Relative strength, sector rotation & inflation

Transcript

Andrew Swanscott 0:01: Welcome to the trading panel, the show where we assemble all different types of traders and we talk about anything trading and the markets. And today, as you can see on the screen, we've got some fantastic guests joining us. But first, welcome, Jason. Hey,

Jason Kurz 0:13: Andrew. Good to good to see you. Glad you got to get a couple extra hours of sleep or or an hour now. Now with the time change, it'd be an hour. So a little bit more That's good. Good to see you. And I was gonna I thought you were gonna say welcome to the Brady Bunch today, because it kind of looked like the Brady Bunch thing. But no, I'm excited about this one.

Ian's a good buddy of mine, Mish came on, like I'm super excited to have a great conversation. I thought these two would be perfect to have on the panel today, considering these are both very good commodity analysts that we could talk to about trading commodities, futures, you name it, lots of stories, this could go many, many different directions. We also got Pavel.

He has a great fun talking about basically systematic trading and algorithmic trading in the crypto space. So this will be a fun conversation. I'm excited.

Mish Schneider 1:07: Well, I'm excited to be here. Thank you, Jason.

Jason Kurz 1:10: Of course. Thanks for coming on, Mish. Thank you so much.

Andrew Swanscott 1:14: So where do you wanna start, Jason? I think maybe Oh, Mish just dropped off, but Ian's still here. Yep. I'd

Jason Kurz 1:22: love to hear some of Ian's background. Yeah, Ian. Let's hear what you do at All Star Charts.

Ian Culley 1:29: So I focus on the fixed income commodity and currency markets. So, I high level into market analysis that, feeds into our our our top down approach and helps our clients, guide the equity markets. You know, I get into some of the futures and some of those commodity trades as well. I look at the markets from a technical perspective, study price. Mhmm. Went through the CMT program, got my CMT designation recently. So, yeah, that my background.

Excuse me. That's how that's how I look at the markets.

Jason Kurz 2:09: Nice. And, Mish, for people that don't know, what's your background? How'd you get into these crazy markets?

Mish Schneider 2:18: Well, okay. Very briefly, I wound up becoming a member of the commodities exchanges in New York when I was young and it was an amazing opportunity. It happened, I believe because of fate and it was at a time clearly when commodities were going crazy and also there weren't very many women on the floor. So I kind of got in on this glass ceiling thing, which is interesting, but yeah. So I spent fourteen years on the floor.

So I really learned pretty much everything I'm still doing really has its basis from being a commodities trader on the floor for all those years because the basic lessons really don't change very much from pure price momentum, stay out of the dead money, follow the things that have the liquidity, notice this rotation, understand risk, and also know when something is coming to an end, make sure you take profits and have stops.

And those are the, the fundamentals that haven't changed at all in terms of trading. But of course, we've all gotten a little bit fancier since then because we all wanna sound like we we have some kinda leg up on somebody else, but, really, that's that's all it is. That's all it is.

Jason Kurz 3:41: You've gotta keep it simple. I mean, really, it's it's something that you see in markets so much. Some people I mean, today, especially, let's talk about the CPI and everybody has this idea of it and this idea of it. And the market's gonna go up if this happens, the market's gonna go down if this happens. Really, you don't have any idea what The market bottomed on a very terrible CPI print back in October 2022.

So why can't the market go up during that? So now you're just gonna have hear narratives over and over again. It's like, something that you and I have been talking about for a long time is the commodities have already started to move.

Mish Schneider 4:16: As the commodities are already starting to move, of course, it's gonna show up in the CPI report. Like, it's not hard to see. And what makes this even more nuanced is that it's not Even though I was the first One of the first ones to show that overlay chart of the seventies to now and how CPI reached its trough in '77. And then same thing with 2022, and now here we are in 2024, starting to come up several months in a row above 3%.

This is hardly the runaway inflation scenario that we had in 1979. So we can't even really compare. We can say different scenarios, but people are so confused and trying to find some kind of a conversation that makes sense when everything has changed. Everything has changed. I mean, gold has been going up not because of inflation, but that doesn't mean it won't start going up if inflation really starts to pick up

but it's not going to pick up based on what we saw in the CPI because durable good, the core goods actually experienced deflation. It was the shelter costs that really went up the most. What's going on here now with gold and silver and possibly miners and copper is really, I think, more based on a chaotic situation that people can't really grasp. The market's up near all time highs.

