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- [00:11]
Josh Brown
Welcome to the Compound and friends. All opinions expressed by Josh Brown, Michael.
- [00:15]
Steve Strazza
Batnik and their castmates are solely their.
- [00:17]
Josh Brown
Own opinions and do not reflect the opinion of Redholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Steve Straza, I see you bopping your head in the background.
- [00:48]
Steve Strazza
This is so fun. A little what? Tuesday afternoon live.
- [00:55]
Josh Brown
What are your thoughts? So I am excited to have you. I'm a big fan of yours. I would say you're like the me of all star charts. You're JC's counterpart. What's a better word? Consigliere. That's not the right word.
- [01:08]
Steve Strazza
It's nice to hear you say that because I've always like, you've inspired me over the years and the way that you do these shows and handle Josh, who's a big personality. I've taken a lot from what you do know dealing with jc. I just joked off air that like, we try to turn his mic down sometimes.
- [01:25]
Josh Brown
How's that working?
- [01:26]
Steve Strazza
It doesn't.
- [01:27]
Josh Brown
Doesn't. All right, thank you everybody for joining us. It is 5:00 on the east coast and we are about to have some fun. Josh is handling some business, so I brought in the next best thing, which is Steve Strasser from All Star Charts. If you're not following, Steve, following JC and the All Star Charts team, there's a lot of them. They produce, in my opinion, the best chart synthesis analysis in the entire business. And I'm excited to have you here today, Steve.
- [01:54]
Steve Strazza
And we have fun.
- [01:55]
Josh Brown
Thanks. We have lots of fun. Yeah, you have lots of fun. All right, you got it. Today's show is brought to you by the Compound Insider. If you want to know who's going to be on TCAF next week, all you have to do is sign up. You'll get the latest Compound content, a sneak peek onto who's on on Thursday. Like you can already know who's on Thursday, but you don't know if you're not a subscriber. So for a chance to win a signed copy of Josh's new book, you aren't supposed to see that. Sign up@the compoundnews.com subscribe. All right, Mr. Strasser, we're going to rewind the clock a little bit back to the third week of December. My dad sent me a newspaper article.
- [02:41]
Steve Strazza
Yeah.
- [02:42]
Josh Brown
Talking about the Dow Jones. The industrials had a 10 day losing streak Chart on, please, John, or picture on.
- [02:49]
Steve Strazza
When dad sends you things, do you pay extra close attention?
- [02:52]
Josh Brown
He really, he almost never ever does with the market. So I just thought this was kind of cute. But this was December 20th. Dow plunges more than 1100 points and marked its longest losing streak since 1974. John, we've got a chart for this. So listen, I don't you see like those 10 red candles in a row. I don't know why this happened. I can't explain it. I didn't try to explain it then, maybe I did. But it happened. And so everybody got pretty bearish. And before we get to where we are today, I want to have a Steve Strasser chart on to talk us through where we were. Not just the industrials, but the average S&P 500 stocks. So John, the second chart that Steve put on the bottom or the first.
- [03:38]
Steve Strazza
Chart, and if I could just speak up, like on streaks, quick, like we've back tested the streak data because it's interesting, right? And every now and then we'll get something where it's like, oh, you know, otherwise had it for the Dow Jones, what, like a month ago, right, where they had eight straight up weeks. And we've gone back, Mike, and we back tested it and there's really nothing there. Like you'll get a big win streak in a bull market, you'll get a big win streak in a bear market. There's really no signal, but it is a cool data point and does get a lot of clicks and headlines.
- [04:07]
Josh Brown
Okay, so it did that. But it wasn't just the Dow. Like look at this gorgeous chart that you have of the S and P overlaid with the average 52 week drawdown. I mean, we did get a pretty healthy correction. Like the average stock was in an 18% drawdown.
- [04:23]
Steve Strazza
Breath was bad. Breath was like at that point where you had to really start to worry as a, as a stock market bull, right? And it looked like things were rolling over. And then if you remember right, Friday two weeks ago, we had like a decision day where all of these downside resolutions and then they just came in the next Monday they reversed it. And then if you can, John, throw up that new highs chart. Not only did they reverse it at the index level, but breath is now definitely supporting it, right? This little reaction rally that we've seen, new highs are blowing out, new lows have more or less evaporated. So this was a big last week was a huge week for repairing some tactical damage.
- [05:06]
Josh Brown
And there was damage. Like you had a Chart that you shared of. Of stocks at a one month low. Like number of stocks at a one month low. And it's. It spiked. It was pretty ugly. There we go. It was pretty ugly.
- [05:16]
Steve Strazza
That's a new cycle high. Right? So that's kind of what I'm talking about. Like this is, this is one of those charts where we were looking at a week and a half ago and being like, oh, Mike Hurley, who is basically like, he's the authority on breath analysis for us CMT folks. He calls it a fall day. And a fall day is like the first shot across the bow where you have some really negative, nasty breath. Big price levels are breaking. And it felt that way Friday, a week and a half ago. Stepped in again. Like they've done over and over and over again.
- [05:45]
Josh Brown
Yeah, it's. We've. How many bullish wipeouts have we had over the last decade?
- [05:50]
Steve Strazza
Yeah, right. The best pattern for the last, I don't know, year and a half is the top. But not betting on the top, completing, betting on the top, failing. You get all of these topping patterns and they fail and they reverse. And those have been the best entries for this whole bull market. Betting on the failure of the market, reversing.
- [06:12]
Josh Brown
I love it. I love it. So, all right, so coming off the back of that 10 day losing streak that got all the headlines. And it wasn't just a losing streak, as we just mentioned. It was, it was legitimate. Like the breadth was. Was really shitty. Jason, get for that sentiment trader just tweeted last week a week for the history books. The S&P 500 just strung together five straight days with more than 68% of its stocks advancing, which I think happened today as well. That ties the record going back to 1928.
- [06:42]
Steve Strazza
We're close to one of those periods where you're not going to want to go on Twitter, right? Because everything on Twitter is going to be about the breath thrust.
- [06:50]
Josh Brown
What do you mean you're actually wanting on Twitter?
