217091292 - 1_oph2ezr2 - PID 1851201 Welcome to the revision daily briefing. It's Thursday, January 13, 2022. I'm Ash Bennington. Join shortly by Katie Stockton, founder and managing partner of Fairfield strategies. Welcome Katie. Thanks him Next and it's going to be with you before we jump into the conversation. Here's what's happening in markets right now. Ugly day, especially on the Nasdaq, looks like still bouncing around a little bit. But off 2.51%. I see here I, my screen looks like getting settled around 1400806, dow, S and P Russell 2000 all turn negative on the day. Quite an unpleasant day, but great to have you here, KDC, you can give us your analysis of everything that's happening, a fun day to have you on. Certainly in terms of understanding how you're looking at these markets. This is the first time you and I have done a show together. Tell us a little bit about what you do and how you see the world. Well, thanks for asking. So I am a technical analysts and I'm really very much a purist in that sense. I only look at charts, I'm only looking at price as it pertains the supply and demand for various securities. I publish strategy research for our clients and subscribers, and we focused primarily on US equities, but we also look at what I consider to be macro technicals. Things like ten-year treasury yields and gold and crude oil and the dollar. And then we've added a couple of products focused on crypto and cannabis, and it will be Jason sector deep dives. And so we really cover a lot of ground, our research and looking for opportunities first and foremost, but we're also trying to help our clients manage risks. So I think that charts are really just so designed for that and that we can identify key levels, things like support and resistance levels. And also we have indicators that take out some of the emotion at trading and investing and help us understand when risks might be high-end a day like today, of course it, I call it the inverse property of technical analysis, like demand for my services goes up when the market goes down. I'm hearing a lot more my subscribers today than usual. And, but so it goes and we just try to help them navigate the volatility. Yeah, as I said at the top, a show a great day to have you here, much to get into, we'll talk about all that and more. But first, at the top of the show, I want you to cue up a conversation between our co-founder and CEO Rao and Julian breakdown of macro intelligence to partners. Very relevant conversation. This piece comes to us from the Pro, from the, from the revision pro tier, pro macro insiders talks for January. Let's take a look at the clip. So I think the biggest risks to the bull market is really in the tip section which is being noticed inflation hedges because I think Aida, I think there is a chance to my profile on my professional clients or so clients yesterday, I thought maybe the CPI number could Paik I was wrong this month, but I think heat's coming in the next few months at a headline rate will pizza that will take some of the oomph out of tips. And I also think that as the Fed starts to tighten rates, that will also take some of the lymphatic tips. And this is where a lot of the money has been hiding. Like people have hidden in the bond market, in the tech sector. And it's also part and parcel of a, I think, a broader theme where I think if I look at 2022, I'm thinking really that, you know, to use that Biblical expression, the last will come first and the first will come last. So the trades I've worked extraordinarily well for the last year or sudden start to reverse. And you're seeing some signs of that in like growth value. It's only embryonic, but I think starts with it's hot in 2022. Well there you have it a bit about macro talking about CPI and tips. But Katie, something that's right in your wheelhouse, Julian ends on this note. The last will come first and the first will become last. Do you see a broad risk reversal and the types of traits that have been working so far. Yeah, I guess so far if we draw that back, that qubit now in 2020, I, I'd say yes, we have certainly seen some kind of shift when you're lucky. Say as an example, defensive sectors and them having picked up a little bit of relative strength of lay over the past two months or so. So I would consider that to be one sort of risk off type of shift. We're seeing it also in terms of market breadth or participation. And that means the number of stocks that are up on up days and down on down days, and that measure peak sometime towards the middle part of last year. And we've seen a more trading range environment and unfold for market breath. Even the major indices have been trading higher. So that's created a more difficult environment. And not more difficult environment is more likely a maturing uptrend. We don't have a lot of pressing near term cell signals, but definitely something to keep an eye on. We don't put a lot of way into market cycles. We feel that it's a very difficult thing to leverage. But listen, there's definitely some truth to the fact that if you had a winning sector as one example last year, well, chances are pretty good, it's not going to be the winner again messier. So we always keep an open mind us to those sector rotation is we know that the markets tend to be very rotational in nature and that doesn't even just go for the stock market, but asset classes, so there's some real rotations out there that we can leverage for sure. Yeah. Well said, we're going to dive in and dig into those asset clauses in just a minute here. But