Even this correction today was basically just testing the bottom of the support of those long channel that we've had for possibly the last couple of months.

You know, what we've got here is fear of war, fear of debt, fear of government spending, fear of, all of this, all of these things escalating to a point where the Fed has to cut regardless of what they say because the interest payments on the debt are so skyrocketed high that they're gonna make a choice. Let inflation go higher because we don't really believe it's it's really there.

It's more war based or reduce our interest payments by 33% by lowering just as much as a 150 basis points. We'll do that. And that's why this conversation is completely different than 1979. But nonetheless, it is interesting to see the similarities in terms of the CPI.

Jason Kurz 6:36: Yeah. I mean, I think it's interesting, Thinking about it in such a historical aspect and seeing where we're gonna end up, and not to mention what you just said, the Fed has to cut. I think the my favorite writer that I first learned about many years ago, which was Richard Russell. Actually, that's what you and I first started bonding over. And he had that one that one what was his phrase? He would always say inflate or die.

The central banks always have a choice. It's inflate or die. And really, it's like at that point t shirt like that. I'm gonna get it. Yeah. Yeah. You know, inflate or die. It should really be the TV. But it's it's the truth. It's their choice right now. You know? Like, how what are they gonna do if they continue to raise rates with the amount of debt? All of these things are incredibly important here.

I think so many people are thinking, this has to end, the Fed really cares about inflation coming down. It's like, well, they've always inflated, It's just never been to the level that's been this extreme. They've always inflated in a compounding way. Hey, 2% a year, it's safe, it's great. We'll just do that forever till everybody dies basically.

Now it's just, Hey, we've just jumped it up to these crazy levels and I guess we're just gonna be here at these levels. I think you and I have talked about it before too, where I think you've mentioned that you thought they might raise that 2% target at some point as well. Well, don't seem to be really liking that suggestion at this point, but that doesn't mean that it won't happen. And let's not forget that

Mish Schneider 8:06: Powell's term ends at some point. I forget exactly when it ends, but And of course, if there's a Trump presidency, which I don't think there will be, but if there was going to be one, he would get rid of Powell in a second. So that's beside the point. Yeah, it really is it really it's just fascinating to me. This whole thing is so fascinating. I'm finding this to be, oh,

and the other difference by the way from the late seventies to now is that we have put so much stress on raw materials because of our advanced technology, supercomputers, AI, they use so much electricity, they use water and electricity comes from raw materials which is one of the reasons why people are now worried about copper scarcity. So all of this has changed. And so, yeah, like they say, may you live in interesting times?

Also, is this is the year of the dragon. And I know Jason, and this is the last thing I'll say, and then I'd like to hear from the others. The year of the dragon, and the reason why I mentioned this because I've been studying Chinese astrology for years. And I studied with this guy Raymond Lo who is I mean, he's been all over the media at at times because he's probably one of the most world renowned Feng Shui astrologists.

He studies all this stuff and comes up with all these predictions every year. And he's not always a 100%, but he sometimes is very scarily right. And one of the he said, this is still, we're still in a year of water domination. And he said, and that really started a few years ago, actually after 2017. In 2018, we entered water and we don't come back to fire until the end of 2025. So he's always felt that certain things would happen as a result.

But what he did say about the dragon is that it is the and it is at the gates of heaven Yeah. But also at the gates of hell. And if you think about a dragon, that makes a lot of sense.

Jason Kurz 10:11: I like, that stuff is so interesting. It's really fascinating because that stuff is really, like when it comes to markets, there's this weird thing, and I think all of our brains kinda hit on certain things. And once again, we're all, like, looking at the markets, making sure we're making the right decisions based on those. At the same time, it's like you can put together a little bit by looking at that.

Also, you're probably getting to the point of China. I think China was also in there too. It's going to be an interesting year with all the geopolitics that are coming up as well. Ian, as well as now we're looking at all this stuff right now. We're looking at the commodity space, which has just been wild. What are you seeing in the commodity space? What are you writing about right now? What's something that's really interesting you lately?

