Nvidia’s Exploding Surge: Can the Market Keep Up?

Eric Chemi 0:05
Welcome to Wealthion. I’m your host, Eric Chemi. So much has happened in the markets this week. I gotta get right to it. Jay Woods is here from Freedom capital markets. Jay, thank you so much for joining me here. What a crazy week we’ve seen in video we’re gonna get into can’t avoid it right? Generally, the movement made is is bigger than so many is bigger than most companies. And that is the move. The Fed keeps adding confusion. We got some big data coming out. We saw some data this week. Basically at these all time highs, right? Keep going up. Beyond 5000. The s&p, I am so confused. I don’t know what to make of this. I never thought we’d I thought we’d see 4000 Maybe even 3000. Before we saw 5000 and ours blowing right past it. So what do you make of this? What are guys on the street saying what are clients say? Or what are you hearing around about all the confusion and the craziness right now?

Jay Woods 1:01
Well, first of all, let’s enjoy that ride. I mean, if we are typical of what I keep hearing, this doesn’t make sense. But we are in a secular bull market. This has gotten a little over the skis and targets that I had set out. My target for the end of the year was 5225. When I made that call in December, and I did not anticipate the run, in fact, last week 2024 Right. Not the end of 2004. Yeah. Oh, did I say 2023 for the end of the year, and you said December? So I wanted to make sure we’re all talking about the same year here. Yeah. Oh, yeah. No. So I made that call December 2023. When they asked you for your in progress, provocations, and I thought 12% When I made that call, and to see the run we’ve been on has been epic, we finally hit that milestone s&p 5000 We get had, so I can get you ahead if you’d like. And, you know, the question is now what and given a lot of the headlines, and we’ll get into the economic economic data. We had the FOC MC meet three weeks ago, and you know, we’re going to be higher for longer. What did the market do? It sold off one and a half percent on that day. And then it slowly rebounded and made it back. Okay, wait a second, I guess we can digest higher for longer. And then the CPI last week, what did we do, we sold off one and a half percent. And we slowly rally then all eyes this week, focused on one thing, one stock in a video, why one stock, we talked about this on the floor, talked about this with you before I got on. I have not in my 30 year career, seen a stock height as much going into earnings, as we had done about in the video. And I say no video, it could be Nvidia to others, it doesn’t matter how you say it as long as you own it. But the hype was better than bigger than Apple during its iPhone cycle. It was bigger than Cisco and Microsoft during the.com era, which I got to live through as well. And this stock had everyone focused and it was going to move the markets up or down depending on how we did. They set the bar high. And they eclipsed it. And then they guided in ways that we didn’t expect. And so when he jumped 70 points on the opening, I thought maybe it will tire here. And it kept climbing higher throughout the day broke out to new highs, and it has lifted the spirits of investors. It’s become the talk of the town I’m sure when you go out now to your local bar or you’re on the phone with a parent. They’re going to ask you about Nvidia because that’s all they can talk about. So it has this hype, this euphoria. But when you look under the hood, it’s justified. Their numbers are great. They’re beating on all metrics. Their forward guidance continues to go to levels we didn’t exceed expect. And then if you look at the market cap, it gained $277 million in market cap 3 billion correct me Yes, I know million. That’s old school. We’re talking billions with a B it’s a $2 trillion company third biggest waiting in the s&p 500. Now behind Microsoft and Apple Yeah, billion it just a couple months ago meta had a day where gained 190 billion to be the best market cap day in in the history of the stock market. We just crushed that record. And justifiably so they are the infrastructure of everything AI Jenson Wang delivered when he talked on the call about how they have to rebuild current infrastructure, and that we’re still as Dan Ives, who goes on all the financial news networks and as a friend told me and tells everyone on TV, it’s still early innings and I believe that the the P E multiples the ratio, they’re not euphoric, they’re not bubbly, they’re justified. So This stock to me is hitting on all cylinders. And I don’t know if it can continue going up the clip it has. But if they keep performing all metrics the way they have, it’s hard not to say I need nividia in my portfolio.

Eric Chemi 5:14
I want to go through the charts and a little bit but my question on the macro side with all of this. Does this make sense to you though we’re at these, your secular bull market, the 5000 numbers when all these massive companies, these Magnificent Seven, right like these, they’re doing layoffs right. Everywhere I see I see layoffs, I don’t see, hey, we can’t find 10,000 workers. I see. We’ve got too many workers. You know, people at Microsoft are getting laid off people at Google are getting laid off. So I don’t understand how can we be with this kind of leadership and this kind of bull market. And yet those companies themselves are doing less, let alone. You know, a lot of my friends in the media industry can’t get a job, right. Media is not hiring anybody. Right. And that’s advertiser, it’s based on advertising. And that’s based on consumer. So explain this to me.

