is you've had a lot of cash raging, a lot of head hedging, buying puts, raising cash at just the exact time. You shouldn't be doing that.
ian_1_02-28-2025_140316And one thing we've talked about is a lot on our team. We still haven't had an 80% day either one way or the other.
david_1_02-28-2025_130313We haven't had, yeah, you're right. We haven't had an 80% upside day or an 80% downside day, so that's another great point. That's another piece of information. Where do we get a 80?
ian_1_02-28-2025_140316flush any like yet.
david_1_02-28-2025_130313Right? We haven't had a flush, so is that still there? Do we still have the chance for. 80 or 90% downside day in the next two weeks. I think that possibility's there.
ian_1_02-28-2025_140316Percent back in os
david_1_02-28-2025_130313Yeah.
ian_1_02-28-2025_140316sitting at 40 as, so this is as of yesterday's close sitting at a 42, well 40, we'll call it forty two, forty three. Anyways, it's on the negative side of the 50 yard line. We are in our own territory and need to get back into the defense's territory.
david_1_02-28-2025_130313Right.
ian_1_02-28-2025_140316Yes. So you've kind of got a pause right there. It's not terrible, right? I mean, in 2022 you've got OS down in the twenties. We're sitting at 43 right now, 42, 43. So it's not terrible, but it's definitely just kind of a meandering reading.
david_1_02-28-2025_130313And we haven't test the 200 day moving average on the s and p since October, November of 2023.
ian_1_02-28-2025_140316No, we haven't. And so to your point, X'S and O's then Bosch percent, the 2023 lows was a 30
david_1_02-28-2025_130313Yeah.
ian_1_02-28-2025_140316we're, and again, we're sending it 43. So there's Flushy ish room, VIX, I don't know. Now there's always a, I mean, right. There's always a theory that, you know, VIX and s and P don't necessarily have to move directly
david_1_02-28-2025_130313I think you know the, the, the term flush. What I wanna paint for our listeners is you can have downside price pressure, and typically you see that end with a flush, meaning like this really sharp move. It gets everybody on the wrong side of the boat and then the boat tips the other way.
ian_1_02-28-2025_140316Like a December, 2020
david_1_02-28-2025_130313Right. Right.
ian_1_02-28-2025_140316Boy, that was, I'd say that was the first. That was definitely of probably my career was the first, oh crap.
david_1_02-28-2025_130313Yep. And so the oh crap moment could still be upon us. Like it doesn't have to. We could hold the zero. We could hold the zero line. This could be it. We could hold these lows from January in something like the s and p 500. And if we do, what? What's great about this is if you're a student of markets and you studied supply and demand, and how this all operates together is we've seen recent market weakness. We have the s and p on the verge of being negative year to date. Where do you need to be looking? You need to be looking at what has strength. Okay. What things are strong. And we previously identified that with things like communication services, international financials. When that beach ball gets released from underneath the water, how much stronger will those areas be? That'll be something to pay attention to,
ian_1_02-28-2025_140316And the
david_1_02-28-2025_130313we,
ian_1_02-28-2025_140316says likely that those will, if you went out six, 12 months, those will end up also being your winners.
david_1_02-28-2025_130313right? And so we're getting good information from the market. When market has weakness. When you're in a sea of red, you wanna look where the green is. Now the question now becomes. Does the sea of red get darker red? Do we have that flush, that move that really gets people on the edge of their seats that takes us beyond a 200 day that takes us through the election gap? That's to be determined. I wish I could tell you. I wish I could tell you. I knew that that was gonna happen. I don't, but you could see a scenario where you get a flush like that. You get a VIX up into the thirties or north. You cleared out all the volatility shorts. You've got a rising put call ratio and all that is, that whole scenario is fuel for the next level leg higher.
ian_1_02-28-2025_140316And I
david_1_02-28-2025_130313see.
ian_1_02-28-2025_140316that's when your absolute charts come more into play, like it's financials. Yeah. Let's do, I mean, great, great route of charts. They are actually filling. I mean, we are really back into the thick of it, and I mentioned this early for March, 2023. I know that was almost two years ago. The banking crisis really did massive damage to the relative chart for even an XLF, which is all financials.