Not that everything isn't interesting, but pick a few things if you can.

Ian Culley 11:04: Gold obviously stands out. And, you I don't I'm not really digging too deep into why gold is breaking out, what's sustaining these these new all time highs. I think it's really interesting to see how it performed today with the strength in the dollar. You know, when I see when I see gold breaking out to an all time highs, I think back to 2019 when when gold create excuse me, completed that, what, six plus year basing formation.

It ended up ripping to its 2020 peak. And that kicked off the commodity bull run that we experienced over the past three to four years. So witnessing gold do the same thing, and silver start to rip too. Seeing strength in the precious metal stocks. And, I think we're just we're we're kicking off the next leg higher for just commodities in general. Digging a little deeper, maybe cattle are starting to top.

Maybe we'll start to see, these grains carve out some sort of tradable low. I mean, we'll see. But, yeah, commodities are really exciting right now. Rates continue the uptrend for interest rates remains higher.

And that's one thing I've I've definitely been pointing out for months now is that, until we see some sort of reversal in that secular primary trend, it's it's it's hard to latch on or or or or to get behind any kind of falling rate disinflation scenario.

Jason Kurz 12:58: No. I get it. And I think everybody's kinda stuck on this, like, rates have to come down, like, immediately scenario. You know? Like, this is always gonna happen. And once again, it's you you gotta give use your flowers here. You've been really on that the whole time. The trend has been down. You've been on it the whole time. You've never changed your stance as long as the trend is down.

That's what a good price action trader does or a good trader in general does. You don't go against the trend. The trend is obviously, bond prices continue lower, yields continue higher, and see where that ends up, because we can't really, we're not predicting the market. It's nearly impossible to predict where the market's gonna be at in a year, but you can take signals, you can put the probabilities on your side.

Most of the time, putting the trend on your side raises your probabilities. You said, if we go across some of these products like Cocoa, just to start off with the craziest one, it's up 173 percent year to date, which is like Somebody asked me about that trade the other day and they were like, Man, that's such a cool trade.

I'm like, Yeah, I don't think I've ever had a trade like that in my life, actually, that's been that high in this short of amount of time. It's very odd to see something move to that degree. Now, once again, it's a thinner market in the commodities market, but seeing that continue to these levels, that's insane. I don't think I've ever seen it before.

And that's gonna be great textbook study right there, because the other point I've been trying to write about lately is when these parabolic moves in commodities

Mish Schneider 14:33: end, it's not a buy the dip, it's over. You head for the exits and move on. And that will be so classic and I can't wait for that to happen because then I think we'll have contextual something to really show from beginning to end a full commodity story, cocoa. The interesting thing is when I was down on the floor, my first membership was coffee, sugar, cocoa exchange.

Cocoa was like this teeny little pit with like couple of older guys that would sit in there waiting for an order. It was where you would go if you really basically wanted to take a nap. So to see it now as the premier mover in commodities has been abusing at best.

Jason Kurz 15:19: I mean, I don't think it's ever been that way. I don't think there's ever been a time where cocoa's been the leader and just continue to move and you're like, Oh my gosh, it's the outperformer. I don't think that's happened. Crude is right behind it at 20%. Orange juice is right behind that at 20% year to date. So you're really looking at a lot of these commodities are really starting to take off. Coffee's been very interesting.

That's one that's kind of catching up. But really it's like

Mish Schneider 15:49: all And I had uranium too now. Uranium. Yeah. Because uranium, of course, is gonna relate to if what you saw all over Twitter today is turns out to be true that Iran is going to have a missile strike to Israel. We'll we'll see if that happens, I hope it doesn't, but it's it's certainly probable.

Jason Kurz 16:07: Yeah.

Mish Schneider 16:09: I just want to say one other thing about prediction, right? I think it is really hard to predict equities because there's so many factors between changes of CEOs or the board or a bad sales quarter or corporate buybacks or interest rate sensitive or whatever. There's so many variables to really make it difficult to say, oh yeah, I know this is gonna be here. Commodities are much easier to predict. They really are. Did you agree, Ian?

