Episode 310: Surface Tension

In this week's episode David and Ian discuss the Russell 2000, Basic Materials areas of the market like FCX, Copper Miners, Gold Miners, Silver Miners, and the relative charts of the miners to the physical metal. They also discuss the recent price action in Biotechnology, Energy, and Regional Banks and how areas like that can sometimes perk up towards the end of a market cycle, U.S. Treasuries, interest rates, and risk on/risk off metrics in the fixed income markets. 

Transcript

SPEAKER_01 0:59

Welcome back to the Weekly Trend Podcast. Today is Friday, August 21st, 2026. SP 500 currently sitting at 7691. I'm David Zolling here with Ian McMillan. Great to be back on here with you. Where would you like to start?

SPEAKER_02 1:14

Yes, a little bit of a whatever week, I guess. Down. Probably we're, I mean, we gotta be red on the week, right?

SPEAKER_01 1:22

Pretty normal.

SPEAKER_02 1:22

I mean above 7,600. So guess as long as that holds.

SPEAKER_01 1:28

About minus 1.2%. I do feel like I should go back on vacation. You know, normally I go on vacation in August and the market corrects, but when I went on vacation and you guys covered for me, the market ripped higher. So I am perfectly willing to go back on vacation for the sake of this market.

SPEAKER_02 1:46

Well, maybe we need a new sacrificial lamb. Maybe I'm the one that should go on vacation.

SPEAKER_01 1:52

We should try it. I feel like this is a good beta test.

SPEAKER_02 1:55

Yeah, well, A-B test it. Yeah. You go on your then we'll have an excuse next time because you have to do the B of the A-B test.

SPEAKER_01 2:05

Yes. And then Kevin's gotta go.

SPEAKER_02 2:07

And Kevin's gotta go.

SPEAKER_01 2:09

And I mean, I don't want to say Lord willing, but if all three of us did that and the market went up on those, then we just have to vacation together.

unknown 2:17

Right?

SPEAKER_01 2:18

If all vacation and the market went up, I mean we don't have to go together together. I don't want to I don't know. Okay, yeah.

SPEAKER_02 2:25

I mean, we could do that, but not like the whole time.

SPEAKER_01 2:28

Yeah. I mean, there's only so much of each other that we can handle. And then I don't know. But yeah, a little pullback this week.

SPEAKER_02 2:36

And so and then and stocks, I guess, other things acting very strongly.

SPEAKER_01 2:43

You still got you still have Russell 2000, you know, up year to date versus the SP. I mean, as long as it if we're holding the levels we need to hold on small caps using IWM.

SPEAKER_02 3:00

What would you say? That is.

SPEAKER_01 3:02

Well, I think if you're gonna start first and foremost, near term, you'd say 288 on IWM.

SPEAKER_02 3:11

Yeah, I can see that.

SPEAKER_01 3:13

It's just an initial, but I could also see us all the way into November testing 288. But as long as you're holding a rising 200A, holding 270, and then this is a massive level, this 240 level. Now, if we're coming back to 240, I don't know that that feels comfortable. I mean, that's a bear market, that's a 20 plus percent correction into those levels. I don't know that we're gonna be able to do that.

SPEAKER_02 3:39

Yeah, and I mean you'd be at uh below 200 day by you know, I guess 260s, 270, 266, 268.

SPEAKER_01 3:48

Yeah, that would definitely be a shot across the bow. But you could see an environment where we're moving sideways in a range into November.

SPEAKER_02 3:59

It's a grind. I mean, look at that. You have a different looking RSI than I do.

SPEAKER_01 4:05

I'm on weekly. Oh, you're on weekly. Only weekly. So on daily, are you saying did that get overbought?

SPEAKER_02 4:11

Because on weekly it's no, it hasn't been overbought since May. Yeah, that's a fair which is again, it's not, but it also hasn't like really gone below 50. I mean, it's definitely a grindy.

