Katie Bar the Door

Summary

Podcast Summary: "Katie Bar the Door" | The Compound and Friends

Release Date: November 8, 2024

Hosts: Downtown Josh Brown, Michael Batnick, and rotating guests including Katie Stockton.

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1. Introduction and Setting the Stage (00:00 - 02:00)

The episode kicks off with Josh Brown and Michael Batnick expressing excitement about diving into a “super political” discussion. They reminisce about attending politically charged watch parties, sharing personal anecdotes that set a relatable and engaging tone for the episode.

• Josh Brown (00:00): "We're going to have a lot of fun today. We're going to get super."
• Michael Batnick (00:05): "There's so much to talk about."

2. Political Watch Parties and Their Impact (02:00 - 03:00)

Josh and Michael delve into their experiences attending election watch parties, highlighting how the political atmosphere can significantly affect the mood and dynamics of such gatherings.

• Katie Stockton (02:22): "...maybe the dollar and yields is being overdone. That might be a little out of consensus."

3. Market Reactions to Elections (03:00 - 07:00)

The conversation shifts to the stock market's behavior during election periods. Josh shares his experience covering the election from the New York Stock Exchange, emphasizing the volatility and uncertainty that elections bring to the markets.

• Josh Brown (02:01): "The more political you are, the less you should want to host the watch party."
• Michael Batnick (04:00): "Tom Lee. We got the call down once. They're like, all right, guys, the next hit is 9:10."

4. Technical Analysis and Market Indicators (07:00 - 15:00)

Katie Stockton introduces technical analysis insights, discussing indicators like the Demarc Count, MACD, and Stochastic Oscillator. The hosts explore how these tools help in identifying market trends, potential breakouts, and risk management strategies.

• Michael Batnick (13:17): "Transparency completely. Right."
• Katie Stockton (14:35): "But also when we're reporting, like, performance and you're showing a pie chart, like, where does this thing. What slices this."

5. Sector Performance and Relative Rotation Graphs (15:00 - 30:00)

The discussion moves to sector rotations within the S&P 500, analyzing which sectors are outperforming or underperforming. Michael explains the importance of relative performance in determining overweight or underweight sectors, emphasizing the shift towards more defensive sectors like utilities and consumer staples.

• Katie Stockton (26:47): "The laggard. It's not confirming."
• Michael Batnick (28:53): "But I think people are hoping for that environment. The catch is it's an environment that I think is more likely to occur in a range or sort of a down cycle where we have that small cap outperform."

6. Discussion on Specific Stocks and Market Caps (30:00 - 45:00)

The hosts analyze individual stocks such as Nvidia, Microsoft, and Salesforce, discussing their performance, technical indicators, and potential risks. They emphasize the importance of managing risk, especially with high-performing stocks that may seem overextended.

• Josh Brown (62:08): "How good are semis looking?"
• Michael Batnick (63:38): "Right? And neither are good. Right."

7. Bitcoin and Cryptocurrency Outlook (45:00 - 65:00)

A significant portion of the episode is dedicated to Bitcoin’s potential mainstream adoption. The hosts discuss recent developments, technical indicators, and speculate on Bitcoin becoming a reserve asset for governments. They highlight the momentum behind Bitcoin and its increasing acceptance in institutional portfolios.

• Josh Brown (69:16): "It's a great example of where you can't fight a trend indefinitely."
• Michael Batnick (70:28): "There's some support... It served as a staging ground for the most recent relief rally."

8. Technology and AI Trends (65:00 - 75:00)

The conversation shifts to advancements in AI, with a focus on AI agents like Google’s Jarvis and their implications for technology and stock performance. The hosts speculate on how AI developments could drive future market trends and influence investment strategies.

• Josh Brown (67:09): "The next year the conversation shifts from LLMs with the AI stocks to agents and agents has the potential to become a really bullish investing theme."
• Katie Stockton (68:20): "This is where things are going and that makes it for me somebody who really wants these tools."

9. ETF Spotlight: Fair Lead Tactical Sector ETF (75:00 - 80:00)

Josh introduces Katie Stockton, the founder of Fair Lead Strategies, discussing her successful ETF, the Fair Lead Tactical Sector ETF (TACK). Michael praises the ETF’s performance and risk management, highlighting its dynamic asset allocation strategy that adjusts based on market conditions.

• Josh Brown (76:44): "Think of it as the alternative to the old sort of buy and hold mentality."
• Michael Batnick (77:43): "It's a slow moving chip designed to only really change during major reversal."

10. Closing Remarks and Recommendations (80:00 - End)

The episode concludes with personal recommendations for documentaries and comedy specials, adding a light-hearted end to an in-depth financial discussion. Josh and Michael encourage listeners to research Katie’s ETF and share their gratitude for the engaging conversation.

• Josh Brown (81:46): "Make sure you visit, visit fairleadfunds.com we're good."
• Katie Stockton (54:38): "These have been wild uptrends and they're giving you an opportunity to get back in."

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Key Takeaways:

• Election Impact: Elections introduce significant volatility and uncertainty in the markets, affecting both investor sentiment and stock performance.

• Technical Indicators: Tools like MACD, Stochastic Oscillator, and Demarc Counts are essential for identifying market trends, potential breakouts, and managing investment risks.

• Sector Rotation: There is a noticeable shift towards defensive sectors such as utilities and consumer staples, indicating a possible range-bound or down cycle environment.

• Bitcoin’s Future: Bitcoin is gaining traction as a potential reserve asset, with increasing institutional adoption and technical indicators suggesting continued momentum.

• AI and Technology Trends: Advances in AI, particularly AI agents, are expected to drive future market trends and offer new investment opportunities.

• Fair Lead Tactical Sector ETF (TACK): An actively managed ETF that dynamically adjusts its asset allocation based on market conditions, offering an alternative to traditional buy-and-hold strategies.

Notable Quotes:

• Josh Brown (02:01): "The more political you are, the less you should want to host the watch party."

• Michael Batnick (13:17): "Transparency completely. Right."

• Katie Stockton (14:35): "But also when we're reporting, like, performance and you're showing a pie chart, like, where does this thing. What slices this."

• Michael Batnick (28:53): "But I think people are hoping for that environment. The catch is it's an environment that I think is more likely to occur in a range or sort of a down cycle where we have that small cap outperform."

• Josh Brown (45:26): "These are all Tesla, it's all Amazon."

• Michael Batnick (70:28): "There's some support... It served as a staging ground for the most recent relief rally."

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For More Information:

• Katie Stockton on Twitter: X.com/StocktonKatie

• Fair Lead Strategies: FairLeadStrategies.com

• Fair Lead Tactical Sector ETF (TACK): FairLeadFunds.com

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Disclosures: All opinions expressed in this summary are solely those of the hosts and do not reflect the views of Ritholtz Wealth Management. This summary is for informational purposes only and should not be relied upon for investment decisions.

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Transcript

[Josh Brown]

All right. We're going to have a lot of fun today. We're going to get super.

[Michael Batnick]

There's so much to talk about.

[Josh Brown]

We're going to get super political. Okay.

[Michael Batnick]

Oh, yeah, yeah. You're talking to the right person.

[Josh Brown]

Where did you watch. Where did you watch the election?

[Michael Batnick]

So I was at a watch party up in Mount Kisco, and it was good, you know.

[Josh Brown]

Okay.

[Katie Stockton]

Mount Kisko is far.

[Michael Batnick]

It's a little far. Where are you even from?

[Katie Stockton]

Connecticut.

[Michael Batnick]

In Connecticut. Stanford and Greenwich. And, you know, that was an interesting night. My husband was up until three in the morning. He said he hadn't done it since college.

[Josh Brown]

Can I ask you, was the person hosting the watch party hardcore to one side or the other?

[Katie Stockton]

Yes, obviously.

[Michael Batnick]

Yes. But I'm gonna just leave it there.

[Josh Brown]

All right, well, I'll tell you a story. I once went to a watch party at somebody's house. Like a very fancy townhouse on Fifth Avenue.

[Michael Batnick]

Nice.

[Josh Brown]

And, like, super, super all in for Hillary. Not Hillary personally, but, like, anything but, like, an anything but Trump host. And so the whole, like, the party, let's say 70 to 80% reflected that. And this is, like, drop dead gorgeous home.

[Michael Batnick]

Yeah.

[Josh Brown]

And it's catered. It's like, there's giant TVs on multiple floors. And, like, there's, like, a vibe. And the vibe is fabulous. The vibe is, we're gonna do this. We got this. And then, like, Florida comes out and then Ohio comes out.

[Michael Batnick]

The mood changed.

[Josh Brown]

Oh, my God.

[Michael Batnick]

I'm sure.

[Josh Brown]

I have never experienced. Maybe I have experienced this at, like, a sporting event where, like, the home team drops down 20 points or 30 points, and it's like, so. It was like that, but worse. So I didn't say goodbye.

[Michael Batnick]

And it was supposed to be a festive atmosphere.

[Josh Brown]

I Irish exited that place. Yeah. I just disappeared.

[Michael Batnick]

Wow. I think that's the way to go.

[Katie Stockton]

Yeah.

[Josh Brown]

I don't think anybody wants to do a big, you know, goodbye.

[Michael Batnick]

Yeah.

[Josh Brown]

After something like that. Anyway, this is true. So my point is, the more political you are, the less you should want to host the watch party.

[Michael Batnick]

It's like being a football fan, right? Yeah.

[Katie Stockton]

Yeah. It's like hosting the super bowl when your team's in it.

[Michael Batnick]

I like when I think about football, I think about nachos and beer and Sunday afternoons, like, very positive. But when it's a real fan and they're not playing well. Oof. It's not that fun. You know, you're not sitting down on the couch, relaxing.

[Josh Brown]

Yeah. But then. And you have to keep a smile on your face. Cause you have guests.

[Michael Batnick]

This is true.

[Josh Brown]

You have to keep the enthusiasm up. Even though you want everyone to just.

[Michael Batnick]

Please get out, leave, and get the catering bill back.

[Josh Brown]

Would you please leave? All right, well, I don't do. I had a watch party at the New York Stock Exchange this week.

[Michael Batnick]

Ooh, that's fun. No, you did the broadcast, right?

[Josh Brown]

Yeah, I was with all the celebs. There were some big. There was some big names in this joint.

[Michael Batnick]

I love it. How did it go?

[Josh Brown]

I thought it went great. It was the first time we ever covered the election from the exchange.

[Michael Batnick]

Okay. So it's like my favorite venue for it.

[Josh Brown]

So here's what's interesting. It was a watch party on the sixth floor in the, you know, the boardroom. Like the chairman's room.

[Michael Batnick]

Really pretty.

[Josh Brown]

It's sick.

[Michael Batnick]

Yeah, it's totally sick.