Ian Culley 16:45: I mean, they maybe so. Maybe that's why I was always just attracted to commodities. It just made sense to me. Exactly. Like, companies are just like, what what do you do? You know? I so may may maybe that yeah. Maybe that's what it was. Well, yeah. And but think about it. I mean, it was pretty obvious that oil,

Mish Schneider 17:05: once it cleared $80 a barrel, I'm looking at West Texas, that was going to be perceived as, obviously Middle East related and supply chain related, which would then get gold going. That was also pretty obvious. You know, in terms of cocoa, once you knew there was drought in West Africa, you knew that was gonna be obvious, the same thing that's going on with coffee.

it's like it and then and then there's sort of a domino effect with certain commodities impacting other commodities. So you knew eventually silver would have to go up for a man's gold. The miners, which actually go out mine for the stuff, if, hey, central banks are accumulating so much, duh, makes sense that gold miners will go up. I like that. And I've waited, Ian.

I've waited forty years to see this type of action and predictability and fun to just sit back and basically make money easily in commodities. But as I said before, you know they'll break your heart one day, and you gotta get out and not get attached.

Ian Culley 18:09: How how do you how do you manage a position in Cocoa at this point? You know, I because I got buddies that are texting me and they're showing me, these these sixty minute charts. I'm like, guys, if if you're not already in, like, I don't even I don't even know how you would get in at this point. Okay. So if I were on the floor trading something like that had just gone parabolic,

Mish Schneider 18:34: I would certainly not be thinking necessarily that I would be buying the dips. I'd probably, at this point, thinking that we may be coming to the end of it. I would be looking for decline in volume, decline in open interest, and I would be more scalping it to try to catch some of those swings because with so many people in that market and many who don't probably have ever traded a future before in their life

but just joined the party, that there are gonna be great rallies to sell and great dips to buy. And as soon as the dips get shallower and this and there's and the rallies and the sell off from the rallies get heavier, then you know the move is over, and that's how you have to do. You have to think like a day trader. I would never put anybody in a position at this point in Coco. Yep.

That's what I would tell your friend is learn how to be a day trader and almost a scalper and really watch those few things I was talking about. I did point and figure charts. They were awesome.

Ian Culley 19:31: That's that's cool. Yeah.

Jason Kurz 19:34: Just running a trailing stop and an exit signal. That's the best I can do. I have no idea at this point. It's one of those things that I've been in a few trades over the years that have actually been like, okay. I'm actually kinda scared. This is one of them. I don't like it. I don't like where I'm at. I don't like the position size. I don't like like, the volatility of it has gotten insane. So I don't ball target my position.

So it's just it's kind of ridiculous right now, and I'm I'll be happy when it's over, because it's running my whole portfolio at the moment. Oh, right. Which has been cool. Yeah. It's it's cool at now. Right now it's moving up, so that's cool, but we all know it's not gonna go up forever. So then it's running my portfolio the other way.

So my stop has gotten a little bit tighter than it normally would be, which I'm kind of embarrassed to say that because that's not what I really do, but my stop's a little bit tighter. I'm sitting there watching it and kind of going, I'm gonna just look at it as least as least as I possibly can, have my trailing stop, keep monitoring my exit signal, and that's all I can do. But like your friend said, like Mish said, I wouldn't touch it right now.

I wouldn't add to it. But once again, I could have said the same thing months ago. I wouldn't have bought it here. I wouldn't have bought it there. I mean, that's why I run the systems I do. I don't think I have much of a turning point predictability for myself at all. Mish, on the other hand, has a great she's very she can do that. Like she said earlier about predictions, like, she can do that more than anybody I've ever met. I cannot do that.

So I don't pick turning points.

Mish Schneider 21:08: Just tell your friend to keep both get a graph old graph paper. I wonder if your generation even knows what that is. And and do two by two, two up, two down in terms of bips in cocoa and start to look at patterns. Even if he never trades it, just to even study short term patterns in a wild commodity market because you're not that it only happens in commodities. So short short term patterns on point figure charts. I love point and figure charts.

I, if I were going to do that sort of thing, that's what I would do. I would I would I would go back to the graph paper and watch it and, 2¢ up, 2¢ down, 2¢ up, 2¢ down, x's and o's until you start to see these patterns. So guess what I just did before I came on the show, Pavel? I bought Dogecoin.