Jay Woods 6:06
Yeah. And well, first of all, the layoffs always make the big headlines. And if you just read the headlines, you wouldn’t believe the jobless numbers that continue to see unemployment at record lows. In the tech sector, we saw a giant boom after COVID Amazon hiring Mehta hiring, and now we’re seeing a correction. I think Mark Zuckerberg was the first one to say this is the great reset the restructuring, and they’re streamlining use the word streamlining when it came to their operations. So in 2020 to two years ago, we had major corrections across all mega cap stocks, the video being another one of them. Now we’re starting to see how they’ve streamlined and the results are proving that they’re running on all cylinders. So when you talk mega caps, and you talk layoffs, you talk about tech sector layoffs, it seems like when someone gets laid off in a Microsoft, they get picked up by a smaller company. So they’re staying in the workforce, and it’s not affecting the bottom line. Now you hit on its source object media, oh my gosh, that’s a sector where AI is now infiltrating, and people are generating basic articles based on AI intelligence, that is a sector where there isn’t growth, but where’s the growth in the AI sector itself, they’re going to need young college graduates who can program these things, they’re going to need experienced people who can tell them what they need to be looking for. So we haven’t seen that spike up in unemployment that I think we’ve been waiting for for a long time. There are conspiracy theorists out there say they don’t believe that jobs numbers, I won’t go down those roads, because you can get political and everyone complains about numbers that don’t go their way. All right now that unemployment number is one that hasn’t raised has hasn’t gone up a half a percentage off the low. When it goes 3.4%. Unemployment was the low if it goes to 3.9 and stays there 4%. For three months, on average, it triggers something called the Somme rule. And it’s something Kelly Evans wrote about actually not too long ago. And that’s when the recessionary fears will come in, that’s when the inflationary fears come in. And that’s when cuts may come in. And right now the inflationary data has been cooling, its trajectory is slowly going lower. And that’s why the Fed is pausing that CPI number was a little hotter than expected. Trend is still slowing, but not at the rate they want to. And that’s why next week, the PCE when that comes out on Leap Day on February 29. It’s supposed to go from 2.9% year over year to 2.8% year over year, that is the Feds preferred measure of inflation. That’s their gauge. So watch that number. If it comes in a little higher than expected, expected, at least a one and a half percent sell off in the s&p 500. I base that on what they did with the FOMC what they did with the CPI. That is the next thing that we’re watching. And for now, the market continues to find a lot of logic because the headlines are telling us one thing, the inflationary data while trending the right way isn’t as fast as people had hoped it would be yet overall the trends continue to go higher. And I’m seeing some broadening out and we’ll talk about that a little later as well.

Eric Chemi 9:25
Well, I know you brought some charts for us, can we start to walk through some of the interesting things that you noticed and then obviously you are a CMT? Does that mean a set of certified or a chartered market?

Jay Woods 9:36
It’s a charter but if you say certified I would never correct your charter market technician. That is the equivalent of the CFA in our industry for those that follow price action price tends to lead. I say only price pays so as a trader before I became an analyst, the charts were everything I based things on I look for momentum swings, I look For different times to enter the market. And now I like to back things out, I like to look long term. So since we talked about in the video, let’s look at the video here. What we had in the video from a technical point of view was a stock that peaked last summer, like late May, early June, and then it started going sideways. So if you can see my cursor, it went sideways between 405 100 for almost seven months. That’s what we call consolidation is when it breaks out to the upside. It’s base building. And what we had here in early January, was a breakout of that long neutral range. And when you break out of a nice consolidation zone, you’re going to have momentum, and we got that in didn’t, we didn’t just get it. I thought the stock could run 20 to 30%, you know, maybe to 600 625 I did not anticipate the strength of this move. And what we’re seeing now in the video is trading around $800. It’s a little overbought. So if you look at this top chart of top bar, the RSI the RSI can be overbought, overbought, oversold below 30 means the stock is oversold on a relative strength index reading over 70 means it’s overbought. So anything you see in this green up here means the stock is overbought. And it’s due to possibly pause. It does not mean it has to come in the RSI had been overbought for several months, going back on its last leg up in 2021. before it collapsed in 2022. We’ve been overbought for six weeks. It is historically high, but nothing that I’m concerned about. And given the run, we see a gap here. We’ve seen gaps in the past. And Nvidia has a history of gapping higher and staying above those gaps. So as long as the video is above 750 I think that’s very constructive a pullback. What will naturally normal happens in most stocks in the video is it’s a class of its own and it continues to run higher just

