00:13hey everyone and welcome to this Friday
00:15March 29th 2024 edition of your daily
00:19five I'm Tom bowy Chief Market
00:21strategist at earnings beats.com and
00:23it's certainly a pleasure to be with you
00:24here at the end of the first quarter of
00:272024 a lot of things have changed in 202
00:2924 but there's also a lot that's the
00:31same uh so let's take a look at some of
00:33the action and uh get an idea of where
00:37the market may be headed in the second
00:39quarter okay first chart I have for you
00:41here is a long chart long-term chart of
00:43the S&P 500 so it's on a weekly chart
00:46and I just want to show you the current
00:48channel that we are in so off of the
00:502009 bottom if you connect that low with
00:54the 2020 pandemic low that kind of sets
00:57the stage for the slope of this channel
01:00line or channnel uh that we're currently
01:03in um and if you take that line and you
01:05drag it up to the top so it's a same
01:08slope and kind of find an area where it
01:11connects most of the highs this is about
01:14where I would draw that line it's
01:17clearly you know catches this high in
01:192010 couple of highs in 2011 have a
01:23little bit of an overshoot here in 2014
01:25which is why I think the market pulled
01:27back for a bit then we've got the uh
01:312018 and then of course the highs that
01:33we saw at the end of 2021 where we
01:35definitely had a little bit of an
01:36overshoot uh which was one of the
01:38reasons why we ended up with a cyclical
01:422022 um but one thing I want you to
01:44notice from this channel line is that
01:46when we get up and we test this upper
01:48channel line that's when we've had our
01:51most significant pullbacks when we get
01:54there I mean if you look at almost every
01:56one of significant pullbacks they come
01:58from uh testing that upper channel line
02:01the only one that's any different really
02:02was the pandemic I don't know if anyone
02:05really saw maybe we saw the the risks
02:09coming but I don't know if anyone really
02:10knew how deep that selling might go but
02:13that ended up actually establishing this
02:15longer term channel line so that we can
02:17kind of keep track of um you know these
02:20highs and where we might see some
02:23weakness but each time we've gone up and
02:25we've hit this High we've either
02:27immediately gone back down like we did
02:29in 20 201 2011 uh 2015 into early 2016
02:34and then again 2018 very volatile
02:36through that trade War uh period where
02:39we had the pullback in late 2018 I think
02:42that was in the fourth quarter before we
02:44started rallying again but every one of
02:46these significant declines essentially
02:49other than the pandemic came from at the
02:52uh upper channel line or maybe near it
02:55if you look at where we are right now
02:57we're certainly climbing and we're
02:58getting closer to it but there's still
03:00plenty of room I mean if you look back
03:02to say I don't know maybe 2017 right in
03:05here it kind of looks like you know we
03:07were starting this big move right in
03:10here and we still had another three or
03:12four months before we even had any kind
03:14of a pullback so I think there's still
03:17room in this channel to the upside
03:19that's my primary point and trying to
03:21bet against a secular bull market as
03:23you've seen really for the past year and
03:25a half since the low in October of 2022
03:29bet against a secular bull market is
03:31big-time trouble I don't think it's a
03:33good idea I continue to say stay long I
03:36don't see a lot of other um signals that
03:39would corroborate any kind of a top at
03:41least from what I you know the signals
03:43that I look at so I think this this uh
03:46chart is just telling me stay
03:49long the S&P 500 we're going to take
03:51another different look this goes back
03:53since the start of the secular bull
03:55market the start of the secular bull
03:57market in my opinion was April of 20 13
04:00that's when we took out the
04:022207 high on the S&P 500 which took us
04:06to an all-time high until you get that
04:08all-time high I don't think you really
04:10know whether you're going to pull back
04:12or not like 2007 we went back we topped
04:15uh right about that 2,000 High you could
04:18have said well the 2003 low was the low
04:21going forward well it didn't turn out to
04:22be it was actually um it wasn't until uh
04:27the low in 2009 that we made you know
04:29finally started to make the move so
04:31anyway this chart is just showing you
04:33the S&P 500 during the secular bull
04:36market phase since we broke out to an
04:39all-time high and yes we've had periods
04:41of weakness along the time along this
04:43this time period but we've also had the
04:46majority uh moov to the upside I mean
04:49most of what you're looking at here is
04:50an uptrend and there have just been you
04:53know maybe a handful of times where
04:54we've seen significant selling um down
04:57below you see the vix and the volatility
05:00index is generally um correlated in
05:04inverse fashion with the S&P 500 when
05:07the S&P is going up typically the vix is
05:10going down so you see it here going up
05:12it's going down when we do have these
05:14draw Downs on the S&P 500 that's when we
05:17tend to see these big spikes on the vix
05:21so one might say well anytime you get a
