July 2020 Video Call (Archive)

TRANSCRIPT

Hello, and welcome to the July video call. We’ve got a lot of subscribers with us today. We’ve got folks from Alpha Money Flow, welcome, and we’ve got a lot of folks from Codebreaker Profits, welcome to you too. We’ve got a lot to cover. If you’ve been following the markets over the last week or six months, whatever, you’ve certainly noticed that we are living in interesting times. We’ve got a lot to cover on that topic today. And really my goal today is to show you kind of that high level view of the markets. If you’ve been on these calls before, we look at things like fear and greed, the various indices related to that and various metrics. I like to look at the overall S&P 500, I’ve got a chart for that today. My goal is for you to walk away with a good sense of knowing where the markets are headed, where we’ve been, and really finding a way for you to cut through the noise of the headlines.

So you’re not guessing day to day based on the latest news and the latest hype that we’re seeing from the talking heads on CNBC, CNN, whatever. I want you to be able to look at the markets and really understand what’s going on, what sort of things are driving the day to day action. That is absolutely critical and very, very important, I think a lot of folks overlook that and miss that today.

So what I’m going to do today is show you where we are in the S&P 500 related to the Liberty Indicator, related to the KI Channels. I want to talk about gold. Of course, if you know me, we’re going to talk about interest rates. And then I get into some of the key metrics and indices that I use every day doing these things, going into the various fear indices, what sort of greed indicators we’re seeing right now. And then towards the end, I do want to talk about our latest Rollover Trades. If you’re a Codebreaker Profits subscriber, you saw the alert this morning. We doubled our money on a play. We’re very close to doubling our money on a second play. I want to go over that and see how those are shaping up this month. I’m very excited about those.

But to get started, here’s a chart, very, very high level, beyond 30,000 feet, this is the 45,000 or 60,000 foot view. This is just a chart of the S&P 500 since early February, last six months. And so you can see, let’s just look at the KI Channels first. So this will be for all you Codebreaker Subscribers. This is what we look at here, these blue lines. And if you looked at this chart and didn’t tell me there’s a pandemic going on, you probably wouldn’t know it, especially if you got rid of this first half or the first third over here.

From April 1st on, it’s extremely bullish. In so many of the alerts, I talk about the mid channel line or our mid channel average, and this is such a bullish trend when we see the stocks bouncing off of this versus this lower one. Of course, we had it come down here in March and then we got above it and we’ve stayed above it. So if I’m looking at stock charts and I’ll show you one later that doesn’t stay above this midline. If I’m looking at charts and I don’t see a stock staying above that and really mimicking the S&P 500 like this, it gives me pause. I look at it again, because this is a strong momentum indicator. And if we start seeing things, stocks, dip below this line and not bounce back above it, that’s a trend reversal sign, that’s something that I watch out for.

But moving down here for all the Alpha Money Flow folks, again we’re very bullish right now. We see this is our Liberty Indicator, our Tripwire, right in here. When we see red going from red to green, that’s when we buy. And we know the further we get into that green, the more bullish things tend to be. So we hit a peak here earlier this week, and we’ve kind of bounced below that, understandably, and now we’ll see whether we go back above it, but combining that with the KI Channel, there’s no reason to believe that we won’t climb back above and bounce against this upper limit here soon again. So we’re back down in here today. We’ll bounce back above it.

Interestingly, I’ve been talking and writing a lot about volume lately, for the last 15 years or so, volume has always been a big part of my investing thesis. And so I wanted to show this to you as going into February, as we hit the highs back earlier this year, volume was kind of waning. Then of course we get these big red bars. People were panicking, selling off, volume bounced, came lower, as we’d expect. Then it went back higher again, and you can see that it really pushed things higher. A lot of this was stimulus spending. I think it’s fascinating looking at the GDP data today, GDP plunged of course, but personal income is actually up for this year. And we’re seeing a lot of that in the stock market. A lot of folks got a $1,200 check. They put it into savings, a lot of folks and younger folks, especially what we’re seeing, is they put it into the stock market.