Eric Chemi 12:09
before you go on NVIDIA Let’s say someone feels like they’ve missed the run. Right? Let’s say somebody feels like I was scared. I know what to do. This is crazy. But now I need to jump in. Yeah. Are you? Do you recommend someone buying for the first time at 750 on this thing?

Jay Woods 12:27
You know, it sounds crazy. But from a long term perspective, given the space it’s in, given that it’s 80% of that AI space, given that its biggest customers are meta and Google and Amazon. It’s clicking on all cylinders, I think over the long term is still an early innings play. It’s a $2 trillion company now, why can’t it be a $3 trillion company? Will you get the meat of the move? No, you’ve probably missed it. But guess what, last year going into earnings, the stock was up 47%. And now it was coming off a major drawdown this year. The peak before it went into earnings. It did pull back a little bit was 47%. And the question is can it go higher? Last year, people didn’t think it could go higher after you know a run into earnings of 47%. This year, everyone was negative on the name who saw Palo Alto Networks in the cyberspace the day before had a similar run up and it guided lower error guided weaker and it fell off dramatically and that had people scared going into invidious earnings. The stock to me is breaking out again, it’s at a new level. And I think someone can buy it and put it away and not worry about if you’re gonna watch it every day, you’re going to get agitated, you’re gonna go bald like me. But if you’re a long term investor, this is a company still, that is growing, that has a great story behind it. And it’s somewhere someone should allocate some part of their portfolio to.

Eric Chemi 13:58
Okay, let’s let’s let’s see what else you got. Cuz I see a lot of tabs here. I’m excited to see what you brought for us.

Jay Woods 14:03
All right. Well, you know, I first wanted to put into perspective, this is the s&p 500. This is the last year we’ve gone on a tremendous run. And when we broke out above the old high here and going back to last summer, we had a sell off going into October, October 27 was the low we rebounded. What I thought would happen is we would pause here around the old highs just under 4600. And we did that pause didn’t last too long, and we broke out above it. Now we’re making new highs above 4600 on a 52 week basis. And when you make new highs, you have to go back in time and look okay, have we been here before the s&p 500 we had we had to get the 4800 we rally to 4800 old highs we paused again. We consolidated in this area here above the 20 day moving average that green line is estimated average of 20 days as traders like to use smaller timeframes that’s about a month moving average 20 days of trading per month. And we still trend it above this blue line the 50 day, the trend continues to be bought every dip continues to be bought. And yes, I thought we had peaked, I thought we’d take a pause once we finally got to that 5000 mark, the data was showing us otherwise, we’re now through 90% of earnings season. We may get that pause now, because I don’t know what the next catalyst is after Nvidia to really make the markets take that leg higher. But every time I say that it surprises me with something and the catalysts that I thought would take us lower economic data points a Fed that’s pausing and keeping rates higher for longer a fed that is not cutting and doesn’t need to cut right now. That should stall the market. But earnings prevailed this quarter and what earnings did well Microsoft did well in a video did well met it did well those are three of the top five holdings. Google Amazon also did well and then you get a broadening so the one sector if you want to pivot now I’ll go there. Then I’m watching. They’re actually three. They’re the industrials are breaking out to new 52 week highs, new all time highs Dow Jones Industrial new high. That’s a good thing. That means it’s not just technology. It’s the things that make in an election year you want to see industrials lead, we’re seeing that health care breaking out of a big base. So I put the healthcare chart up XL v is the symbol. This is basically a sector that didn’t really go anywhere for over two years. It stayed in this very choppy zone I call the chop zone and trended around its averages and finally broke out as you can see in this circle here, something changed. So what do I do? I look under the hood, what are the biggest stocks within the healthcare space that are moving? Well, the stocks the winners have been the leaders all along Eli Lilly Abbey V. Merck continue to make 52 week highs continue to lead the laggards. Pfizer, j&j, Bristol Myers, these stocks start going down, something has changed. And I see basis in these stocks, and they’re starting to turn. So healthcare all of a sudden, is a sector that is starting to lead. So we’re getting a broadening of the rally. Then when I look in it, I have one favorite stock. I’m gonna go there right now, if you’re alright with that, Eric. Let’s see. Let’s see within the healthcare space. Last week, we had 13 F filings. 13 F filings come out every quarter. They are basically reports by people that have over $100 million in assets, your hedge fund managers, big money, smart money, if you will. And what we look for in 13 F filings while they’re delayed, this is what they did in the fourth quarter. 45 days later, they have to report what they did. I look for new activity. And something really rang a bell and resonated with me. David Tepper, you may know him of Carolina Panthers fame. He’s also runs a hedge fund called Appaloosa and Michael Berry, who you may know from Big Short fame, but he’s run a hedge fund sky on and they both took new positions in a stock that I was interested in. Not only technically but fundamentally and that’s HCA healthcare, HCA health care. The story there, one let’s let’s just look at the chart. It just broke out to new highs and consolidated and broke out and had a strong solid quarter. Hence the gap here we see it broke out to new highs and the story. What does HCA who is their demographic, it’s the older generation. Well, in the next four years, more people are turning 65 than any span we’ve ever seen in our lifetime. Elder Care is very important. And they are the premier providers of that whether it’s just going in for a visit, it’s going to a senior living facility. HCA is at the forefront of that they’re based in Nashville 200,000 employees. So it’s not a small company. And the stock is breaking out. Two of the biggest investors that I like to see what they’re doing smart money, if you will, got into the name. To me, this is a space you want to be in and if you want to look under the hood a little bit more. There are two names in the healthcare space. Ew, Scripps, and Stryker. Those are also in that same demographic service servicing that same demographic and breaking out to new highs. So you’re blessed technically, you’re blessed fundamentally. And then people that I admire leaders smart money are getting into the names. So that’s like, thrice blessed if you will, fundamentally tactically and smart money, that these are names that I believe should be in everyone’s portfolio. And this shows that the rally isn’t just Magnificent Seven It, it’s basing it broadening out. And this is a positive for the overall market.