Pavel Kýček 21:56: Yeah. Really nice. I don't have it in the portfolio probably. Let let me check it. We have, like, 25 open positions right now, but Dogecoin is not there. But I just wanted to react a little bit to the question how to trade maybe Kokua in this environment. Statistically said, the best approach is trading short term breakouts above like, trending days.

So if there is some strong trending day, one to two days breakout above this high is statistically very, very solid. And on new all time highs, it is especially especially strong entry point, statistically said. So these are quite good markets. I like entering in this kind of environment because you can get quite a lot of money from these movements short term.

Of course, it is not the best entry for long term long term to middle term trade, but one to two days straight, it's just perfect environment. And the more volatile, the better, I would say.

Jason Kurz 23:08: So, Pavel, when you're you're looking at a parabolic move, like, you could do that in just about everything. You're talking stocks, crypto Yeah. Commodities. That's interesting. Hope somebody goes home and tries to build that model because I'm I'm definitely gonna look at how that works. That's cool. It's a good idea.

Pavel Kýček 23:24: Yeah. Or or see the momentum sometimes. Momentum like short term momentum trades or on the other side, short term miner version trades in these corrections. The the these these moves have between 55 to 70% win rates. So this is especially especially interesting for trading. Again, one to two days one to two days trades. No no long term positioning here.

Ian Culley 23:55: Yes. And

Andrew Swanscott 23:58: how do you manage the moves? How do you manage those trades and moves like that, Pavel?

Pavel Kýček 24:05: Basically, by time stops. So I'm entering with some logic and I expect to get out in one to two days or so these are the type of exits that are the best in terms of profitable to some drawdown ratio really to get in and get out quickly. So this is how I'm thinking about it and also what the statistics is showing long term.

Ian Culley 24:40: So if you have a time stop, are you just holding it to the close? Whether it's one or a few days out? Yeah. Exactly.

Pavel Kýček 24:45: Exactly. Nice. It is always the best if you want to be in the market more than one day. And in this environment, one day could be enough, one to two days. Then I have some safety trailing exit. Like, if there is really big, big dip against my position, I'm just getting out of it. Or automatically the position is basically switched off. Nice. But really, these kind of movements, people are often scared of it,

but that's why this is the best one of the best time to get in short term but to get in because usually these trends and I love the quote from Larry Williams that these overextended moves tend to be overextended even more and statistically it's just true.

Jason Kurz 25:40: I've always loved Larry's work. He just has a real good way of just dissecting the markets. And speaking of another person who has a good way of dissecting the markets, Mish. So I think something that would be fun to chat about, as I was talking the other day, somebody brought up to me something about the reflation trade and saying, you can't say inflation's coming back when financials look this good and so on.

When you're looking at this inflationary type of environment, and you're able to dissect things just as you did earlier, and Ian sees me do that a lot, and I got that from Mish completely. You're dissecting something where you're going, okay, this is oil, this is what's going to happen with this sector because of this and so on. What are you seeing here today?

Do you think the market's under enough pressure that inflation's actually putting pressure on the market at this point, where that's why the market might be coming down? Or do you think market has more room to run? What are you looking at in all the inter market analysis that you look at?

Mish Schneider 26:42: Well, first of all, just like the commodities markets are nuanced and inflation is nuanced, so are the actual market sectors right now. So semiconductors, even though it's sold off, is still holding up better than most of the other sectors right now, which of course makes sense. Because if there's any area that continues to prove itself out, it's the large cap stocks that are related to tech and semiconductors.

You look at something like retail though, my granny retail that I always talk about, that actually collapsed pretty good today and went under its most recent trading range that goes back about eight weeks and broke down pretty heavy along with the small caps. So essentially what you really have to say is what is this telling you?

And what's this telling you is that even though the market logically knows hire for longer to Ian's point, you have to really think about this as what does that mean? For the consumer, it's exhausting. They're exhausted now. And, obviously, even though we saw core goods go down, there's still a lot of things going up, including things that everybody needs, which is auto insurance.

I think that rose something like by twenty three percent, which is huge. So, and then now let's look at companies and different sectors. What's going to struggle for higher, with higher for longer and slightly inflated costs, not all over the place, but in many places.