first, before I get into the details, I will give you the opportunity just to give a broad context on what you see here today. I know it's a bit challenging. You've been in front of the camera here as we've been coming into that close. But give us a sense of what we see on a day like today. Obviously some pretty significant downturns particularly and tech stocks. What do you thinking about it and how do you contextualize it? Yeah, I had gotten that question a couple of times already, as you can imagine, and it really just makes me feel like the tape is somewhat fragile. It's been something we've been saying for the past week or so, maybe even the past two weeks and that we've seen that loss of market breath or participation. And then we had that high growth corrective phase late last year. All of that taken together to show so I guess fragility to the market and today's certainly exemplary of that. Today's action takes the nasdaq 100 Index is one benchmark back below support level that we've been watching. So we always make sure any kind of break downs or confirms though. And by that we mean a couple of days, a couple of flows as blow key level. Our key level is 15 thousand 575, but the nasa 100, it did close below. So we would need to see a subsequent who's below again tomorrow to then confirm that short-term break down, we've already seen some short-term breakdowns, as you can imagine in technology more broadly, including for Microsoft, including for Google, which of course have a pretty big footprint, and the nasdaq 100 and the S and P 500 as well. So these are all kind of ****** in the armor of the market. And we, we move to a neutral long-term bias and October. And yet we are short-term bullish still here. The reason being our indicators on the monthly charts looking at the long-term gauges that we follow, we did start to see some signs of exhaustion Starting around September and October. And now they're even more pressing, having unfolded and more benchmarks. As an example, the nasdaq 100 has a new cell signal for the DMARC indicators Athena. Tom to Mark's work, there's a new cell signal based on one of his models this month for the nasa 100, we already have active signals of that nature. For the S and P 500, we have a monthly map, the cell signal and momentum cell signal effectively for the Russell 2000 index. So all of that, it does create that. That's it. Just a bit more of a difficult tape. Back to you, of course, moving average convergence divergence indicator. You talked about the key support level that you sought breached on on on the Nasdaq today. I'm waiting for confirmation of that gives us a sense of what that means. Have you know, when that's been confirmed and if it has been confirmed, what does a fertile in your model? Yeah, except for me and I think everyone's different, right. What they should require, what they do require Herb a break out or break down, look decisive. And we've just find that to create some kind of time qualifier is, tends to be a good idea because you often get width thoughts, right? Whip saws or shake out. And that tends to be associated with emotional trading at which you could certainly assign that to this afternoon's trading. And so we make sure that we see that two closes below. So today would be one, tomorrow could be another to confirm if short-term break down or breakout. And then on a more intermediate term level we'd look for to weekly closes below or above a key levels. So it just depends on the time frame that we have in mind. And even if you're looking at intraday charts, a day trader might look at a 60 minute bar and say I need two hours above the level or below level to confirm. So I think that time filters really very helpful and it's helped us avoid now kinda shake out. So which is assumption if false break down below various support levels of which there are very, very common. And sometimes it seems like it's just because so many people are watching a key support level and now suddenly see a bit of a flurry of activity around a level. And yet we never see that confirmation of a break down break advocates, buyers are stepping in. And also we have to think about support and resistance levels, not as precise points. There's just too many market participants out there to let that be the case. But rather cushions. So think of them as something that we can come down to dip low intraday intro week, whatever it may be, and still find that support roughly in that area. So we've just talked a little bit about nasdaq. Let's turn here to S and P 500. So it looks like it's off. I'm looking at my terminal here. It looks like off on the year to date, minus 2.3%. That said up almost 23 percent, just shy of 23% on a 20th, on a 12 month trailing basis. Give us your sense of what your thoughts are for S and P 500. The long-term momentum behind S and P 500, and also just the major indices and insight and the Russell 2000 is delta the upside, but it's definitely waned, are fallen off since that can October time frame at which time we saw that Uber bought sound signals start to develop. So he's seen it down, taken mom. And in and of itself is not a break down and we certainly don't have a breakdown in the S and P 500 at current levels. But it is something that we'd be really wary because we have those signs, website exhaustion. And these are measurable things. So when we say something is over bought it, something that we're seeing from a mathematical perspective. It's when those over bought conditions actually yield downturns in our indicators. Things like