Eric Chemi 20:05
Jay, can I ask you a question about the demographics? The age 65 thing? Is, in a way a no, no. Right? Like you, you could have known this 65 years ago, you could have known this as you watch these, these population trends. So what is it about happening? What is it what’s happening now that all of a sudden, investors should jump on these when the market knows these demographic data points? It’s not like we just found out you know what I’m saying like that the efficient market thesis here, right?

Jay Woods 20:34
And that’s a great question. And we can say, with the millennials, buying houses, all the homebuilders are making new highs, mortgage rates are spiking. But why are they making new highs because that age group is moving out and looking for that house, because they have a child or two, and they want to go to the suburbs, we saw that coming and the homebuilders went with it. So in this space, yeah, it was a little late to the party. It got hit in 2022, like the rest of the market. And now, what we’re seeing, we’re seeing results. So not only is the demographic there, we should have anticipated it. Yes. But people were waiting to see results and the earnings are there, the forecast that guidance continues to be higher because of those changing demographics. And now people are finally rushing into those stocks. So yeah, you should have been at it earlier. But in 2022, if you thought you were early to the party, knowing those statistics, unfortunately, you would have been in a major drawdown of close to 50%. from peak to trough.

Eric Chemi 21:36
Right. Right. That makes sense. What else you got? Show us show us more.