SPEAKER_01 4:23

Well, let's talk about the from a market a technical analysis perspective, right? This is the market through the lens of technical analysis. I think what you're saying is that as long as we're staying in a bullish range in daily RS, yeah.

SPEAKER_02 4:37

Would like to see it get over by. I mean, beggars can't be choosers. Fair enough trend.

SPEAKER_01 4:44

Yeah. So I if small caps are gonna do that, if you've got financials still holding up, I thought you shared a great chart this morning with the team with Freeport.

SPEAKER_02 4:57

Yeah, it looks pretty good.

SPEAKER_01 4:59

I mean, that's an economically sensitive stock, is it not?

SPEAKER_02 5:03

Yeah, you got copper miners, cop, I'm sure CopEx looks pretty good now. Well, got the of course it's on a gap. Of course, everything happens on a gap.

SPEAKER_01 5:11

Well, look at I mean, look at how right we had sellers at the $60 level back in 08, 2011. Really nice consolidation here in 2026 and now moving higher on an absolute basis. It's not bad, Ian. I think it's a great highlight. Might be chart of the week. Wonder what that looks like on a relative. Probably my fingers worked. I mean, if that breaks out of that secondary, pretty hard to get bearish on the market overall.

SPEAKER_02 5:42

Yeah.

SPEAKER_01 5:43

So that must mean materials.

SPEAKER_02 5:45

Eh. What do you think? I mean materials look good on an absolute basis.

SPEAKER_01 5:50

Absolute. So you can't complain about that on an absolute basis.

SPEAKER_02 5:56

I mean, it's a pretty sweet-looking breakout on an absolute basis if you go to a daily I will do that for you with a couple clicks of the button.

SPEAKER_01 6:04

Yeah, and if that's being led by if Freeport is to lead materials out of these.

SPEAKER_02 6:12

Are you buying that material? Are you buying the materials chart though? The XLB chart.

SPEAKER_01 6:17

Well, if my job is to generate alpha, if I could just park in the S P and my job is to generate alpha, maybe, but we got a flat relative 200 day.

SPEAKER_02 6:27

Uh that's the thing is so what about PS? What about PSCM?

SPEAKER_01 6:32

PS small cap materials.

SPEAKER_02 6:34

Not as good shorter term.

SPEAKER_01 6:38

Yeah, but still uptrend. So materials economically sensitive and uptrend. Gold. Should I go to gold miners? Should we talk about that?

SPEAKER_02 6:47

Yeah, I guess we have to.

SPEAKER_01 6:49

I mean, GDX on an absolute basis, again, holding these levels and moving higher. I think there's some work to do on a relative basis, but I don't think it if gold miners are clearing this level versus the SP, let's call that level 0.013 on a ratio, could be off to the races again. Right? They had a really strong start to the year, pulled back.

SPEAKER_02 7:17

Yeah, man, this move, of course. I mean, yeah, the relative charts. See, that's what made the uh the move like last November. I mean, really even if you went back to last August. Yep. You had gotten a nice relative and on the absolute chart.

SPEAKER_01 7:40

And that was you got 100% alpha from that break to the top. Now, you also what was great is that you could use this level here as risk management if you were participating, boom, you get above it. You know, you did a great job of that with our clients as capturing a lot of this move here. Be interesting if that gets going again. Some some differentiation. And then if we look at I mean we probably should be looking at gold miners versus gold.

SPEAKER_02 8:10

Yeah. Okay, now look at Cell J versus GDX J.

SPEAKER_01 8:14

Okay. So you're saying, so first on this chart that we're showing gold miners versus gold. Typically risk risk on environment for in the precious metal space, you want to see the miners outperform the metal. But now you're saying GDX J with gold, which is junior gold miners, is more risk on than GDX, but you want me to look at it versus Silj.

SPEAKER_02 8:42

Silver two backsplashes. Backslashes.

SPEAKER_01 8:46

Thank you. So you wouldn't you want to see this opposite? Is that what you're saying? You'd want to see silver.