That's going to be companies that do not have good growth potential, have had terrible balance sheets, have lived off of low interest rates long enough to be able to stay afloat, borrow against their losses and expenses at practically zero for so many years. And so, that's where you start to, almost like the Red Sea, you have to part it and see what's on one side and what's on the other.

And this too is going to be challenging for anybody who's invested in this market over the last ten years who knows nothing but by the dip and everything always works out and everything goes up in tandem. That is not true. So I think it does behoove us right now as people who talk to other people and try to guide them to really make sure that we ourselves understand the implications and not necessarily say, oh, yes.

Spies going to new highs based on the fact that the Fed's going to cut a couple of more times or not going to cut a couple of more times or the stock market's going down to 4,800 because they're not going to cut. I think that is just so oversimplified and really doesn't explain the dynamics of today's economy because we spent forty years in basically zerp, and that's done. You know, like Ian said, that's over.

That's not at least not in my lifetime, I don't expect it to come back. You guys are much younger, so you might see it again. But I don't I don't look at it that way. So that's why I start looking at, the rotation. People throw the word around a lot, but they don't really understand what that means in that. That means real trading decisions. So, we mentioned semiconductors. Right now, obviously, they've come down.

If the market was to hold here, probably that would be the sector to go up before anything else, but that doesn't mean that we're gonna go make new highs. So what other sectors could be interesting here? That's how I look at it. That's why I've come up with solar energy.

Because whether EVs have lost their popularity or not over the last year, you look at a company like Microsoft that is using so much water to power their supercomputers knowing that they're actually draining resources that are valuable. They're looking at wind and solar energy to be able to provide energy source for them for the for that company. Multiply them by every other company that's huge.

So you say, well, solar energy has been so beat up because it's just ran out of favor for many reasons while oil has continued to climb. That to me tells me that keep your eyes on solar energy. First, solar already has been starting to rocket up. And and that's kinda like the granddaddy. That's like the NVIDIA of semiconductors for solar of solar energy. But watch tan. That's the ETF. Watch PBR, I think, is another one that is related.

I don't know if it's PR wait. Hold on. I'll tell you one second. I get my p's confused here. I'll look it up. But one there's another ETF that has to do with solar. I forget which one it is now, something with a p. So yeah. I mean, that's how I look at it. If you really wanna dissect this now, just be a logical human being and realize that interest rates have to have an impact and things are not the way they were.

Jason Kurz 31:36: No. I like that because I think it's it's incredibly important for many reasons. Whether if you're a price action trader, you really have to understand where relative strength is heading to understand where you wanna be positioned next. I know you guys have a model and an indicator that you guys built to do that too. So that also helps you to figure out what sector is moving next. Where's money flowing into?

Like, this month, we've seen it flow heavily into energy. Energy has been the place to be lately. It's been the place to be for a while now. So now we start to see that start to move, and then we start to see money flowing out of the tech space. And what does that mean? And then the commodities are ticking up. So I love the way you dissect that because there's people watching and they can learn how you kind of look at the markets like that.

Because to me, that was the first thing I ever noticed about you that was really like, Oh, wow, well, that's how I wanna look at the markets. I wanna be able to put this lens on and basically understand where money could be flowing into. And basically, once you start to be able to do that, you can start to figure out what areas you wanna be invested in.

And like you said too, interesting thing, so many people have learned so long by the diff has just worked. And it just doesn't work forever, it just never has. However, yeah, sure, you can make a lot of money in it, but as traders, we have to always be positioning for what's best, what's going to be the outperformer. And so I guess the next answer is like you like solar energy, but what else are you liking in the market at the moment?

Well, I'm looking at emerging markets, particularly those that aren't really impacted by inflation

Mish Schneider 33:15: or won't necessarily suffer if the war gets escalated in The Middle East. And that would really bring us to Asian countries. I actually, I was on CNBC Singapore last night and the gentleman that was on before me was like the guy who runs the banks in Thailand. And it was so interesting because he was talking about the fact that they've had very low inflation.

They're talking about cutting interest rates right now because they've been high for a very, very long time. And they feel that they can afford to do that without the risk of getting into rampant inflation. Switzerland just lowered their interest rate recently. So start to look for countries that have had the opposite impact from inflation.