Jay Woods 21:40
Okay, well, you know, since we’re talking about things to watch next week, there are two stocks that are on my radar that I’m going to focus on actually three, I’ll talk about Z scalar, as well. But workday, workdays, as you know, was a hot high flying stock during the COVID pandemic. And in 2022. As you can see, in this drop down here, the stock basically gave back over 60% of its gains. Well, it started bottoming, it started reversing, it’s coming back, you know, EHR software, that is a space that you know, now, especially with people working at home people in the office, that continues to be a big need. So and then I look at it technically, I see two things. I see this big gap here, on the right hand side, my right hand side, where we finally got back to 52. week highs, this 250 level was resistance. We cleared that hurdle last quarter. And what did we do? We ran about 5058 points to new highs, all time highs, we got back that full round about to a level where we peaked in November of 2021. So we made it all back, the fundamental story continues, they continue to improve on their earnings. Now, as a trader, as someone that wants to invest, I’m very curious to see how they react to earnings. I believe there are two opportunities to buy this stock. You can buy it on a pullback, if it holds this consolidation area around 280 to 285 70, which is the rising 50 day moving average, I think that would be a good time to dip the toe in the water. Or you buy it on strength. You buy it on a breakout, like a video. If it gaps higher. This has room to run. We saw it happen it gapped higher if you thought it was crazy to buy this stock on a positive earnings on a gap. Well, you were wrong. Yeah, that gap ended up being the lows. And when you want to trade the stock, you want to look at your risk and reward. And the risk reward setup is favorable to someone buying on a gap because as a technician, you don’t want to see it retrace into that gap. That means something’s changed. And that breakout may have failed. So you can limit your loss. But if you hold on to it, setting your stops below that gap, you’re gonna get the meat of the trade. And that’s what we want to do. We are not going to pick every bottom we’re not going to pick every top, but we want to get the largest chunk of that trade. And that’s what I see an opportunity in Workday. Lowe’s, we had Walmart, we had Home Depot report last week. Walmart did well all time highs Home Depot did well but not as well as Walmart was still doing well. This is Lowe’s over three years. It’s been choppy up and down, up and down. But it’s making higher lows. It’s trading above its major moving averages. And if we just focus on the right side, the last year, we’ve we’ve seen it come back and get to its 52 week high that’s constructive. We also see and I didn’t annotate this I apologize. What we see is a nice head and shoulders formation. And when you get that you can give yourself a targeted upside so if this stock does perform well, I suspect It will rally at least from the bottom of the head to the neckline. So some 180 to 225, we’re talking 45 points, I add that 45 to the 225 level, it’s already given us seven of those, I think it’s going to one run to all time highs, which would be right in line with its peer, and Walmart, and to probably go to 255 260. So I’d like to set up from a technical point of view, if it pulls back, watch the moving averages, watch the 50 day a rising 50 day that tends to act as support, as well as this consolidation area around 210. So when I talk to my clients, my customers here at Freedom, I want to give them levels of interest where they can get involved. I don’t give Buy Sell hold recommendations, but I look at risk reward setups. And that’s what I see.

Eric Chemi 25:48
You mentioned these risk rewards, what is the typical risk reward you’re looking for? When you put in a target exit and a stop loss? Are you looking at three to one, four to one, two to one, what’s the ratio you’re looking for?

Jay Woods 26:00
Okay, well, that depends on the individual’s risk tolerance. When I was a trader trading every two seconds down on the floor of the New York Stock Exchange, the setups were tight. If I’m a long term investor, which I’m trying to reach out three months, six months target, if not longer, I’ll give myself five to 10%. Because you don’t want to set your stops too close, because they could get triggered quickly. And then it reverses your initial thesis, you want to try to stick by as much as possible. And my initial thesis is, if it does break to the upside, it will run doesn’t mean your entry is going to be perfect. And it never goes lower than that, that that would be foolish to think that’s the case. So what your pain threshold is 5% loss 10% loss, because it this goes back to my basic, you know, school of thought day one on the trading floor, when you get into a trade four things can happen, you can have a small gain or small loss. And those are normal occurrences. Your goal is to have a big game, the one thing you can’t have happen is have a big loss. And what I do when I talk to my clients about what I did as a trader is I avoid the big loss if something breaks below where I feel comfortable, whether it’s 5% 10%, a trend change, anything like that a news event that fundamentally gets me out of the stock. I take my last I move on there 5000 Plus, you know, between stocks and ETFs, I think it’s over 7000 different vehicles, one can trade, don’t get married to one idea, have a game plan when you enter, and to me, that’s why it’s risk reward. So there is no spurt, you know, specific level. If I was a day trader, it’s going to be tighter. If I was long term trader, I want to believe in my thesis and set it 5% 10% below where I entered, and then live with that loss and then move on to something else. And believe me, I’ve taken lots of little losses over the day. But when you hit that in video, when you hit that alphabet, those are the things that reward you. And there’s no better feeling than that.

Eric Chemi 28:08
How do you know when to get out? Like I think about the NVIDIA people I think about, let’s say you’re an employee, right? You got stock in a much smaller number keeps going up. When do you get out? Right, right. The people that had crypto weigh in most people don’t let it ride all the way they usually sell it at that time.

