Speaker 1hit it it's friday october 16th 2026 episode 303 i'm patrick ceresna and i'm kevin
Speaker 2muir this week it's a no interview show so it's me and patrick dig in kick back and let's hear what the charts are telling our resident technical analyst well listen we're going to get to the charts here but get us a disclaimer here kev nothing in this podcast should be viewed as investment advice listeners should consult an investment professional before making any decisions regarding topics mentioned in the show side effects of too much huddle may include the core weave contagion syndrome the ai debt hangover disorder or the cosby free fall fatigue
Speaker 1oh that's all three things that i'm suffering from in uh all right all right let's go let's
Speaker 2get to the charts lots to talk about interesting times right now what do we got all right well
Speaker 1you know listen kev this is uh i want to it's been uh like a what a month or more actually it's been almost uh six weeks since me and you actually did a session together we've both been traveling uh having a great time while the market started things we really should have just a deep conversation about how shit is developing because the macro story has has really dynamically changed in two months yeah right like we uh and and we really need to dig a little bit deeper uh into everything i don't even know if we're going to be able to do that in two months i don't even know if we're going to be able to do that in two months i don't even know if we're going to be able to do that in two months where to begin i mean do we start with uh talking about interest rates in the fed and what's happened in the uh well patrick you are a
Speaker 2new stir trader and all the time you love talking
Speaker 1about stir so why why don't we the other the other thing is was like the the ai story has to be like so like which one do you think we start with they're
Speaker 2intertwined to a certain extent as well so you just pick patrick all right okay let's
Speaker 1let's let's start off with ai because this is uh very raw and real right now and uh the bond market thing is very relevant but it's been sort of happening for the last month and everyone sort of already understands a good chunk of it so we can save it for a little later so um let's let's start off here with just looking at the chart on the s&p 500 and uh and we can see that it's staying above the 50-day moving average staying in a bull trend and this may be the single most deceptive chart that uh that exists out there uh because it does not in any way reflect what is actually happening in the markets and this dispersion kind of like where where the correlations of the indice to the to the underlying components uh we haven't seen something like this since 1999 well i think it's
Speaker 2even worse than that i saw ubs recently had something where they said the realized correlation of the s&p 500 is the lowest it's ever been in essence in modern history i could believe that so the actual realized correlation is is off the charts and in patrick i i think we spoke about this before i remember you talking about the generals and how you know if we were to get it for the market to go up we needed the generals to go up as well the reality is that since we had those discussions the generals have exploded to the upside and everything else has gone no bit
Speaker 1well that yes and that will actually was the story up until uh this week right and so uh what i want to start off with is just looking at the breadth of the market because uh and it hit its low on the first of october where we were at 20 percent of stocks above their 50-day moving averages in other words only one out of five stocks were maintaining bull trend uh ahead of its 50-day moving average that means uh four out of five stocks were in some form of a downtrend or pullback or correction or full-on bear market decline or whatever it's happening and that was obviously driven by the bond market uh and uh well i want to dig deeper into the bond market but when interest rates were skyrocketing any it caused the hurdle rate to rise uh and anything that is yield sensitive valuations anything else had to be repriced it was like a 2002 uh 2022 kind of bear market event where basically interest rates are going up and subsequently all assets had to be repriced down and this meant that the vast majority of the market was responding negatively but it was disguised by the fact that like you were saying the mag sevens are such a huge component of the index that so long as they could maintain bull trend then the s p itself is not reflecting what is actually happening under the hood when you dig a little bit deeper and and the the sectors were all getting hammered but that changed in the last two weeks and particularly the most evident thing was in the last few days and uh and when we saw yield starting to come off uh from their highs and now here i'll just show like the 30-year literally peaked uh on october 8th um and uh and when we saw this uh you know 25 30 basis point pullback in yields on the 30 and the 10 we basically saw the breath at the market uh start to increase as we actually saw some sort of a rotation and uh and that's actually the key thing that we want to need to talk about with what's going on in and around the world and that's what i'm going to talk about in the next few minutes and i'm going to talk about what's going on in the next few minutes and i'm going to talk about what's going on in the next few minutes and i'm going to talk about what's going on in ai what's going on in ai because well what it was was all of this money was chasing semiconductors because well what it was was all of this money was chasing semiconductors was chasing all these different was chasing all these different was chasing all these different things and uh that money suddenly went defensive things and uh that money suddenly went defensive things and uh that money suddenly went defensive uh and uh and it all happened along this core uh and uh and it all happened along this core uh and uh and it all happened along this core weave news so let's um let's briefly weave news so let's um let's briefly weave news so let's briefly just pivot to talking about core weave just pivot to talking about core weave just pivot to talking about core weave because i i think this is important did because i i think this is important did because i i think this is important did you want to first uh well no i i'm not
Speaker 2you want to first uh well no i i'm not you want to first uh well no i i'm not sure it was actually the core weave sure it was actually the core weave sure it was actually the core weave because to me it was also earlier wasn't because to me it was also earlier wasn't because to me it was also earlier wasn't it open ai or they talked about 70 50 it open ai or they talked about 70 50 it open ai or they talked about 70 50 billion instead of 70. that was really billion instead of 70 that was really billion instead of 70 that was really the start of this um okay yeah the start of this um okay yeah the start of this um okay yeah so it's yeah the core weave so it's yeah the core weave so it's yeah the core weave the core weave exacerbated the problem and the core weave exacerbated the problem and the core weave exacerbated the problem and made it much worse made it much worse made it much worse but i i think that you might push back but i i think that you might push back but i i think that you might push back and say that that was the and say that that was the and say that that was the actual start of the correction was the actual start of the correction was the actual start of the correction was the was the change in the guidance was the change in the guidance was the change in the guidance in terms of the revenue for i is it in terms of the revenue for i is it in terms of the revenue for i is it revenue from a open ai was absolutely
Speaker 1revenue from a open ai was absolutely revenue from a open ai was absolutely they had to reprice basically from being they had to reprice basically from being they had to reprice basically from being them targeting a two trillion dollar cap them targeting a two trillion dollar cap them targeting a two trillion dollar cap to one and a half trillion uh and uh and to one and a half trillion uh and uh and to one and a half trillion uh and uh and basically yeah the whole repricing of basically yeah the whole repricing of basically yeah the whole repricing of uh of that is just showing the kind of uh of that is just showing the kind of uh of that is just showing the kind of conditions that we're here conditions that we're here conditions that we're here we're in the market here but before we
Speaker 2we're in the market here but before we get to that i i just want to highlight get to that i i just want to highlight get to that i i just want to highlight what occurred from and i i used some what occurred from and i i used some what occurred from and i i used some charts in my post charts in my post charts in my post that was from the moment uh fed warsh that was from the moment uh fed warsh that was from the moment uh fed warsh did a federal uh fomc chairman warsh did a federal uh fomc chairman warsh did a federal uh fomc chairman warsh did his speech at jackson hole at the did his speech at jackson hole at the did his speech at jackson hole at the late october or late august late october or late august late october or late august up until these previous two weeks ago up until these previous two weeks ago if you looked at that we had a situation if you looked at that we had a situation if you looked at that we had a situation where as i think that the where as i think that the where as i think that the the mag seven was up seven eight percent the mag seven was up seven eight percent the mag seven was up seven eight percent the nasdaq was up five the s p was up one the nasdaq was up five the s p was up one the nasdaq was up five the s p was up one and a half or two and a half or two and a half or two the s p equal weight patrick was down the s p equal weight patrick was down the s p equal weight patrick was down three the small caps were down three the small caps were down three the small caps were down six so the difference between the nasdaq six so the difference between the nasdaq six so the difference between the nasdaq or the mag seven and the small caps was or the mag seven and the small caps was or the mag seven and the small caps was absolutely huge and to your point you absolutely huge and to your point you absolutely huge and to your point you talked about how these things had to get talked about how these things had to get talked about how these things had to get repriced repriced repriced i think it was almost a mad scramble i think it was almost a mad scramble i think it was almost a mad scramble into um into