[Josh Brown]

But then we're down on the floor doing the show. But then there was these huge breaks in between. Cause they don't want the markets people on the desk the whole time. Okay, so, like, we're at the. We're at a little side desk, just like the market nerds. The real people covering it is, like, Carl Quintanilla, and he's at the main desk. So we do like. Yes. We get on at like 7:40. And they're like, okay, your next hit is 8:50.

[Michael Batnick]

Oh, wow. So it's like, oh, we'll go up to Harry's.

[Josh Brown]

No, we go upstairs to the party.

[Michael Batnick]

Yeah. Oh.

[Josh Brown]

The problem is I don't go to parties and drink club soda. You know, I think you know this about me. Yeah.

[Michael Batnick]

You know, it's a late night, right?

[Josh Brown]

So that's. That's one. That's one of the issues. And we stay there till midnight.

[Michael Batnick]

So was it till midnight you were broadcasting until. Oh, I didn't know that.

[Josh Brown]

I got there at 6pm I was there till midnight. So by the last hit. Maybe I shouldn't have done the hit.

[Michael Batnick]

Yeah, fair enough. Now I'm going to go back to the tape. I want to see that, actually.

[Josh Brown]

But I'm a true professional.

[Michael Batnick]

Yes, I'm sure.

[Josh Brown]

Tom Lee. We got the call down once. They're like, all right, guys, the next hit is 9:10. It's 8:50. Please report back to the desk. So we're all seated at the desk. Tom Lee comes with, like, a plate of food.

[Michael Batnick]

Oh, that's. Tom is very relaxed about it.

[Josh Brown]

He's like a focaccia. Scott's like, maybe we could put the plate off the desk.

[Michael Batnick]

Amazing.

[Josh Brown]

I love Tom, he is the absolute best, honestly.

[Michael Batnick]

He is. He really is.

[Katie Stockton]

So, Katie, yesterday we were talking about what moves in the market, any market. Yesterday seemed like the most overdone or maybe the ones most likely to get to reverse. You know what? I was thinking about it after the fact. Maybe Tesla. Like, does Tesla really need to be up 20% in two days or whatever?

[Josh Brown]

It is followed through today?

[Michael Batnick]

It did, yeah. And it actually looks like a real breakout. Right?

[Josh Brown]

You would assume.

[Michael Batnick]

Well, in terms of the resistance, it's right.

[Katie Stockton]

At previous highs, yeah.

[Michael Batnick]

Right. Up against 300. Well, I think the dollar is looking a little bit crazy and to see any currency make such a massive move in one day. So I'm more leaning towards the dollar and yields is being overdone. That might be. Yeah, that might be a little out of consensus. Listen, there's definitely some equities that went a little bit too crazy, I think. And whenever you see all these gaps up, you get worried that the gaps will be immediately filled. So we're not taking that action and looking at it as a breakout. It's hardly bearish. Right. But we're a little bit wary of its sustainability.

[Josh Brown]

So there's like a timing thing. Like, let's say you're like, all right, it's a red wave. They have all three houses.

[Katie Stockton]

Beautiful wave.

[Josh Brown]

Effectively, this beautiful wave enables the Trump policy team to put through almost anything they wanna do. The thing with the dollar is that that's a tariff trade and they don't even need Congress for that. That's an executive order. He can do tariff stuff in January.

[Michael Batnick]

Yeah. It could happen faster, you're saying so.

[Josh Brown]

Right. This other stuff where it's like, oh, deregulation. Well, when does that show up in J.P. morgan's earnings? Two years.

[Michael Batnick]

Yeah. The financials. The move in the financials was wild, really anticipatory for something that could take a year. Plus. Right.

[Katie Stockton]

The market doesn't wait.

[Michael Batnick]

This is true.

[Josh Brown]

I think they think. Right, I think. But no, I think they think 2025 is an M&A slash, IPO, slash, buyback and dividend bonanza.

[Katie Stockton]

I think it's coming and it could be.

[Michael Batnick]

Yeah, I'm less constructive, but obviously it comes from a different place. Right. And by that I don't mean I'm bearish, but I do think that we're going to get into a range, at least for the first part of 2025.

[Katie Stockton]

I would hope for that.

[Michael Batnick]

Like a digestion phase is the way to put it.

[Katie Stockton]

I think bulls would want to see that. You don't want to see things go vertical. Like, that's not easy.

[Michael Batnick]

And we've just struggled to find, like, the entry. Right. And I do think we're going to see an entry. I do think it'll come lower, and we just want to have more indicators. But by year end, probably not. Right.

[Josh Brown]

I wouldn't make that happen.

[Michael Batnick]

I would say we might see a correction start to unfold between now and year end, but I don't think it'll culminate necessarily. That'd be really pretty dramatic, don't you?

[Katie Stockton]

Or do you think it's more likely that people are going to chase? Like, if we don't. The longer we don't get the entry, the pullback, the people are. They're going to have to. They're underinvested. They got to chase.

[Michael Batnick]

They're already chasing, aren't they?

[Josh Brown]

You also don't have under. So if it's President Kamala, then the conversation is, well, we better take these capital gains taxes this year because if they enact something in 25 and it's retroactive to January. Okay, so you look. I don't think anyone thought that she was gonna have a blue wave and be in a position to enact anything anyway.

[Michael Batnick]

Right, right.

[Josh Brown]

But I'm just saying, like, that counter narrative is not even a conversation now.

[Michael Batnick]

So people are trying to anticipate what is not gonna happen now. Right. So, you know, you have to look outside of the US Right now. European benchmarks, Japan, China aside, I do think that the global equity markets are telling us a little bit of a different story, maybe a more realistic one than the US Is right now. And it's not to say Europe leads us, but there's like a distribution phase there that's been resolved to the downside pretty much already. And Japan looks toppy is probably the best way to simplify it. So we feel that it'd be really surprising to see that completely shrugged off by the s and P500. But honestly, if the Russell 2000 does confirm this breakout, you're going to hear me say confirmation a lot. Because it's really important in our work. We want to always make sure any breakouts hold through another week. So for the Russell, it needs to hold above. I think it was about 2360.

[Josh Brown]

Can't be a popular.

[Michael Batnick]

Can't just be up there for, like a few days.

[Josh Brown]

I'm going to interrupt you. We forgot to start the show.

[Michael Batnick]

Oh, let's do that.

[Josh Brown]

We're going to put these on our head. Michael, got yours on. Okay. All right. John's going to do the clicks coming.

[Michael Batnick]

In with the three claps.

[Josh Brown]

All right. We almost forgot to start the show.

[Katie Stockton]

Whoa, whoa, whoa. Stop the clock. John, before you clap, here's a word from our sponsor.

[Josh Brown]

Hey, guys. Today's show is brought to you by Van Eck. There's a huge wave of demand currently and on the horizon from hyperscalers for data center power. Where are they gonna get it? Possibly nuclear.

[Katie Stockton]

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[Josh Brown]

Did you know that there's an ETF that can capitalize on the demand for nuclear produced electricity?

[Katie Stockton]

I actually did. And the ticker NLR was launched over 15 years ago and has been offering the most comprehensive exposure through various cycles in the nuclear space. To learn more, visit vaneck.com NLR that's.

[Josh Brown]

Vaneck.Com NLR get nuclear today.

[Michael Batnick]

Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the.

[Josh Brown]

Opinion of Ritholtz Wealth Management.

[Michael Batnick]

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.

[Josh Brown]

Let's go. Ladies and gentlemen, welcome back to the world's finest investing podcast. My name is Downtown Josh Brown. With me, as always, my co host, Michael Padnik. Michael, say hello to the folks.

[Michael Batnick]

Hello.

[Josh Brown]

Hello, you guys. John is here. Nicole, Duncan, Rob, the whole gang. Daniel, my friend, welcome to the. Welcome to the audience. All right. Hey, guys, I got to tell you, when we bring back a returning champion, we put a lot of thought into how the first show went, and we really only bring back our very favorite people.

[Katie Stockton]

And also for the election, we had to have Katie.

[Josh Brown]

Very, very political, very partisan. Katie is one of our favorite people. Katie's first episode on the show did unbelievably well. We heard from not only people that focus on technical analysis, but people that focus on fundamentals, people that focus on asset allocation. Katie's a star.

[Katie Stockton]

Biggest crowd ever.

[Michael Batnick]

Thank you.

[Josh Brown]

Wow, you had a tremendous response.

[Michael Batnick]

I'm hon be back.

[Josh Brown]

So for those who don't know, Katie is the founder and managing partner of Fair Lead Strategies, an independent research firm and advisory focused on technical analysis. Prior to joining Fair Lead Strategies, Katie spent more than 20 years on Wall street providing technical research and advice to institutional investors. In 2022, she launched her first ETF, the Fair Lead Tactical Sector ETF, aka Tak Tac. And that's been a big hit.

[Michael Batnick]

It has, yeah. It's unbelievable.

[Josh Brown]

I mean, I knew it would. I knew it would work, but it's.

[Michael Batnick]

Not an easy business. By the way, the ETF business.

[Josh Brown]

I know.

[Michael Batnick]

Really proud of it.

[Josh Brown]

I could have told you that, but.

[Michael Batnick]

You should have warned me.

[Josh Brown]

No, but it's a thing now. People reference tack all the time, so.

[Michael Batnick]

It'S good to hear that. I mean, active products, to me, have a real place in the market. And it's sort of early adoption, but I think it's coming.

[Josh Brown]

Active is the hottest category of all ETFs. It's not the biggest, it's the hottest over the last year. It's now a permanent. It's not a fad. People are permanently utilizing different active ETFs.

[Michael Batnick]

Well, they realize they can achieve the returns and sort of the risk profile that they could maybe only before through a private fund with higher fees. Right. So they're accessing good managers at a lower fee base with this nice, like, tax wrapper around it. So I understand why it's.

[Josh Brown]

And transparency.

[Michael Batnick]

Transparency completely. Right.

[Josh Brown]

People know exactly what the manager is doing, and they can look anytime they want and say, what happened today in the portfolio?

[Michael Batnick]

You know, one of the challenges is that advisors don't seem to know where to put active products Right. In their overall portfolio. So that's. What's the learning curve for? I think everyone. I feel like it doesn't necessarily fit into a sleeve by the traditional means of the sleeves. Oh, is this large cap value? Is this hedged equity? So that's going to be the learning curve. But I think if you think more of the outcome or the desired goal of these active products, that's going to help people understand where they fit.

[Josh Brown]

Advisors like to be able to categorize things because when the advisor is talking to a client, it's their job to bring order to what would normally be chaos and say, all right, here's your portfolio. These are your core. These are like your satellite or Core and Explorer. And I think it's easier to sell something to an advisor as a satellite than it is to sell as a core, because Core is a race to the bottom on fees. Core is like True Vanguard vs. IShares.

[Katie Stockton]

But also when we're reporting, like, performance and you're showing a pie chart, like, where does this thing. What slices this.