05:23really high Vick that's what when you
05:25want to be in the market right makes
05:26sense here it's right at the low this
05:29Spike right at the low this bike right
05:31at the low but let me ask you a question
05:34If you're looking at this in real time
05:35how do you know which where the spike is
05:40end you don't know until it's already
05:42ended and it starts to reverse back to
05:44the the upside or the vix to the
05:46downside and the market back to the
05:47upside so it's really difficult because
05:50many of these vix tops I mean if you
05:51look at them some of them are at 20 some
05:53of them are 25 23 here's one at 40 these
06:00these are both up between 35 and 40 this
06:02one was at 80 90 that was during the
06:05pandemic here a couple tops coming in at
06:0840 here's multiple tops when the vix is
06:10at 35 that's when you're getting Market
06:13bottoms so my point is yes it's almost
06:16like um I'm not sure what the right word
06:20is but yeah I mean anytime you get the
06:22vix when you're looking back with
06:24hindsight you could say yeah this is
06:25where you should get in but again the
06:27point is you know how do you know as
06:30it's going up it's not going to top at
06:3232 so if you think it's going to be 32
06:34and you get in that move from 32 to 40
06:37on the vix is going to get really
06:39expensive when the vix is rising above
06:42the 20 Level that's when the market is
06:45taking its biggest hit the higher the
06:47vix goes the bigger the hit gets to the
06:50downside so you've got to time that vix
06:53perfectly but you know so they I think
06:55the overwhelming majority of folks
06:57thinks that when the vix is low that's
06:59bad for the market and when the vix is
07:01high that's good for the market let me
07:04show you something that might uh you
07:06know dissuade you from that way of
07:08thinking here this was an article I
07:10wrote back on November 26th uh 2023 and
07:14I said what are the chances of a market
07:16crash back then in November we were
07:18starting to make this run but there were
07:19a lot of pessimists out there thinking
07:21oh this can't last this is just a
07:23deadcat bounce we're going to have a big
07:25drop and I said at that time this
07:30says the chances of market crash are
07:32around zero and what I was looking at
07:35and I what I did and I've updated this
07:37and I'll show you this in just a minute
07:39but I went back and I looked at the S&P
07:41500 annualized return When the vix
07:45closes in different ranges so here
07:49you've got the vix over 20 anytime the
07:52vix closed above 20 I took into account
07:55how the S&P performed that day so all
07:59these readings when we're above 20 you
08:02would think you know most of these
08:03readings are coming in on down moves in
08:05the vix right I mean here almost this
08:08entire thing is down moves we have a few
08:10spikes but we're downtrending for the
08:13most part over here we're downtrending
08:15for the most part lower vixs means
08:17higher S&P 500 right look at the
08:20annualized return anytime the vix closes
08:24above 20 I have said I get out of the
08:26market I don't take any chances if you
08:29don't trade when the vix is above 20
08:32you'll miss every bare Market there's
08:35never been a bare Market when you've got
08:37the vix that stays below 20 every bare
08:39Market every major correction will have
08:42the vix go through 20 it's the way the
08:45market works so anybody who says oh the
08:48high vix that's the time to get in uh I
08:51would say that right there would suggest
08:54otherwise because again unless you know
08:57the exact time of that top and in real
09:00time good luck because the Market's
09:02going to be I mean when you get up to 80
09:04we're talking about the market going
09:05down 5% in a day everybody panicking
09:09you're going to calmly step in and buy
09:12how about if you bought two days too
09:14soon maybe when it was at 45 or 50 I can
09:17tell you the loss that you would have in
09:19incurred over the next few days just by
09:22missing that vix top it's not worth the
09:25risk of trying to find that vix top so
09:29anyhow unless you have other
09:31corroborating information when the vix
09:33is above 20 I personally I stay away
09:35from the market the vix between 17 and
09:3820 and then the vix between 13 and 17
09:41and then the vix below 13 I gave you an
09:44article I would suggest going back and
09:45reading it um because it gives you a
09:48little lot more information what I'm
09:49going to show you here though is that on
09:51this vix now I've updated it you'll see
09:54the number there is still minus
09:5836.748373 where that it was back in
10:00November of 2023 why because since
10:04November of 2023 we haven't had any vix
10:07readings above 20 so I haven't had to
10:09update anything now if you look at these
10:11other territories where we've had vix
10:16closes above this um uh 17 to 20 area or
10:21vix is between 13 and 17 or vix below 13
10:26this these last two are where most of
10:28the action has occurred since back in
10:30November but look at the difference of
10:33how the stock market trades depending on
10:35where the vix is vixs 20 or above the
10:39percentage days higher this is just the
10:41percentage of days that the S&P 500 goes
10:44up when the vix is above 20 44.81 per.