And we see that in this volume here where people are actually pushing stocks higher based on that stimulus. So we’re seeing that start to taper off here. So this is going to be interesting to watch as volume gets back to levels that we saw pre-crisis, pre-pandemic. We’re going to have to watch where that goes. And I think if we get another round of stimulus, probably won’t see quite as big of an input into the stock market, but we certainly will see some, so that’s something to watch, this volume trend. As volume wanes and diminishes here, we’re seeing a lot of greens, so that’s good. That’s a bullish sign. And hopefully it picks back up and stays green, and then the sky’s the limit.

But looking at S&P 500 here, again, if I didn’t know there was a pandemic, this chart wouldn’t indicate it other than that big plunge off to the left. Post April, you wouldn’t know there’s a pandemic. And again, why is that? Because there’s so much free money floating around out there. Just this morning, I wrote about Kodak and shares up 400, 500% in a day because they got an $800 million loan. Pfizer last week, I think it was last week, got $2 billion. So there’s just all this money. Remember we printed more money than we spent, excuse me, we printed more money in March than we spent in all of World War II, trying to fight this pandemic. We’re printing money like crazy, and it’s got to go somewhere and a lot of it is going towards the stock market. A lot of folks would argue that that money is going to cover debt that’s not been paid and cover other big bills from all this, that hasn’t happened yet.

It’s not washing away that debt. The debt is a small part of that statement. So ultimately it’s got to be a net positive, which is a theme that I’ve been pounding the table on for weeks now, and why I think the stock market, right or wrong, will continue to climb higher. Regardless of economic data, I’m convinced the stock market will continue to climb higher simply because there’s that much more money in the economy.

All right, let’s move on before I ramble too far. Kind of on that note: gold. So this is a chart of GLD, basically an ETF proxy of gold prices. And you can see, again, it’s very similar to the S&P chart, a lot smaller of a dip here in March, but we’ve stayed above that…blur of a dip here in March, but we’ve stayed above that mid channel line for the most part. Had a small dip here, a small dip, of course, back here. But then look at this, just in the last two weeks, where gold has really taken off and now hit record territory. We climbed above that KI Channel. So this is going to be something to watch. Typically, when you get this far out of an upper KI Channel, a pullback is expected. So we’ll have to see what happens there. It’s going to take a lot of energy to maintain that as the KI Channel, this is just an average, rolling average comes up to this level. So I think we’ll see a pullback. We haven’t seen anything major yet, so that’s going to be one to watch, but look at all this green volume in here.

And then, again, for all you Alpha Money Flow subscribers, buy gold right here and look what happened. You’d be making a lot of money on this crossover here. So looking at money flow, ton of money still going into it, the volume is green. It’s a good time to own gold. And I’d say, on any of these dips, as gold comes back down to this upper KI Channel, any of those dips, that’s a good time to be buying gold. The fundamentals for gold are only getting better. The dollar’s showing some weakness, there’s more and more headlines out there talking about the dollar losing its status as the world reserve currency. So the fundamentals are there, absolutely. They’re not making too much more of this stuff these days.

All right, so this is of course from the Fear & Greed Index from CNN. I apologize for the graininess. I tried to make it as big as possible. This is a chart that I don’t show all that often, or don’t talk about all that often within the mix of what that page, the CNN page, shows. Really in the simplest terms, what this is showing is how many stocks are climbing versus how many are falling or losing value. And so of course, going into to March the height of the financial downturn, we saw this head lower, but now it’s heading higher and higher. And so every day we’re seeing more stocks climbing than we are falling. And that’s just a sign of a good strong bull market. And again, you can see we’re getting up here into that record level that we saw going into February.

So that’s going to be the key to watch whether we can climb over this 4,000 level here will be huge. That’s extremely bullish. It’s leveled off over the last month or so, which we’d expect. But as long as this doesn’t start to fall, again, it’s a very, very strong momentum indicator that’s showing that more stocks are climbing each day than are falling. So it’s very bullish right now. This is a similar kind of chart, but just a different take. You can say it’s more on the extreme. This is companies hitting 52-week highs versus lows. So this is adding them all together and taking the net. And we’re seeing many more stocks hitting 52-week highs. Many of them are in our portfolios right now than lows. Which is, you have a GDP measurement today down over 30%, a record unemployment, another million people filed for unemployment last week, million new people filing, but yet stocks keep climbing and more stocks are hitting highs, 52-week highs, than are hitting lows.