[Michael Batnick]

Yeah. Where does it fit?

[Josh Brown]

What does it accomplish?

[Michael Batnick]

Satellite, to me, is Like a catch all in a way. Right. So I'm hoping to see that morph into something a little bit more crafted to the investable implications of these strategies. And it'll take time to get there. You know, our product happens to be a very good core product. Right. So that's another challenge for us, is that it doesn't really qualify necessarily as a satellite unless you're saying, okay, well, technical analysis, that makes it a satellite.

[Josh Brown]

What about active sleeve? Like, shouldn't that be.

[Michael Batnick]

Could be.

[Josh Brown]

Excuse me, alpha sleeve.

[Michael Batnick]

Alpha.

[Josh Brown]

The client doesn't care if something's active, the client cares. Is this gonna do better than something else I could buy instead?

[Michael Batnick]

Yeah. And does it serve a purpose? Right. Is it somebody.

[Josh Brown]

And does somebody draw down? Does it do something unique? Okay. All right, well, listen, you have your lane now and you're. No, seriously. So are we allowed to ask you what the AUM is? Are you allowed to say, oh, yeah.

[Michael Batnick]

It'S all public, so it's about 220 million. Thank you to Trump. Well done.

[Josh Brown]

Yeah, yeah.

[Katie Stockton]

So, Josh, before we get to the doc, I just want to. Kylie shared this with us. So as we speak, Jerome Powell is giving his Fed press conference that cut 25 basis points, as was widely expected.

[Josh Brown]

I forgot. Was that going on this week?

[Michael Batnick]

I know, so. All right, listen to just another market moving event.

[Katie Stockton]

Hi, Victoria with Politico. Some of the President elect's advisors have suggested that you should resign. If he asked you to leave, would you go? Jerome says no. Can you follow up on, do you think that legally you're not required to leave? And he just said no. So then somebody asked a follow up. Do you believe the president has the power to fire or demote you? And has the Fed determined the legality of a president demoting at will any of the other governors with leadership positions? And he said, not permitted under the law. She said, not what? And he replied, again, not permitted under the law.

[Michael Batnick]

Well done, Jerome.

[Josh Brown]

Stay off Twitter, Jerome. Jerome, I'm gonna tell you right now, whatever laws you think are in place, lol. Pretty much, if he wants to get rid of somebody, he can. He might have to use Twitter to get them to quit, but I wouldn't worry about Trump being able to do what he wants at this point. You might love that. That might be music to your ears. You might hate that. I don't know who. You know, I can't speak to, like, every single person and every audience everywhere. I can only say all at once, this is what you should expect. The next four years, I'm telling you, it's a robber baron era coming. And again, you might make a lot of money in the next four years, so don't get mad, but we are now in an era where some very clever people have the attention of the commander in chief and all of them want the same thing, which is their stock prices to go up.

[Katie Stockton]

So, yeah, speaking of that, Katie, going into yesterday, it had been the best return for the S&P 500 in an election year since. I don't know, what are we looking at? 1936, literally.

[Michael Batnick]

Yeah.

[Katie Stockton]

So given that backdrop, were you surprised with the violent pop?

[Michael Batnick]

You know, we were anticipating a rally, but yeah, maybe the violence of it we were surprised by. The difference is that most of these elections we've come into it after pretty significant corrective phase volatility into the election. Yeah, we didn't have that and it made sense because there's uncertainty. And I mean if this one was an uncertainty or rife with that, I don't know what was. So we came into it with almost like we had no sample size to reference over history for the current setup. Now that we have usually when you get the gaps up after these prolonged up moves, that is more exhaustive in nature than otherwise. So again, we're sort of a doubter of the strength of this rally and yet we don't want to fight the tape.

[Josh Brown]

But the breadth doesn't change your mind at all because it was pretty substantially good.

[Michael Batnick]

Yeah, so good. But if you look at the breadth data, like the cumulative advance decline line, it had lost some momentum ahead of this event and so had the broader market. So even the major indices had seen a loss of intermediate term momentum that was somewhat meaningful. Weekly stochastics rolling over, weekly MACDs starting to get pinched, 20 day moving averages roll over. And those are usually indications that we're into some consolidation phase. Right. So I don't want to give too much credit to a two day move and I guess it doesn't negate what we've already seen from these indicators, including in market breadth.

[Josh Brown]

Jon, can we put this chart up? S and P500 year to date returns in election years. I understand what you were saying, that the rally was sort of like narrowing going into the election, but it was one of the calmest 30 day periods going into an election ever. Maybe because everybody that wanted protection already bought it. Like everyone was girding for a worst case scenario with recounts and ballot boxes and all that. Yeah, but just on the overall year, like to Michael's point, it's back to 36. From my perspective, understanding what I understand about human nature and the agency problem and Wall street and people's careers being on the line, it's on. I just can't picture anybody leaving the party, especially if they're trailing, which of course 50 something percent of active managers are.

[Michael Batnick]

Yeah. And I don't think anybody should leave. Right. But of course I understand they might want to wait to add exposure or get partially hedged. While the US was very calm and obviously had great returns, we didn't see that overseas. So developed global markets were not enjoying the same follow through. So I think that that lack of global breadth is something that nobody's really talking about kind of. It nags at me a little bit. The participation on Wednesday was really very broad. As you mentioned. We saw I think 420 stocks reach new 52 week highs on the NYSE. We haven't seen that since, I think 21.

[Josh Brown]

That didn't end well.

[Michael Batnick]

No, it did not. It wasn't right at a peak actually the measure at this level. But it did give you a sense that things might be getting overdone. So we always look at those market internal measures, sentiment, breath leadership, all of that from a contrarian lens. And so in mid October, reasonably so, sentiment got overly bullish by historical measures. Right. Fear and greed index got very, very bullish. So 75%. Is that extreme where you do tend to see markets start to lose their stronghold?

[Josh Brown]

Is it important to you at all that financials were the best performers? Is there any signal there in your work or is that just something that's coincident with the moment and not necessarily predictive of anything?

[Michael Batnick]

It was a really explosive move and I think we need to evaluate it more on a case by case basis. Look at the individual stocks that have run up. I looked at JP Morgan for one Wild looks great. I can't argue against that chart and certainly beneficial to the holders. Right. So to me they're all holds on that gap up. But we do have. And the Russell 2000 move by the way is really part and parcel with the financials move.

[Josh Brown]

There's a lot of small cap banks.

[Michael Batnick]

Yeah, yeah.

[Josh Brown]

That drag that thing up.

[Michael Batnick]

So the regional banks were up massively and with these gaps up, we just be careful. We'd wait for that confirmation. So not to be overly sensible, but we want to wait until really kind of next Friday to make sure that the breakouts that have developed above resistance levels hold and that's where we can add value. Despite taking out some of the emotions of this week. Of which they're running very, very high. Right. And if we see them confirm, well that's great because that suggests that it genuinely is broadening out in a way that we really haven't seen. At least from large to small and mid.

[Josh Brown]

What's an ideal situation for next week then Monday, Tuesday, profit taking and then a resumption of strength into the end of the week.

[Michael Batnick]

I would say that yes, in a way like digestion would be great as long as that digestion doesn't start to see the major indices and a lot of individual high profile names come back into their gaps. I don't want to see those gaps penetrated for the most part. And the lows from yesterday, they're far enough away that I think we have some wiggle room so we could retest.

[Josh Brown]

Without breaking down into the gaps.

[Michael Batnick]

Okay, yeah, just kind of a hanging around current levels would be healthy.

[Katie Stockton]

So yesterday was the largest positive day in The S&P 500 post World War II on an election day was up 2.5%.

[Josh Brown]

John, we have this from.

[Katie Stockton]

And again coming off the strongest year in election year heading into the day, it's just a wild.

[Josh Brown]

What the hell happened in 1948? Anyone?

[Katie Stockton]

No, no, no idea.

[Josh Brown]

Who is Duncan? Who's the president? 48 is that. It's Truman.

[Katie Stockton]

Rob says Truman.

[Josh Brown]

It's Truman. Right. Okay. So I guess the market, market was not a big fan of nuclear bombs going off or. All right, so all right, this one's not. This is, this is pretty note. This is pretty notable though. No matter like no matter what. It's a historic day. The problem with yesterday, I don't know, it's a problem. The thing with yesterday is that in four years we have another election. We're going to have all the content leading up to the election. What do stocks normally do, blah blah, blah. This is going to drag everything higher.

[Michael Batnick]

That's right.

[Josh Brown]

And the averages and you're going to say, you're going to hear everyone say make sure you're in for the election.

[Michael Batnick]

You make a good point. Because it's the same thing with any seasonal phenomenon. Right. We have front running of these seasonal factors. Right. So what somebody said, well, Q4 is always strong. Okay, well it's already been pretty strong.

[Josh Brown]

And everyone knows it's going to be.

[Michael Batnick]

And then Santa Claus rally. Well, is it possible that we've already had the front running of that seasonal push higher? So by the rumor, by the news, I like it.

[Josh Brown]

So I like to front run longer periods of time. I don't front run the Santa Claus rally. What I like to do is say 30 year periods are usually pretty bullish. So I'm going to get in today and I'm just.

[Michael Batnick]

Well, to take a long term view, I actually agree with that. If you can put on blinders to a lot of the noise that happens over the short term, you're usually really well served by that. When we did a lot of back testing for our etf, we tested different signal frequency dailies, weeklies, monthlies, et cetera. And we found that the longer term generally either built on returns, certainly improved on the strategy by not over trading and not getting you out of a market when it was just correcting. Right. Corrections are healthy. They, they, you know, are worth living through, maybe hedging partially through them and the market's usually in a bull market. Right. So we want to make sure that we're there for those environments and you can't do that if you're trading around all the time.

[Josh Brown]

Well, the problem is when you're in a correction, you don't always think it's a correction. You think it's the start of something worse.

[Michael Batnick]

Well, that's why you have to use technical analysis. Right. And do it systematically because we agree.

[Josh Brown]

With you on that.

[Michael Batnick]

Yeah, the emotions get taken out of it. I think about the COVID corrective low. Now we can say that. Right. It didn't feel like it was a correction at the time.

[Josh Brown]

Oh, it looked like we're about to get cut in half.

[Michael Batnick]

Yeah, it really felt pretty awful to me too. But if you use the indicators they wouldn't have gotten you sort of fully risk off, at least in our work and they would get you to a full equity exposure way before. I think you'd be comfortable yourself. Right.

[Josh Brown]

They would buy. Buy you back in.

[Michael Batnick]

Buy you back in.

[Josh Brown]

Well that's the part, that's the hardest part.

[Michael Batnick]

That's always selling is easy. Yeah, yeah, yeah.