- [06:52]
Steve Strazza
We're close to a Whaley thrust too.
- [06:54]
Josh Brown
A Whaley thrust?
- [06:56]
Steve Strazza
Yeah. Right. So we have all these cute names as technicians, right? 68%. 70. Whaley is. Hold on, I got it right here. It's something like 73.58%. Right. So we get really into the numbers here with our breath thrust. Here's the thing to know about market internals and initiation readings when they're worth paying attention to. The whole world knows it's like sentiment, right? Like everyone's very loud about it. And my breath indicator is firing and your breath Indicator is firing and Whaley's is firing and Mike Hurley's is firing, and everybody is on the same page. This was a huge initiation thrust. I'm talking about, like May of 2020, right off of the pandemic lows, third quarter, October of 2023. These huge breath readings where we all agree and all the indicators line up something about 68% of stocks increase. No, that's tough. That's tough. He's curve fitting that data. And it's okay, right? Because we have had like five consecutive.
- [07:53]
Josh Brown
Sure, yeah.
- [07:53]
Steve Strazza
Where we're up in the high 60s. So, like. So I get it. But it's not.
- [07:58]
Josh Brown
So when you. When you see strong breadth. I mean, to quote the great Mr. Peretz, how could an overwhelming amount of demand for stocks be bearish?
- [08:08]
Steve Strazza
No, it's great. And coming off a lot of these breath thrust indicators too, Mike, they calculate where we came from, which is very important. Right. There's context built into them. So I think it's the Whaley. It calculates when you come from, say.
- [08:22]
Josh Brown
Whaley one more time.
- [08:23]
Steve Strazza
Yeah, Whaley's good to an extreme high. Right. And it's that corrective mode where the market comes in and basically repairs the damage of some sort of corrective phase that you get some really strong readings.
- [08:34]
Josh Brown
What are you seeing inside the Russell 2000 or the S&P600? Because we're talking about the big boys now, but they haven't made a new high in a long time. I think it's been like 840 days since the Russell 2000 made a new all time high. It's like the third longest streak ever. Are we seeing some. Some strong internals there as well?
- [08:51]
Steve Strazza
I think, like, every now and then we're lucky and we get like a really clear and clean level that we can trade against. And that's the story with small caps right now. Like, there's no reason to overcomplicate it. I wish I brought a chart, but, like, you could just draw a horizontal line at, I don't know, 240.
- [09:06]
Josh Brown
Yeah, right.
- [09:07]
Steve Strazza
Those highs from late 2020, where we also peaked out and rolled over a month or two ago now, that's it. Right? So if we take out those pivot highs and those prior cycle highs, it's go time. And that's probably one of, like, the best bullish signals we can get for the broader market.
- [09:23]
Josh Brown
But why do people get scared when we. When we talk bullish, when we say it's go time? Like, are people afraid to make money in a bull Market.
- [09:29]
Steve Strazza
Well, what's crazy is that there's a lot of that talk. And then we talk about this chart of the Russell 2000 that still has not broken out. So most stocks, the s and P500, you know, this doesn't do a very good job at showing us what most stocks are doing. It's showing us what 10 stocks, maybe the 50 largest stocks are doing. Right? And it's a great representation of most people's portfolios and that's why we talk so much about it. So I think that's great. However, if you want to know how like most stocks, the average stock in the market is doing, you want to look at the Russell 2000 or the value line geometric, they're going to show you those charts are going to show you what the average investor is doing in one of his investments and really haven't taken out the prior cycle highs yet. I think if you paint it that way, we could just be getting started. You could paint a bullish picture that we're in the third or fourth inning with the chart of the Russell 2000.
- [10:19]
Josh Brown
Steve, I should have done this at the top of the show. 30 seconds. Who the hell are you? How'd you get here? Because you weren't always a technician.
- [10:25]
Steve Strazza
No, actually I started in the big four. I have an accounting background, so my early days was all fundamentals. Right. So it's been, it's been a really nice ride being able to take that fundamental background. I started out as a CPA working for Deloitte and Auditing, you know, public company financials. And now moving into technicals, it's been a blast. So I try to pair the two together, you know.
- [10:48]
Josh Brown
All right, so we're going to move on to. So anyway, to put a bow on this.
- [10:52]
Steve Strazza
Go ahead, you want it? So this is like we've been tracking, you know, this. You read our note. We've been tracking these insider filings hardcore for, I don't know, four or five years now. And we've learned a lot. We've back tested a ton. Nancy Pelosi is really good. 95 of the headlines about Nancy Pelosi's insider trading are not real. But it's not to say that she's not great. She's beating the market. Uh, it's fantastic. So she just filed and I feel like this is the second coming of Warren Buffett for Apple. She just sold $8 million worth of Apple stock. She's a permeable Mike. She's only getting long. She buys like deep in the money. Call Options on all the magnificent seven names. She's nailed all of these trades. She was in Nvidia way before people were talking about AI many, many years ago. She's dumping Apple. It's not her full stake, but It's a lot. $8 million.
- [11:43]
Josh Brown
So did they not pass a law or were they just talking about passing a law that these people can anymore. It is such utter garbage that they're allowed to trade.
- [11:52]
Steve Strazza
I couldn't. I could not disagree with you more. I think that these people are underpaid in the most disgusting way. We want the best and smartest people to run for public office and to run our country and to run our states. Right. How can you incentivize good people to run if first of all, what are they paid? $125,000 to be a senator, and now you're going to tell them you can't invest in the stock market?
- [12:16]
Josh Brown
I don't think that they should be able to trade off of information that the rest of us have. And dude, it is a golden ticket to riches. Outside of their congressional duties. Come on.
- [12:25]
Steve Strazza
They're not supposed to do those things, though.
- [12:27]
Josh Brown
Come on. All right. But I do appreciate the disagreement, but let me ask you this. Do we know where this is happening? Is this her advisor? Is she literally doing these trades? Or does she just have a phenomenal advisor who's a terrific stock picker? I found it hard believe that she's actually logging on to her Schwab account and doing anything. It sounds insane.