david_1_02-28-2025_130313Right. That was a Six Sigma event. That's, that's something that's quote unquote not supposed to happen in a million years,
ian_1_02-28-2025_140316it is really, I, yeah, I agree.
david_1_02-28-2025_130313but it's markets. I mean, things happen all the time that aren't supposed to happen in a million years.
ian_1_02-28-2025_140316I think with like an XLF, I mean the, and the, and the absolute like an XLF absolute chart is not falling apart yet. That's where. You still, I think gotta have some it can look great on a relative basis, but if, again, kind of like we talked about Staples earlier, if it's just underperforming to the downside, then it's still not, we don't wanna be involved in that.
david_1_02-28-2025_130313Right.
ian_1_02-28-2025_140316and that's actually the first we start off all of our client or prospecting client educations with is. Very first pillar of the three pillars is absolute trends. Like you gotta be going up first and foremost. If you are even gonna be considered buying, then we'll filter it down. Whether are you better some then some other stuff.
david_1_02-28-2025_130313right.
ian_1_02-28-2025_140316But yeah, XLF your JPMs, your bank of the Morgans, your. Berkshire's. I think Berkshire had a, did I think they had yeah. I mean, Berkshire looks great. They had earnings. I thought it was this week, right? Yeah. Monday out to all time highs relative chart. Also getting to I can't remember who had financials work, but, but like the Berkshire chart. I mean, these are your important stocks, your big banks and Berkshire, and they look, that's great. I mean, that's a good looking chart.
david_1_02-28-2025_130313Yep. And then we have crypto.
ian_1_02-28-2025_140316What happened with Bitcoin this week?
david_1_02-28-2025_130313Well, it broke down out of the consolidation that had been going on,
ian_1_02-28-2025_140316Did
david_1_02-28-2025_130313you know, since November of last year had built a nice consolidation between 92,000 and 106, we'll call it, using round numbers. Broke down outta that touched yeah, 78 thou. 70 th.
ian_1_02-28-2025_140316realize that we went down to 78,000. I
david_1_02-28-2025_130313So,
ian_1_02-28-2025_140316that was overnight last night.
david_1_02-28-2025_130313yeah, so pretty big, pretty big move. Reclaiming the 200 day here. And maybe that's the flush.
ian_1_02-28-2025_140316Yeah,
david_1_02-28-2025_130313Maybe. Maybe that's the flush. That's from a risk appetite standpoint that you're seeing. Bitcoin basically, you know, that's a pretty big move. And then reclaiming a 200 day.
ian_1_02-28-2025_140316From 1 0 9 to 78
david_1_02-28-2025_130313And there's a pretty big, you know, volume profile pocket here between, you know, 70,000 and we'll call it 86,000. So we'll Bitcoin fill that in and find out where the real buyers are. That's the beauty of price discovery.
ian_1_02-28-2025_140316also went down to the relative 200 day versus the s and p.
david_1_02-28-2025_130313Okay.
ian_1_02-28-2025_140316Visited, I mean, the relative chart of Bitcoin versus s and p pretty fascinating with the last 24 hours. From a risk reward standpoint, I do not hate it. I do not hate Bitcoin At 84, 5,000.
david_1_02-28-2025_130313Yeah, that's a, there's a lot worse places you could enter using a relative chart.
ian_1_02-28-2025_140316You get backup. Yeah. And you get a backup above 91, 92, 93. I know those sound big numbers, but from a percentage standpoint, they're in Bitcoin terms, a few
david_1_02-28-2025_130313Yeah,
ian_1_02-28-2025_140316dollars. It's not necessarily huge. Spread. Yeah. We'll see.
david_1_02-28-2025_130313we will see.
ian_1_02-28-2025_140316It's one 50 central on a Friday. So who knows where we close. But as far as you know, Bitcoin peaked early is, I mean, it peaked by, made its high back late January
david_1_02-28-2025_130313right.
ian_1_02-28-2025_140316before stocks. So are we going to see it also find a flush and demand early? I think that's a practical argument.
david_1_02-28-2025_130313Yep. And so maybe.
ian_1_02-28-2025_140316gotta be one of the biggest, I mean, as when you're looking for like risk on queues in the market, Bitcoin's gotta be up there, right?