um into um into ai as a safety play right it was the into ai as a safety play right it was the into ai as a safety play right it was the situation where like situation where like situation where like they realized the economy was going to be they realized the economy was going to be increasingly choked off by higher rates increasingly choked off by higher rates increasingly choked off by higher rates and in that situation what do you do you and in that situation what do you do you and in that situation what do you do you buy the only thing that's growing that's buy the only thing that's growing that's buy the only thing that's growing that's not not not uh as acceptable to uh interest rate uh as acceptable to uh interest rate uh as acceptable to uh interest rate hikes as the rest of the economy so hikes as the rest of the economy so hikes as the rest of the economy so everyone rushed into these everyone rushed into these everyone rushed into these uh ai stocks but interestingly enough uh ai stocks but interestingly enough uh ai stocks but interestingly enough and this is back to your point about and this is back to your point about and this is back to your point about the core weave the core weave the core weave as that occurred we also got a situation as that occurred we also got a situation as that occurred we also got a situation where credit spreads started to widen where credit spreads started to widen where credit spreads started to widen and now all of a sudden even the uh the and now all of a sudden even the uh the and now all of a sudden even the uh the increasing costs for the neoclouds is increasing costs for the neoclouds is increasing costs for the neoclouds is starting to put the whole thing into starting to put the whole thing into starting to put the whole thing into jeopardy jeopardy jeopardy so it really what it really felt like so it really what it really felt like so it really what it really felt like this just this just this just mad scramble into the final into the this just mad scramble into the final into the this just mad scramble into the generals as this generals as this generals as this last hurrah and i i patrick am last hurrah and i i patrick am last hurrah and i i patrick am really bearish and i and i think that really bearish and i and i think that really bearish and i and i think that this is this is this is a start of something much more ominous a start of something much more ominous a start of something much more ominous but we but we but we we can talk about that and uh and we'll we can talk about that and uh and we'll we can talk about that and uh and we'll talk about this talk about this talk about this this bounce that's that's occurred in the this bounce that's that's occurred in the this bounce that's that's occurred in the other stocks and this decline other stocks and this decline other stocks and this decline in the open in the ai stocks over the in the open in the ai stocks over the in the open in the ai stocks over the last week which is what you wanted to last week which is what you wanted to last week which is what you wanted to focus on here focus on here
Speaker 1focus on here well i think the one point i just was well i think the one point i just was well i think the one point i just was trying to trying to trying to get to was uh get to was uh get to was uh there was a very clear sector rotation there was a very clear sector rotation there was a very clear sector rotation uh this week uh this week uh this week into defensives healthcare into defensives healthcare into defensives healthcare consumer staples and a little bit of consumer staples and a little bit of consumer staples and a little bit of utilities all of those uh prototypical utilities all of those uh prototypical utilities all of those uh prototypical uh kind of defensive sectors like look uh kind of defensive sectors like look uh kind of defensive sectors like look at um xlp the way it ripped on the at um xlp the way it ripped on the at um xlp the way it ripped on the upside uh look at the way xlv ripped to upside uh look at the way xlv ripped to upside uh look at the way xlv ripped to 52-week highs on the healthcare so you 52-week highs on the healthcare so you 52-week highs on the healthcare so you have consumer staples and uh healthcare have consumer staples and uh healthcare have consumer staples and uh healthcare suddenly taking flow so what we've The witness. here is now money moving out of the AI space, but it did not touch the MAG-7 yet. And this is the crazy part because I wanted to just do a tour of how brutal things are in the AI space. And so what I wanted to do is focus on ETFs that are more specific. So here is your data center and digital infrastructure ETF. Now that's a symbol for that, Patrick? It's DTCR. Okay. Okay. And so what you can observe here is that it literally peaked at the same time as the KOSPI. And this is the thing, I actually believe that this already turned back in the summer when the KOSPI peaked. I think the KOSPI was really kind of like the epicenter of the most crazy. part of the bubble. And actually, let me just show you the KOSPI chart, because I think the KOSPI chart tells a lot in terms of what was happening here. Where do I have it here? But we basically saw that June peak in the blow off. We saw, you know, it literally is mirroring the NASDAQ in 2000, which is that after it peaked. No, no, but listen, after it peaked, it had a 44% crash. It was nasty. Like when you have a 44% crash, that's immediately breaking the entire bull market. Like you can't sustain something like that. And then it proceeds to have a multi-month bounce from trough to peak. That was a 36% bounce. The NASDAQ back in 2000, after the first low, had about a 40% rally. And then the KOSPI went over several months after the first wave down. And now the KOSPI rolled over and broke down. And so like it really is an example of what actually, I would argue that the AI bubble burst actually back in the summer. And we are actually only setting up here for another leg. And the interesting part is that that's not evident because of the index and because of the MAG-7. But when we're looking at it now, we're looking at it now because of the MAG-7. We're looking at it now because of the MAG-7. And we're looking at it now because of the MAG-7. But when we're focusing solely on the AI stocks, not the hyperscalers, this is becoming more and more evident. And so back to this, you can see the data center and digital infrastructure stocks sequentially, a lower high failed at the 50-day, then proceed back in August, proceeded to once again, try to break to a higher high in September, reclaim the 50-day, fails, breaks back down. It tries to rally again the last week, fails at the 50-day, breaks to lower lows. That entire consolidation and support line now completely broken. Now let's move on. This is the artificial intelligence super cycle ETF. It looks exactly like the KOSPI without the same downside volatility on the first leg. But it's like the big drop, failed rally. That's a symbol on that though, Patrick. This is the AIS, the artificial intelligence. Super cycle ETF. And you can see failed now has broken all of its August and September lows, complete breakdown. Then take DRAM, which was the ETF that was released back earlier in the year. It peaked at the same time as the KOSPI breakdown, entire flagging formation rallying on the upside, all failing at Fibonacci zones, complete rollover. And breakdown. You then take the AIPO, which is the AI power and infrastructure ETF, peaked in June, failed rallies, failed higher highs, now broken to fresh new lows. The thing is that the AI story actually already died. The thing is the hyperscalers have not. Apple's making 52-week highs. NVIDIA, just recently made 52-week highs. It's disguising what is actually happening in the broader basket of the stocks. And the last one, I'm just going to think before I let you kind of comment on this, this is the SMH, which is the semiconductor ETF, disguised a little bit, disguised a little bit by the fact that NVIDIA ripped to fresh new highs. But this failed to retest its high even as a double-digit. So it's like a double-digit. So this is like a double-digit. So the last one I'm just going to think before I let you kind of comment on this, this is the SMH, which is the semiconductor ETF disguised a little bit, disguised a little bit by the fact that NVIDIA ripped to fresh new highs, but this failed to retest its high even as a double-digit. So this failed to retest its high even as a double-digit. And this now has done what I call in technical analysis, a V formation, which is it basically wiped out its entire previous rally attempt in its entirety, which is basically evidence that that rally was a false start. And we're at a huge support line where if these semiconductors give out this 540 level, that's like full-on bear market signals. On breakdowns. And you know what is not at all? The MAG7 ETF. The MAG7 ETF is in a stunning bull market, higher highs, higher lows, running higher. And these mega cap hyperscalers are basically carrying that S&P index and everyone just, you guys are idiots for being bearish. Look at the S&P at its highs and making fun of things like somehow the index being up there because of these seven stocks is somehow masking that the fact that we are in complete carnage in the markets. Like, anyway, you can give me some feedback.
Speaker 2I listen. I love it. And I'm with you. I think that the damage done is amazing. And I'm just perplexed, you know, befuddled like at the rush into the MAG7 stocks. I would have never called this in a million years. It just goes to show you how tough trading is because almost everything is rolling over. And then somehow now all of a sudden everyone's getting religion and buying the MAG7. These were stocks that were hated and were sources of funds for the longest time. And now then everyone's rushing into them. To me, it really feels like the last gasp, right? Like it's just, it gets narrower and narrower and narrower and narrower. And it's just kind of that one final push into these stocks. And it is it.
Speaker 1And the best part is not best part. The crazy part about it is that it is in the pain trade because what happens is everyone's like, well, look, the market's in trend. I got to stay invested. But then they're wondering why the hell is my portfolio down 15 percent when the S&P is holding up? Right. What happens is, is that the S&P is giving them a false message and a false sense of safety that everything is fine when, in fact, the majority of their investments are bleeding out and they then they don't have a signal saying, well, something is wrong because everyone goes on CNBC and says, no doubt doing this. S&P is doing this. Everything is fine. Nasdaq just made a new high. You know, like it's like no one needs to worry.