the stochastic oscillator for one. That's where we start to say, okay, now is the time to put on hedges. We'd like to look at those sticks or daily, weekly, and monthly bar chart. So to get that coverage of short-term, intermediate term and long-term. And for the S and P 500, the level that's equivalent to that, that the 15 thousand 575 for the nasdaq 100 is roughly 45, 46, and it's based on a previous resistance level and also approximates short-term support by a couple other measures as well. Below these levels, the next step, or at least as of two days ago, was about, I'd say eight to 10 percent below. So what we can do is is look at the secondary support level as a gauge of potential downside risk in the event of a breakdown. It doesn't mean that benchmarks have to down to that level. Maybe you'll get an oversold bounce first and we'll try to help our clients navigate that. You don't do it. Do I wait for the selling opportunity? Do I sell into the weakness, that type of question, we try to help them answer. But the increased risk does dictate some kind of hedging. If and when we get these confirmed breakdowns or just a reduction and exposure, maybe you want to get more defensive. Increase your gold exposure, increase your exposure to cash equivalents, or add treasuries if you're so inclined. So there's just ways to kind of navigate that and that the support levels we never recommend by stop orders. We never say, okay, S and P 500, you know, 4200, that's where you want to buy. We can say with some level of confidence that we have a sense that it should bottom at or above that level. But not until we see the turnaround and indicators to the upside, will we feel confident that we have an entry point into hands. So we rely not only on the levels are a gauge of risk, but also our indicators that we've been talking about these markets, principally in fact, exclusively from the context of technical levels, technical trading, technical analysis. Obviously the big stories over the last two days have been CPI inflation peaking at around 7%. This is the highest in 40 years. And some murmuring from Federal Reserve officials, particularly Loretta, MR. from the Cleveland Fed president. Cleveland, if I say, I'm Raphael Boston at the Atlantic, fred president of that bank, who we're talking about, the need to potentially signal rate hikes as soon as March. How did these types of macro signals play into your models, if at all? But I don't really have models per se, but rather to technical indicators and what I care most as its market sentiment coming into these types of potential events, right? If, if the markets are characterized by extreme greed, which we have ways to measure, then that creates an environment that's very ripe for a correction and vice versa. If folks are really bearish coming into a fan meeting, then of course it tees up for a relief rally of sort ones. That news finally is absorbed by the marketplace. So we think about it more in terms of market sentiment. A couple of ways to measure that we'll be using the fear and greed index. It's a pretty popular gauge offered online. And it incorporates seven different components that are reflective of how folks are positioned. Are they exposed to what are high, low relationships, time as that type of thing, PUT call ratios. And those can tell us if people are positioned in a way that they feel really confident in the market or not so much. And then also the VIX or the volatility index, which I consider to be like a transactional gauge of market sentiment when the mix rises, especially if it's spiking in that of course, is associated with increased downside volatility for the major indices. So we give a lot of weight to the volatility index and we're expecting the vex to clear resistance subtle, it's just below 28. Of course, we're hoping I get ahead of that. And out and in terms of the S and P 500 call APA, if we do see that level theory, it would suggest that we have gotten out of this like low volatility cycle that I think has characterized the market for more than several months. If you look at the VIX, it does hazard but cyclicality to it. And when you get these big spikes above key levels, the last time we really saw this, based on the model that I'm looking at or the indicator that I'm looking at was early 2018. So I'd put estimating that kind of environment where, if you recall, in 2017, we saw a nice view for the market in that period. A good sort of prolonged, not parabolic, but nice, deep, solid uptrend. And that it was followed by the same cell signals that we have now. And then that Vicks climbed above a key threshold and goddess and to what was a more range span environment overall for 2018. But within that range, we had two pretty major corrective phases. So it just required a bit more risk management and more attention to the short and intermediate term indicators. So we suspect that we can be getting into that environment. But as it pertains to those macro types of events, we really have a lot of weight to market sentiment. And I've always adhering to momentum indicators and support and resistance levels to judge reactions. I'd say almost the same thing would apply when we get into earning season. The charts aren't going to add any value or color pertains to anything fundamental and or related. But what we can, at least judges, is whether something's running into an earnings report somewhat high IE financials, or is it coming into the interneurons report more oversold which would teed up for a relief rally. We can look at market history