Jay Woods 28:25
Yeah, it that is actually the hardest question to answer. Because when you’re in a winning trade, it’s euphoric. And you think you can go higher and go higher. I like to set goals. And once I buy a stock, and it does start going my way, here perfect examples in a video. My father owns NVIDIA, you know, that’s why I’m his favorite child. I got him in the stock. And I got them out before earnings, because you know, he had a tremendous gain. So third, you have to manage your risk, because if it didn’t go well, he could have dropped the 100 points instead of going up 100 points. And I want him to protect profits. So I’m always protecting profits. The old adage no one got poor by booking profits. Yes and no. It’s true. No one got poor. But yes, I also know the pain of selling something too early. I bought Google. I think I told you the story on the last last time we met on its IPO day paid a little under $100. for it. My goal was if this stock can make 50% I’m going to lock it in. It got up to 150 rather quickly. I locked in I was ecstatic until they sort of go to 200 300 and then become the stock it is now. Yes, I gotten back into stock and it’s part of my IRA and long term holdings. But yeah, you you want to beat yourself up if you sell too soon. But the bottom line is you made money and that’s what we’re here to do. We’re here to lock in profits. We’re here to preserve capital. We’re here to make money. If you have the stomach and you believe in something so strongly, then let it go. But don’t be fooled. Do not lock in some of your profits. If you have a double When the stock take take at least half off the table, you’re in it for free. Now, yes, you may look back and say I had the greatest thing. I am not one of those diamond hands kind of people. That’s not how I talk to my customers, clients relationships, I want to see them make money and save money. I’m not gonna say YOLO into Bitcoin and I know people that got into bitcoin early, and they’re still holding some of that initial investment. I’m very jealous of those people. But I made a little bit of money, I take it off the table. It’s conservative, it’s kind of boring, but it’s smart. It’s safe, and you live to, you know, get on to the next big thing.

Eric Chemi 30:40
Okay, that makes sense. So let’s you were going to show us Zscaler talk about that.

Jay Woods 30:43
Yeah, Z scalar. Here, I really I’m focused on this. I wasn’t focused on it too much. Coming into the week until I saw what happened in Palo Alto Networks, Palo Alto Networks was down 100 points, I believe 33% lost a third of its value based on some weak guidance. And what happened I don’t know if you can follow my cursor. But on the right side of the screen Zscaler was in a beautiful uptrend reversing much of its loss, going back from its 2020 to peak, a theme, a trend I see in a lot of stocks, and a lot of sectors coming back reversing. So Z scalar sold off dramatically to 60 to 200 gave back 60 points. We’re talking a dramatic hit, not based on its earnings, not based on its performance. And here’s a fun fact, I looked it up since they went public. They’ve never missed on their quarterly earnings. It’s it’s the guide that people will trade. So people, I suspect there’ll be, but they got punished for something. So one of their peers did the leader in cybersecurity in Palo Alto, it’s rebounding a little bit. Now let’s see, can it tell its own story and rebound and get back on this nice slow uptrend, and finally try to make a run at its 2022 highs. So that’s what their earnings will tell me. Technically, I think it was punished, you know, just for being in the wrong sector at the wrong time. But it’s also reaped the rewards of being in that sector. Now it can tell its own story next Friday when they report so that’s another one then I’m watching anything else chart was or should we shut the charts down the charts down but we should talk about the Russell? But

Eric Chemi 32:22
Pull it up then, let’s see a quick Russell. Let’s see a quick Russell