10:49so generally when the vix is above 20
10:53you're going to have down
10:55days and the annualized return ofus 36.7
10:597 4% doesn't compare very well to the
11:02average annual or average um annual
11:06return of the S&P over longterm I mean
11:09going back to 1950 of 9% so this is
11:13really bad action when the vix is above
11:1620 which is why when it goes above 20 I
11:18tell everyone be careful and that's
11:21usually there's going to be a lot of
11:23movement back and forth a lot of Traders
11:25really love that action normally if the
11:28vix is above 20 and it's triggering some
11:30kind of a bare Market cyclical bare
11:32Market if anything I would be
11:35considering shorts I would not be
11:37thinking about Longs at that point
11:39anyway when you drop down to the vix 17
11:41to 20 the odds of the market going
11:44higher with a vix that closes in that
11:47range jumped from 44.8% to
11:5851.04339 keep dropping into these
12:00various levels we closed the end of the
12:03first quarter with the vix at
12:051301 so just above 13 look at the 13 to
12:0917 range the percentage days higher now
12:26of the days are down since 19 1950 so
12:30when you've got a vix between 13 and 17
12:32now you've got a higher percentage that
12:34chance that the Market's going to go up
12:36and look at that annualized return now
12:433.97% one last thing on this chart for
12:45those of you that think that a really
12:47low vix reading means that you need to
12:51get out of the market the vix when the
12:53vix is at 13 or below every single day
12:56that it closes below 13 this is how it's
13:00traded S&P 500 annualized return is 48.3
13:055% percentage of days higher jumps up to
13:08about two out of every three 66.7 two%
13:13so when you see those low readings in
13:14the vix and you think oh I'm going to go
13:16all in on the short side just remember
13:19this conversation last two charts I have
13:22for you Number One banks anytime I
13:24didn't annotate this chart but you see
13:26the downtrend line here back in 2015
13:292016 when that was broken look at the
13:32move up in the vix or excuse me in the
13:35S&P uh banking area once you take out
13:38this downtrend this only lasted for
13:40about a quarter or so but again another
13:42big move to the upside this downtrend
13:45which was pretty severe back in 2020
13:47with the pandemic once that broke huge
13:50move to the upside um then we have this
13:53downtrend that's been going on now for
13:54about two years we broke out of it in
13:57October November of last year and we are
13:59clearly trending up above the 20-day
14:01moving average I mentioned Banks because
14:04I like banks in 2024 I think his rates
14:07uh begin to be lowered by the uh fed
14:10starting I think maybe sometime this
14:12summer sometime between June and August
14:14is when I think you'll probably start to
14:16see rates decline the actual um
14:19decreases to the F fed funds rate um I
14:22think that's only going to add to the
14:24strength in Banks and I think a lot of
14:25the reason for this movement right now
14:27is because banks are in anticipating
14:30what happens with banks when those
14:31short-term rates come down is that the
14:33yield uninverted um and turns back above
14:37zero and starts Rising that raises the
14:40spread the net interest margin for banks
14:43which is basically on normal companies
14:46like apple talking about you know
14:48raising revenues because that
14:51effectively is the product in banks that
14:53net interest margin um is the driver of
14:57the bottom line in a bank and so when
14:59you get the short-term rates coming back
15:01down fed funds and you got the 10-year
15:03treasury yield the longer uh end of the
15:06the yield curve more you know staying
15:08the same or maybe going down a little
15:10bit or maybe even going up a little bit
15:11who knows that spread is going to
15:14trigger in my opinion a very very strong
15:17banking um group and I think it's
15:19already started last thing I'll mention
15:22iwm versus the QQQ this is the small
15:25caps Russell 2000 versus the QQQ I
15:29actually use a userdefined index at
15:32stock charts and this is one of the
15:33features at stock charts I think is