SPEAKER_02 8:51

Well, you would think so, but then look at the last run in the 2025 run.

SPEAKER_01 8:55

Oh, that's a good point. You're saying this this part from here. Yeah. Oh, interesting.

SPEAKER_02 9:02

I guess you did have silver. Yeah, I guess you did have silver.

SPEAKER_01 9:06

Because I can reverse this too.

SPEAKER_02 9:08

Yeah, see, I guess silver day, yeah, because I have a little bit of silj.

SPEAKER_01 9:12

Yep. There was some outperformance there. Your point being maybe the same but different. Like if gold miners are going to outperform gold. Gold miners, silver. I guess I mean we probably should look at silver.

SPEAKER_02 9:26

SLV look like.

SPEAKER_01 9:27

We should look at silver miners versus silver. Again, that was a 2025 theme, and now we're seeing it again here. And what did you want me to look at? What do you want me to pull up?

SPEAKER_02 9:40

Same thing.

SPEAKER_01 9:41

Same thing. So there's definitely things going on. I mean, if you have Freeport MacMoran doing that, you've got gold miners looking good against gold. Here we have CopEx versus the SP with this massive base. And was this just a deep retest?

SPEAKER_02 9:57

Right, because we're the gold miners thing is 10-year base. Gold miners since July 17th of about the month. Gold miners at 47%.

SPEAKER_01 10:08

So there's some risk on characteristics and materials for sure. Don't hear a lot of people talking about that. We could look at steel versus S P, more work to do, but this copper miners versus S P is quite a bit telling to me if that's a retest and we're gonna move higher. And if Freeport is gonna be a leader in that, probably gonna see this area of polarity getting cleared between FCX and SP. Right? I mean, this is a level that goes back in time, historical memory back to 02, a bottom in 08, breakdown, sell-off in 2015. If we break above that, game on for copper, copper miners. What else are you seeing out there, Ian?

SPEAKER_02 10:56

Same stuff as last week. Biotech, energy. You know, biotech's always feels a little late cycle to me, but Oh, okay.

SPEAKER_01 11:07

I feel like you I feel like you've touched on this before that biotech.

SPEAKER_02 11:11

No, no, I just I don't really trust it. Same with regional banks. I think they're stupid little stocks that only do well right before everything poops to bed. I don't, I'm not, I don't actually think they're stupid little stocks. I'm just saying. Well, and look, so then you got KRE, right? So KRE made it all the way back to it's I don't know if these are all-time highs, but they were yeah, they were all-time highs. 78 bucks.

SPEAKER_01 11:36

And is there gonna be resistance again?

SPEAKER_02 11:38

Which relative chart relative charts are abysmal.

SPEAKER_01 11:42

If you this is your first time listening to us or watching this, some people who might not understand technical analysis, I mean, how interesting is it that supply shows up in the same place it was in 2021? But do we really get to be surprised by that? I mean, anybody who bought up in here, if they got back here, got back to even, now I'm selling. It's not crazy. But I will say this if I use IBB, this breakout is pretty quality.

SPEAKER_02 12:15

It is a lot of the biotech stuff looks good.

SPEAKER_01 12:17

You know, IBB versus SP has a lot of work to do. You know, we have a downward rated trend, but could also make the argument that we overshot on the downtrend and now we're possibly gonna overshoot on the counter trend move. We have a rising 200 day. Not terrible.

SPEAKER_02 12:35

Do you think it's sketchy that energy and gold miners and all that stuff are outperforming? I mean, energy, you want to talk about late cycle.

SPEAKER_01 12:47

Yeah.

SPEAKER_02 12:48

I'm just saying. I mean, it is holding, it is holding up. XES equipment and services are still terrible. Should okay, terrible in the context of the last this week. They've been red every day. Well, no, they were green Monday. Red every day since then.