Speaker 2Right. Right. And Patrick, to your point, like, yes, if you own spooze like SPYs or some sort of index product, you are achieving those returns. But the reality is that most people that are, you know, picking stocks and having portfolios that are non indexed, right, because the reality would be it's difficult to have 40 percent of your, of your portfolio in the top seven names or whatever they are, the top 10 names. And almost everyone will be underweight the tech portion because they can't afford to have that. Or if they're not underweight, the tech portion there, they're in other names that are non mag seven because of concentration risk. And they're those stocks are getting crushed, as you highlighted
Speaker 1earlier. So let's just quickly go through the mag sevens. Let's just go through the seven stocks just to see the individual stories. And the one in the most explicit bull trend is Apple. Now, first of all, Apple's not an A.I. story. They probably they were the they were not even labeled a hyperscaler because they simply never did the type of of build out the way the other mags did. But this thing is in a very clear bull trend. Higher highs. There is no sign of cracking. It might eventually crack, but it's not. No. There's no sign of it right now. And there's measured moves up to three sixty three seventy on the upside. And Apple might actually do it right. Like so I don't even want to say anything bearish about this because there's nothing bearish on the chart yet. Only thing I would say is it feels very seventh inning of the advance, which is it's not like just because it's in a beautiful bull trend doesn't mean there's asymmetry and rushing to buy it because like as far as I'm concerned, you know, trying to clip an extra ten to twenty bucks on the upside versus an additional ten to thirty bucks on the upside. And so it's not like it's going to be an asymmetry in the payoff, but the bull trend is very pronounced in this. Right. And now another one that kind of was far messier was Amazon, and it attempted to break out this last week and gave it all back in this little correction. It's really in the consumer discretionary basket. So Tesla and Amazon make up 40% of the weighting in the XLY, right? So the XLY being the consumer discretionary ETF is weighted there. So when the consumer discretionary sold, there's clearly Amazon got caught in some of the distribution there, but it never caused the stock to get badly hurt. It basically wasn't a contributor to the downside, but it's not the one that's working on the upside. Now take Microsoft. Now here is another one that's being full bold. What was crazy is that Microsoft was the epicenter of that software versus a semiconductor pairs trade back in 2000 at the start of the year. And it got murdered to the downside. What was it like a peak to trough? Yeah. Microsoft got murdered 36%, one third of its value shaved off and has been in a huge bull market like AI is not going to hurt it anymore. It's amazing how that pair trade just completely reversed. But like Microsoft has its previous highs now as overhead resistance. Now it doesn't mean it can't beat it, but you know, like this thing has been the rock star in this move. The other one Meta, which obviously, had the really strong, what was it? Muse. Yeah. It ordered,
Speaker 2it ordered a watermelon to Mark Zuckerberg's house. So you had to add a hundred billion in market cap. Like literally it ordered a watermelon, Muse ordered a watermelon to his house. And then the next two days, the thing added a hundred billion. That's the kind of market we're in. Exactly. And so,
Speaker 1so this thing goes ripping again, though, back to its previous highs. Now this often can act as overhead resistance. It doesn't mean right now, these are still pronounced bull trends. And I don't want to say something bearish about, about something that hasn't yet demonstrated bearish price action. I would argue again, that similar to Apple, where maybe the asymmetry isn't attractive, where the upside is probably limited and there's going to be some downside risk when it turns, and it's probably not a great new entry point, but it could still work. It could still arguably go higher. Now, what is interesting is just in the last few days, it did give back a breakout attempt. And you never want to ignore when there's a flagging formation that is, gives a bull signal that would typically have a technical traders rushing in for the continuation pattern and then wipe out and stop them all out. When it, when you see a false start that way, then at least it's a sign that the Meta might. Be heavy because it, because clearly some big money leaned into the breakout to distribute the stock.
Speaker 2It's almost like somebody didn't believe that ordering a watermelon to his house wasn't a big deal.
Speaker 1Almost, almost like that. But, but you can see that these four stocks, at least three of the four are very explicitly in bull trend. Now, Google obviously has been issuing ridiculous amounts or raising ridiculous amounts of capital, whether debt markets or, or, or stock issuance and all these different things, which is more or less had the stock stuck. It has not participated. In fact, I am shocked by how trade range bound this name has been over the course of four months.
Speaker 2Well, they might have, if I'm not mistaken, like they did the big issuance, but they also have an at the market issuance as well. So I'm wondering if at any rallies they're issuing stock. I don't know that for sure, but. It wouldn't surprise me at all. And then you have to ask yourself if they're selling stock, why
Speaker 1are you buying it? Yeah. I mean, isn't it convenient as well, like just to kind of throw that curve ball in there? Like when was it exactly that SK Hynix came into the US markets with the ADR to raise the money?
Speaker 2Yeah. By the way, that was still trading, that ADR is still trading at a premium to the underlying SK Hynix in Korea. Yeah. I'm shocked at it. But the point is,
Speaker 1they literally did it at the market top. Yeah, when the ducks quack feed them, baby, that's the famous one. But the point here is, is that Google isn't though contributing to the downside, at least not yet. Now, this is from a technical analysis perspective, one spectacular horizontal triangle pattern, which is basically it's winding up for a move. And it's coiling up, building up energy. Now, I don't, obviously, if the whole stock market breaks, it's very likely Google is going to go the direction of the whole market. So this is going to be direct because of its market capitalization, it's going to be directional map. But I do think that this very tight range is going to result in meaningful directional volatility when it finally breaks out. I think with the very low implied volatilities that Google generally, that it does have, I actually think this is probably one of the more interesting straddle candidates. Like literally, but even then you can even ratio it with a bias to the downside if you're bearish. But I think that the very low volatility and tight range, there's lots of room that when this ultimately breaks, there's going to be a move of at least a half. least $100 to maybe even $150 directionally when this thing finally goes. And I think it's a great idea to kind of put it on that way. Obviously, straddles don't carry very cheap, but and who knows how, whether it's going to grind past the elections and whether it's, you know, you're one month too early on the idea, but it is an interesting coiling chart. Now I want to move on. Would you any comment on that? No, no, let's keep going. So NVIDIA, now NVIDIA did a break to 52 week highs. Was that a prairie dog? Oh, yeah. Noble animal. It's a noble, like, who would have believed that a prairie dog would appear on NVIDIA? But nonetheless, you know, the targets were up to 250. So NVIDIA did a break to 52 week highs. So NVIDIA did a break at the end of the last rally attempt, which is, which means that there's some very motivated sellers coming in, because normally buy on dip traders are more than capable of, of preventing that from happening in a good bullish orderly market. And so it's the first kind of negative thing that's happened to the stock. But the fact that the whole SMH semiconductor ETF is rolled, I would be that much more concerned considering that NVIDIA is obviously the biggest shareholder in the stock market. the largest weighting in that basket um uh in in that etf and so the question is is did nvidia see its top already uh that's a that's be creative it was a prairie dog top you know what the noble animal has struck the animal they're shifty little buggers you got to be careful all right but and the last one is tesla i'm gonna just touch on and uh and the interesting part is that uh obviously obviously there was this big product thing their flying car or whatever uh it was pretty cool actually did you see the flying car is it coming into is it coming in two years uh yeah 2028 it is it's two years but uh but it was cool right after literally after full fsst they they put uh they put uh spacex uh uh rockets on a roadster and so that they flip the car and the car just like completely flips over and straightens out and lands jeez i'm gonna send some money i'm gonna put myself in line for that i'm gonna buy one yeah anyway but what i wanted to highlight though from a technical perspective the entire rally has been just a fibonacci retrace and even such positive news you has not been able to actually create bullish follow-through this is actually the only mag seven that is explicitly bearish you know
Speaker 2what's funny patrick nobody wants to short it because they're all convinced that elon's gonna buy it and tuck it into spacex nobody is short it nobody and there's people out there buying it because you know he's because of robotics or whatever i just think it's a good thing that they're not buying it because they're not buying it because they're not buying it because they're not buying it because you just think it's interesting that at the time when you're highlighting how it's trading like no one wants it like technically the reality is that the narrative has completely changed and nobody is is short anymore there you
Speaker 1go so uh nonetheless it is it's only one but it's only one out of seven stocks that and even then the point is tesla is not contributing to the downside here yeah in fact over the last two months it's been recovering and holding point is is that the seven largest market cap market cap names that are the behemoths in the indice uh and then throw in on top of that for instance you know the big mega caps like elise lily you know breaking up along 52 week highs the point is that even beyond the seven stocks there's a couple of these big hitters that are actually still holding it all together anyway the point is is that these if you if you own these stocks you're like no nothing is wrong but if you own any stock that's not one of these uh you've you're like i think that it was goldman that came out a week or two ago that said the median stock in the s&p 500 is 16 off of its 52 week highs yeah
Speaker 2it's ugly out there man like just pull up the rsp and look at that chart it's terrible looking yeah
Speaker 1now well there we go no that's and but the equal weight has bounced it recently but recently yes but that's as the