15:35amazing for anybody that wants to do any
15:37research and we'll come back to this but
15:39if you go to the dashboard on stock
15:41charts and you go down here to uh went
15:45too far right here userdefined indexes
15:47you can create any kind of index you
15:49want you can track your weight um you
15:52can TR track your golf scores I mean you
15:53could track anything but I like to do
15:55research and track my research using
15:57these user defined indexes one of the
16:00things that I do is I look at the
16:03intraday action as opposed to just
16:05looking at the ratio between any two
16:09stocks or asset classes or whatever here
16:12you can see the iwm QQQ if we if we um
16:17include gaps and we're just looking at
16:19the ratio between these two the QQQ or
16:22excuse me the iwm has broken out
16:27QQQ um that's important obviously
16:30because now we can see that that
16:31rotation is starting to take more of a
16:33hold a lot more money rotating into the
16:36iwm but if you look at it from an
16:39intraday basis forget about the Gap I'm
16:42only looking at what happens from the
16:44opening bell to the closing bell because
16:46that's when most of the trading that's
16:47when accumulation is going to take place
16:49or distribution so I ignore the gaps
16:52which in my opinion is nothing more than
16:55manipulation and I'm focused entirely on
16:58what happens during the trading day and
17:00again I use a user defined index I do
17:02all my work on an Excel um spreadsheet
17:05and I get my data every day and I I um
17:08daily I take the daily totals I come up
17:11with and I post in that userdefined
17:12index and that's what this right here is
17:15tracking so I started at 100 we were
17:18going down down down look at the iwm
17:21it's intraday rotation versus the QQQ
17:25which is the NASDAQ 100 we are right now
17:28at the highest level that we have seen
17:31since back at the end of October when
17:33this rally began look at the move coming
17:35off the February low this is a lot of
17:38rotation that's taking place in the
17:40market under the surface that I don't
17:42think a lot of folks are understanding
17:45at this point so this is telling me that
17:47iwm perhaps is just getting started
17:51after being a lagered for a while we're
17:53seeing that money rotate under the
17:55surface into small caps and that could
17:58Bode really well for this group later
18:00this year and again that's the
18:02userdefined index that helps me track
18:04this so that's probably a feature many
18:05of you have never used I find it to be
18:07an incredibly helpful feature especially
18:09when I like to do my own research uh for
18:12myself and for all of our members over
18:13at earnings beats um one last thing I
18:16want to mention before we uh wrap this
18:18thing up if you go over to earnings
18:19beats.com I've got a four-part
18:22educational series completely free
18:24starting on Monday April 1st no April
18:28Fool's joke Monday April 1st 4:30 p.m.
18:31I'm going to do the first series on
18:33candlesticks so that's going to be
18:35coming up on Monday I'm going to teach
18:36you the basics of candlesticks and I'm
18:38also going to show you how I use
18:40candlesticks in my trading to better
18:42improve my reward to risk make more
18:44successful trades limit losses all of
18:47those things uh come out of
18:49understanding candlesticks so that'll be
18:51Monday the following week price volume
18:54then I'm going to look at divergences
18:55and finally on H the 22nd of April
18:58trading gaps and how I use uh these
19:01candlesticks to help me with trading
19:03gaps all of that coming up all you have
19:05to do click on this link it'll take you
19:07to a page where you can register uh with
19:10your name and email address and we will
19:12get you set up and I'll see you on
19:14Monday listen it's been an awesome uh
19:16time here on the your daily 5 I love
19:18doing these periodically and just giving
19:20you a quick update on what I'm seeing in
19:22the market uh thanks so much for tuning
19:24in make sure you like the video if you
19:26like the video and uh subscribe to stock
19:29charts Channel I'm sure they'll
19:30appreciate that have a great day