david_1_02-28-2025_130313And I, and I think it's, it's also you're, you know, you're talking about a$1.6 trillion asset, And that's just looking at the raw coin. That's not even looking at what's in the, in ETFs.
ian_1_02-28-2025_140316right? I
david_1_02-28-2025_130313So, I mean,
ian_1_02-28-2025_140316a mega cap stock.
david_1_02-28-2025_130313right. That's, that's a high beta risk appetite instrument. Maybe we just had the flush in that maybe stocks are next. Maybe it's not. Maybe, maybe the flush in crypto is some type of bottoming process. We'll see. I mean, time, time will tell, but it is important to note that it's reclaiming it's absolute 200 day, it's relative, 200 day after a pretty big move overnight. We'll see what the weekend brings, right? Bitcoin trades over the weekend,
ian_1_02-28-2025_140316which is
david_1_02-28-2025_130313right?
ian_1_02-28-2025_140316a Bitcoin proxy plus beta, right? So, I think of, I've heard it described as essentially two x Bitcoin,
david_1_02-28-2025_130313right,
ian_1_02-28-2025_140316So then if you use a two X-M-S-C-R, you get four X Bitcoin. our clients are familiar with that. But yeah. And that's come into a 200 day.
david_1_02-28-2025_130313right. So some really good informa we're right at the precipice. You could see one more flush lower. Doesn't have to happen again. We could hold the 1231 line, zero line. We could hold the January lows and something like this. And P, we don't even have to fill the gap. That's definitely a possibility. But you can also see an environment over the next two weeks where we do see a spike in the Vix pop in put call ratio. Clearing out the ball shorts and then we're off to the races.
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313and the, and the scenario I haven't even brought up, you know, we've talked about do we move higher from here, do we correct and then move higher? There always is the scenario that we correct, and then that's just the starting signal for new downtrend.
ian_1_02-28-2025_140316Yeah, I think you could have a decent rally in here and not fix a lot of horizontal polarity levels.
david_1_02-28-2025_130313For sure.
ian_1_02-28-2025_140316back up to 6,000. You still haven't broken the, so we've got a rate of trend from the oh three bottom, which we hit in that August oh five lows. hit on this January 13 lows. We've now broken this. I mean, we can rally, we can definitely retest some things from the underside. Four and that could take two or three weeks and we haven't done anything. I think Andrew Thrasher, I looked for this early this morning. Actually take that back, I think it was Assad to noose. And he had talked about how he thinks. Best case scenario, we go sideways for a bit and I do. Wonder if we are getting into some 20 15, 20 16 ish type, right? And you remember that like before we hit the top in 2015, we
david_1_02-28-2025_130313Yep.
ian_1_02-28-2025_140316it. Like if you pull up a chart of the s and p. Summer 2015, like it was just choppy, nasty grind along and like, yeah, the index did okay, but, and then we get two year, I mean, I, that's a possibility.
david_1_02-28-2025_130313I think it's okay for if the market's up 43% since November
ian_1_02-28-2025_140316Yeah, it's
david_1_02-28-2025_130313and now Yeah. Take a breather and, and we've, we have moved sideways.
ian_1_02-28-2025_140316We have, you're right. That's a good point.
david_1_02-28-2025_130313We have moved sideways since October of last year. Yeah.
ian_1_02-28-2025_140316Yeah.
david_1_02-28-2025_130313So it's, it's okay that we're digesting. That's definitely a scenario where you digest the gains that have just happened before moving higher. You know, things you'd be looking for is, as you alluded to before, staples outperforming and they're in a downtrend, which they're not, or things like I, I do think. Junk bonds versus IEF intermediate bonds, treasury bonds is worth paying attention to, but they're also at a inflection point at this level, they're at their ELE election day level that they hold here. You've got triple C credit spreads rising, but not what I would describe as blowing out. So you would typically see those blow out if there's a bigger correction coming, you'd see money tightening, those type of things. We haven't seen that yet. We're open to it. We're open to, if we clear those levels that we talked about a week ago, you know, using something like a 200 day moving average. You know, even the support of this podcast, the Adaptive Select ETF, listed on the New York Stock Exchange, under ticker A DPV uses some methods to reduce risk that particular product helps investors access to the most prevalent factors in markets using momentum and relevant strength using proprietary identification methods. The adaptive Select ETF attempts to own the strongest 25 large cap stocks when the market is an uptrend. And since not all market environments are the same, adaptive select seeks to prevent extended decline by moving to short-term treasury bills and cash during long-term market. Downtrends. Investors can find out more including how to invest in A DPV by visiting ad pv etf.com or calling 1-833-880-FIVE 200. As always, investing involves risk, including possible loss of principle. A DPV is distributed by Quasar Distributors, LLC, and even something like that has a way to reduce risk when the market environment changes enough that we're in a new bear market. We're not there yet. We still have. Stock prices using the s and p 500 using the nasdaq above a rising 200 day. Now we have small caps on the other hand, and that'll be interesting to watch on a relative basis because that's, you know, at its prior lows, most recent lows from just a little while ago. So we'll see how that all bears out.