[Katie Stockton]

So there was as we mentioned, just an explosive move to the upside yesterday. Let's talk about small caps for a second because this is the area of the market that's been the. Yeah, but right, like the most the.

[Josh Brown]

Right. The laggard. It's not confirming.

[Katie Stockton]

It's like yeah, the mega caps are going up but look at the Russell. Well actually did you know John, this chart's a little bit further down. Raise your hand if you knew that over the last year the Russell 2000 is outperforming the S&P 500. Now that only just happened as of today.

[Josh Brown]

Well, on a 12 month basis.

[Katie Stockton]

How wild Is that.

[Michael Batnick]

Yeah.

[Josh Brown]

Wait, really?

[Katie Stockton]

Yes.

[Josh Brown]

How really?

[Katie Stockton]

All right, so I put a new one in here, but as of Today it's the Russell 2000 is outperforming.

[Michael Batnick]

Now I see it too.

[Katie Stockton]

On a total term basis over the last year. Is that wild?

[Josh Brown]

Nobody knows that. I would never have guessed that I would have bet money against that.

[Katie Stockton]

Now you know. So anyway, Kevin Gordon tweeted yesterday, the percentage of Russell 2000 members trading above their 50 day moving average moved up by 17 percentage points. That's insane. So it went from like 50% up to 76 or whatever the numbers are. The. That is the strongest increase since July when really this rally into small caps kicked off when we got that weaker CPI report.

[Michael Batnick]

Right. So is that a good thing? And if you look, it's probably not. Unfortunately it looks like it oscillates and.

[Josh Brown]

We'Re at the upper end of the year.

[Michael Batnick]

And we're at the upper end. We're nearing what ends up being a peak in absolute terms for the index. The. It's a good thing if you were.

[Josh Brown]

In it a month ago already.

[Michael Batnick]

Yeah.

[Josh Brown]

Not a good thing to buy into it necessarily.

[Michael Batnick]

Right now we've had really good outperformance off of just the Recent low Russell vs. S&P. And what I think a lot of people are hoping for is that this coming year is more about the small caps. Right. Because then there's more opportunity and value. There's a lot of things that come with that that I think the market would welcome because it's not all that sort of leadership stronghold to the mega cap complex. And it makes it easier, I think, especially for financial advisors to add value in a way that honestly they just can't when it's all the Mag seven and all passive. Right. So I think people are hoping for that environment. The catch is it's an environment that I think is more likely to occur in a range or sort of a down cycle where we have that small cap outperform.

[Josh Brown]

That's interesting, small cap outperformance. Cause that was a big phenomenon from 2000 to 2009 was that small caps did better than the S and P.

[Katie Stockton]

Seems unfathomable to me.

[Josh Brown]

And it was ranged around.

[Michael Batnick]

But I mean in 2022, I'm looking at the ratio, it was pretty much equal. Right. So is it good to see the ratio of the Russell to the S and P sort of stabilize? I don't know that it's good or bad in terms of the market implications, but maybe it gives us more choices, more to work with.

[Josh Brown]

It's good for IPOs. If people feel like there's interest in market caps below $50 billion, they're more likely to bring deals to market. And those deals are more likely to be supported by people that are willing to bet this thing is going to get into the Russell in a year if it maintains its $6 billion market cap. Like there's no interest in that part of the market right now.

[Michael Batnick]

Good for Wall street certainly too.

[Josh Brown]

I think it'd be good for Wall Street. Let's do this. Let's, let's do this. IWM chart with the, with the gap.

[Katie Stockton]

So sentiment trader Jason Gepfer tweeted that it was, yeah, this is yesterday, the fourth largest gap up in IWM history. But if you take out 2008, which was obviously not great, not bad in terms, in terms of returns on a go forward basis, you could Skip to this.

[Josh Brown]

2008 was the tarp approval. Is that why you had that gap up? You could skip that. That's a once in a century again.

[Katie Stockton]

There'S, there's, there's four events. So, you know, looking at forward, you know, I guess you pretty much my, you could toss this out the window. But it was notable just in the sense that the gap higher and in a bull market nonetheless. So I guess Katie, to your point, like is this the exhaustive gap that gets filled next week that clearly that's not what we want to see. So when you're thinking about gaps, because I, I joke around that like all gaps get filled. That's my like unofficial thing. But there's a difference between gaps getting filled, you know, three days later and gaps getting filled, you know, a year later. So what, how do you think about like holding gaps?

[Michael Batnick]

So I think of them as a great way to manage risk and to identify whether it's a real breakout. So if it gets filled immediately, that usually is a bad thing. That's a bad thing. Right. But I kind of agree. Yeah. You do often see them filled much later. This chart's interesting, but I have to say look at the corrective phase right ahead of the last four instances.

[Katie Stockton]

Right. This usually happens in a bear market.

[Michael Batnick]

Yeah. Much separated environment.

[Josh Brown]

Oh, so you think about gaps at an all time high for. Not for a stock, for an index. A gap at an all time high has a different connotation than a gap after like a 12 month consolidation or.

[Michael Batnick]

Okay, so those we would call breakaway gaps typically.

[Josh Brown]

So that sounds like it's a good thing.

[Michael Batnick]

A breakaway would be. No following a downdraft actually so that's more of like a turnaround.

[Josh Brown]

So what kind of gap is this? Baby gap?

[Michael Batnick]

It would be, what do we call it? This would be exhaustive filled. Obviously that's when we know it's exhausted, but it would be more likely exhaustive.

[Josh Brown]

So when you say it's a good tool for risk management. So let's say you have a trade on, not you, your etf, but like anybody, let's say somebody has a trade on, they got this right. They bought small caps. They anticipated the catch up trade. The Trump trade. It did work in 17. I would point out people love these little industrials and banks. Okay, these little industrials. No, they did. That was a hard thing for like six months. I was there. You were there. So let's say somebody got this right this time. What does the gap do in terms of giving them a risk management fulcrum? What do they do with that?

[Michael Batnick]

Yeah, well first of all it just makes it so it's math. Right. It's all about price and you don't have to have the emotions involved. So I'm looking at IWM right now on a daily chart. Yesterday's low.

[Josh Brown]

Michael's going to put this trade on.

[Michael Batnick]

As you're talking about 232 and three quarters. Right. So that's our effective stop loss. Right. We don't want to see that. But it has a limit. It's within like five days. And this is scientific.

[Josh Brown]

And you want to give that like a weekly, like a Friday look you're saying not you don't want to react.

[Michael Batnick]

Yeah, this would be more like, you know, if within the next few days it dips into the gap. To me that's the trades that makes the whole thing so much lower probability that I want to be out.

[Katie Stockton]

But if it doesn't get in there within the next five days then we, then we've set a new floor.

[Josh Brown]

For now flip the book.

[Michael Batnick]

What it also does, it makes you take pause. Right. It can be at times very frustrating because then you'll see maybe additional follow through. But this gap up also happened to be associated with a whole lot of demarc sell signals. You guys know the demarc indicators, right? Yes.

[Katie Stockton]

Remind us, what is that? These are all the numbers?

[Michael Batnick]

Yeah, they're designed the numbers. Right. Floating above.

[Katie Stockton]

And Paul Tudor Jones was a big fan of this.

[Michael Batnick]

He is. And Steve Cohen. So you know Kanye, they're one of the best ways to identify trend exhaustion in my opinion. So we can all look at a trend and identify it. Just use a moving Average a MACD for us to understand when it might be nearing exhaustion, that's harder. Right. So usually we'll have lagging indicators that will roll over like those stochastics.

[Josh Brown]

And it's already too late.

[Michael Batnick]

Yeah, it can be. They're going to get you there closer than waiting for a breakdown at least.

[Josh Brown]

So DeMarcus literally counting the days in a potential exhaustion period to note either the end of a selling trend or the end of a buying trend.

[Michael Batnick]

Right, right. So it comes on the downside and on the upside.

[Katie Stockton]

But when you see those numbers on the chart, that's not subjective, is it?

[Michael Batnick]

No, it's really model driven, completely mathematical. There's like some basis in my opinion. And Tom, this is not. He owns this suite of indicators. But my sense is there's some Fibonacci sequence that's embedded in the indicators and they're truly one of the most timely things that you use. But we can.

[Josh Brown]

Some people use it better than others because there's an interpretive.

[Michael Batnick]

I think that's where I was just going to go.

[Josh Brown]

All right, please.

[Michael Batnick]

Yeah, just cross referencing. Right. So if there is a breakout, then one of these so called sell signals becomes lower conviction. So there's some people that might follow it more to a T than we do. So we're always cross referencing with other indicators and support and resistance to put more odds in our favor. But with these breakouts associated with a lot of 13s including by the way, the S&P 500 cash today, we want to just doubly make sure that we see that confirmation.

[Katie Stockton]

So you have a chart, you have a budget charts for us. One of the ones that you brought is a fear and greed index with the 10 day moving average. Was this going into the election? What are we looking at here? Because it looks like fear and greed was rolling over.

[Michael Batnick]

Yeah. So coming into the election, it was actually somewhat conducive to the bounce. Right. Because I think it was around 43%. But notice that the sort of faded gray line did reach 75% very recently. That was that mid October reading. And we like to isolate it with the 10 day just to kind of smooth it out. But you can see that the periods during which the sentiment metrics sort of rolled over. Right. Generally are not great periods for the equity market. You would see some consolidation that needed to get you back to a level where people could feel comfortable adding excellent exposure. So we feel like sentiment is a risk right now.

[Josh Brown]

So you ideally are looking for a moment at or below the green line for a Lower risk entry. But this is very short term.

[Michael Batnick]

This I don't know about very short term. It would be more intermediate terms. So for me that's like, you know, each quarter.

[Josh Brown]

Okay, Right.

[Michael Batnick]

Sort of the swing.

[Josh Brown]

Okay. So we were definitely more toward the greed portion and then rolling over right there.

[Michael Batnick]

And it's when you see that 10 day rollover that it tends to be like a. Think of it as like an overbought downturn and you don't need to see it go all the way to the oversold reading of 25% to get an entry. But. And by the way, that's when the market feels terrible generally. Right.

[Josh Brown]

Well I was, I was going to say like this year it really never did other than that one moment in August.

[Michael Batnick]

August low. Yeah.

[Josh Brown]

Where I don't even know what was going on. I think like the non farm payroll numbers started to accelerate. Negative. But it was really about storms. Yeah, but like Texas had a storm and we just decided, oh, now is the recession. It was claims.

[Katie Stockton]

It was claims.

[Josh Brown]

It was claims. Yeah, yeah, okay, but. All right, but so that's really the only moment where you had a very obvious. Okay, sentiment just got way too negative.

[Michael Batnick]

Short term entry point off of sentiment. And I mean look at each of those. I mean there's what, I don't know, six over the last three or four years.

[Josh Brown]

Were those all great buying? I mean everything's been a great buying opportunity.