Jay Woods 32:24
Okay you want to see the way I’m gonna use the IWM for the Russell, that is the Russell 2000 ETF, a lot of people talk about, well, the small caps aren’t rallying, they’re not participating over the last three months, the small caps until this week, were up 15%, just like the s&p 500 over a three month span, just like the Dow Jones Industrial Average, a little less than the NASDAQ 100. The Russell have been participating they haven’t been participating this year. So when I look at the Russell, I see a mess is IWM. We’re up, we’re down, we’re up, we’re down, we’re up, we finally broke above this 197 level, which is basically Russell 2000 2000. We broke above it, we failed to stay above it. But when we came back when this index came back, it made a higher low, something changed. And when it changes like this, it held the key moving average. It’s not a line in the sand, but is a very key level of interest. And it rallied. It failed to make a new high. I didn’t like that it pulled back it tested the 50 day moving average it got below it for a day. Three days is what I want to see when I can sense something has changed. It rallied back above it. We have yet to make a new high in the Russell over the near term. On the IWM. I’m looking at 205. It’s trading at 201 as we we tape this, but it continues to make higher lows. I think the Russell is being held by no the Russell is being held back by higher for longer rates. That’s the most rate sensitive index there is. And we’ll watch the PCE we’ll watch the Fed but when they cut rates, I think you’re gonna see the Russell explode again. And when it moves, it can move quickly. So that’ll be the beneficiary of the rate cuts. It’s starting to happen 49% of the Russell is made up of three sectors and it’s not technology. Although this super macro semiconductor stock, I call it super happy fun stock because it trades like some of these crazy stocks we saw during the K Webb phenomenon years ago. That makes up almost 1.7% of the Russell haven’t seen his stock have that much of an impact on the Russell it since the.com era it will eventually graduate to a higher index. But that stock is a small portion. It’s industrials, its healthcare its financials, those three sectors are 49% of the rustle. Those three sectors are breaking out, the one part holding it back or the regional aspect of the financials. The regionals have been lagging they continue The lag they haven’t sold off again, which is good, but they haven’t let let the market live but the big cap financials not in the Russell, the Goldman’s the Morgans, the JP Morgan’s of the world, they’re doing extremely well, and they’re breaking out again. So I think the regionals will come back. And based on those three sectors, I think the rustle will have its day in the sun. And the good news is it stopped going down, and it stopped going down dramatically. It’s absorbing higher for longer. So the IWM is what I’m watching. I think the broadening is here, I think the market is head scratching that we can continue on this, you know, 16 out of 18 weeks up in the s&p 500. That’s remarkable. But let’s enjoy it. The one thing I learned from some of the old timers on the floor now I’m that old timer, which is frustrating is what are the hardest markets to predict what are the hardest markets to live through, not just as a trader, but as an analyst. And it’s not the rough bear markets that we lived through, it wasn’t the COVID market, where we had that ridiculous drawdown of 30%, in 30 days, it’s slow and steady bull markets. And that’s what we’re finally getting. It’s starting to slow, but we’re trending higher. And everyone’s looking for a reason to sell and looking for a reason for it to end. I think it’s just beginning when you look at the technicals, we finally made back almost 2023 losses 2024 we breaking out, and now we’ll slowly trend higher. It’s not a bad thing. You have a you know, a lot of economic data, a lot of headline risk, you know, in this election cycle, who knows what’s going to happen. But I do know, during election cycles, we do finish the year strong in an election year. And you know, we can go back and look at 2020. It’s a controversial election. And there was a lot of uncertainty around it. Guess what we did after the election, we rallied into the year we rally through January 6, January 8, we were making all time highs and something happened on January 6, that would have made me think the market would sell off. You go back to 2016, another contested election. The results were kind of shocking to some people market sold off pre market. But once the election was settled on that Wednesday, after the Tuesday, election day, the market trended higher and continued to trend higher, we usually finish election year stronger up 12% On average, and I suspect we may get some consolidation, some sideways action now. But when the dust settles, and we do sell off a little bit we correct those are normal things 5% retracements happened three times a year 10% retracements happen once a year on average. It wouldn’t shock me to see the s&p drop below 5000. Get back to 49 4800 If something was really to kind of go south in perspective, that’s where we were in November. Okay, that’s that’s not bad considering the the economic data points have not caused the Fed to cut rates. So I see positives. But how long this momentum continues? I’m a little on the fence. And if I had some nice profits, I would take it I look for another opportunity. I think they’re there and industrials, healthcare and financials.

Eric Chemi 38:06
So you would say in general, you’re bullish, but take profits where you can?

Jay Woods 38:13
I think so I do. I like I said, no one no one lost their shirt taking profits, I think you can rotate some of those profits. And we saw we saw it last a week ago Thursday. Well, very interesting day, it only happened once since 20 2211. Sectors basically define this market there 11 primary sectors, technology, communications, financials, etc. On Thursday of last week, 10 of 11 sectors were up one sector was down, it was technology. That was like shocking, because it doesn’t happen very often. That shows the strength shows people are putting money to work. They’re just getting out of some of the tech stocks. And they’re rotating into other sectors. And we saw that we saw it literally happened a week ago, Thursday. And based on the broadening out of this rally that is slowly occurring under the surface. I think I think there are places to stay within equities that may not be these hot tech stocks that will help you know keep this market stable for a little while. And then the end of the year. Maybe the tide will lift all boats, we have a nice, you know, rip your face off rally like we did last year. I don’t think it’s going to be too dramatic to the upside. But slow and steady always wins the race. And I think that’s where we are. That’s not a bad thing, especially for our 401 K’s or IRAs for the long haul the day trader, it gets a little frustrating, but I think the long picture the big picture, we’re in good shape for the next year or two.