Speaker 2ai trade has come off we've gotten a bit in those
Speaker 1what is interesting is obviously health care and consumer staples ripped which caused the equal way to bump but look at the small cap yeah it's terrible the small cap couldn't react all right so now let's have this conversation i want to go to the uh the cot reports at cot signal.com check it out everybody no you beat me to it by the way it's a free resource go to
Speaker 2cot signal.com it is free and that's
Speaker 1that's why i have no shame in it there's nothing to sell there it's a listen just go out there and use it um the point is on the heat map look i want you to observe one thing what is the nasdaq large spec score at the end of friday i you know what i got old eyes buddy hundred
Speaker 2hundredth percentile yeah and what is the russell zero zero
Speaker 1nice this is one of the most that is
Speaker 2that is a macro tourist dream there baby actually and it's funny you say that patrick because over the last three days i've been chatting in my chat talking about how i am actually long smalls and i've been talking about how i am actually long smalls and i've been talking about short cues or the short ndx yeah there
Speaker 1you go as a pear tree but look at this yeah on the nasdaq as a friday before this big reversal on the downside whether you do on a a one year uh it's at the hundredth percentile in the one year three year look back hundredth percentile five year look back hundredth percentile basically uh right at the top here the large specs went all in to five year extremes yeah yeah last cast baby i'm convinced right and and at the same time you know you go uh and look at the russell you know on a it's only on a one year look back that it hit zero percentile but look at this red line at the bottom the gross shorts and we let's spend this five even ten years you we have now seen the gross shorts in uh the the russell uh two thousand reach a pretty much a 10-year extreme yeah crazy positioning uh and great stuff check the charts out for yourselves everybody no no it's pretty but it's no it's pretty interesting that that but obviously large specs encompass uh ctas and the trend definitely turned so every cta flipped short this is a this is a clear given uh now um this year is is what's happening on that chart and i'm not sure if it's going to be a good year or not but i'm sure it's the interesting part is the s p is already showing uh uh negative positioning but you know what the s p has not yet hit cta uh cell triggers i don't know if you had a recent update but the last time uh i i heard one source give me that was somewhere near 7600 was the recent update and i but i heard another source that was saying that the cta cell triggers are somewhere closer to like 7700 uh it could be 3 off the market high i think that anybody that actually
Speaker 2believes that they can you know pinpoint it to that degree of accuracy or dreaming yeah like you could you're more likely to be able to pinpoint the vol cell triggers the volatility control funds fair because those are based upon indexes but the reality is that ctas it's it's based upon individuals running money in a trend following system and those are based upon indexes and the reality is that ctas it's based upon individuals running money in a trend following system and those are based upon individuals running money in a trend following system and those are based upon individuals running money in a trend following system and those are based upon individuals running money in a trend following system are adapting based upon individuals running money in a trend following system are adapting and changing and and and they're all over the map
Speaker 1so but i but i will say this uh one of the best arbiters of trend is just clean and it's not necessarily a great market timing tool it's more of an arbiter of trend just in terms of identifying uh the 50-day moving average does a phenomenal job when the markets are in a downtrend they simply remain decisively below and when they're an uptrend they stay decisively above and it is usually a very easy thing to to recognize that if we are sustaining below the 50-day on any uh prolonged period not just a a little um you know uh turtle head formation dropping below a 50-day uh on the downside you have a you basically know that ctas are going to start selling yeah i'm with you there even though that's how much i think
Speaker 2like that a lot better than those that are trying to pick like specific points where they believe it'll flip it'll flip it'll flip i just i i just haven't seen it work to that i just i i just haven't seen it work to that i just i i just haven't seen it work to that extent and maybe unless yeah the systematic
Speaker 1extent and maybe unless yeah the systematic extent and maybe unless yeah the systematic traders traders traders i feel are actually the um i feel are actually the um i feel are actually the um will be the fuel that turns the mag7 will be the fuel that turns the mag7 will be the fuel that turns the mag7 in other words if this s p is dragged in other words if this s p is dragged in other words if this s p is dragged down down down to a level where uh systematic selling to a level where uh systematic selling to a level where uh systematic selling starts hitting the bid starts hitting the bid starts hitting the bid then the index selling will trigger the then the index selling will trigger the then the index selling will trigger the downturn in the hyperscalers and mag7s downturn in the hyperscalers and mag7s downturn in the hyperscalers and mag7s which will uh signal cell signals on which will uh signal cell signals on which will uh signal cell signals on those charts those charts those charts and it might become a self uh a and it might become a self uh a and it might become a self uh a manifesting kind of turn point that manifesting kind of turn point that manifesting kind of turn point that actually puts it all together actually puts it all together actually puts it all together um that's a speculation yeah i don't um that's a speculation yeah i don't um that's a speculation yeah i don't but you know this is
Speaker 2but you know this is but you know this is i i just don't think that the systematic i i just don't think that the systematic i i just don't think that the systematic sellers will be sellers will be sellers will be anything but they'll be coincidental anything but they'll be coincidental anything but they'll be coincidental in my view as opposed to the the trigger in my view as opposed to the the trigger in my view as opposed to the the trigger and there could be a million different and there could be a million different believe that it's going to end um because some of us not us but some people believe that it's going on forever and that you got to close your eyes and buy it but if you are in the ai it's a bubble camp and that we're going to have an accident here i i'm still going with it's going to be an earnings miss that will be the irrefutable evidence that causes that and the ctas the fact that they're long because the the the trend has has been upward will only make it worse same with the vol control same with like i wrote recently about this tax aware long short fund i think that that's causing some really strange things happening in the correlation market um and and all these things will add up and it just to me to pick one to say it will be systematic as opposed to vol control or as opposed to these guys i think that's wrong i think that ultimately it's going to be fundamentals and it'll be a missing of the earnings that's what i'm going with and by the way patrick you know we haven't discussed this but we're entering earning scenes in here and the reality is that the the highest growth rate in earnings in recent history is priced into this market so yes you can say earnings are going to the moon but as in all most things in trading it's a question of what's priced in there and i think that that's one aspect that is just continually underestimated is how much of this good news is already in the market yeah and that that that's that's where i really come down to i'm like i don't want to sit here and you know when people ask me you know ai is it going to be as revolutionary as you think and i'm like i don't even care because the reality is that it's not going to be as as profitable as the market thinks and that's ultimately what we're trading we're not trading you know all what ai's impact on society will be we're trading what it's going to be how much companies are going to make can you value it yeah
Speaker 1and to me that is much more important all right listen let's i just i want to nail a couple quick uh sector things and just actually go through some of these all right so the first one i want to touch on is uh the xlf which is the financials etf and um a little bit of uh a comeback here on the very short term uh in terms of bouncing in the last week or two but it was certainly one of the sectors that was uh was getting hammered but what is particularly interesting is that when we take a look at some of the big boys like jp morgan had its earnings uh and it was generally a a net miss now it was a miss and the stock uh well it's showing here the surprise was negative on the uh on the right i didn't realize that because i saw the stock
Speaker 2reacted very positively
Speaker 1well no well it reacted positively and by the end of the day it was down right uh then look at city and city on its earnings basically uh tried to rally above the 50-day and immediately slammed to the downside and then came bank of america and completely gapped to the downside with a huge miss and so the bank stocks actually uh are are starting to get genuinely hammered and the interesting part here is the XLF is actually uh bounced because of some of the other components in it like uh Berkshire and other things the question here is this a short like uh is uh is fading the rally here in the XLF ETF an opportunity to keep playing the financials a downside because higher interest rates essentially um uh screw with their credit business right like in the end uh they own their highly leveraged credit machines and you raise the cost of credit you're basically screwing with their business it's very hard for banks generally it's not a let's call it a headwind versus a tailwind don't you think there's better shorts out there though than that no I'm just I literally just looking at the chart purely on
Speaker 2charts okay all right maybe on the charts I I think there's better shorts out there than that I I okay I'm probably more inclined you know to to give them the benefit of the doubt so say that so let's go through the sectors okay
Speaker 1um and so uh consumer staples they were the one of the epicenters of the selling when the bond markets were getting their faces ripped off and what a spectacular turnaround in some sort of sector rotation uh and I don't know whether this AI thing basically changed the macro regime from high growth high inflation to suddenly everyone has to reprice growth and and that the regime has to obviously because in a in a period of uh slowing growth and high inflation defensive stocks tend to be the place that typically flows come in was this inflection point and breakout because some big asset managers basically think that the growth cycle is slowing and they're doing a huge portfolio rebalancing and they're doing a huge portfolio rebalancing like is this a huge sector rotation what's your thought I think