SPEAKER_01 13:06

I mean, one of the better energy environments, I think, is what you're highlighting, is that if we take XES versus XLE, when you see that move higher, pretty rip roaring for energy overall. But I I will say, you know, like XOM a liter. XM on like you look at absolute chart, I mean, this is about as textbook as it comes.

SPEAKER_02 13:28

You have this you want to buy are you buying XLE here? Should have bought some on Monday. But you know, me just walking around last Monday. I mean, last really last week, got up above 60.

SPEAKER_01 13:44

I just think it's a on an absolute basis, it's confirmation, but you're saying late cycle.

SPEAKER_02 13:49

Uh you know, like 2022.

SPEAKER_01 13:53

Yeah, you're just saying like late 21, early 22, it was energy.

SPEAKER_02 13:58

Well, that's not it's not like it's the only thing. I mean, that was extreme. That was like the only thing working for like an entire quarter almost.

SPEAKER_01 14:06

Well, and I think what you're referencing is this part here, right? You've got when you see materials and energy lead can be market top behavior, right? If we do sector rotation analysis, I think that's what you're alluding to. Yeah, which is which is what we saw late 21, early 22 was materials and energy lead. I mean, there were what two or three months in early 2022 where we could we generate a lot of alpha by commodity ownership and energy and materials. So could be. I'm open to that for sure. Where do you think we are in uh you know, when you think about another way to view sector rotation or asset class rotation? I think we've got bonds down. Interesting, we per bonds, yes.

SPEAKER_02 15:01

Yeah, you know, these dorks in DC trying to do stuff.

SPEAKER_01 15:06

It's good alliteration, DC dorks.

SPEAKER_02 15:08

They're so stupid thinking that they're and then what did he say? Like there was they were gonna inject like four billion. What is a four billion dollars gonna do?

SPEAKER_01 15:19

Yeah, which we did have a breakout. But yeah, I mean if he's the the oil stuff, it's all oil and forex and the rates and well it does make you wonder because wasn't when we look at 30-year rates, and let me zoom in because it's this week and I like to zoom out, but yeah, I just don't know how you can stop that train, man. We we broke out of this range, we get that announcement this week of intervention of trying to basically impact yields. Was it two-day move, and we were still on breakout alert for yields?

SPEAKER_02 16:02

Yeah, came back, retested it. Market said, no, you're gonna have to do better than that, and brought them back up. So and they say, and he likes to say, oh, we don't want mark, we don't want investors to trade on headlines. Well, you just create these dudes create all the headlines. Right. With their little tools.

SPEAKER_01 16:25

We're sitting uh in on TLT at 20-year lows, which means we're at 20-year highs in rates.

SPEAKER_02 16:34

Again, if you saw that on a stock chart, let's just say that was a daily short intermediate term stock chart. Yeah, clearly it has broken resistance. But the other thing that like really makes it pretty lame and I think gives more evidence that those will just go lower, is there wasn't even like I mean, okay, maybe in 2020, you know, a f a legit bounce attempt. But this was such this is almost like one of those, what do they call it, like little H bounce, like a wimpy little, like, you gave it one little dinky shot back in 23, 24, and then never even got like just this was such a wimpy little, and again, we're talking in the context of three, four years. Three years since rates, you know, put in their big initial bottom. You're talking this lower case age, like this, yeah, just very didn't even really try to create a range, nothing. Just like everyone just knew the fate, their fate.

SPEAKER_01 17:39

Yeah, yeah, it it definitely reeks of higher higher rates.

SPEAKER_02 17:46

I mean, we didn't even get like any type of like 50%. I mean, there's just like no belief. We never got like a 50% retracement or any type of hold on, well, maybe rates aren't going higher. No, I mean from COVID on, they said, yep, we are.

SPEAKER_01 18:05

Well, and was this area down here just one big flush, you know, probably right, because this was just a consistent when you look at this if I it's a trend. It was a channel, you know, it's just a it's a trend, it's a it's a variant trend, and we get the flush down here in rates, and then I thought for a little bit it could maybe we're just gonna overshoot to the upside, yeah.