Eric Chemi 39:37
Before we go can you pull up a treasury chart. You can pick few like twos fives or 10s. Show me a treasury chart. Tell me what you think they’re

Jay Woods 39:45
the 10 year yield. Basically when the 10 year rally to 5% which was the top you see in this chart. When it made fast moves, the market went the other way. What’s amazing about the resiliency of the market now Is since the lows are actually since the beginning of the year. The tenure continues to slowly climb higher rates have risen, and they’re doing so slowly. We’re at four and a quarter percent 4.248 to be exact right now in the 10. Year. That’s, you know, higher than it was back here in late December. So late December, the tenure bottom at 3.75%. Where was the s&p trading, s&p was trading at 4800. All right, tenure, rallying here, it has not had a big effect on the market as we’re trading above 5000. Yet the 10 year has rallied, something has changed. And to me, it’s the speed of the moves when you have a shock to the system. And the 10 year spikes moves quickly, the market will knee jerk react the other way, right now, the market is absorbing this narrative of higher for longer, it’s not being spooked by a tenure that is continuing to rise. And technically, it’s in a consolidation zone, I would not like to see it get back above this 4.3544 area, I don’t think it will, I think it will pause here. But watch the 10 year, I’m glad you brought it up. Because if we get a spike up again, then equities are going to correct and that’s not abnormal. That’s par for the course, what’s different this time is equities have rallied on a rally in the tenure, because the tenure has been gradual. And I liked that. Because the one thing I’ve learned in my 30 years with technology moves happen faster than ever, and is tough. You have to, you know, as a trader, set your limits, set it and forget it, as we say. And you know, because you never know how quickly move can come and hit a bid or take an offer. So this little chart, while it is trending higher, has not affected the equity market. And it’s kind of remarkable. I think that’s a story unto itself.

Eric Chemi 42:01
Very good. Very good. And then lastly, before we go, is there anything that you would just really stay away from? Is there. A country just like don’t touch this run as far away as possible.

Jay Woods 42:13
Yeah, the country globally, things are going well. You know, everyone will say we’ll stay away from China, I take the contrarian approach and take a shot there because when they get involved in their markets, it has a mean reversion possible. In China, Japan’s breaking out the 30 year highs, I wouldn’t avoid a market at 30 year highs, energy oil, it hasn’t really come back, I wouldn’t jump into that trade at all. Staples while they’re boring. Staples, utilities, they’re good smart, safe plays. If you get a little bearish, you may want to go there because it looks like they bottomed. But what I think they’ll do is they’ll kind of go sideways to slowly up. They’re never fun trades. But if you get a little skittish, and you think the tech run is over, you may want to allocate some assets into staples and utilities just to get that dividend play. And just to you know, manage any downside risks that you think could happen. But there aren’t many voids right now that I see out there. I think the market is really starting to click on most cylinders. And that’s that’s kind of impressive. And that’s a testament to the market now remember the markets not the economy, the economy is going to stumble, this soft landing narrative everyone’s on board. If you will never have a soft landing something will happen. I don’t know what it is. But that’s what makes coming to work every day so exciting. I don’t know what the next day is going to bring but I’m ready to adapt and adjust to it when it happens.

Eric Chemi 43:45
I love it. I love it Jay thank you so much appreciate you walking me through everything I feel I feel so much more informed about the markets and and how you’re seeing and really walking through the charts really made a big difference so thank you so much.

Jay Woods 43:55
Thank you for having me are always a pleasure

Eric Chemi 43:57
Thanks to our guest Jay woods for joining us here on Wealthion of course if you liked the episode, actually hit the like button or the subscribe button, comment, share do all those things that helped get helps get the content out there to more people so they can enjoy listen learn as well. And of course, for more information about all our shows all of our past episodes, you can go to Wealthion.com a lot of resources there you can see like Anthony Scaramucci show, you can submit questions for that it’s got the live q&a. If you’re trying to figure out hey, I need an investment. Help a professional, someone who can help me walk through this because I don’t want to do it myself. We’ve got a form that you can fill out we can connect you with people that we know that we have relationships with doesn’t cost anything just a free public service that we provide no commitment to something you can check out at Wealthion.com Thanks again to Jay Woods. I’m Eric Chemi. We’ll see you next time