Speaker 2that the the the non-mag seven sectors are tiny compared to the mag sevens and so the moment you get mag seven selling it has to go into the rest of the market and what you find is the rest of the market is like uh you know very few people are selling through a door and it just it ends up being yeah pushing those way higher and so when I look at that although I might say sure over the short run that is one of these things that most likely will go back and probably be back to this moving average if I'm worried about a financial accident I think one of the surprises in in a financial accident will be how we get some weird occurrences and we see things going up that impact us and we see things going up that impact us and we see things going up that impact us and we see things going up that impact us and we see things going up that impact us and we see things going up that impact us and we see things going up that impact us and have no you know from a fundamental point of view will be difficult to explain and we'll be sitting there going what wait why why is you know staples going bid that much and people will try to you know argue that the market is telling them xyz because of this like or the the this is the market views and I think it's going to be flows and one of the things I I have a buddy that um you know has been around for a long time and I remember him telling me that he was up there and he was big money manager and you know big hedge fund guy and I think he said something like he was up 30 percent in in 2000 30 or 40 percent and he said I didn't have a single short and the reality was that we had all these stocks screaming that had been left for dead that that that rallied and so one of the things that I would just like to just remind folks about is there's a lot of shorts out there in terms of things that have been funding this mag seven trade and and unwind crazy things might happen so I I'm I'm open to the idea that although this like consumer staples look expensive in terms of the rally of the last week or whatever in a true accident they might do some really absurd things so let
Speaker 1me let me just go through a highlight three or four of the names okay so let's start with coca-cola fresh 52 week high out of a flagging formation you know that's interesting but actually uh this has been a great time for Berkshire you know apple's been ripping coke's been ripping like a lot of those kind of core names that are are their holdings have actually just generally been doing very well so uh but another one that just made a big reversal after its earnings back in September has been a big turnaround in Costco Walmart made a spectacular one week rip to the upside breaking well it's been a basically a four month downtrend right like so you uh like look at the way Procter and Gamble suddenly was it was dead for like basically six months and suddenly it took flows right so there are some super interesting names in like the consumer staples that you know like and it's funny because I remember we talked about it like six weeks ago that Eisman was on CNBC and uh you go he he was a little bit bearish they asked him uh you know well what what are are you buying are you going to buy like some of these defensive names he goes there's no way I'm gonna buy any of these defensive names like so he's bearish the stuff but he he wouldn't touch them because he was the dead money and it's it's it's funny that uh that they're they've come alive it's like anyway I'm not gonna say anything else uh on that but uh the other one I wanted to show is XLV which is the the health care and this continues to be taking huge flows but I wanted to ask you something specific here and typically we have seen um health care stocks be politicized during elections and uh and during elections they end up being the centerpiece of you know vote me in we're going to uh lower your medical costs and stuff like this I was a little bit worried about these health care stocks as we are approaching the election as to whether that was the case and it I don't know if you're hearing anything but there is literally no sign that anyone gives a shit about these uh health care stocks being uh you know centerpiece on the election
Speaker 2isn't it usually the actual election as opposed to midterms so I agree with you yes this and usually don't they don't they sell off into elections but and then when you are swinging
Speaker 1when you're swinging though from republican to democrat at least the the odds are that this is going to be a democratic sweep at least from um uh you know what the some of the stats are saying uh usually democrats uh tend to uh be the ones that focus on these topics I know but Patrick
Speaker 2there's still the president's going to be there to veto stuff so I don't think that the health care is worried about that so I think you should put that aside in terms of it yeah anyway beautiful
Speaker 1breakout uh beautiful breakout a lot of them are working and that and so it's not everything bearish there's actually places you can find bold trends that are very clean and they are working and taking flow when other areas are distributing all right so was there anything else in the markets we need to cover because I want to move on to the commodities and stuff like this no all right are you oh wait are you not going to do bonds and stuff yeah sorry no no let's talk bonds okay let's let's talk bonds uh because you know me and you we take a couple months off from doing a session together and during that time was an extraordinary uh bond route on the downside yields go screaming higher uh Kevin the the infamous bond bear uh I was wanting to pick your brain on this uh in terms of how you think this was all playing out uh and what do you think were the drivers but I actually felt that in next inflection point was going to be actually in the the pocket like we have we have a very high event risk window where we have an FOMC the the belly of the uh the earnings distribution and an election all within a week of each other basically and so I I was thinking that the bond yields were probably going to be under stress uh until some sort of a catalyst emerged and that's what the kind of window I felt that was the greatest chance that there was going to be some sort of a catalyst but yet very clearly we saw uh our money very flow back into the long bond here in the last week uh do you think it's over oh that's a
Speaker 2great question and uh I I didn't think it was over and I'm actually becoming more concerned that it might be over and that the top any else the bottom and bonds might be in I've been of the belief what would the
Speaker 1catalyst have been named like when people look back and say if that was the case like what was the inflection point that caused that was it just such a shock to you extreme selling that it was
Speaker 2just it couldn't go so one of the things that I that I believe in is that I have one of my buddies efficient market hype uh he's a great guy on twitter and he says and I and I've kind of adopted this as my mantra he says bonds breaking will break equities until equities breaking saves bonds meaning that you know as rates go higher eventually we're going to going higher will slow down. the economy slow you know be a competition for stocks stocks will go down and therefore you know the economy will slow and bonds will go up and that was kind of where i was at um i think it was exacerbated by the fact that we had this uh cheapest to deliver switch and so i had been writing about it i see recently that harley has also written about it but into that move higher we had this situation where the futures contract is on the long bond uh it actually switched in terms of which was the cheapest to deliver so ironically what occurred was as rates went up in a yield down in price the asset managers who were long these uh bonds or bond futures they were getting longer they were in essence short gamma and i think that that made sense to me and i think that that made sense to me because i think that that made sense made it worse so the real question was you know was that move made all the worst by this monster short gamma position in the ct in the cheapest to deliver and i think that in hindsight it probably was a bigger factor than i thought so when you ask me what what why might i be bullish or getting more bullish bonds it really comes down to the action of the last few days and patrick what i bad CPI report and bonds gap down, right? On the, what was it? The Wednesday and bonds gap. They were really ugly looking, but then as the day progressed, what occurred bonds rallied stocks went down. And to me, it's increasingly looking like that relationship of bonds, attracting flows as people sell equities is, is, is reasserting itself. Like in the old days, you used to go buy bonds to protect yourself from the stocks going down. And in, in, in, in the last, you know, ever since COVID, I would argue that we've had a situation where it's the opposite bonds going down as drag stocks down. But now that relationship, the old relationship might be returning. And then you add in the fact that the economists had their cover and, you know, the, the economists are famous for having covers that are at the worst possible moment. And it was a magazine cover factor.
Speaker 1It was funny, by the way, I want to, I want to add to this magazine cover thing. I was, I was in Argentina doing my mastermind with my inner circle and we pulled up the magazine cover and we, I basically said, okay, that's clear. Or let this, this could be a turning point. I said, how about we go in there and sell some puts on, on treasury bonds. Nice. And I said, no, no, I said, I said, how many of you put up your hands? How many of you want to do this? Crickets, not a single person. I hope you doubled your position, buddy. Like literally I, and I, and I, and I joked with them and I said, you realize the fact that none of you want to do this. Yeah. You know, that bonds are going to rip. Yeah. And, and then literally they started to rip right afterwards. For sure. Like it's, it's, it was hilarious.
Speaker 2My worry was that I, I, a lot of the smart guys around me were, had been trying to buy bonds for the last kind of month. I think they'd been trying to pick the bottom. So I was hesitant because I kind of seen them getting beaten up. And I thought to myself, I really was looking for that just point of maximum despair. Like the Walter Deamer, when the time comes to buy no one will, you won't want to. Well, I guess the, the reality is you have to, you know, your, your, your mastermind guys didn't want to, and maybe that was the sign, but anyways, going back to the bond market, it just showed sentiment.
Speaker 1It just showed how people felt about that.
Speaker 2I was worried because too many of my smart buddies were buying it, but they obviously were smarter than I thought. And in hindsight, I am getting worried, Patrick, that I might've missed it. And I'm still hanging tough. I'm not going and chasing the bond market here. Cause ultimately I, I, I think we still have, I think we still have a problem with supply and I'm not convinced that, that all the, I have a better question for you.