SPEAKER_02 18:30

Kind of like uh I think that like even into like 2020, like 2023, you could have said, like, oh man, maybe we're yeah, maybe we're just gonna like overshoot to the upside. You're just saying up there, maybe just consolidated, yeah.

SPEAKER_01 18:45

Up in this area, like, oh, this was just an equalized move in overshoot to the upside, but now the way this looks, that's no longer a thing.

SPEAKER_02 18:56

No, yeah. Once I mean once you start going sideways, yeah.

SPEAKER_01 19:00

And consolidate like and now you're talking talking about an intermediate term five percent move in rates, takes you up to 6.3 percent in the third year. Okay, bonds down, stocks up.

SPEAKER_02 19:15

We'll see. I mean they are, that is true. You're not lying, but yeah, we'll see. I don't know if it's like the stocks are gonna help the market stay up. Semiconductors, still terrible.

SPEAKER_01 19:28

And look at, I mean, again, international treasuries versus US treasuries moving higher. Semiconductors, you mentioned you mentioned tremendous moves since uh 2025, but consolidating I mean alpha opportunity has been pretty tough the last uh few weeks here. But I think you do wonder when we look at seasonal patterns. This is from Jeffrey Hirsch, almanac trader. You can expect weakness in a midterm year going into election. That's perfectly normal. What else are you seeing?

SPEAKER_02 20:07

So how's it all midterm election? Yeah, I could see that. May through the I don't know. That's really it. I don't see too much unless you're into like ESG funds. Those are doing well.

SPEAKER_01 20:19

Which are just basically SP funds.

SPEAKER_02 20:21

I guess. I don't even I don't even bother to look into Sharia law funds, but doing well.

SPEAKER_01 20:27

One curiosity I have is okay, you've got junk bonds outperforming intermediate bonds that are US based, right? So we've got this move out of here, and yet you so that looks good, that's like a risk-on metric.

SPEAKER_02 20:44

Yeah.

SPEAKER_01 20:45

But then we look at triple C credit spreads rising since October. And that's you know, since October, that's when we've been seeing all this, it's kind of been calm on the surface, on the market surface, but so much volatility underneath it. It's a little bit of a warning shot, and probably would want to see this cool off, and maybe it's not gonna cool off until November, which would just be coincidentally with midterm elections.

SPEAKER_02 21:10

So I gotta wait, huh? That's what you're telling me.

SPEAKER_01 21:13

Yeah, I mean, sometimes two and a half months. Sometimes consolidations happen. I mean, would it not be normal to see SP move into November and then move higher? I don't know. I wish I knew. That looks that looks pretty lame, though. For the next few months it does for sure. Hey, Brewers Braves, Brewers Braves coming up.

SPEAKER_02 21:38

Golly, dude. We just got swept by the twins.

SPEAKER_01 21:41

Wins are good, dude, though. No lie.

SPEAKER_02 21:44

I think we uh we had a makeup game against the White Sox. Um I don't know. We'll see.

SPEAKER_01 21:49

Like they're doing Brewers Braves, but I think their third game, or how I don't know what they're doing, is kicking is like a little league World Series game in Pennsylvania, like a neutral site.

SPEAKER_02 22:00

Are they playing on the Little League field?

SPEAKER_01 22:02

That would be amazing.

SPEAKER_02 22:03

It'd be like seven home runs. That would be incredible. Yeah, I mean the Braves, I mean, we were hot there. June was good. I mean, August or July was good.

SPEAKER_01 22:15

August has been Braves are five games up on the Phillies.

SPEAKER_02 22:19

I mean, well, we were like 14 games up.

SPEAKER_01 22:23

Oh, really?

SPEAKER_02 22:24

Yeah, don't you remember their start to the year?

SPEAKER_01 22:27

Yeah. But it should be a good series. Leaders of the National League East. Leaders of the National League Central. Should be good, I think.

SPEAKER_02 22:35

Sure will be.