- [12:53]
Steve Strazza
No, it's a great question.
- [12:54]
Josh Brown
Who's her. Who's her guy or girl? Like that's the real question.
- [12:57]
Steve Strazza
Well, we can only speculate, right? And what. What people will tell you is that it's her husband. Is his name Paul? I think it's Paul.
- [13:05]
Josh Brown
Well, Paul's got the alpha. What does he do?
- [13:07]
Steve Strazza
He gets all the credit. He gets all the credit. But we. We have no idea. What I will say is that they. They report these filings and they can give us a lot of detail or a little detail like, for example, like the range for her Apple sale based on the filing requirements. She could have told us it was 5 million and 25 million. That extra in the description. She tells us 32,000 shares. She doesn't have to do that. So her filings are extra descriptive in a way where we can like go back and really trace how she does. And that's fantastic because most of the political people who file these things, they don't give us that level of detail.
- [13:44]
Josh Brown
I love how you Say they're underpaid and that she sold $8 million worth of Apple partial stake.
- [13:49]
Steve Strazza
I mean, she's one of the wealthier ones. I don't know what you want me to tell you. She's done well, but do we have.
- [13:54]
Josh Brown
There must be like a composite or like data beyond. Beyond Pelosi. Like do these people outperform or is she just the lucky one or the skill?
- [14:02]
Steve Strazza
So, so last year, if you just do it in the most crude way, and there's no perfect way to do this, right, so they have like these trackers, like the Pelosi trackers, they'll get you close. It's an estimate though, right? Doubled the performance of the market. She was up like 48% last year. So, dude, she's an extra cap weighted index is what she's running. She was heavy in Nvidia, Microsoft, Apple. She's got Palo Alto. And then what stood out about this one? Some new names. Like she's, she's all in on these megatrends and she's usually, usually early. Vistra. And this AI wait, is Vistra, that's.
- [14:36]
Josh Brown
The giant utility winner.
- [14:37]
Steve Strazza
Yeah, Vistra, that's vst, right? It's like, it's like Constellation, right? One of the best performers in the S&P 500 last year, I believe. And then look at Tempest T E.
- [14:46]
Josh Brown
M. I don't even know that name.
- [14:48]
Steve Strazza
She's YOLO and AI Stocks.
- [14:50]
Josh Brown
Tempest What? Okay, Tempest, what is that? Is that a small company?
- [14:54]
Steve Strazza
Tempest. It's something that Nancy just bought is what it is to me.
- [14:58]
Josh Brown
Okay, so it's up 35% today.
- [15:00]
Steve Strazza
And that was on this news. So to be clear. Yeah. Why do we follow these filings every day? I mean, you get a pop like that. The stock's up 37% on the fact that Nancy's buying call options.
- [15:12]
Josh Brown
It is amazing how stocks trend. And we know this and it's still hard to make money off it because idiots like me get scared to make money. So like Vistra, this thing just made a new all time high today. And we spoke about this, like us know nothings. We spoke about this like, I don't know, six months ago, maybe longer.
- [15:28]
Steve Strazza
That's a utility stock. Yeah, it's utility.
- [15:33]
Josh Brown
Unbelievable. All right, let's move on to a big story, at least in our world. Nate Anderson at Hindenburg is calling it quits and not sure if anything could more perfectly capture the current zeitgeist than a short seller saying. And Hindenburg was not their shtick. Was not like, oh, this Company's overvalued. Their shtick was this company is committing fraud, and there is zero.
- [16:04]
Steve Strazza
And they were great at it. They were literally the best in the business.
- [16:07]
Josh Brown
And so the weekend of Trump coin coinciding with. All right, I guess fraud doesn't matter. I mean, it's pretty poetic. It's like, really Chef's Kiss stuff.
- [16:17]
Steve Strazza
They're forensic accounting experts, some of the best short sellers in the game. And I think this is all you need to know about sentiment right now. When was it that Chanos shut down? Two, two, three years ago. Right. They're throwing like, Andrew left in jail.
- [16:31]
Josh Brown
Yeah.
- [16:32]
Steve Strazza
Like short sellers cannot survive in this market. Elon Musk, who's maybe the most public opponent of short selling, now has the best seat in the White House.
- [16:42]
Josh Brown
It doesn't work.
- [16:46]
Steve Strazza
The president just launched a meme coin. Like, it's. I would imagine, a boardroom meeting or, you know, a company like this or Citron, and they're sitting around like, guys, this is just not a good. It's not a good idea anymore.
- [16:58]
Josh Brown
It's a horrible business. I mean, a company can announce that they're committing fraud and go up 50% that day. So it's. It's not a viable business model.
- [17:07]
Steve Strazza
I will say, at a certain point, though, you start to miss these companies because they do call out and expose market inefficiencies.
- [17:15]
Josh Brown
Oh, I think that the short sellers play a vital role because, again, this guy is not shorting expensive companies. That's not what he's doing. He's like, no, no, no. This matter of fact, he said nearly 100. So he wrote a letter, like a going away letter. He said nearly 100 individuals have been charged civilly or criminally by regulators, at least in part through our work, including billionaires and oligarchs, we shook some empires that we felt needed shaking.
- [17:37]
Steve Strazza
Yeah, yeah.
- [17:39]
Josh Brown
Chart on. So I forget who put this together. So my apologies. Oh, there we go. Mint research basis. Hindenburg. Okay.
- [17:47]
Steve Strazza
They almost never miss. Look at how little green there is on here.
- [17:51]
Josh Brown
This is going back to 2017. 51 of 63 companies now trade at a lower price compared to before. Hindenburg put on a note on them giving Hindenburg success rate of 81%. And if you think about the type of market that we've been in since then, it's been a bull market. And this, I mean, this is an unbelievable track record. So I think it's a great loss for the investing community because you need people like this, because otherwise companies start to get really brazen. If there's nobody keeping them in check.
- [18:16]
Steve Strazza
Yeah, no, you need some good forensics. And I come out about short sellers and I'm typically on the other side of this.
- [18:23]
Josh Brown
Like, meaning what?