Speaker 1Yeah. It's okay. We have a supply issue, but, but I have a second question. What do you think happens with rates under the chance that the situation in the middle East actually escalates and oil genuinely gets disrupted where there's no inventories enforcing genuine demand destruction, having to, having to happen through higher prices. Let's just say oil's going to let's not that I'm forecasting, but let's just say oil goes to 200 because of some extreme circumstance. How do rates respond? Can we call a bottom where we're like under that kind of situation?
Speaker 2So I think that would be the, the death knell for the global economy. And therefore, although over the short, short run, you might have the front end, you know, rocketing higher in yield. So the long end might look at that and say, Oh my God, this is the end of the economy. And they start buying the long end. So I think the curve inverts and it actually is the point where you start to figure out what, where you want to play, how you want to play it. And that, that would be the most difficult to stick handle. And I agree with you, Patrick, like that would be a lot tougher, right? But you,
Speaker 1do you think that it could still have the first response on a, on a huge breakout would be down or you think that the first, like, cause I would imagine, okay, if it's going to $150, $200 a barrel, then it's like, Oh my God, it's going to kill the economy. But oil here going to back to a hundred, 101, 102 may not have that conclusion made. And a higher oil, it means higher inflation expectations. Could there still be another leg down in the long bond, maybe a double bottom made doesn't have to necessarily go to, to lower lows, but is there, is the first response actually bonds weakening?
Speaker 2I think the first response is bonds weakening with oil going up for sure. And then the question is how quickly do, does the market start to anticipate the rolling over the economy? And then it's going to be made even more difficult, Patrick, because the response of central banks to that will also dictate how it behaves. So, so if we get central banks throughout the world going, we are not going to chase this higher. We're going to let it go. Then you could see the bond market getting into even more trouble at the long end. So it's not, I keep, I don't think you can say this is going to happen. And for sure you should do this because you need to then see the response of the central banks and also the government officials. Right. But if we get, if we got a classic response where the central, the central banks followed rates higher, then I think that that would be the end of the global economy in terms of this, this expansion, it would usher in a recession and therefore the long end would be people would be willing to buy the long end. Having said that, if everyone pushes back against it and says, no, no, no, no, no, no, we're not going to raise rates. We're not going to chase this or whatever. The long end might get really spooked. So it's not as easy as people make it out to be insane. For sure. This will happen. You have to see the response. Well, you have to,
Speaker 1you have to look what the unfolding reality really is. Right. It's just where you were creating a, a, a, a, we're creating an initial hypothesis as to what we're kind of going to see how it responds. Interesting. Oh, sorry.
Speaker 2I thought that you were a question you were going to ask me though, was if we get a situation where we have a financial accident, what part of the curve do you want to be in then? And to me, that is also an interesting, interesting and much more difficult question to answer. Because if you said on a dollar basis, like just no leverage, then you should, you know, if we get a financial accident, then you should own tens or thirties because you get more duration and therefore you'll do better. But if you were looking at it from a yield perspective, I think that in a true financial accident, we're going to be shocked at how quickly the fed lowers rates. And I do believe it will be the fed leading. And I know this is going to sound absurd, but in a, in a real, you know, risk off like financial accident, I think rates in the U S are going to 1% at the front end. And then as they go to 1% at the front end, I don't think the long end is going to like that. And so we could get into a situation where the fed, you know, rushes to lower rates and the long end revolts. And so therefore, although you might think that you should own 30, isn't in a financial accident, maybe, you know, buying, you know, so for front end levered futures is a better way to trade it than that. If you, but if you believe a financial accident and you have to believe the financial accident, if you don't think there's a financial accident coming, then that's a stupid trade. Do not rates are not going to one. The only way rates are going to one is a financial accident. So if you don't think there's a financial accident coming, don't do that trade.
Speaker 1The thing is, is that I feel like it, a financial accident could happen, but usually they are a chain reaction, like a domino effect where one small thing that was a surprise breaks another thing breaks another thing and breaks another thing and it starts to compound and then something in the financial system is like we weren't prepared for this and something breaks but there's so many
Speaker 2things that i could give as examples of that private credit all of these spvs um the the predominance of uh triple double and triple lever etfs the fact that the correlation trade has gone there this tax aware long short i think is is a disaster waiting to happen in terms of leverage there's so many potentials out there patrick yeah that uh and and just the concentration that's that alone is scary right like you go back and look at the history how many times we've been this concentrated in the markets it's like 1929 1962 or something or in 2000 right these are not good times to be invested so i i'm much probably more worried about a financial accident than most and i always joke and say you know why are you worried about it's because nobody else is right and and i tell this story of in 2023 cuppy and i had this event and we we um had listeners come and they had to sing for their supper they had to present an idea and everybody was like uniformly bearish and it was like it was the end of the world doom and 11 everywhere you know every single one and cuppy and i presented we presented bullish ideas and the number of people that came to me and said you know you guys are really nice guys i really like enjoying but idiots yeah but i do but i you guys just don't understand how bad things are out there that was what that's what they told me and people would ask me are you worried about about a crash and i go no i'm not worried about a crash and they go why not because because you're asking about it all right and like the the the one of the things about crashes is that you have to have nobody worried about crashes for crashes to occur because if everyone's worried about a crash they've already taken steps to make it so that they're protected against it so anyways so here's my question here's
Speaker 1my question to you uh so this is one year volatility basically at multi-year lows six month volatility near multi-year lows three month volatility at near uh it's uh you know multi-year lows uh the uh the one month volatility the main vix sitting right along its previous lows the bottom line is right now there is there is no um marginal buyer demand on options to force volatility to be repriced higher there there just is right now um uh a thing but but the point is volatility right now find the skew has uh has picked up which basically a high skew at 160 means the tail is a little more expensive so so that that tail insurance is being priced up uh on the market but still vol is cheap and the part that just when i hear you saying that i mean at this moment it doesn't cost a lot to be insured on your portfolio right like it can i can i highlight
Speaker 2something about that vol is cheap and you're talking about all those implied vols be really you know in the in the dumps one of the reason that vol is cheap is because correlation is so low and i i know this sounds technical and you're going to say like how does that matter and our buddy vincent deloard of stonex had this great idea that inspired me like he he talked about the shadow vix and what he said was imagine if the correlation was normal right like if stocks move together in a regular fashion okay if you take the implied volatilities of the individual stocks and then went and looked at what the implied volatility would be for the index on a regular correlation all of a sudden the vix goes from 15 to 35 right and that is the part you know i i hammer home and i talk about this correlation all the time and people seem to think like oh you're just you know you're you're you're too obsessed with it and i say but it's so important to how things get priced and if correlation returns and by the way correlation you know when you talk about amongst indexes uh you can only go to zero and we're basically at zero right we're at the point where it's tough for it to get any less correlated so the surprise is going to be the other way and to me i i look at this and say this vix and these these the stock market index vol is is uh just is getting tossed away for too cheap given like how much these markets are going to be markets are moving right like the individual stocks like if you go look at the individual stocks the implies are actually quite high and the reason that they're high is because things are moving right that's actually the case like go look you showed me microsoft one of the largest stocks in the index it went from it went down 36 and then it went back up these are big moves this is occurring so but here i'll push back on you
Speaker 1i'll push back on you look at this this is the semiconductor uh volatility index and you can we were at 64 back during the the bubble blow off and we had a collapse of volatility i have uh right so like it we're not at in fact if you go uh on individual basis even though you're correct that volatility is actually higher on individual names it actually has been declining no no
Speaker 2it has no no doubt about it if you pull up i think it's vix eq i think it's the symbol for the for the vix of individual stocks i uh does that come up yeah you'll you'll see that no doubt it has come in there i'm not disputing that but if you go back over a long a like a much longer time period you'll see and don't forget i think that vix eq is based upon one month volatility so it's very much driven by the earnings cycle right and so but regardless of that i think it's going to be regardless of that i think it's going to be regardless patrick the correlation is weighing regardless patrick the correlation is weighing regardless patrick the correlation is weighing on on index vol to an extraordinary degree on on index vol to an extraordinary degree on on index vol to an extraordinary degree it's it's underappreciated by markets it's it's it's underappreciated by markets it's it's it's underappreciated by markets and i you know i have the saying like buy and i you know i have the saying like buy and i you know i have the saying like buy your straw hats in the winter your straw hats in the winter your straw hats in the winter buy your volatility when you can not when buy your volatility when you can not when