That’s pretty crazy. This is another bullish chart and just shows you the strength of the market right now and what all that stimulus money is truly doing and really record low interest rates, which we’ll get to in a second. Just how stimulative all that is for the stock market. So when I keep talking about, buy, buy, buy and buy like hell, this is why. Because a lot of money and a lot of momentum is in the stock market right now. All right. And this is just a variation on the theme, really. The S&P 500 versus its 125 day moving average. We looked at this last month and we talked about it bouncing off the moving average and climbing higher and it sure did. So as long as we don’t bounce below that, and we’re a long ways away from it.

So when we talk again at the end of August, I bet we’ll have come back down in here and closed some of this gap, that’s only natural. Surely, the 125 day moving average is going to climb up to this level a little bit more, but I highly doubt unless something catastrophic happens over the next month, that we’ll climb back below this. We’ll continue to test that. And again, that’s very bullish. The VIX. So the VIX jumped today on the news and especially when President Trump said we should push back or he tweeted that we should push back the election until we know it’s safe to vote and the election can’t be rigged. I’ll stay out of the politics on this, but that’s certainly something that creates volatility. But again, we’re below the 50 day moving average on the VIX and we have jumped up and hit it a couple of times and fallen right below it. Again, just another bullish indicator.

All right, so I mentioned the 10-year Treasury. Now we’re really getting into the macro side of things and the nitty gritty of what really moves the stock market and the economy. And we’re once again, I’m not sure if it’s officially record lows because I think we hit it in March here where we got into the two handle. But as far as longterm trends, you can just see that interest rates continue to fall. And really in the last month, they’ve started to fall at a pretty continuous clip where we’re back down here below 0.55%, which is just a poultry yield. And so if we start getting back into where we were in March, that’s where alarm bells are going to sound that something’s going wrong in the economy. But Jay Powell came out yesterday and said, interest rates are going to stay low for longer, that they’re going to do whatever it takes to keep the stock market and the economy moving higher.

Excuse me, he didn’t say the stock market. That’s me saying that. That’s implied when Jay Powell says he wants to keep the economy moving higher, but the stock market is certainly along for that ride. And my interpretation of what he said is that they’re going to do whatever it takes to keep the economy going and therefore the stock market moving higher. And that means interest rates are going to keep moving lower and with lower interest rates, this is what’s critical for the stock market. Folks, as I say, over and over and over again, money goes where money is treated best. And if you’re getting 0.54% on a 10-year from the Treasury, the so called guaranteed yield, you’re going to put a lot of money back in into the stock market.

And what we’re seeing and I’ve written about if you’re a Manward Letter subscriber, part of our Long Short idea that I’ve been writing so much about, stock buybacks. We’re starting to see them peak back into the news. Companies are starting to buy back their own shares. Apple is absolutely the leader of this. Where else can it invest and get such a good return than buying back its own shares. Shares of Apple have doubled over the last year, largely, not entirely, but largely because of share buybacks and that’s absolutely the best return on an investor’s money right now. So the company is going to keep doing that and handing investors that reward, as it should.

Money goes where money’s treated best, and it’s certainly not being treated very well right now with treasuries where the Fed is purposely crowding folks out, and pushing yields lower and prices higher, and forcing them to go somewhere else, and borrow money elsewhere, borrow money … Doing what Apple is doing, borrowing money, buying back their shares. We’re going to continue to see that over and over and over. That’s why interest rates, and that’s why this chart is so critical. The further that line goes down, the higher stocks should naturally climb.

All right, so let’s get into those Rollover Trades, getting a little bit more granular into some trades. So PayPal, if you’re an Alpha Money Flow subscriber, you’re getting a bit of a bonus here. These are some August contracts that we jumped into in mid July, part of our Rollover strategy within Codebreaker. They are not good buys right now. So normally I don’t give stock advice from one service to the other, protecting the folks that have paid for that. But these are not buys right now. This is just follow up on these Rollover Trades. So if you’re a Codebreaker subscriber and took advantage of these, congratulations on PayPal. The company came out this morning, sales were up 25%. It was the best quarter ever since PayPal has been a standalone company, since they were spun out. I think it was five years ago. The numbers were just fantastic.