- [18:24]
Steve Strazza
It's hard for me to understand, like a short seller's life, right? Like, you zoom out on the chart of the s and P500 and I just wonder, like, why would you want to be in that business?
- [18:34]
Josh Brown
Right.
- [18:34]
Steve Strazza
Trying to bet against the market. So it's tough for me. And usually I come out and I'm like, these guys are. Table. These were some of the good guys, Hindenburg, really the best in the business. And they'll be missed. New shops will keep coming up. Right. And the new way they're doing it is they're combining the media company with the investment company. It's a whole liability thing and it's a whole jumping through all these hoops legally. But they're trying to figure out a way that basically what they were doing at Citron would not be illegal anymore.
- [19:03]
Josh Brown
Do you guys do anything on the short side?
- [19:06]
Steve Strazza
No, we have one scan, so we'll put out maybe 10 short setups a year, but very little, especially in the bull market. Sometimes we'll just kill it.
- [19:17]
Josh Brown
Okay. Okay. All right. So we got some, some moving and shaking out of the White House today. Today was his first day in office. How does that work? Is yesterday's first day.
- [19:29]
Steve Strazza
So I don't know, like he started doing things yesterday. So. And I'm trying to pay attention. We had like a market holiday. So I'm like catching up on work, reading emails and I have it on in the background, I think, anyway, almost 100 executive actions, right? But think about all the talk, like people say, listen to, don't listen to what Trump says. Watch what he does. Right? All of the talk about terrorists, all of the scary rhetoric around China, 100 executive actions, I think 68 yesterday, 48 executive actions, not a single tariff.
- [20:02]
Josh Brown
Not yet.
- [20:04]
Steve Strazza
So they're saying it's going to be February 1st. The point remains that he comes out and he says there's going to be these monster tariffs. There's going to be a ton of them. We're going to impose them on every country and then it's going to be a watered down version of that. So the market might react based on what is said, but then comes out here and it's completely different. And then if you think about China and the situation, China was a huge winner this weekend. Look at what happened with TikTok. They're going to strike a Huge deal. I think the United States and China and Mike, some of these tech companies out there, they're almost as big as the tech companies in the United States and they're trading at single digit price to earnings multiples. These are the best tech companies in the world outside of our tech companies in the United States. You'll never get them this cheap.
- [20:50]
Josh Brown
JC was talking about being long China last week. You guys are in on the trade. How are you guys playing it?
- [20:57]
Steve Strazza
Sentiment couldn't be better. Right. It's one of those situations where we're just like looking at this rounding bottom. That's still playing out. Right. We're still in a sideways trendless mode, but we're building. It's clearly an accumulation phase. And sentiment, the kind of sentiment that we're seeing at these lows can't get worse. This is megatrend sentiment.
- [21:16]
Josh Brown
I try, I tried twice, I tried twice to, to nibble, but I'm. When I. So when I try and buy bottoms, I'm out really quickly.
- [21:22]
Steve Strazza
Yeah, but you're like buying call options in JD no, no, no, no, no, no.
- [21:26]
Josh Brown
I don't. No options for me. I'm a common man. Common stock.
- [21:30]
Steve Strazza
I think the big dynamic and the big story here is that emerging market money managers ran from China. They fled from Chinese equities and into. And the prices and the valuations of these Indian equities now have been really bid up and there's a ton of money just sitting there on the sidelines waiting to be redeployed back into China.
- [21:49]
Josh Brown
I think. When to get back in.
- [21:51]
Steve Strazza
Yeah, I think China is the biggest story of this year. Everybody's going to chase it. Two years from now everybody's going to be talking about it.
- [21:57]
Josh Brown
Yeah, could be. Right. So how do you like, let's assume that there's going to be some executive actions, executive orders, I don't know what they're called on tariffs. And the market's going to be volatile.
- [22:08]
Steve Strazza
Yeah.
- [22:10]
Josh Brown
How do you like stay sober throughout the volatility? Do you use weekly charts? Like how do you recommend people come down a little bit?
- [22:17]
Steve Strazza
No, you use the trend. Right. So it's the same way that you would approach earnings every quarter. Right. You trust the underlying trend and then you just know that if you do that over and over and over again, you're going to be right and get a 20 or 30% upside reaction more than you're going to get that 20% downside reaction.
- [22:33]
Josh Brown
Why? Because surprises usually happen in the direction of the underlying trend.
- [22:36]
Steve Strazza
Absolutely right. All news events like, reactions to all news and headlines tend to occur in the direction of the underlying.
- [22:42]
Josh Brown
Almost always. Not always, of course, but like the overwhelming majority of the time.
- [22:45]
Steve Strazza
It's a general rule.
- [22:46]
Josh Brown
Right.
- [22:47]
Steve Strazza
So it's wrong all the time. I was in. What was it? Lovesac. They make couches.
- [22:51]
Josh Brown
Love LoveSac. Is that a stock or a store?
- [22:54]
Steve Strazza
Hold up. Love. This perfect base. Right.
- [22:57]
Josh Brown
What's the ticker?
- [22:58]
Steve Strazza
Love.
- [22:58]
Josh Brown
L O V E. L O V E. How is that not taken? All right. The Love Sack Company.
- [23:04]
Steve Strazza
You don't know about these couches?
- [23:06]
Josh Brown
No. This chart doesn't look good.
- [23:08]
Steve Strazza
Right. But look at it and then zoom out. Like two months ago. Right. So I bought this trend reversal pattern and then it gets slammed back in the box. That's going to happen. All right.
- [23:17]
Josh Brown
That's actually a great example because that looks like a clean breakout. And it wasn't. That happens.
- [23:22]
Steve Strazza
It was a good breakout. So you buy that and you trust that the earnings reactions that follow will occur in the direction of the underlying trend.
- [23:28]
Josh Brown
Yeah.
- [23:28]
Steve Strazza
And every now and then they're not going to. Right. And you're going to get slammed. You're going to lose 20%.