[Michael Batnick]

Yeah, pretty much, yeah. So.

[Josh Brown]

And look, March 23rd is the mini banking crisis that, that almost happened. Like you could like shout them out.

[Michael Batnick]

October low last year, what a beautiful entry that was. And sentiment helps us feel confident in adding exposure when it does feel that bad emotionally. Right. So we don't feel like it's, I mean you could describe it as neutral right now, but it certainly tells us that if you want to add exposure, probably better off waiting.

[Josh Brown]

Okay. I like that way of thinking about it. If you're about to put money to work and you are under some sort of a constraint about getting the timing right for a 90 day period and a lot of asset managers are like, is today the best day? Not definitely.

[Katie Stockton]

Probably not.

[Michael Batnick]

Yeah, I know and I know that's hard because the market does have such momentum. Right.

[Katie Stockton]

It doesn't wait for you to get in.

[Josh Brown]

Let's do this. Cumulative NYSE advance decline.

[Katie Stockton]

So we got a cell signal. How dare you, Katie.

[Michael Batnick]

Yeah, I know, I know. And what I like about this, I admire your courage, is that it tells us that breath has been strong. Right. Because I do feel like people are still kind of harping on 2023 when breath was really lousy for the Most.

[Josh Brown]

Let's do 30 seconds on MACD. So this is moving average convergence divergence. It's an indicator, but it's not predictive of anything. It's telling you what has just happened.

[Michael Batnick]

That's right.

[Josh Brown]

Tell people why that matters to technicians.

[Michael Batnick]

Well, we want to eliminate noise, we want to identify prevailing trends and we want to also understand if those trends have good momentum. Right. And the MACD serves all three in a way. So it's a trend following metric. It'll tell us is it an uptrend or downtrend over various time frames.

[Josh Brown]

And it looks for the listener, it looks like a wave. And you'll frequently see it as the bottom pane of a chart of something.

[Michael Batnick]

Stocks. Yeah, that's crossovers, two lines. One is a data line, one's a signal line there for crossovers. And the crossovers will give you so called buy and sell signals. They'll give you an idea of whether it's a trend shift that's meaningful enough to act upon. You can evaluate it for divergences as well. And you can also see if momentum is growing or contracting. You know, you might still have upside momentum, but it could be less so than it was a few weeks ago. And there's information in that.

[Josh Brown]

You want to buy the upside cross of the signal versus the data, generally speaking.

[Michael Batnick]

But you always want to cross reference that with everything else.

[Josh Brown]

Yeah, it's not the only.

[Michael Batnick]

The MACD itself probably would test all right, but certainly not perfect because it will at times eliminate too much noise. So we want to enhance it with things like this stochastic oscillator and the demarc indicators.

[Josh Brown]

But what is this chart? So you have a chart here, cumulative New York Stock Exchange advanced decline, which I think everybody understands what that means. This is the number of stocks going up minus the number of stocks not going up and cumulative, meaning it's not.

[Michael Batnick]

Just today, every day, it's building, it builds on it.

[Josh Brown]

Okay. So that if I know nothing about markets at all, I look at the top pane of your chart. You're showing a 40 week moving average. That looks amazing to me. That's a record.

[Michael Batnick]

A very good uptrend has been in place since.

[Josh Brown]

So why do you show these two things juxtaposed with each other?

[Michael Batnick]

It's to show that the uptrend has lost momentum. Right. And it's not an outright as much as it says MACD sell signal. That's to denote the. That's right. It's more like.

[Josh Brown]

I'm sorry, this is a MACD of the thing above it.

[Michael Batnick]

Yeah, that's right. Yeah.

[Josh Brown]

Okay.

[Michael Batnick]

So it shows that the breath has actually lost momentum, which is kind of interesting. And all that would tell me is to say, okay, if we do see breakdown in absolute terms by whatever, we're gonna be more likely to honor those breakdowns and react to them because breath contraction can be pretty tough.

[Katie Stockton]

Well, we're getting a breath thrust in or a surge, I should say. I know a breath thrust is an actual thing that's being measured.

[Josh Brown]

A breadth surge. What's the difference between a breath surge.

[Michael Batnick]

And a breath thrust?

[Katie Stockton]

A breath thrust is mathematical. Okay.

[Josh Brown]

I have to be honest, just the term thrust makes me very uncomfortable.

[Katie Stockton]

I'm very comfortable. I am a thruster.

[Josh Brown]

I know that you are.

[Katie Stockton]

All right, so breadth and NASDAQ surgin chart can made this chart that shows 14% of Nasdaq stocks are at a 52 week high. And historically this has not been a top signal, like at all.

[Josh Brown]

Yeah, so why is this. All right, so this is an interesting question. Do you think about NASDAQ stocks differently than The S&P 500?

[Michael Batnick]

Yeah, I would say collectively, yes. I give more weight to the S&P 500. This is a broader, broader sector representation. And so I think of the NASDAQ as being a little higher beta in general and also a little bit more mega cap heavy. Right. So those things matter. We often, if we are recommending hedges, short term hedges, we will use the inverse triple QS or PSQ for that recommendation.

[Josh Brown]

You get more bang for your bucks.

[Michael Batnick]

That's right, that way. Because oftentimes you do see the technology sector to which the NASDAQ is more heavily exposed underperformed on the downside. Right. High beta. So we want to get that tech exposure before getting hedged.

[Josh Brown]

So if you're putting on a hedge to the S&P 500, the right way to do that might be. But don't you also pay the price for that if you're not, if you're wrong, if the market continues higher, you're definitely paying a beta price because the Qs are probably going to outperform.

[Michael Batnick]

Of course. Yeah, typically I would say. But we have seen the Q's and this is not a technology problem as much as it is a mega cap problem. When you have Apple and Microsoft, which are two massive heavyweights, as you know, having kind of lost their relative performance that is impactful to the whole benchmark.

[Josh Brown]

Let'S do this secular and cyclical trends. What's this first chart? This is a monthly chart of the S&P 500 index.

[Michael Batnick]

A great chart. Yeah. So it shows a lot of the.

[Josh Brown]

I'll be the judge of that. Tell us what's in it.

[Michael Batnick]

The indicators that we use most, including the demarc indicators on there.

[Josh Brown]

So there's your number, there's your demarc count.

[Michael Batnick]

So you see the secular bull trend. You see that the shaded area. That's our cloud model. And it shows that we are likely to get into range and then resume higher. Right. So maybe a cyclical range and then the secular bull can resume. Just visually, it's not really a gauge of support right now. Too far away to matter. Hopefully it won't have to matter. We also had the stochastic oscillator that's in the middle window there and the MA D indicator with a histogram in the lower window.

[Josh Brown]

What is the stochastic pain telling us? Because you have, as a note here, long term overbought.

[Michael Batnick]

Yeah. So we have to clarify to folks that overbought is not necessarily bad. Right. Overbought is actually mathematical term.

[Katie Stockton]

I have JC in the back of my head. How can too much demand for stocks be bad?

[Michael Batnick]

Yeah, yeah. So. And it's momentum. Right. It shows momentum. What's bad is kind of what you saw with the sentiment metric, where it rolled over from overbought. That's when it's bad. It's when you get the stochastic coming back below that overbought threshold, which happens to be 80% in our work. So we are overbought, and that has us sort of on edge. But we don't have an overbought sell signal. So that's how we'd interpret that. The one thing that we've been using more and more this year, if you look at the macd, the histogram in the bottom is another way to represent it. And it's basically the spread between those two lines. And you see how it kind of like builds a mountain and then peaks and then goes.

[Josh Brown]

One peaks before the other.

[Michael Batnick]

Right. The histogram is showing sort of the convergence and divergence of the macd. And what we found is there's real value in trying to identify that peak in the histogram because it will occur well before the MACD cell signal itself. And it'll give you again, a sense.

[Josh Brown]

A indicator for an indicator.

[Michael Batnick]

Yeah.

[Katie Stockton]

This is what Warren Buffett uses.

[Josh Brown]

Yeah, I was gonna say you're playing it just like Berkshire.

[Michael Batnick]

It's like two Derivatives away from price. Right. But that's about as far as all goes.

[Katie Stockton]

But anyway, the bad news is we've got a big fat number, 13 up there. That looks ominous.

[Michael Batnick]

It does, doesn't it? And listen, they're not perfect. Right. If you look over history, but it does, again, have you sort of bracing for something that could lose.

[Josh Brown]

13 is the demarc count for this monthly candle.

[Michael Batnick]

That's right.

[Josh Brown]

What is that? Why is it 13?

[Michael Batnick]

And it's a 13 on the daily as well? It's a 13 because of the qualifiers that Tom has sort of built into this one indicator that you see here. And the qualifiers, it's pagan in nature. I'll give you an example of one of the qualifiers. In order to go from a 10 to an 11, the close has to be above the high from two bars ago. Okay, don't quote me on that, but it's something like that. Right. So it's looking at how price is trading in the current price bar versus bars, you know, two, four bars ago. And it's there in measuring momentum. So it's like an extend.

[Josh Brown]

It's like an extended. So what's so crazy is we were a. You're saying. Not you. The formula is saying we were a 13 before this week, like ending October as a 13. What are we now?

[Michael Batnick]

Well, the 13 was actually there in October, but based on October's close, it disappeared, which is one of these very frustrating things for people like me. But now in November, November's bar is up there.

[Josh Brown]

Oh, we do have.

[Michael Batnick]

So it is not locked in. We'll only know that at the very end of the month. But it does give you just a visual sense that it's overdone. And by the way, we're not terribly far from that measured move objective. 6118. It's a pretty widely known objective.

[Katie Stockton]

What does that take us to? 6,000? Just a little bit more.

[Michael Batnick]

6161. 6100. Yes. 6120.

[Josh Brown]

So that would be a measured move in Fibonacci terms, is.

[Michael Batnick]

This isn't even really Fibonacci. It'd be like a 100% replication of the move that preceded the bear cycle.

[Katie Stockton]

I think even the most bullish of bulls would say, yeah, it would probably be health if we could just correct through time a little bit, just digest, take a break.

[Michael Batnick]

Just visually. Right. And let's hope it doesn't have to look as pronounced as 2022 does when you take a step back.

[Josh Brown]

Well, so I want to be careful with Correct. It needs to correct. I think most bulls would say they would prefer a consolidation, not a correction. That's good news, because where does a correction. Where does a correction take us down? Where does that 10% move take us down to from today? Is that 5200ish? That's not pleasant.

[Michael Batnick]

Like, every consolidation or range unfortunately, has to pretty much start with like, a correction, like a proper correction to establish the low point of that range. So we do think that we'll get that correction. That is probably going to happen relatively soon. And that's why we're just saying, hold off on new purchases. Hedge some of the higher beta exposure that you have. Partially. We always say partially because we want to be there for the bull cycle. Our fund is 100% in equities right now, basically. So we're still exposed ourselves, but we do see. Look at that MACD histogram. It kind of feels like it's peaked to me.