They don't necessarily have to suffer from it and because they have room to actually become a little bit more accommodative in their central banks, they could actually start to outperform. People were rushing into emerging markets last year and they turned out obviously not to be so happy unless they were like in Mexico. There was a few countries that did very well. But that's the way I'm looking at it.

Or if we really think there's going to be stress on our raw materials, what are the countries that produce these raw materials and those country ETFs could be interesting? You know, like maybe a Latin America where people argue me and say, well, guy, they're really running those countries terribly there and you should never get invested. Yeah, but they also have a tremendous amount of raw materials and who cares about how a government is get led.

we can make an argument that people think we have no leadership here, but it hasn't certainly impacted our stock market. So, yeah, that's how that's another area I'm looking at. But right now, I'm just happy being longer in gold, silver miners. I, I talked about coffee. I'm looking again at uranium, although that's me and uranium don't always get along very well.

And and I'm looking at some companies that are in the small to mid caps that have strong earnings growth. We have a model like that, but one is oh, goodness gracious. What's the name of this company now? What's the name of that shipping company that we MNN or NMM? Yeah. You know, I'm I'm I'm at the time of the day where my memory for names starts to slip. I think it's MNN. It's it's Davios. Yeah. Wow. Wow. That just came into my head.

There you go. Right. Davios, like that stock, if you take a look at the chart, it's just gone straight sideways. Even today, it barely moved. And if there's any supply chain issues, that's a that's a shipping company that's done well. It has great earnings potential, earnings growth. You know, you gotta you gotta this is when people realize that, hey, you know what? Maybe this isn't so easy after all.

Either better learn something or go to cash and come back when things get easier again or lose all my money and then never come back. That happens too.

Jason Kurz 36:26: So, Ian, you cover the sectors too. Right? I do. Yeah. So I focus on materials,

Ian Culley 36:33: industrials, energy.

Jason Kurz 36:37: What sectors are you really looking at now then? Are you looking at any of these commodity sectors as having major outperformance going forward?

Ian Culley 36:46: You know, I like energy a lot. You know, I like materials, breaking out to new all time highs. Industrials, have have been leading the way. The most, tightly correlated with the broader market. I like just energy just broadly. Mish, I also like tan a lot. Oh, good. It's actually digging in relative to the S and P 500 right around the 2020 lows. So a logical area

Mish Schneider 37:21: to see some 40. Yeah. Yeah. Right. Yeah. To see some outperformance. So Mhmm. And by the way, we have an indicator called real motion indicator, which is a momentum indicator, and it's showing a bullish divergence. And that momentum is above the moving averages, even though for solar, excuse me, tan is sort of fluctuating around that fifty day moving average and really far from the 200.

It's above both the 50 and the 200 in momentum interestingly enough. Can you excuse me for one second? I have Yeah, go ahead. I'll be right Okay.

Jason Kurz 37:53: I did have a question for Pavel because we're looking at the market right now and looking at the crypto markets and seeing all these underlying small crypto names and some of them are moving, some aren't moving. I know you are trading a lot of these. How small can you get in your models and still trade something? Like how what's what's the smallest coin you trade?

Pavel Kýček 38:20: It's good question, but it really depends if you are just a retail trader that is trading very I'm talking about you personally for your fund. Well, we we in our company, because we are covering institutional clients and retail clients, we are trading like top first 40 to 60 most liquid coins on crypto futures universe. If I would be individual trader only, I would go a little bit farther.

But on the other side, if you make some tests or many tests, you can find out that these really small coins tend to not trend for long time. They really suffer from these pumps and dump schemes pretty heavily, so you have to change your models accordingly.

So you can really see some differences between those very really small coins and those bigger ones like Bitcoin, Ethereum, these, like, top 10 by liquidity, you can already see some kind of long term trendiness. But in most crypto coins, in more in crypto in general, yeah, they tend to tend to really move, like, I would say, on steroids, like on short term cycles, very volatile ones, much more short term compared to commodities,

but they don't have these long term trends like stocks, usually based on the data.