Speaker 1buy your volatility when you can not when you have to absolutely absolutely so you have to absolutely absolutely so you have to absolutely absolutely so um so if you don't mind i want to um so if you don't mind i want to um so if you don't mind i want to continue with uh i think by the way continue with uh i think by the way continue with uh i think by the way let's just let's just let's just finish off on bonds in in one quick uh finish off on bonds in in one quick uh finish off on bonds in in one quick uh little uh little uh little uh run through on some of these first of all run through on some of these first of all run through on some of these first of all here here here is um the the junk bonds which are is um the the junk bonds which are is um the the junk bonds which are dropping a lot of this drop was not uh dropping a lot of this drop was not uh dropping a lot of this drop was not uh credit spreads blowing out but they have credit spreads blowing out but they have credit spreads blowing out but they have risen yes risen yes risen yes and so the question is is that is there and so the question is is that is there and so the question is is that is there another leg coming this time from credit another leg coming this time from credit another leg coming this time from credit spreads rather than spreads rather than spreads rather than uh they're uh
Speaker 3just uh yes yes yes yes uh they're uh just uh yes yes yes yes uh they're uh just uh yes yes yes yes okay
Speaker 1okay okay okay that's it's it's uh i am bearish credit okay that's it's it's uh i am bearish credit okay that's it's it's uh i am bearish credit speds and they're all it's only speds and they're all it's only speds and they're all it's only gonna get worse gonna get worse okay uh and what what else uh was super okay uh and what what else uh was super okay uh and what what else uh was super interesting is is that this is the uh interesting is is that this is the uh interesting is is that this is the uh bizd which is the bdc income etf which bizd which is the bdc income etf which bizd which is the bdc income etf which is those private equity is those private equity is those private equity um uh um uh um uh credit uh basket credit uh basket credit uh basket and uh you can see and uh you can see and uh you can see it's now breaking to a lower low uh it's now breaking to a lower low uh it's now breaking to a lower low uh everyone's everyone's everyone's was talking about private equity back in was talking about private equity back in was talking about private equity back in the start of first quarter being the the the start of first quarter being the the the start of first quarter being the the epicenter epicenter epicenter and quietly no one's talking about it and quietly no one's talking about it and quietly no one's talking about it anymore does private equity have anymore does private equity have anymore does private equity have another uh round to play in terms of uh
Speaker 2another uh round to play in terms of uh another uh round to play in terms of uh for sure that's where the bodies are for sure that's where the bodies are for sure that's where the bodies are going to be and it's a huge asset class going to be and it's a huge asset class going to be and it's a huge asset class it's underappreciated again in terms of it's underappreciated again in terms of it's underappreciated again in terms of the disasters waiting to happen there the disasters waiting to happen there the disasters waiting to happen there my buddy paula macro has been all over my buddy paula macro has been all over my buddy paula macro has been all over this and i i'm with him he's like one of this and i i'm with him he's like one of this and i i'm with him he's like one of the few guys is still talking about it the few guys is still talking about it the few guys is still talking about it but the reality is that those things are but the reality is that those things are but the reality is that those things are disaster i i suspect they get worse into disaster i i suspect they get worse into disaster i i suspect they get worse into your end too your end too your end too like who's you know why are you gonna like who's you know why are you gonna like who's you know why are you gonna own these things
Speaker 1own these things own these things all right so i'm gonna pivot to oil all right so i'm gonna pivot to oil all right so i'm gonna pivot to oil because uh can i say one thing about
Speaker 2because uh can i say one thing about because uh can i say one thing about about rates though before we're talking about about rates though before we're talking about about rates though before we're talking about like about like about like in terms of the squiggles almost all in terms of the squiggles almost all in terms of the squiggles almost all um g7 countries are priced in um g7 countries are priced in um g7 countries are priced in somewhere three to four hikes over the somewhere three to four hikes over the somewhere three to four hikes over the over the yes coming over the yes coming over the yes coming year yeah you know year or whatever like year yeah you know year or whatever like year yeah you know year or whatever like till till like that's the the curve of till till like that's the the curve of till till like that's the the curve of peak rates or whatever peak rates or whatever peak rates or whatever for the first time in a long time for the first time in a long time for the first time in a long time patrick the front end is actually patrick the front end is actually patrick the front end is actually giving you an opportunity to be long it giving you an opportunity to be long it giving you an opportunity to be long it and earn carry and earn carry and earn carry this is this has been like in the past this is this has been like in the past this is this has been like in the past we used to have a situation where we used to have a situation where we used to have a situation where everyone was anticipating rate cuts rate everyone was anticipating rate cuts rate everyone was anticipating rate cuts rate cuts rate cuts and it would trade inverted cuts rate cuts and it would trade inverted cuts rate cuts and it would trade inverted and there would be all these things and there would be all these things and there would be all these things now all of a sudden we have this now all of a sudden we have this now all of a sudden we have this situation where situation where situation where if you are if you are if you are if i forced you to say is there going to if i forced you to say is there going to if i forced you to say is there going to be two be two be two or six and this is the guys of goldman or six and this is the guys of goldman we're talking about this so i'm going to steal this from them if i said to you you can there's four priced in what do you think the chances of six are or what do you think the chances of two are and to me i'm i'm in the camp that the two is a lot more probable than the six and don't forget
Speaker 1four is priced now you know there's a very important thing i want to actually uh ask here um the question is what actually happens that they'll only move twice or what the market will price in because for instance i believe that crude oil is about to rip and if it does there could be another hit right you're thinking that
Speaker 2that's a great point and that is the that is really important and i'm glad you brought that up because it could be that you're right that six get priced in and then they ultimately do too that
Speaker 1see this is the thing because i would choose two in terms of what they actually do yeah there we could have six or even seven great points priced in if oil's ripping 120 140. great point patrick great point right yeah and that's right and that's why training is so easy yeah and so uh so listen but let's talk oil here okay because i think that this is one of the most fascinating things and you know we're dragging on so i don't i don't want to go on too long but this is actually an important conversation because i really think what's happening in oil is so interesting because oil had this correction it's going higher someone who just looks at a continuous chart or is you know tracking oil prices for the purposes of you know reporting it as you know election influence and everything like this it looks like oil's been flat for a month right when you just look at this chart well look you know we were trading at uh this 97 level back on september 9th and we were at 94 back in july right like this is looks like an oil market that's not moving and this is incredibly deceptive because almost all of this selling has only been at the front month now uh we have been uh in um obviously oil markets naturally a trade in backwardation not always but it is very common for there to be very clean backwardation in the curve and we have literally seen huge flattening of this backwardation and it's actually disguising what is actually happening now first of all i want to go to the cot reports and i am baffled by when you go to this uh wti we're at the 31 percentile but we continue to see on the red line which is the gross shorts you have to go back a decade to see this amount of gross short positioning in crude oil in spite of crude oil going higher some big players continue to hold very aggressive short positioning i'm not going to get it down the rabbit hole of who this is but i want it no no but i want to stress but this is all influencing the short term price of oil on the front month so this is here but look this is the december oil contract what is it doing breaking to 52 no all-time new highs broke out thing look at this chart of the april 2027 contract it's in a screaming freaking bull market yeah it looks great right the point the point here is is that what for 95 percent if not nine percent of people are just staring at that continuous chart in that base level uh and saying well nothing's happening in oil oil's being stable going to election but when you look deeper under the hood uh the situation in the middle east is materially escalating and when you just leave that front month contract that has been pulled down and by short sellers who think are fading this thing you have a screaming bull market in oil i think that's what's going to happen and that's what's going
Speaker 2to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen and i think that's what's going to happen
Speaker 1but no but like to me like this is like look at the like we are in the last um uh in on this uh let's say april contract we have seen a 21 oil rally in the last 70 days uh basically a 31 rip higher the entire backward nation is flattening the oil one year two year out is screaming higher as they're basically saying that the right price of oil is higher patrick
Speaker 2you sound like bill murray and ghostbusters dogs and cats living together pandemonium no
Speaker 1but i i find this thing like why like why is everyone just staring at that front month but look brent oil about to break to uh to uh uh back to its highs the fact that the oil itself like even look at this is the dutch nat gas contract uh the european gas just breaking to new highs uh oil and uh refined products everything is actually ripping and somehow the front month oil contract that wti is being aggressively shorted and is not actually representing what is actually happening in the vast majority of the energy markets and yet this is the benchmark that everyone is staring at oil markets are in a screaming bull market right now the middle east is a show and it's only likely to get worse and uh and and everyone is actually start ignoring this trade i think it's uh i think that there is an extraordinary opportunity to be bullish here drop the mic baby that's i have nothing yeah you know what do we do we leave it on that nope yeah i think we leave it on that we end strong baby only i want to just touch on a