- [23:32]
Josh Brown
When I try and buy bottoms, which I can't help it. I just. It's in my nature. Like, I. I'm not proud of it. I know it's not the right thing to do, but at least to my credit, I'm. I'm out. I'm out quick. If it fails, I'm out. And I position. Size it properly. I put on small positions and you.
- [23:45]
Steve Strazza
And you sell quick too, right?
- [23:47]
Josh Brown
I sell too quickly. I'm. I'm out like 30%.
- [23:50]
Steve Strazza
You bought some of these bottoms over the years.
- [23:53]
Josh Brown
I nailed a lot of them.
- [23:55]
Steve Strazza
Yeah, but like, you wrote it, like 20%.
- [23:57]
Josh Brown
No, no, no. Netflix and Facebook, I was up 100% on.
- [24:00]
Steve Strazza
That's solid.
- [24:01]
Josh Brown
Yeah, but Netflix, I sold too early. I can't help it. It's okay. I'm not mad. Stock is up 10% in the after hours, by the way. They're raising the prices again. I kind of am mad that I sold Netflix. Who am I kidding? What a winner.
- [24:14]
Steve Strazza
You make money in the market. You did nothing wrong.
- [24:17]
Josh Brown
True, true, true, true. Okay, so I've been pointing to this chart as the most bullish chart in the world. I've called this chart out many times, and what we're looking at is the equal weight consumer discretionary market divided by the equal weight consumer staples market. And maybe I'm wrong. I want to get your take on this. So next Chart, please. So Todd Sohn did this great chart that shows consumer staples as a percentage of the Overall S&P 500. And it's smaller than Apple and Nvidia. So I guess my question to you is, do consumer staples matter at all? Should we. Should. Do they count for anything?
- [24:55]
Steve Strazza
And yeah, it's a good way to ask the question because, well, my first thought was, isn't Apple a consumer staple?
- [25:05]
Josh Brown
No, Apple is a tech company. You mean literally, is it a staple?
- [25:10]
Steve Strazza
Like the majority of their revenues come from iPhone sales? Yeah, your phone breaks. What do you do? Do you shop for a new one? No, no, it's an emergency. You run and go buy one. Yeah, it's a staple, dude.
- [25:25]
Josh Brown
Yeah, but you know my point? But like, like, do the McDonald's and Colgate's and Kimberly Clark's of the world, do they matter as a sentiment gauge at all? Or they just. Or is that just like a moment in time? And this is gonna sound really stupid in a few years.
- [25:39]
Steve Strazza
I think that the classifications have changed. I think that eventually technology won't be a sector because tech will be so pervasive. Right. Tech. Tech should be in every sector. Right. I think they eventually remove it. So I think it is like a sign of the times.
- [25:52]
Josh Brown
So I still do. I still do like this chart as a gauge, right? Because in a bear market, like this is going to reverse real quickly. But these are the top 10 names. These are huge companies. These are top 10 names in XLP, Costco, Walmart, Proctor, Coca Cola, Pepsi, Philip Morris, Colgate, Altria, Mondelez, and Target. These are gigantic companies.
- [26:14]
Steve Strazza
And I don't know what Staples do in the future, but this sector going back a century, you can go back 100 years. From a risk appetite perspective, it's hard to get better data from the broader market than from consumer staples. In other words, when you look at Staples on a relative basis, they call every bull and bear market in advance. It's literally one of the best indicators that we have as technicians. So it's one of those things, Mike, where I think we trust it until it stops working. And it hasn't stopped working. It's been great. Just the past two cycles.
- [26:47]
Josh Brown
I mean, it's been great confirmation that we're still in a bull market. It hasn't. There hasn't been a single hiccup in the past recently.
- [26:52]
Steve Strazza
They're making new relative lows right now, which is one of those things that we look at and like, check that box when the market's making new highs.
- [26:59]
Josh Brown
Okay. All right, let's move on for the last second to last topic of the day.
- [27:05]
Steve Strazza
Yeah. This is Davos. Have you been paying attention to Davos?
- [27:10]
Josh Brown
I have not.
- [27:11]
Steve Strazza
So if I told you a couple years ago that Brian Armstrong would be at Davos, which crazy, right?
- [27:20]
Josh Brown
Yeah.
- [27:20]
Steve Strazza
Easy, boy. How times have changed, right? And maybe a new president makes a big difference. I don't know. It doesn't really matter to me, but it seems like this is crypto's moment. Brian Armstrong is there. He's doing interviews, giving speeches and whatnot. They were asking Brian Moynihan this morning.
- [27:38]
Josh Brown
I have a clip of that. We're playing that in a second.
- [27:40]
Steve Strazza
Oh, you got that clip?
- [27:41]
Josh Brown
Yeah. So let me show you this. I made a meme. I made a meme. You've seen Gladiator.
- [27:48]
Steve Strazza
Love it.
- [27:48]
Josh Brown
All right. Meme on. Yes. So for those who are listening, it's Maximus talking to Proximo and he says, satoshi Nakamoto had a vision for bitcoin Proximo. It's not. This is not it. And then he goes and kills some other people.
- [28:06]
Steve Strazza
So explain. Explain yourself. What does that mean?
- [28:11]
Josh Brown
So I don't think, first of all, I think that the stuff over the weekend with Trump coin and Melania is just the height of grifterism. It's the grossest shit I've ever seen. And I don't think crypto people are embracing this. I think most people are like, whoa, that's not what we're doing here. I don't think that they're embracing it now. I'm sure some people are, but me, this is really nasty. And the. The dude who did the pastor after the inauguration. Let's just. Just watch this clip. Stephen, tell me if this is what you think bitcoin is about. I need you to do me a favor right now. I need you to go buy the official Lorenzo Se coin. I want you to be able to see politics become manifest, not just in a way where we're praying over political.
- [28:53]
Steve Strazza
Gatherings, but what we're saying.
- [28:56]
Josh Brown
Us become the hands and the feet of the Lord Jesus Christ. Would you help me? Would you help us in this endeavor? Would you go and purchase the coin? No, I will not, sir. Charlotte, off. I can't take it. I can't take it.