And what was really interesting is, the company now has guidance that is better and stronger than what they were putting out pre-COVID. And the CEO said numerous times in the earnings call last night that they think this is just a transformative event for the economy, money transfer, electronic money transfer, and overall online retail sales, and PayPal’s role in that. Venmo and PayPal, same company, are now teamed up with CVS, their first big retail customer. So we’re starting to see that trend really take off. And boy, can you see it in the chart here. We’re now, today, hitting this upper KI Channel again, and you can see just the ultimate in bullish charts, where we’re not bouncing against that mid channel line, we’re bouncing around this upper KI line. So just a super bullish chart. We came back below it, got into bouncing across the mid channel line. And now I’m sure this trend here, hopefully you can see my cursor, where we’re going to start bouncing along that upper KI line again and again.

And for Alpha Money Flow subscribers, just look how bullish the Liberty Indicator is here. It’s been solid green, except for a few dips, even through March. Shares dipped, but we never got that big rush of money flow out of it, which was a good indicator that things would eventually go bullish again. And again, volume, look at this volume spike, push share price up, great indicator of a longterm bullish trend. So we took gains of about 120% or so on half of our options today on PayPal, I think they’re going to go bigger. My goal in this one is 300%. And if you have studied what I’ve said on this rollover, or trade, our average gain over the long term is about 180% or so, just over that. So I think this is going to be one that helps really push that average higher. I think again, three, 400% gains on those options between now and expiration in mid August, August 21st, I believe. Those gains are going to be very strong. So continue to hold that second half, and congratulations on doubling your money on the first half of those option trades.

Fastenal is another good one. So it’s just slightly less bullish, you could say, then that PayPal chart. It’s a very similar chart, but again, we’re bouncing in between the mid channel line here and the upper KI. Hit it pretty good here and bounced off, but now we’re back up into the bullish territory. Again, if we can just switch up and get above that, and then start using this line, not as resistance, but as support, we’ll be in really good shape. But again, I think we closed yesterday on our options up about 95% or so. They’re down a tad bit today, as I’m recording this. But again, I think one bad day, or one down day, certainly we’ve had those before, certainly aren’t going to make this trade.
I think as more stimulus talks come out, Fastenal’s a good infrastructure play. I think this company is going to continue to climb. And a little bit of foreshadowing, I anticipate we’ll hit a hundred percent gains. I think we’ll take half of our profits when we hit that. But again, wait until I send that alert out to do that, because who knows, I might see something that makes me want to keep holding on to those contracts. But I think we’ll be hitting that official triple digit gain mark here, soon.

Unfortunately, that has not been the case with Fuel Cell. This one is, when I made the recommendation, I said, “This is the epitome of the Rollover Trade”, just cause there’s huge, huge, huge volume on the options relative to the size of the company, which means we’re going to see some volatility. And volatility we have seen, for sure. I’ve been tempted to cut our losses and run on the underlying side, the equity side. Not thinking that on the option side at all. But then looking at this chart, we’re going to bounce off this lower KI Channel. We saw some strength, interestingly, at the open today. And look at this, in the Liberty Indicator we see across over here, I think we’re going to see a bounce. Whether it’s a big enough bounce and it comes quick enough to make us ultimately profitable on this trade, I’m not sure. But everything says to hold on, and take advantage of the bounce from here on out.

So this one is definitely our highest risk play of the three that are open right now in the rollovers, but I think it’s worth holding and just seeing where we go really, over the next three weeks. You can see in this chart three weeks to make a big difference, and so if we would have sold here in March, in three weeks from there, we’re back into this territory, ideally up into this territory. So I think we could bounce, and certainly get back to that mid channel line, if not that upper KI, by the time those options expire in mid to late August, August 21st. So keep holding, we’ll see where it goes. The question is whether they can move fast enough and give us enough, to use option jargon, implied volatility to make us profitable between now and expiration. I’m hopeful. But I think we can at least make some money back on the trade.

All right. So to wrap it up, I’m rambling here about a whole bunch of stuff, what to watch between now and when I hold another call like this in a month. What’s the main thing that I’m looking at? Stimulus. Stimulus is absolutely number one. I’ve said it so many times over the past few years, this is a stock market that is addicted to stimulus. Even after 2008, where the economic fallout now looks paltry compared to what we’re dealing with now. But so does the stimulus that we came out of that. But we had a Ben Bernanke, Janet Yellen, now Jay Powell in there. None of them could raise interest rates without the stock market throwing a fit.