and see how the pass reactions haven't folded for that name in particular at, but earning season, as we all know, does tend to create a little bit of volatility typically. So I think this time will be no different. Yeah. I'm curious your thoughts. You mentioned bonds. Now, let's talk a little bit about cost of capital US 10 year treasury yield. I think just as we're speaking here, dip below 1.7 on a yield basis. What are your thoughts on the 10 year treasury note? How are you looking at it? If I could, I'm now share a chart on this one. So I think that the chart sometimes speak louder than my words as you can imagine. And as mentioned, you did see a pull back today and yield terms. But the thought here on ten-year treasury yields which are loading on my terminal here slowly. It is that will expect some short-term consolidation over the next week or two, BAM. And it's a very natural place for that to happen. Because if you look at this weekly bar chart, there is a resisted in subtle, it's roughly one in 79. It's based on a 50 percent Fibonacci or treatment level. And it also approximates the high from last year. It's a very natural place or this steep up that we saw at the start of the year to take pause. So we are looking for some consolidation. But notice here that this shaded area on the chart, this is called the Cloud model. And this is showing that ten-year treasury yields RNA gradual uptrend. It's providing support repeatedly. And our intermediate term gauges, you see here on the chart something called the meekly stochastic oscillator that's pointing higher. If you look at the trustee Mack D, that's also pointing higher. So those intermediate from gauges suggests that we will get through that 179 resistance level following some short-term consolidation. And then and find was looking at a secondary level as a gauge of downside, we do the same on the upside. And secondary resistance for ten-year treasury yields is about 2.13%. And that is based on another Fibonacci were tradesmen level, it certainly would seem attainable if we get that breakout which we are looking for. So is that a Cloud model with an overlay to mark indicators against Fibonacci bars. Is that we're saying? Yeah, that's right. You make it sound and complicated, but I feel like it is, but yes, and it's been at JMU or a Cloud model. You see some demarc indicators and signals in here. Last big so-called bias signal is here. Pretty timely. If you lift through this move and the stochastic oscillator. And then we have another chart of which we have and different to mark indicator, a series of moving averages and the MAC D indicator with the histogram. So this is a very common sort of chart template for us to use as we analyze any kind of security. Just a sense for people who aren't familiar with these moving average convergence, divergence, what it means and why it's significant in your view in terms of price action. It's all about eliminating noise and isolating important trends shifts. I think we're at the point with all the software out there that very robust charting programs for very low cost that's available to us. We can all really judge what the prevailing trends are. The hard part is to understand when they're reversing and when it's more than just noise. So that's what we really rely upon. Black from the Mac D, which Spread between two exponential moving averages at price. And that, that spread is then smooth by another moving average to get a so-called signal lines. So the blue is the data line, the red is a signal line. And the crossovers to us, or most informational, when you have a crossover, it's signifying an important trend shift over whatever time horizon even looking at which in this case I'd call it intermediate term because we have a weekly bar chart, pull it up and then the histogram and show you some expansions and contractions and momentum as a trend progresses. And that can be informational to just as a great case in point. I still had downside momentum here based on the MAC D, but notice it was taking higher, higher before finally going into positive territory. So we definitely get some nuances from that histogram. And I think it's a fantastic way to eliminate the noise around these turning points and to make sure that momentum is, is basically on her side, just like any indicator for us. It has an inherent lag to it. It is based on moving averages of price, which are looking back over history. And yet we can navigate that by using some more sensitive indicator is either on shorter term time-frames or using things like these to mark indicators. Can, what are the durations of those moving averages is that you're measuring the ratio against when you look at those crosses on the Mac D are on the moving average to hear what both, but I was thinking about back day. It's a spread between a 26 period, 12 period typically. So some people don't use this standard parameters, 26 to 12. And then the smoothing is usually a nine period moving average. And I believe it's funny because those parameters tend to agree, reappear and other technical indicators that one included would be the Cloud model are at JMU. And I think it probably is the case because the market coulomb or MHC is just something that probably tested well over history. And it has some derivation from the market canned or why those parameters tend to be helpful for folks. And so we're very perfectly happy using the standard parameters. I think the key takeaway is that you need to go back to the same indicators. You can sort of manipulate them as you go