- [29:07]
Steve Strazza
Disgusting. No, it's absolutely. It's terrible. And I couldn't agree more with you. This is a new all time high in terms of grift. But should anyone be surprised. How is this different, Mike, than like the watches that he pedals on his website? We know who this man is.
- [29:23]
Josh Brown
I know, man.
- [29:24]
Steve Strazza
I don't understand what the problem is for most people. Like, first of all, he wants to be the first crypto president of all time. He better have a meme coin.
- [29:30]
Josh Brown
Dude, come on. 24 hours for inauguration, it's so gnarly. And he already cashed out $500 million because, like, sure, why not? Who's going to stop him? All right, so let's, let's.
- [29:41]
Steve Strazza
No, but hold on. Can we agree it is unequivocally bullish for crypto as an asset class? This is the stuff we're talking about.
- [29:51]
Josh Brown
I don't think the meme coin pulls crypto forward. I don't. I think that there are a million other things like this. Go ahead.
- [29:58]
Steve Strazza
I think the Solana Network pulls it forward and everything cool and exciting and innovative that's happened in crypto over the past few years happens on Solana. And this was just another example of that.
- [30:07]
Josh Brown
Okay.
- [30:07]
Steve Strazza
I think if there's any winner, it's Solana.
- [30:09]
Josh Brown
Okay. So you mentioned Brian Moynihan, the CEO at bank of America, talking to Andrew Voss Sorkin about crypto. John, if you please.
- [30:20]
Steve Strazza
On crypto, we just had Brian Armstrong.
- [30:22]
Josh Brown
Sitting in the seat that you were.
- [30:23]
Steve Strazza
In and obviously there's a lot of excitement about crypto.
- [30:26]
Josh Brown
The banking business for the most part.
- [30:27]
Steve Strazza
Has stayed away from crypto. Given President Trump's full throated support for.
- [30:34]
Josh Brown
Crypto, do you imagine bank of America is going to be full, full on in the crypto business? If we have this conversation 12 months, 24 months from now, I'd separate out this sort of.
- [30:48]
Steve Strazza
Crypto versus stable assets and digital movement of money. Because we already move the vast, vast.
- [30:54]
Josh Brown
Majority of our money digitally.
- [30:55]
Steve Strazza
Our consumers do, our companies do. And so the question is, what's the business practice that you have to have to move another type of currency? So if they, if the rules come.
- [31:06]
Josh Brown
In and make it a real thing.
- [31:07]
Steve Strazza
That you can actually do business with, you will find that the banking system will come in hard on the transactional.
- [31:12]
Josh Brown
Side of it, non, anonymous, transactional, verified, et cetera.
- [31:17]
Steve Strazza
Because we have to. Because it's just another way our customers are going to. The other thing we were talking about was the possibility.
- [31:21]
Josh Brown
Video off. This is great. This is bullish.
- [31:24]
Steve Strazza
Now they're separating the digital from everything else.
- [31:28]
Josh Brown
So this is bullish. We also got an announcement today for immediate release. SEC Crypto 2.0 Acting Chairman Mark Ayuta announces formation of new crypto task force. So that's going to be led by Hester Pierce, she will lead the task force to develop a comprehensive and clear regulatory framework for crypto assets. So they're all in. I think the grifting meme coin stuff is gross. I cannot be convinced otherwise. But I think Howard. I think Howard Linson had a great analogy for this. He said people did not stop going west just because they were killed along the way. Like, we're going there and this is a sideshow, but it's coming.
- [32:11]
Steve Strazza
And. And Mike, the big banks and financial institutions, they've been ready. They've been preparing for this. Did you see the look on his face? He's like, we have hundreds of patents in crypto and blockchain. Like, they've been sitting back and waiting. I think now this is the year where all of these things happen very slowly and then all at once. This is the year now where you log into your Fidelity account or your Schwab account, and it's all the same.
- [32:33]
Josh Brown
Right.
- [32:33]
Steve Strazza
Coinbase links right to it. And it's seamless and it's fantastic. And there's no reason why this shouldn't be implemented, like, super fast, because they've seen this coming from miles, miles and miles away.
- [32:44]
Josh Brown
So given that most crypto assets are at all time highs, I'm guessing you guys are bullish on the prices.
- [32:49]
Steve Strazza
First, Most of them are not. Like, we talk about breath in the stock market. It's fantastic. Breath is still pretty. Pretty awful in crypto.
- [32:58]
Josh Brown
Well, but I think most people are accessing it through bitcoin. Eth Solana. The big ones.
- [33:02]
Steve Strazza
You look at the big ones. Just like we focus on the mag sevens, right? You focus on the big ones. If the big boys are moving in the right direction, that's typically the right side.
- [33:08]
Josh Brown
Do you personally play around in the meme coins? Are you on Phantom buying farcoin?
- [33:12]
Steve Strazza
No. No. So, like, JC was, like, mocking me today. He was literally not. No, he, like, called me to make fun of me this morning for not buying fart coin. I didn't buy Trump coin on Friday or Saturday.
- [33:21]
Josh Brown
Come on, man. How much time do you have in the day, dude?
- [33:24]
Steve Strazza
I wouldn't know how to buy it is the truth. Like, I don't dabble. I'm on Coinbase. I'm on Binance. Like, I don't. I don't kucoin. I don't. It's not.
- [33:31]
Josh Brown
Okay, okay. All right. I. I thought of a new segment for you, Steve. It's called Is this the bottom? All right.
- [33:39]
Steve Strazza
Oh.
- [33:40]
Josh Brown
So we're gonna run through some charts. I brought 1, 2 3, 4.
- [33:43]
Steve Strazza
You brought me charts?
- [33:44]
Josh Brown
I brought you five charts.
- [33:45]
Steve Strazza
Oh, this is fantastic.
- [33:47]
Josh Brown
Two of them are for me personally and three of them are for the rest of the people. All right, first chart please. We're looking at Apple. It is in a 15% drawdown. It weird. It went straight line up, straight line down. Your thoughts?