We’re back to that timestamp. I don’t see interest rates rising anytime soon. I think we’ve seen the death of interest rates. I’ve written about that many times. Now we’re getting into a fiscal stimulus where a trillion dollars no longer seems good enough. Trump, again, was out this morning saying… Or last night. Excuse me. That $1,200, these next checks, the stimulus checks may be bigger than that. It’s being debated in Congress. The $600 a week in unemployment kind of a bonus, it might be $600, might be $200.

I doubt it’s going away. I think it’s going to be closer to that $600 mark. The right side of the political aisle right now doesn’t have a whole lot of chips in it’s favor as far as economic data to pull back on fiscal stimulus. I think we’re going to end up seeing something above that trillion dollar level. Maybe not as high as the $3 trillion that the Democrats are proposing. But I think it’s going to be higher than what the Republicans have proposed and really want to spend.

I think we’re going to have to keep spending to keep the economy from sinking. The more and more it spends, the higher and higher stocks are going to go. Stocks and the economy are largely disconnected right now. I think we just have to take advantage of that. I think I said last month, we’re going to be long until we’re wrong. We got to take advantage of that rising stock market, and not sit on the sidelines, and not be fearful of it like so many folks were during the bull run in the last 12 years.

Every month folks were saying, “This has got to be the top. This has got to be over.” Look. Here we are. It’s a pandemic and the NASDAQ is setting record highs, and the GDPs falling backwards, and stocks are back up to… Many, many stocks are above where they were prior to all this.

Stimulus is the name of the game. That’s the number one thing I’m watching. In a fairly close second it’s interest rates. Not watching that as closely because largely know where they’re headed. They’re headed lower. They’re largely flat lined. But over the last month or so they’ve dipped pretty significantly. That’s something to watch. I’m going to watch interest rates.

But there’s no way… I’d love to eat my words. But there’s no way they’re going to be above 1%. The 10 year is not going to be above 1% when we talk at the end of August. They’re to be closer to that 0.5 level. I hope they’re not below 0.4 or, dare I say it, in the 0.3 range. But if they are, stocks are certainly going to be higher, and gold is certainly going to be higher.

Technicals. I’m always looking at technicals, the KI Channels, money flow. I’m watching that very heavy. But I’ve put a larger emphasis lately on just plain old volume. There’s a lot of indications with stimulus. I mentioned the volume in March and April with that stimulus money flowing in. But individual stocks volume is becoming a big thing. It’s been a big indicator.

I wrote about it a little bit with the Kodak announcement. I’m going to write about a lot more related to Kodak. It’s something I really want to dive into. But the amount of volume that we saw on Monday before the announcement, this is something, I used to run a service way back in the day called Volume Spike Alert. I looked through the markets, and looked for just kind of random to the naked eye volume spikes, and do some research, do some due diligence, run some technical indicators on there, and see what that volume is about.

Almost always it was a precursor to a big announcement. But what I’m rambling about here is on Monday we saw a big volume spike in Kodak prior to their big announcement and a huge volume spike that we saw on Tuesday and Wednesday, and again today. Volume is becoming more and more of an individual stock analysis tool and something I’m watching a lot.
But if you add it all up, it’s the stimulus. I’m just watching those technicals and watching the stimulus money flow in to various stocks and really following the news flow, just to connect all the dots. It’s a fascinating time. It’s a very profitable time to be an investor. It’s a cliche to say, “Buy when there’s blood in the streets.” But there’s a lot of fear in the markets right now.

But yet it’s turning into a lot of greed as folks are taking advantage of that free money that’s out there. It’s got to go somewhere and so much of it is going into stocks. That’s what we’re watching. It affects our Rollover Trades, it affects money flow, and the Liberty Indicator. We can see money bouncing around in those KI Channels.

Keep buying. Stay tuned to alerts. Keep your questions and comments coming through the mailbag. I appreciate you tuning in and listening to me ramble about the markets for the last 40 minutes. But enjoy those fresh profits. Both services. We’ve got some really strong profits. I didn’t mentioned the gold profits. But we’re up over I think over 400%, almost 500% on our gold profits in the last a month and a half. Congratulations on those.

Keep buying. Keep your eye on the alerts. I appreciate you tuning in. I’ll talk to you next month.