SPEAKER_01 22:36

I don't know what the deal is with America League, but how you can have this 500 team leading the division. It's crazy. Olsey, I know it's your your brain.

SPEAKER_02 22:51

I'm just I'm zoned in on football right now.

SPEAKER_01 22:54

Are you?

SPEAKER_02 22:54

What do you got? What are you just ready for it to start? Yeah, when does college football start? It's gotta be a play. It's gotta be like a week from last night.

SPEAKER_01 23:05

Oh the game cottage.

SPEAKER_02 23:08

So does that make it like the twenty-eighth?

SPEAKER_01 23:11

I mean they got games here on the twenty-ninth. Bunch of 'em. So there's gotta be yeah, there's gotta be way earlier.

SPEAKER_02 23:18

I feel like it's gonna start that Okay, so yeah, I guess I got some week zero stuff on Saturday. The twenty-ninth. I mean, not that much good stuff. Well I will I be tuning in for Hawaii Stanford though. Probably. A little Memphis UNLV? 10 PM Eastern.

SPEAKER_01 23:39

Staying up staying up. How's the how are the game cocks gonna be this year?

SPEAKER_02 23:44

Probably 10 and 2.

SPEAKER_01 23:47

That's pretty good.

SPEAKER_02 23:48

You heard it here first.

SPEAKER_01 23:50

I did. I'm excited for you. Yeah, we'll see how the badgers are. Not sure. They've been hyping them. They finally changed their I think the way they're doing business, so we'll see.

SPEAKER_02 24:00

It's good. Gotta spend the money nowadays.

SPEAKER_01 24:03

I guess. Yeah, another news before we wrap up. You know, Watson Wright and Tom Dorsey passed away this past month. Pioneers of using point and figure and Dorsey Wright and Associates. Kind of crazy to that was a big brand in uh TA one. Yeah, and to have those two Titans pass in what the last 10 days is kind of crazy. But gotta recognize them. I never I never talked, got a chance to talk to Watson, and but Tom I talked to several times, not as if I knew him as a friend, but a person who was willing to share when we were at COT symposiums or at their conferences in Richmond, Virginia. Seemed like a good dude. Pretty down to Earth. Anything else, Ian, that you want to highlight before I ask people to give us a high ranking and cover the support of this podcast, the Adapt to Select TTF. Anything else you want to cover?

SPEAKER_02 24:57

I don't have anything. I mean, breath is still okay, right?

SPEAKER_01 25:01

Yeah, breath is great. It's the high beta rotation underneath the surface. That's hard. A lot of dispersion, negative momentum, if you will, for a few months here makes it hard, but rotation is the lifeblood of markets. It but it's I don't know, to me, it's fitting the perfect characteristics of a midterm year where summer doldrums, high dispersion, high beta rotation, out of leadership, and then all of a sudden the final two months are just rip roaring back into leadership and momentum.

SPEAKER_02 25:33

So that is indeed how it usually goes.

SPEAKER_01 25:36

Yep. Just got to be patient. Well, appreciate you being on here and want to highlight the Adaptive Select ETF, which supports this podcast listed on the New York Stock Exchange under ticker ADPV, which helps investors access two of the most prevalent factors in markets: momentum and relative strength using proprietary identification methods. The Adapt to Select ETF attempts to own the strongest 25 large cap stocks when the market is in an uptrend. And since not all market environments are the same, Adaptive Select seeks to prevent extended declines by moving short-term treasury bills and cash during long-term market downtrends. Investors can find out more, including how to invest in ADPV, by visiting adpvetf.com or calling 1-833-880-5200. Investing involves risk, including possible loss of principal. ADPV is distributed by Quasar Distributors LLC. Well, thanks for being on here again, Ian. If you guys enjoy watching and listening to this, we do ask you to share with your family and friends and give us a high ranking on your platform of choice. That means a lot to us.

SPEAKER_02 26:36

Have a great weekend, everyone.