ian_1_02-28-2025_140316And the, and the Russell 200 A is still rising too.
david_1_02-28-2025_130313And there's a. There's volume weighted average price levels here coming up.
ian_1_02-28-2025_140316There are, so I was gonna, I was meant to bring that up earlier, Dave, especially with talk around January 1st and we talked about the election. I think those are really good areas. obviously, I mean, we use a lot of volume weighted average price at certainly at low's, big, you know, intermediate and long-term lows. But there are other pinpoint and I just love your, january 1st thing. I think that is such a big mental thing that probably a lot of humans don't even realize that they battle with,
david_1_02-28-2025_130313I'm guessing that if you, if you ask the
ian_1_02-28-2025_140316fair. Like I'm not faulting anyone for that.
david_1_02-28-2025_130313right.
ian_1_02-28-2025_140316normal.
david_1_02-28-2025_130313Most people, if you ask'em, Hey, the market's negative year to date. Are you bearish or bullish? Well, if it's, if it's down for the year, I guess I'm bearish, but this is all happening within the context of an uptrend. If we, if we break below the zero line, well we'll know that that zero line will be reclaimed and will move higher. If this is truly the continuation of bull market, it won't. Stay below the 1231 price. If it's, if it's a bear market. It's pretty simple.
ian_1_02-28-2025_140316Agree.
david_1_02-28-2025_130313So with that, we're towards the end of our time. We don't want to create too much work for Kevin. Anything else you want to touch base on before we wrap it up?
ian_1_02-28-2025_140316So this is not some, oh my gosh, I haven't reacted yet. We are five days into a potential larger correction from a technical standpoint and right. There's lots of people that say, oh, they sold in the strength or. We were X percentage away from some moving at like kind of this, were too far away from the stream. I would say those are not real trend followers. Know some people cmts and I'm friends with them, that, and they'll tell you when you're drinking a beer with them that they're trend followers and then they'll say that, oh, I sold this in the strength. I would say like, even a, a Jerry Parker would disagree with that. If you are a trend follower, that you're not selling into strength like you are simply following whatever your predetermined limits are as far as trends. and you know, for us, you brought it up 200 day, we're still above a rising 200 day as painful as the week was. And yeah, it could get worse and the, the 200 day can flatten out. Right now, we're just a week in.
david_1_02-28-2025_130313Right.
ian_1_02-28-2025_140316very, very, very little damage done in what was the context of the last 15, 16 months.
david_1_02-28-2025_130313And, and underneath the surface you've had, breath is standing on the floor. Breath is not standing on a ladder with one foot in the air. This is not, this is not a scenario where. You had, you know, breath extended to the upside, you're actually a baseline negative breath. Yes, you could get a flush, but the likelihood of that flush actually being a significant bottoming process, meaning like for a sustainable future bull market is pretty strong. And you don't even have to get that. You could just have, you could just have onward chop through March. Markets are gonna have a negative. February. Perfectly normal. We had so many positive months leading up to this perfectly normal to digest price and make sure that the buyers are for real. That's a quality, quality reset for an ongoing bull market. So Ian, I appreciate you being on here. Love everybody. That's listening. We hope you share this podcast with your friends. That's a huge compliment to us, and give us a high ranking on your favorite platform or choice. Otherwise, we'll see you next week.
ian_1_02-28-2025_140316Have a great weekend everyone.