- [34:00]
Steve Strazza
My thoughts are that Nancy Pelosi just nailed this trade for like 80%. She almost top ticked it. She got out on December 31st. Okay. And I think you continue to see rotation, right? So you have a long term moving average. Is it safe to say this is a 200? Looks to me like a 200 whenever we get down in this area. Right. This is a buy zone and you tend to want to lean in the direction of the underlying trend, particularly with these big leaders. I think you buy this dip in Apple, but it's not. This isn't a chart that I look at and I get excited about.
- [34:32]
Josh Brown
Yeah, I tend to agree. I've been on record saying like, I don't understand why Apple was up 30% in 2024. It did not have a good year. The business, it was all multiple expansion. So that sense to me, I think the pullback is probably, I would say probably a good entry point, but who knows?
- [34:49]
Steve Strazza
And then I look at other mag sevens, right? So like shout out Amazon and like you could make long. You can make an investing strategy just around rotating through the mag sevens. It's so incredible.
- [35:00]
Josh Brown
Remember when they used to all move together?
- [35:01]
Steve Strazza
Look at the bull flag in Amazon though, right? So take profits in one, pour it into another. That's been the strategy. That's been what worked.
- [35:08]
Josh Brown
Amazon looks so mean.
- [35:10]
Steve Strazza
Remember when Netflix, they just reported. Remember when Netflix used to be included in this whole conversation? Nobody talks about them anymore.
- [35:16]
Josh Brown
Yeah. Okay, next chart. This one's for me. So I own this. Rates. Did rates top? Did zeros bottom? I own zero Z.
- [35:29]
Steve Strazza
So why do you own this over other bond funds?
- [35:32]
Josh Brown
A few reasons. Number one, I just thought that the interest rate thing went too far. Sentiment, everything went too far. I just wasn't buying it, number one. Number two, if there is some sort of like volatility day, I feel like this will be like good tail risk protection. And number three, my all I own is stocks. Like this is the only thing I own that's going to work in a risk off environment. Now, now, now, now, now. If I'm wrong, I'll, I'll sell it.
- [35:58]
Steve Strazza
So fine. It's hard for me to hate this. I also think there's like some sort of scoop and score situation going on around like 69, 70 level. Nice.
- [36:05]
Josh Brown
Yeah. This is not like a, this is not like a long term hold for me, like if I make, yeah. 15, 20.
- [36:11]
Steve Strazza
So like I, I, I was thinking the same way as you. Last year I got, I got involved, I bought a bunch of these primary trend reversals and bond funds. I got stopped out of like everyone one after the next.
- [36:21]
Josh Brown
Yeah.
- [36:22]
Steve Strazza
So no, but that, that chart's got score written all over it. But I'm excited about the next one. I want, I want Dollar Tree.
- [36:28]
Josh Brown
So it's a strong maybe from you. Okay. So Dollar Tree is a chart that I own and I'm just seeing gaps that I think are going to get filled. I see a gap up at, up at 81. If we can get past that. I see another one up at 94. Now, of course there's some work to do, but work's been, listen, they've been done working like they've been working a bottom over the past couple of months. So the company's in trouble. The fundamentals aren't great, but I think IT guy, I think got overdone. What do we think?
- [36:52]
Steve Strazza
This is so tradable. And the point that you just made about the longevity of the base is so important, right. Because you get down there and you break down to a new low and there's a key level, but you've only been there for a week. I like that. A lot less than something that's been building a nice base. Right. And you can see clear accumulation like you can here. And then you look above, right. You just look a couple points higher from Dollar Tree's current price and literally from, from here to 94, that's a memory gap. Right. So memory gap is an area on the price chart where buyers and sellers have not transacted much. And what happens is once we tend to get back into these memory gaps, they act in much of the same way as normal price gaps, right. Where they get filled very quickly because there is no price memory there.
- [37:38]
Josh Brown
So around here, gaps get filled.
- [37:40]
Steve Strazza
Yeah, we're back. So let me call it 77, 77, 78 for confirmation. But then you're in that gap zone and that's 2020 higher than 94. That could be a killer trade.
- [37:54]
Josh Brown
So if it goes, I'm gonna add to it. But let me ask you this. So like the question is, where's my stop? So is it like the recent lows up at 67 or is it like, I don't know that I want to hold it all the way down to below 60. I don't have that much conviction.
- [38:06]
Steve Strazza
Well, on something like this, right. The way I would measure it out, it's all about risk reward. Right. So I'm measuring this out as. So if I'm right on this trade, I'm selling at 94. Right. So I'm out at like a 20 profit. So I have to adjust my risk.
- [38:18]
Josh Brown
What do we like, three to one, three to one, four to one.
- [38:21]
Steve Strazza
You want at least two and a half. I mean, it depends on the setup. So I would use the pivot lows here.
- [38:24]
Josh Brown
Yeah, right.
- [38:25]
Steve Strazza
If it lows give you 6%. 70.
- [38:27]
Josh Brown
Yeah. You know what? If it. If it breaks below that 68, it's probably. It's probably garbage anyway. And listen, let's be honest. Stocks like this don't serve the benefit of the doubt. They're in downtrends for a reason.
- [38:35]
Steve Strazza
And when you're looking for a stop on a trade like this, it's less about, like, finding some like that perfect level on the chart, because there is no perfect level. It's more about just adjusting that risk reward. Right. To an appropriate standpoint. And if you drop the V WAP from those lows from Q4 of last year, it's going to come in right around that same level. Right around.
- [38:54]
Josh Brown
Sometimes it just lines up. Sometimes the stars align. Yeah. All right. So obviously, I will keep an eye on that one because I own it and I look at every day. All right, thank you. Okay, this one has implications for everybody who's listening. So this one is not selfish. This is selfless. Look at me. Is this. I mean, this is big one. Is this a double bottom? What do we think?
- [39:12]
Steve Strazza
Well, it's also. What does it mean if it is double rainbow, like. No, but that's the way that most of us should be thinking. Like, you look at the chart like this. So we're looking at the equal weight S&P 500 versus the cap weight S&P 500 that we all talk about. So if this line starts moving up and to the right, what does it mean? It means that pretty much anything besides the Mag 7 is a better place to be than the Mag 7. So what that would mean is that what investors learned people who have been long in this bull market. Now, you need to change that playbook, maybe even flip it on its head. Right. Instead of owning the biggest, best, strongest name so far.