[Josh Brown]

Okay, so that sounds completely reasonable. And one of the beautiful things about using technicals is not that you'll always be right, but it's when you take action and do something, you can point to a reason why you did it. And also, if it was the wrong thing to do, whether you shouldn't have bought or you shouldn't have sold because the outcome went against you, the technicals will help you fix it.

[Michael Batnick]

They won't let you be wrong for too long, is what I say.

[Josh Brown]

That's actually the better way to phrase it.

[Michael Batnick]

Yeah. And J.C. and I were talking this morning about how did you get a word in edgewise? I did. It's very generous, but we're very much like, philosophically on the same page, typically. Right. And, you know, when we think about technical analysis as a discipline, you know, people are like, oh, it doesn't work in this environment, or, you know, it's not. We agreed that it's not technical analysis that ever fails anyone. All technical analysis is, is the identification of price trends. You know, analysis of supply and demand where it falters would be in the eye of the beholder. Right. So it would be me saying, you know what, I'm probably giving a little bit too much weight to these overbought oversold metrics in an environment in which I probably should have given more weight to momentum. So it's more in how you're weighting the various inputs that you get from the technicals that I think you can be on the wrong side of things. But the market won't let you stay that way for very long because you're just going to have to concede. And that might mean for me, the MACD does something that I give up type of thing.

[Josh Brown]

I think with technicals now there's more of an appreciation of how they can be used even by people that are not technical analysts to manage risk. I think where technical analysis as a discipline gets into trouble is when something happens and somebody pulls an indicator out of their ass that you've never heard them use before and say, yeah, look, this totally explains it. But that's any the fundamental people, same thing.

[Michael Batnick]

The systematic approach is really the right way to go with most disciplines.

[Josh Brown]

Like you shouldn't have a new indicator just because the one you normally use didn't spot something.

[Michael Batnick]

Confirmation bias.

[Katie Stockton]

They don't do that in fundamental analysis. There's no community adjusted ebitda. Oh wait. All right, so I know you're a fan of inter market analysis as a technician and ratios and all that good stuff. So I want to show you what I think is one of the most bullish charts in the world, which is the equal weight consumer discretionary style stock divided by the equal weight consumer staple stock. These are Invesco products.

[Michael Batnick]

Okay. Oh, that's good to know because I didn't realize it was equal weight.

[Katie Stockton]

Well, the reason why it's so important as you know, is because you were.

[Josh Brown]

Going to say it's all Tesla, it's all Amazon.

[Michael Batnick]

Yeah.

[Katie Stockton]

XLY is 40% I think Tesla and Amazon.

[Josh Brown]

So it's great.

[Katie Stockton]

If you look, if you look at the equal weighted version of the discretionary divided by staples, it is ripping to new all time highs.

[Michael Batnick]

It is, yeah. And listen, if that breakout's confirmed, then that'll be meaningful. Right. So I'd make sure that it's a risk.

[Josh Brown]

It's another risk on.

[Michael Batnick]

Yeah, it's very much, you know, it's like this week is the week that it lifted above that resistance. So I would just make sure that it holds up there. Right. And that would be bullish in my opinion as well as just one sort of enhancement. And it would also, in a way.

[Josh Brown]

Put it this way, you wouldn't want to see the reverse. You wouldn't want to see a 1500 point rally in the Dow and this is the reverse.

[Katie Stockton]

Well, look what happened. So look at, look at 2020, right. This ratio crashed during the bear market, ripped during the bull, crashed during 2022 and now we're on fire again.

[Michael Batnick]

Yeah. And it feels a little extended to me, admittedly I'm vertical.

[Katie Stockton]

Yeah, me too.

[Michael Batnick]

Yeah. Yeah. I thought a few Weeks ago that it was rolling over.

[Josh Brown]

This will fix itself. It has to. It's a ratio chart. Like at a certain point it oscillates.

[Michael Batnick]

And we also had to remember it's hard because we do a weekly report that focuses on sector relative performance. Right. And we give overweight, equal weight, underweight recommendations with an intermediate term time horizon, which to me is very helpful.

[Josh Brown]

What's intermediate term to you?

[Michael Batnick]

So if I had to say weeks to months would be sort of the general. If you could center it maybe around three months and then for short term it's days to weeks, long term would be six months plus, something like that.

[Josh Brown]

So what sectors look good based on the last thing you put out?

[Michael Batnick]

It's funny because it's in this weird transition period right now where we're actually equal weight most sectors in our recommendation because you've seen a transference, tech has fallen out of favor. So that's equal weight. Energy is still underweight, but maybe that'll move to equal weight as it transitions. Potentially here with drill baby drill banks, financials. If you look at the ratio, it's probably pending confirmation of a breakout this week. But my guess is that we won't get that confirmed breakout in the ratio. So we're equal weight financials as well. So equal weight a lot. But if you take a step back and look at the longer term view, we have an RRG relative rotation graph.

[Josh Brown]

Yeah, we've seen this. Jeff at renmac has one of those too.

[Michael Batnick]

Yeah, Julius de Kempenar is the creator of these and they're a way to look at relative performance normalized and you get this cool data visualization tool.

[Josh Brown]

It's like a wheel and you have some sectors rising, like growing in relative strength while others are falling. I don't know that it does anything for a 10 year investment, but if you're like what's working now? That's a really great way to argue.

[Michael Batnick]

That it's almost even better for that 10 year timeframe. Just to give you a general sense of what's unfolding and, and if we look at a six month view of sectors within the S&P 500 versus the S&P, it favors utilities, REITs and Staples, which that gives me information. Right. It kind of tells you it's rewarding what we saw in the way of a relief rally in relative terms for those sectors, it's saying that the momentum has shifted. And then conversely, tech and communication services look the worst. They look like they're the ones that are rotating out of favor.

[Katie Stockton]

Is that Bullish or bearish to you?

[Michael Batnick]

That would be bearish. Yeah.

[Josh Brown]

Because they're so big. Those market cap is so big.

[Michael Batnick]

It's the market cap, but it's even more so than that. It would just be the defensive sector rotation that that could imply. But it's not something that we're taking as like investable information. It just creates a backdrop. But the challenge that I was going to mention with the sector rotation and relative performance is that people don't realize that you really are talking relatives. Right. We're not saying with an overweight recommendation necessarily to go buy that. That sector. So that's a challenge on our end in terms of making sure people know that, you know, they aren't, they're not totally independent. Right. But relative performance is, you know, something that you want on your side, but it's not necessarily a buy or sell trigger.

[Josh Brown]

You agree with Michael though. This is a bullish chart. It might be extended, but it's like what you would want to see.

[Michael Batnick]

Yeah. Oh yeah, yeah. That's supported the uptrend for sure. It shows risk on versus risk off. The consumer staples stocks have gotten pretty interesting, I have to say. Well, as interesting as they can, I guess.

[Josh Brown]

You don't look like shit in the rally and it should be obvious that it would. Pharmaceuticals.

[Michael Batnick]

Yeah, right.

[Josh Brown]

Trump hates these companies.

[Michael Batnick]

It kind of makes sense.

[Josh Brown]

He doesn't like.

[Michael Batnick]

I think Lilly has a breakdown.

[Katie Stockton]

Yeah, it doesn't look good.

[Josh Brown]

He's gonna start yelling at them about drug prices for sure. And he wants to make deals with them all for the US purchasing of drugs, biotechs. And Bobby Kennedy is like, I think anti vax. He might be involved with the fda. Those stocks look awful.

[Michael Batnick]

Yeah, they've been really beaten up in that sometimes there's opportunity but you don't want to be too early. We've been constructive on Boeing as a good example of a countertrend, sort of hopefully.

[Katie Stockton]

What are you nuts?

[Michael Batnick]

Hopeful trade.

[Josh Brown]

But you don't seem to be. That doesn't seem to be central to what you do. Like falling knives.

[Michael Batnick]

No, it's really not. No. And listen. And Boeing, honestly, we only got there recently once it showed some stabilization and held trend line support, that type of thing.

[Josh Brown]

But you're not looking for that.

[Michael Batnick]

No, we're trend followers. We much prefer to have most of our positions be in long term uptrends. We're okay living through corrections. As you've heard.

[Katie Stockton]

You were about to say something interesting about Staples.

[Michael Batnick]

Oh yeah, the staples. So the corrective phase that has damaged their relative Performance of late brought a bunch of these high profile names into their 200 day moving averages which are often, I want to say even self fulfilling as support at times. So it was like General Mills, Coke, Kimberly Clark, really defensive pg. All of the really very high profile but not very exciting consumer staples stock stocks had these pullbacks simultaneously. So it was very much a sector move. Right. Not specific to any of those individual names. And I feel like that was at least a short term entry for some of them.

[Katie Stockton]

But a good entry, right?

[Michael Batnick]

A good entry. Yeah. And something like.

[Josh Brown]

Because they should find support there.

[Katie Stockton]

These have been wild uptrends and they're giving you an opportunity to get back in.

[Michael Batnick]

Yeah, some of them. And it feels also like if you are like me expecting consolidation, well the consumer staples relative performance should be a little bit better. Right. And so it feels a little safer to me. So not only do you have an oversold reading near their 200 days, you have the potential for Staples to be better insulated if we do get into a more prolonged consolidation.

[Katie Stockton]

Know what happened this afternoon as we're sitting here talking the largest market cap company that's ever existed in the United States and ostensibly in any country. Nvidia hit an all time high for any market cap of 150. Yet any US stock ever. It's $3.63 trillion. No US stock has ever been that large. Nvidia is at 148 all time high.

[Michael Batnick]

It's another.

[Josh Brown]

People ask you about. People ask you about Nvidia more than any other stock.

[Michael Batnick]

They do, okay. Yeah, they do. I mean I really.

[Katie Stockton]

How good are semis looking?

[Michael Batnick]

I have to say that's not the best chart that I.

[Katie Stockton]

Exactly.

[Michael Batnick]

Yeah, yeah. I say interpretation.

[Josh Brown]

So what do you tell people that ask you? Because if the people are asking you about Nvidia, they're either in real life they might not use these words. They're either asking you for permission to buy it because they missed it or they're asking for your like stamp of approval for them to keep holding it.

[Michael Batnick]

Right. So a lot of them already own it.

[Josh Brown]

Right.

[Michael Batnick]

Wondering if they need to manage risk somehow around their position.

[Josh Brown]

The answer is yes, you need to manage risk.

[Michael Batnick]

Yeah, I would think so. That the big sell signal, the demarc indicators that you saw in the S and P is shared by Nvidia on its monthly chart. Nvidia has been such a huge influence on market sentiment and really a driving force as we all know. It's a general big time. And it's not to say that it's a bearish setup. It's not to say that everybody should sell Nvidia all time.