to, to, and then you get that confirmation bias, right? Looking at something that's doesn't quite see what your thoughts are and then you tighten it up and say, Okay, there it is. And so to prevent that confirmation bias, if you can just come back to the same parameter is every time. And I think that's where you get some value from these mathematical gauges, which really can take it out a lot of the biases of the market. I know we're getting low on time here, but I wanted to hit a couple of other assets. I'm curious, talking about places where we've seen some volatility. I'm looking at a 12 month chart right now on sale one, this is WTI fib 20 to contracts. What are you seeing in oil and in the energy complex more broadly. Yeah, we, we publish on oil weekly and of course focus as well on the energy sector and its relative strength. Look for opportunities there. And certainly there have been a lot of opportunities. It's one of the few sources of breakouts. Wti crude oil, if you look here on the generic contract, has come right up into resistance base on previous highs in here, this is the generic shes, the resistance around 85 at the front month it's it's closer to 8283. And this is a proving ground for crude oil. So if we could see and decisive break out, however you define that. And for us it's a couple of good solid closes above. That breakout would catalyze upside follow through in our opinion. And and yet the targeted level from that, if you do use what we call an measured projection, it's pretty bad conservative or that front month, I think it was something like 8485. So not as impressive in terms of upside potential as your average break out. And that's just a function of how deep the corrections before this move began was and also the the relief rally. So a lot of this short-term moves has, I think, been baked into some of these stocks which are now starting to show some signs of short-term upside exhaustion. So I would say the takeaway is that a unit that crude oil prices are at a proving ground here break out would be positive, but only modestly positive based on targeted levels. We sense that crude oil like the equity market might get into a bit more of a range bound to the environment, the CIR, as similar to our comments as it pertains to the long-term indicators. As one example on the monthly crude oil chart here you see a downturn in the stochastics after it had been elevated for some time. In the last time that happened was late 2018. Okay. I know we're running low on time here, but I want to get to one question. At least this one comes to us from Jeff, be from YouTube. And the question is, what love to her? Katie's thoughts on bonds, which we've heard about, and the dollar in this environment, which we haven't kidding, What are your thoughts on the dollar? We just started commenting on this this morning and I'm worried, note to clients and that dollar index has upheld. Positive intermediate term momentum for some time as it loads here I'll show you on the weekly Mac D, it's been positive since June until this week are really until just a couple of days ago. So we do have a pending short-term break down and the dollar index. And you can see the impact is negative on this weekly Mac day indicator. The crossover assume units there at the close tomorrow of the week. That would suggest that the dollar is at least getting into more of a range band type of situation here as opposed to maintaining this nice uptrend as it has been. So we're looking for a greater loss of momentum behind the dollar index. And the level that we are watching as resistance in part is this 96.1 kind of area based sum them monthly cloud. That has been a bit of a hurdle as it seems. So we do think that we'll see worn dollar weakness at before it gets out of this consolidation mode, support for the dollar next is roughly 93 for bandwidth that we've gotten a little bit of outperformance from emerging markets for a change. Yeah, and if you can't see that y-axis, it looks like 94 spot 87, dx y right now, obviously not a great couple of days for dollar index kidneys. We come to the close here of this conversation. Final thoughts, key takeaways that you'd like to leave our viewers with. Oh gosh, Well, I would just say it and be very mindful of any breakdowns that occur are messages to and for the most part, keep an eye on that vx and then also keep an eye on market breath or participation as evidence in a cumulative advanced decline line, which hopefully is available pretty easily online. We don't want to see a break out, an x and a breakdown in cumulative breath because that would tell us brute we've gotten and to add it. But what is new longer really categorizes an uptrend going back to early 2020, but rather a more difficult range band environment like 2018. So I think that's a key thing to watch. And then with that, if we get that situation, then Gold might be something that folks want to have a look at. If you see gold, it's a long-term triangle formation at this time, triangles tend to be really high probability technical price patterns. So we gotta break out and gold and I think the resistances around 860, so not far, that would be a pretty major development from a long-term perspective to consider. Getting this was great, especially walking through those charges. Thanks again for joining us, really enjoyed this course. And thanks again for watching real vision daily briefing. Maggie will be here tomorrow with Rao. As always, the conversation continues on real visions, the exchange. Thanks for watching everybody.