Speaker 2few a couple quick oh you're ruining it you're like michael do you listen michael jordan you you switched the bass you switched the basket and i need you you went out of the highs you had the trophy and now you're coming back and you're playing for the wizards our
Speaker 1listeners are going to be upset if we don't touch on gold okay the bottom line uh i just want to ask you uh under these kind of conditions that we just described yeah um what does the macro condition in your mind have to do to make sure that you're going to get the gold that you're going to get in your mind have to pivot in order for gold to finally get a tailwind and and get moving like what would
Speaker 2gold will go down with financial assets until we get to a point where they realize that the fed is going to pivot really hard and having said that i'm using a traditional lens to view gold um but on the whole i still think china is the one accumulating it and they might surprise you and not go down and actually rally it in weird inopportune times i think that too many people still look at that relationship of the us dollar and of the um uh into real interest rates and often what you'll see is they'll push it down because they think oh rates are going higher or whatever and they'll be you know selling their longs and then the next day china comes and just sops it up and we rally for no reason so although everyone's nervous about it i'm not as nervous about it especially over the
Speaker 1long run okay so listen i'm just gonna lightning round through a few more things copper uh it was uh a month ago um at a a decade high in terms of its uh long positioning from large specs everyone was loaded in we're now down to the 58th percentile large spec is starting to unwind a little bit off of that extreme level um the thing is is that copper and industrial metals tend to do best from in the macro regime of uh rising growth and rising inflation and copper was a very very popular trade the whole ai story is you know these data centers need the copper wiring and all this stuff um but yet copper has basically for six months been completely unable to make any progress in spite of all of this bullishness that's been in there and the question here is if we are witnessing a slow growth pivot here uh do industrial metals have been able to make any industrial metals finally peak out and are we witnessing a topping formation just asking i'm not forecasting but it does look ridiculously heavy and there was some extreme bullish positioning uh is copper gonna trip up here is my question if you don't have a comment i'll keep going oh let's keep going baby uh the other thing like uranium now uranium was uh super bullish um uh during the ai story but what is fascinating to me is that as ai turned the nuclear uh story was obviously uh very much tied to it and we are in an outright nuclear route even though um the nuclear build out story is very very real but the stock investors are just getting completely pounded uh on on owning this it's turning into a bloodbath out there uh even yesterday's attempt to rally is already being faded like uh the question here is in is like when are these stocks going to be fully washed out because it's it's there is zero sign of anything bullish here and i i find that so crazy because fundamentally there's such a great bull story to be told and the price is just destroying everyone who bought the story just to show you technicals matter more than you think well well you know well to say technicals uh flows matter yeah yeah and i'm just i'm just joking
Speaker 2well for a while so although the fundamental story is great you have to say maybe it's all in the price
Speaker 1yeah at some point that that's been priced in and that is uh that is the thing the last one thing i just want to mention is on the ags uh and and you know there was obviously a a bull case to be made about all of these grains uh ripping but the last month and a half has been a pretty nasty pullback i was just going to ask you like uh do you still think that the ag story can march to the beat of its own drum
Speaker 2oh a hundred percent by the way you know when i was out traveling i had the good fortune to meet some guys in athens terrific guys actually really enjoyed chatting with them and one of them is a big um uh egg bowl and he really got me thinking and i and subsequently talked to some guys patrick one of these days we're gonna get a surprise here that is going to shock everyone it's going to be a source of alpha we should all be getting better with the eggs and learning this market and focusing on it more there is going to be a rip-roaring bull market in eggs one of these days and it's going to be fortunes are going to be made right like we're going to we're going to be we're all going to be ag traders shoot and you know i don't know if it's this one with this el nino or whatever or the problems with ukraine there's like lots of different moving parts that i i don't understand as well as i should but when i just look at this and think about how in real terms wheat has been you know going down and down and down because inflation's occurred right like if you if you take that wheat and you discount it you know deflated by inflation we're at all-time crazy low levels and the world is becoming more unstable and not only that the climate issue has become larger and we have this fertilizer problem and we have well you know like listen there can be an accident here and and and when we're looking at those charts we could be shocked at how far these things
Speaker 1move absolutely that's right this is the weekly chart on wheat and you can see like like prior bull market in 2020 that was obviously the ukraine war kind of build-up uh scenario but that just goes to show you what happens during wheat bull markets and uh and you can see here we're obviously on this weekly chart having a pullback but this is far from what wheat is capable of doing when things get really spicy and uh it'll be interesting to see what where and how the the dip gets bought here and where the bulls ultimately defend this thing it'll be uh it'll be certainly interesting but guess what kev i don't think we should go any longer i think okay that's good
Speaker 2all right everyone thank you for tuning in uh we'll see you next week patrick where can they find more about you and your terrific
Speaker 1analysis listen uh number one check out my youtube channel patrick underscore suresna i do these daily chart things so if you're enjoying these charts i literally give an update in live stream every single morning uh of the week uh number two we were talking those caught charts so check out cotsignal.com completely free and if you want to directly uh see my stuff in action come to bigpicturetrading.com okay all right can they find you but uh
Speaker 2they go to macrotourist.com or you can email me if you want a specific piece kevin at the macrotourist.com and i'm happy to send off some stuff for people who are interested uh listen bear market bull market uh we're just happy to spend some time on this terrific ride that is the market huddle thank you for tuning in everyone see you next week all right and here comes danny danny where are you very very um like beachy guys that was super good not that great what was confusing well you didn't even say and and now it's the after show i mean oh i screwed up that was my fault i was thinking oh and now it's the after show it's because i didn't have it up there and i didn't do it i couldn't really read it
Speaker 1how many years have you been doing this ah not that long yeah no but uh yeah listen it no okay first of all i just got to say this like that we were not together the three of us having a chat on our 300th episode i had i know it's my bad that was me that was me i apologize you know what kev first of all it's been a great pleasure you're an awesome uh uh co-host uh of the huddle and having bagged 300 of these episodes uh it was such a journey the shows evolved so many different ways over that time but uh you know we're uh we still have a great time doing it and uh just wanted to say uh let's make a 300 more you know i really
Speaker 2appreciate that it's very kind of you to say and uh and i feel like right back at you you know people always say to me you know how did you meet patrick and you know how long have you known him and they're always shocked to find out that uh we basically met a year before we started this and yet i feel like i've known you my whole life and you're just one of those uh partners that you instantly have a rapport with and uh i i really appreciate it and and to your credit patrick i would have i did it as a lark you asked me to do it i did it as kind of a fun little lark and i would have never thought it was would have been so wonderful so i i owe you a huge debt of gratitude for you uh suggesting we do this
Speaker 1awesome and you know we uh and danny came on and has been great it's it's uh it's awesome sorry that i uh don't have tips like the previous uh producer i'm so sorry
Speaker 3everybody it's a sex a sexy voice yeah everyone everyone was like sexy voice that leader she got the sexy voice no but uh so
Speaker 1yeah listen uh did uh i i just came back from argentina i know you were all over europe by the way you did you end up doing oktoberfest no i didn't
Speaker 2i got lazy um you know i was in greece had some great pictures yeah a cuppy invited me i was i was i had to fly through munich and i and i was just it ended up being just so tiring and i'd done so much things but by the way i'd just like to thank everyone who met me throughout like all the things like the guys from incrementum were were you know terrific and took me out for dinner i had a bunch of different meetups like in switzerland and i mentioned the guys in athens and uh did i have any more um but anyways i just want to thank everyone because it was a real pleasure meeting everyone and thank you for taking time to show me your country and take the time out
Speaker 1yeah you know that's awesome that's awesome yeah i was uh i was down in uh argentina and uh with uh my inner circle and we basically went out to the gatsu falls uh okay that that the huge famous waterfalls that's uh on the brazilian argentinian and paraguayan border there okay uh man is that stunning like really it is uh this is
Speaker 2coming from a guy who's near niagara falls so it must be absolutely no
Speaker 1no it's uh like niagara falls has this volume thing but it from just the beautiful jungle uh atmosphere and the way that this thing it's like it's amazing we went uh on the on the boat and it's not nothing like the fairy of the miss on the niagara falls it's like they literally bring you like right near the water where the water is literally almost like pouring into the boat it's it was uh it was a wicked experience so
Speaker 2patrick you know answered the age-old question is length better than volume but obviously you know we know now length of stones all right daddy's just
Speaker 3groaning we're done
Speaker 2i'm sorry i couldn't resist i know that's a bad let's end on that okay anyways thank you very much for tuning in everyone have a great week and stay safe out there cheers everyone
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