[Katie Stockton]

Highs are not bearish. J.C. told me that.

[Michael Batnick]

No, this is true. But if for someone who feels like they missed it, just be patient.

[Katie Stockton]

Let me throw another chart in your face. All right. Does Micron look a little bit better?

[Michael Batnick]

It's more of a turnaround, so, you.

[Katie Stockton]

Know, you want to wait for it to clear.

[Michael Batnick]

Well, yeah, there's.

[Josh Brown]

What about that chart do you like? I don't understand.

[Katie Stockton]

Me.

[Josh Brown]

Yeah, I.

[Katie Stockton]

Well, if it goes. If it gets past that, could this. Because I'm not a triple top guy. Don't believe in him. If it gets past 100 1350, it's gone.

[Michael Batnick]

Yeah. There's no triple top because it hadn't been trending higher for me with a lot of these. In fact, it does have a demarc buy signal, by the way, that short term.

[Josh Brown]

So you and Todd DeMarc, what else.

[Michael Batnick]

You got two weeks in dur. So you gotta be there now. But for these, the semis in general, I'm not talking like ASML with its breakdown, but just kind of a generic semi actually has a pretty notable loss of momentum that's carried over to the monthly charts. So it's really not a great sector right now. What I think there's. And you guys might feel it too in your conversations and with your clients is that there's just interest. Really. Not even just the mega cap, but really very tech centric.

[Josh Brown]

But software not susceptible to tariffs in the way hardware is. Is like there seems to be like I was looking at CrowdStrike and some of my software names. These things are. These things look like regional banks. Like they're.

[Michael Batnick]

There is a. So it's a really mixed group. I just looked at them today for someone and some of them look just like the S and P. Right. And those to me are the ones that carry a little bit more risk. And then others, like look at a HUD spot or something. You know, these names have just been on fire and they're coming off of what were really long term base breakouts. Even Zoom as one that was beleaguered.

[Katie Stockton]

I bought and sold it. Damn it.

[Josh Brown]

That's why it's working.

[Katie Stockton]

But here's. Remember, software is dead. Like Salesforce. Salesforce did get murdered. But look at that chart of Salesforce came roaring all the way back.

[Michael Batnick]

It did, yeah, it came right back.

[Josh Brown]

We do this Microsoft. Let's do this Microsoft stuff. Katie, you have a chart here. Can we do like a second on the wall Street Journal quote.

[Katie Stockton]

Is this from me?

[Josh Brown]

I did put it this in from you. Who's this?

[Katie Stockton]

Who did this?

[Michael Batnick]

The Wall Street Journal, you know.

[Katie Stockton]

Guilty. I'm sorry.

[Josh Brown]

This was me, okay?

[Michael Batnick]

Not me.

[Josh Brown]

So I want to make sure we get to this.

[Katie Stockton]

All right? So listen to this from the Wall Street Journal. This is knuck and futz. The AI boom has transformed Microsoft structure and its balance sheet sheet. In the past four quarters. The company's capex worth $64 billion up from 36 billion in the period a year earlier. It's now spending in a quarter what five years ago it spent in a year. Microsoft suspending in a quarter what it spent in a year five years ago on capital expenditures and ostensibly all going.

[Josh Brown]

To a lot, a lot of it going to Nvidia. Not all, but a lot. Yeah, it's GPUs.

[Katie Stockton]

It's wild.

[Josh Brown]

And data and building construction for data centers.

[Katie Stockton]

And notably, the company recently disclosed that all its AI services combined are pulling in revenue at a rate of $10 billion annually. Does anybody want to bet that it's not going to be 20 billion in very short order?

[Josh Brown]

I don't. Let's do the Microsoft chart. Buy, sell or hold.

[Michael Batnick]

I mean, would you guys buy that?

[Josh Brown]

No, no, no, not yet.

[Michael Batnick]

Me neither. Yeah, no brand new macd sell signal on the monthly chart. Right.

[Josh Brown]

And an overbought downturn now rolling over.

[Michael Batnick]

That's a great example of where it goes from overbought healthy to overbought proper.

[Josh Brown]

Can the market survive this? If this. If this looks this way and then we get something similar with Apple, like can. Can the rally hold up?

[Michael Batnick]

It feels like it rests on the shoulders of Nvidia in a way. Right. So.

[Katie Stockton]

Yeah, I know it's rhetorical. The answer is disgusting. Chart.

[Michael Batnick]

There's some support.

[Katie Stockton]

Okay. But this is. So I was about to ask like when you're thinking about ratio charts.

[Josh Brown]

So what is that?

[Katie Stockton]

This chart is Microsoft divided by XLK and it looks like trash.

[Josh Brown]

Yeah.

[Michael Batnick]

So it's really underperforming when you're thinking.

[Katie Stockton]

About Microsoft relative to. I assume, are you relative to. To its sector or the market?

[Michael Batnick]

Broader market. Okay, but I mean it's not a great.

[Katie Stockton]

It's not great either way.

[Josh Brown]

But hold on. The quote in that article ends with the company recent recently disclosed that all its AI services combined are pulling in revenue at a rate of 10 billion annually. Maybe. Maybe I'm an idiot. It doesn't sound like you can spend $64 billion a year in AI capex for 10 billion in annual revenue for A really long period of time. So either that capex number comes, I don't want to say comes down, stops accelerating, which I think probably hurts Nvidia, or it stays where it is and Microsoft starts to lose a lot of money. But it feels like one of those two things has to break.

[Michael Batnick]

Right? And neither are good. Right.

[Josh Brown]

Neither are good for the market.

[Michael Batnick]

So yeah, I mean I don't have a handle on the fundamentals of course.

[Josh Brown]

So you would not get long Microsoft here year technically.

[Michael Batnick]

So if your time horizon is like a week or two, sure it's got a short term oversold upturn within this context. So the timeframe is really important and in fact as I look at the ratio it does actually have a counter trend indication. Maybe it just means that the underperformance has gotten to the point where it's a little overdone.

[Katie Stockton]

But if we're zooming out, I mean this is still very much in an uptrend, let's be real.

[Michael Batnick]

It feels toppy though, doesn't it? I mean to me it's got what could be a classic head and shoulders top unfolding there. So I think it's somewhat risky from a long term perspective and certainly at a very minimum there are much more compelling setups out there.

[Katie Stockton]

Well, if this thing breaks down to.

[Josh Brown]

360 I'm in away from the charts for one second. I think next year the conversation shifts from LLMs with the AI stocks to agents and agents has the potential to become a really bullish investing theme. So something interesting happened this week. Google accidentally made its Jarvis AI product available in their own store, their own app store and then they pulled it like a day later a whole bunch of people downloaded it. They couldn't access it because it wasn't really ready. But it seems like this is going to happen before the end of this year. For those that don't know, Jarvis is an agent. So this is not asking an LLM to help you with your homework. Jarvis allegedly will have the ability to call a restaurant for you and get you a table. Jarvis could then change your reservation because you tell it to. Jarvis can put you on an airline, which to me sounds like the hardest problem on earth to solve given how many variables. Like I want to fly out an hour later. No, wait a minute, I want to be in first class. No wait, how much is the price for this? But whatever, if that's where we're going next year, I feel like it's out of. It's hard to not be in these AI stocks because Claude already exists. And what these agents are doing is taking screenshots of your computer while you work so that they can then replicate the things that you already do.

[Michael Batnick]

Imagine if you could have it call your health insurance company and stay and hold for you and get it done. I mean that would be a game changer.

[Josh Brown]

Let me read this to you. This is potentially very creepy. It's called on screen awareness. That's what the next generation of AI is going to be about. It's going to watch you in action and then mimic you when you ask it to do something.

[Katie Stockton]

What if you're incognito?

[Josh Brown]

Dude, you have a lot to worry about. That's a separate conversation. All the news about Project Jarvis is giving us major deja vu because of how many times we've seen the capabilities being touted just by another company. So Anthropic has Claude, which Amazon is all in with. Anthropic. It controls your computer for you already works. It'll be taught to use computers by taking screenshots, sending them back to the model to analyze what's happening on the screen. Apple Intelligence is going to do on screen awareness, which seems like it's very invasive. Observe your activity. Feed that into its system to intelligently carry out those tasks for you. On another occasion, Microsoft has Copilot famously plus recall. Very nosy. It's all in your business.

[Katie Stockton]

I love it.

[Josh Brown]

This is where things are going and that makes it for me somebody who really wants these tools. I don't want to give up on any of my Nvidia stock. I don't want to because I feel like this breathes new life into the story.

[Michael Batnick]

Can't you just buy psq right to manage through any risk that you're taking?

[Josh Brown]

I suppose I could. I suppose I could.

[Michael Batnick]

If you wanted to get hedged to some degree. It is hard to time the entries in a stock that has such good momentum. So I think the message is, yeah, maybe you hold your existing position, you hedge through top down sort of avenues and that's your risk management. I don't think you also have to sort of incur taxable events if you're trading in and out of these core holdings. So if it's a core holding, we usually say as long as that core holding has long term upside momentum, stay with it. But then you can sort of hedge it.

[Josh Brown]

Yeah, you don't want to churn yourself in a position that you view as like truly core to what you want your portfolio to be invested in. I agree with that. We can't let you get out of here. Without Bitcoin. This is exciting. This is like an exciting week. Not just because of what the price did, but because the decriminalization of investing in this stuff is now coming. And I just can't. I said this over the summer. I said Trump's going to be the bitcoin president. He's just going to fall in love with all the money that's come to him during the campaign. Now he has all these really smart friends and they're going to stay very involved, it appears, with the administration. And a lot of the dominoes will now fall on the side of this becoming more mainstream, not less. Like there's probably going to be change at the sec. Okay. You also basically have the acquiescence of Larry Fink and even JP Morgan.

[Katie Stockton]

Acquiescence of Larry Fink?

[Josh Brown]

Yeah, he's all in about three years ago. He thought it was a scam. So we have to watch Bitcoin now. The added reason is that this might become a reserve asset for the government.

[Michael Batnick]

Okay.

[Josh Brown]

So now this is now something that, that every technician, every macro person, they have to. They have no choice. They can't dismiss Bitcoin any longer.

[Michael Batnick]

It's a great example of where you can't fight a trend indefinitely. Right. So when you have a breakout and this one is looking like it will confirm this week, you have to honor that breakout as acting as a positive catalyst as long as you don't have any big sell signals. And Bitcoin does not have any of those. So we do also get from bitcoin sort of diversification in a portfolio. Our recommendation really historically has been that everybody should have a small position in bitcoin, even just for the call option of it really working and really exploding. But now also from a technical perspective, with it having advanced from a downtrend channel that had been in place since March, that's a big deal. Assuming we see it close.

[Josh Brown]

Got a new high this week.