- [39:46]
Josh Brown
You want to buy Dollar Tree. No, I'm just kidding. By the way. For the record. For the record, most of my bottom Fishing does not work out. So if for whatever reason this gives you don't keep it small, keep it small.
- [39:58]
Steve Strazza
No, but it's so you know what they call it? A stock picker's market.
- [40:03]
Josh Brown
I love it. It's been a while.
- [40:04]
Steve Strazza
Moving higher. Yeah. You want to pick your spots more selectively. You don't want to do the Nancy Pelosi portfolio if that ratio starts moving higher.
- [40:11]
Josh Brown
Okay. Another one that has implications for everybody. I could have shown the dollar, but the dollar is not bottoming. So let's look at the biggest component in the dollar basket, the Euro. I mean, this is a big one because if the dollar starts to weaken, boy, things are going to get juicy like.
- [40:26]
Steve Strazza
And I get information from that in my training. Just like I was telling you. How about like bond funds last year? And I was like, that's really strange. And I thought about that. It's probably top for bonds. I was looking at fxc, the Canada. I don't ever think about buying currencies or currency funds. Right. But some of these charts are set up so nicely not in favor of the dollar. Right. So I'm talking about fading dollars, whether it's the yen, euro, pound, cad, Aussie, there's big support levels in all of these charts. And when you think about it, right. And you think about what happened over the past couple of months, we had a big post election reaction rally. Then there was probably an even bigger fade that came after. Right. And then we just talked about how breath, a lot of that damage has been repaired.
- [41:10]
Josh Brown
Right.
- [41:10]
Steve Strazza
So it's been really sloppy, really messy market. And then you look at what's happened from an intermarket standpoint during that time, rates have been ripping, dollars have been ripping. If the dollar, the Dixie index, which is the best measure, falls back into its old range, that old box over the past few years, that's huge for risk assets. And imagine a world where the dollar not just falls back into that range, breaks down below the lower bounds of that range. Chinese stocks, China, it's all the same thesis.
- [41:39]
Josh Brown
Yeah, totally.
- [41:41]
Steve Strazza
Imagine if that dollar retreats and retreats in a big way. And we're talking about this time next year, dollar in the 90s.
- [41:49]
Josh Brown
What is it now?
- [41:51]
Steve Strazza
110.
- [41:52]
Josh Brown
All right, so are these the things that you guys at All Star Charts are talking about?
- [41:57]
Steve Strazza
Yeah, the intermarket is so important. We've been watching that range in the dollar forever and it keeps moving with the bond market. But you're getting a huge fade over the past week and a half from dollars and rates that's big on tkf.
- [42:11]
Josh Brown
JC said he likes Alcoa and Freeport. Yeah, they look like shit. What, do you like them?
- [42:17]
Steve Strazza
It's cute, right?
- [42:18]
Josh Brown
This is a cute little too cute.
- [42:20]
Steve Strazza
No, it's a bull market thing. It's something that we only do in bull markets. We're like, we'll literally go and like find like the worst looking piece of shit and buy it, hoping for like some sort of rebound rally.
- [42:31]
Josh Brown
And so what's, what's really good? What's like hot garbage?
- [42:34]
Steve Strazza
Freeport's really hot garbage. So the worst, the worst garbage is still pot Stocks, man. Like it hasn't changed for so long.
- [42:44]
Josh Brown
Yeah, but those are just like dead. That's what they want.
- [42:47]
Steve Strazza
Don't matter anymore. So that's the easy answer. Solar energy would be another one where it's like, God, and I'm looking at these things like they're going to get up off the floor. Like I think First Solar because they have a couple different things going on, they're involved in like the AI stuff too. I think First Solar is probably like, you're probably getting a great entry.
- [43:05]
Josh Brown
It looks way better than like the rest of the basket.
- [43:08]
Steve Strazza
None of them look good. Even End phase Enphase is one of the best performers.
- [43:12]
Josh Brown
Last bull market, dude, I, I made the case for end phase like a year or two ago and just got smoked.
- [43:18]
Steve Strazza
The top and M phase, like one of these multi year massive tops. Like you run from those patterns. Those are the worst patterns in the world.
- [43:25]
Josh Brown
What does a multi year top look like? Like, what does that mean? I'm looking at it right out on M phase.
- [43:28]
Steve Strazza
That's exactly what it looks like. Look how nasty that thing is. You had a clear resolution, a quick retest and now it's following through. That chart has zero written all over it.
- [43:40]
Josh Brown
I don't know, this looks like it goes much lower to me.
- [43:43]
Steve Strazza
I'm saying bearish things about it.
- [43:45]
Josh Brown
Yeah, agree. Not for me. All right. Steve, my friend, did you have fun?
- [43:52]
Steve Strazza
This was so fun, man. Thank you for inviting me. Really.
- [43:54]
Josh Brown
Of course. Thank you for doing this. For people that want to learn more about how Strazza and JC and the rest of the gang looks at markets, where do we send them?
- [44:03]
Steve Strazza
Go to All Star Shots, all starcharts.com or stockmarketv.com and join us on the morning show. We have so much fun having conversations like this every morning. 8:30 to 10:00 Eastern Time, stock market TV.
- [44:16]
Josh Brown
All right, Steve, you're the man. Thank you. Thank you everybody for listening Have a great night. We'll see you next week.
- [44:25]
Steve Strazza
Whether you Whether you're just getting started.
- [44:27]
Josh Brown
As an investor or you're managing a.
- [44:29]
Steve Strazza
Multi million dollar portfolio, Ritholtz Wealth Management.
- [44:32]
Josh Brown
Has the solution for you. It all starts with building the right financial plan. To speak with a certified financial Planner today, visit ritholswealth.com don't forget to check us out at YouTube.com thecompoundrwm. Make sure to leave a rating and review on your favorite podcasting app.
- [44:52]
Steve Strazza
If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits.
- [44:59]
Josh Brown
Thanks for listening.