[Katie Stockton]

Look at this weekly chart. How like that is so bullish.

[Michael Batnick]

It's almost like every day.

[Josh Brown]

Classic cup and handle.

[Michael Batnick]

Yeah.

[Josh Brown]

You would buy any asset that has that setup.

[Michael Batnick]

Yeah, I think the cup and handles are pretty high probability. Even Microsoft before it got into this corrective mode had this beautiful cup and handle breakout and follow through on the back of that. So we like this breakout, assuming it.

[Josh Brown]

John, can we put Katie's chart up? It's toward the end of. Okay, so, all right, this is Bitcoin weekly. You're looking at both a 10 week moving average and a 40 week moving average. And you have a cloud and you're looking at that cloud area as if it falls. As long as it stays in there, it's still intact.

[Michael Batnick]

Well, it shows a good band of support, essentially below current levels. It served as a staging ground for the most recent relief rally. Momentum has shifted.

[Josh Brown]

Oh, sorry, you're quote, but you're labeling this a pending breakout. Ain't nothing pending about it, girl.

[Michael Batnick]

Like, this is where it frustrates folks, especially in a high beta asset class.

[Josh Brown]

Say why it's pending, say why it's pending.

[Michael Batnick]

Because we haven't had the two weekly and we have to say closes with quotes for bitcoin, the two weekly finishes above our resistance level.

[Josh Brown]

So could this confirm for you by next week?

[Michael Batnick]

It's Sunday. Yeah, Sunday. It's when it rolls to a new price bar on the weekly.

[Josh Brown]

The good news is I could buy it Sunday. When you text me.

[Michael Batnick]

You'll see it coming. You'll see it coming and just make sure it's actually me.

[Josh Brown]

So why are you saying measured move 80,600. What is the significance of that?

[Michael Batnick]

That's just based on the width of the pattern and where it's come from from before. It's that same 100% extension. It's only any measured move is assuming the existing trend is resuming and in a similar slope and fashion.

[Josh Brown]

So. But what does that mean to the person that goes long on the breakout? Like 80 is where they should think about taking profits.

[Michael Batnick]

You know, it's more of like an objective. It would be a stopping point, a natural stopping point on the chart. But by no means should it be where they say, okay, I'm going to close my position there. It would be a natural place for consolidation, typically. Okay, so Even with that 6100 level for the S and P, same type of idea there, that doesn't mean that's where it's all done. Bull cycles over necessarily. But it's an objective that if it's reached, it would be a natural place.

[Josh Brown]

For it to pause. My price target is derived a little bit less scientifically than yours. I'm going to say 110,000.

[Michael Batnick]

I've heard that before. Yeah.

[Josh Brown]

But the reason why is because once it goes to 100, that's when like the real desperation starts. Any asset management firm, any asset allocator that has no bitcoin is going to want to kill themselves. And that last burst at the end and that could take place in one day. That's like a trillion bucks coming in as it breaks 100,000 and we've gotten.

[Michael Batnick]

To the place where there is.

[Josh Brown]

It's like FOMO on steroids.

[Michael Batnick]

There are more ways to invest now, of course, in bitcoin.

[Josh Brown]

Oh, it's. You can. Now it's easy.

[Michael Batnick]

Now it's easy. And, you know, I don't feel like it has the institutional adoption really yet, but just imagine if all of the pensions out there or the state funds, what if they picked up just a.

[Josh Brown]

Little slice, sorry, Central banks. I mean, this is actively being discussed at the US Treasury. And if the US treasury decides this is a serious asset for American stability or whatever, you're going to have central banks in other countries say, well, I guess we have to do something. It doesn't have to be a lot because we're talking about trillions of dollars that are buying gold. Buying dollars, doing other things.

[Michael Batnick]

We saw what gold did too. Right. So gold is, if it's any proxy. We've seen what gold's capable of. It hasn't been acting like a safe haven asset class, really. It's just crazy momentum.

[Josh Brown]

All right, so you're constructive on bitcoin and you think the breakout could confirm as soon as this happens.

[Michael Batnick]

Assume it will confirm. It doesn't mean you have to chase the move. There's a little resistance, final resistance, just near current levels. So maybe some consolidation for a couple of weeks, and then that would be your trigger to add exposure. I don't think we're going to see a lot of things just run away the way that they did this week. I think we can kind of calm down a little bit and let things confirm, let things digest and consolidate. If you do want to add exposure. Exposure.

[Josh Brown]

You know what? I don't know. Tell me. Can you imagine somebody selling bitcoin right now?

[Katie Stockton]

No.

[Josh Brown]

Like, what would make them want to sell it? Right. Like, of all the times to sell it, so. And again, there are science signals.

[Michael Batnick]

Yeah, yeah. And you can make a case from different sort of perspectives. Right. You're talking almost like a money flow perspective. We're talking charts. There's the government, you know, so there's a lot of things that are bolstering the asset class.

[Josh Brown]

Okay. Hey, did you have fun on the show today?

[Michael Batnick]

I did. Yes, you did. Thank you for bringing me back on.

[Josh Brown]

We always have so much fun and we always learn so much from you. I want to just ask you before we get into favorites, for people that are unfamiliar with tack and unfamiliar with, I guess you would call it, your flagship etf, Right?

[Michael Batnick]

The one and only.

[Josh Brown]

Okay, so, like, broad strokes, we want people to Go research it, of course. But broad strokes like what is the elevator pitch? If you meet somebody for the first time and they say, should I buy your etf? What does it do? What do you tell them?

[Michael Batnick]

Yeah, I think of it as the alternative to the old sort of buy and hold mentality because dynamically it will do that for you when it's appropriate. Right. So as a technician, it's hard to ride down the market in a 2008.

[Josh Brown]

So it's not a rules based approach.

[Michael Batnick]

To do that for you very long term. So think of it as a slow moving chip designed to only really change during major reversal and it uses asset allocation to limit drawdowns. It's not this sophisticated option strategy or something that arguably is hard to understand and could break. It's very classically moving into short term treasuries, long term treasuries and gold. And that's unique. And it becomes almost. The 6040 model is getting some criticism. It actually is about a 65, 35 model over history. But it's dynamic. At times it will be 100% equities like it still is now, and at other times it could be nearly 25% in gold.

[Josh Brown]

Do you have any sense of who's using it? Like percentage wise, wealth management versus retail?

[Michael Batnick]

Yeah, a lot of retail and a lot of RIAs, I'd say. And we're on some of the major platforms as well, so it's been great to see the uptake there. It was number one in its category in terms of performance in Q3, so that was really awesome to see. Congratulations and great risk metrics.

[Josh Brown]

200 million is a big deal for any active anything, so congratulations and can't think of anyone more deserving than you.

[Michael Batnick]

So I appreciate it.

[Josh Brown]

Absolutely. We always close the show with favorites, as you know. Besides Trump, is there anything that you want to shout out? What's something that you're into these days that other people should check out?

[Michael Batnick]

So I would say I thought about this because I knew you'd. Ancient Apocalypse.

[Josh Brown]

Okay, say more.

[Michael Batnick]

Have you seen this?

[Josh Brown]

Oh, I thought you were calling for one. Cause I'm all in. I'm ready for it.

[Katie Stockton]

I'm leaning in. What's this?

[Michael Batnick]

So it's a documentary and it goes into sort of the mysteries. It's on Netflix, I think it is Netflix.

[Josh Brown]

Okay. I think I saw it, but I.

[Michael Batnick]

Didn'T realize they're into the second season and highly worth it. I really think it's fascinating. I know documentaries might come off as seeming boring, but this is it. Really kind of challenges the common theories about when mankind. Sophisticated version of mankind exists. So. And at the same time, it's a little bit of a travelogue. It's really a good show.

[Josh Brown]

What other conspiracies do you believe in?

[Michael Batnick]

Oh, gosh.

[Josh Brown]

Who built the pyramids? Katie?

[Michael Batnick]

No, I've talked about that. They go to Easter island in the episode I just watched, and the Maui, you know, statues, the heads. And they go into sort of controversy around that. And it really is very compelling.

[Josh Brown]

There's, like a lot of Mayan stuff where you say, like, how do these people build this?

[Michael Batnick]

It's remarkable.

[Josh Brown]

Yeah.

[Michael Batnick]

Yeah, okay.

[Josh Brown]

I like stuff like that. Michael, do you have a favorite for us?

[Katie Stockton]

Last night I was watching Sam Morl, a comedian, has a special on Amazon.

[Josh Brown]

It's.

[Katie Stockton]

It's. It was. Came out over the summer. It's called you've Changed and quite funny.

[Josh Brown]

That's good.

[Katie Stockton]

Yeah, it's funny.

[Michael Batnick]

Write it down.

[Josh Brown]

So I have two favorites of things that I haven't seen yet. Ridley Scott gave an interview to the New York Times this week. First of all, great interview. He pulls no punches. They asked him about Quentin Tarantino stopping making movies at 10. He goes, Bullshit. That guy's making another movie. But he's in his 80s and he's made some of the greatest movies of all time. Gladiator 2 is coming out, and he said it's the best movie he's ever made or one of the best movies he's ever made. And the people that have seen it are saying denzel Washington is gonna win every Oscar.

[Michael Batnick]

Should we go?

[Katie Stockton]

Let's go to the imax.

[Josh Brown]

I bought. So sorry. I bought tickets with sprinkles. I'm gonna take shower. She has no idea what I just did. I'm gonna.

[Michael Batnick]

Those are hard to watch, but on a big screen, it would be.

[Josh Brown]

It's gonna be. It's gonna be awesome. So I haven't seen it yet. It's my favorite. The other thing I haven't seen yet, this Saturday, they have Bill Burr coming on. So it's the first Saturday night live from the election. They normally have Chappelle in that spot. The last two elections, they've had him on the next Saturday night. Bill Burr is one of my favorite comics.

[Michael Batnick]

It's funny. Yeah.

[Josh Brown]

I like that SNL is allowing these people now to do their thing. I say these people. There's kind of like an unofficial list of comics that were maybe, like, not politically correct. They're the best part of this season so far. And Bill Burr is one of the greats, so I'm looking forward to that. All right, that's it from us this week. Special thanks to the crew. You guys crushed it this week, as always. We did a lot of content. We laughed, we cried, we voted. We did all the things. Guys, thank you so much for listening to the show. I want to tell you where you can follow Katie Stockton. You're big on Twitter. It's X.com Stockton, Katie. FairLeadStrategies.com is the URL. And if you want to learn more about the tack ETF, make sure you visit, visit fairleadfunds.com we're good.

[Michael Batnick]

Thank you so much.

[Josh Brown]

All right, we're good. Everyone's good. All right, guys, thank you so much for listening. Please subscribe. Please. Like, we'll see you soon. Should we do it one more time or. That was awesome.

[Michael Batnick]

No, I'd love it.