Jason Kurz 39:59: Yeah, no, it's interesting because I've been looking more into possibly adding some more. Only use the futures market at the moment, so I'm only using Ethereum, Bitcoin. I'm kind of dabbling with that idea a little bit. So thanks for that answer. I'm kind of thinking about it a lot more. Yeah. Well, you definitely should because especially for brand followers,

Pavel Kýček 40:20: I could show you dozens of models and

Jason Kurz 40:24: I But you're the only reason why I'm thinking about it because I have seen your work and always been like, you know what, I'm just gonna stick to the biggest ones and that's it. So that's how I'll make my money. And it's been great. However, adding more markets, it could be even more even better. So we'll see where that ends up. But thanks for thanks for the Yeah,

Pavel Kýček 40:46: because it's I like opening this size because it's it's about a major versus major market. Bitcoin is still very volatile compared to traditional markets, but compared to coins on four 30, forties position based on liquidity, it is much, much more mature, and you can see it on day to day volatility. Volatility of Bitcoin is four to 5%. The lower coins, easily nine to 10 daily. So this is this is what it is about.

And these trend following models are, like, make your test on commodities and make it times five to 10, and you can see the potential of crypto right now. So this is also the reason why we are running our company basically on crypto because, yeah, we can make the most money there. It is not that I'm in love with crypto, not at all, but it is the most volatile, most trending asset. So that's why I want to be here,

and I want to take the advantage because I can also see if you go to 02/1989 oh, sorry, 1819 compared to 2223, you can see that even this asset is starting getting a little bit more mature compared to four, five years ago.

So I expect for sure that the volatility and trendiness, and we were discussing it with Mish too, that it will be evolving, and it will it will be similar to, I don't know, the trend in commodities and stocks in tech bubbles and so on. So it will be more standardized over the long term, but right now, it's just the place to be in my opinion for traders for traders, not for investors.

I don't think it is an asset for long term investment except of maybe Bitcoin, maybe Ethereum or so. Depends on what you believe in. But for traders, it's just heaven.

Jason Kurz 42:53: Amen. Andrew,

Andrew Swanscott 42:55: you wanna go through oh, go ahead, Andrew. I was just gonna ask a question for Pavel because Mitch was talking earlier about, I guess, into market analysis and understanding the interactions between different markets. Do you see that same kind of concept in crypto with some of the, I guess, the larger coins or maybe they're built on some specific technology or have a story? Do you see that working in crypto as well?

Pavel Kýček 43:19: Yeah. Well, I'm not doing this inter or inter market analysis in crypto because I just don't have enough data, like five, six years of it's it's nothing, to make some, yeah, some baseline for real trading. But you can, of course, you can see that bit coin is usually starting the strongest trends. So if bit coin is trending, you can expect that few days later, there will be the smaller coins trending and this is one of them.

I was also studying some types of correlations to traditional markets, to Nasdaq 100, for example. So you can see there, but it's not statistically strong enough to use it in your trading models. What's interesting maybe what is interesting are statistical arbitrages because I used to be trading them in stocks six, seven years ago, and then it was only the game of time later on or these days.

It's not for retail traders, and it is definitely way how more skilled retail traders could be making money in crypto right now. Because there are really these inefficiencies are much, much, much bigger than anywhere else.

Andrew Swanscott 44:45: But I imagine to be able to leverage that you need this technology factors, And being able to even test that kind of is a bit more complicated, I guess, than traditional testing strategies.

Pavel Kýček 44:59: There is no tool for testing crypto, for example, portfolio crypto trading. There is no tool for making your survivorship bias tests and so on and so. So you have to you have to basically build everything. So is it this is for skilled programmers for sure. We have built it for one and a half years in three three people and one more team of another three people so yeah it takes some time but it's worth it.

Jason Kurz 45:33: Andrew do you want to hit some of the questions in the chat?

Andrew Swanscott 45:37: I was saving this one for when Mish got back because I think this one popped up when Mish was talking about the relative strength. So I'm just trying to find it in the chat. Here we go from Samberg. What does the panel think about RRGs, which I think are relative rotation graphs. I'm looking at a weekly RRG of the 11 S and P 500 secondtors with energy firmly in the improving quadrant and pointing towards the leading quadrant.

What do you think about RRGs?

Mish Schneider 46:10: Well, I merely think of Julius De Campanar, which I would imagine this person might be a student of who has a whole system using RRG. In fact, I think it's called RRG or something like that. Yeah. And I love Julius, by the way. I we've we have been together several times. Ah, okay. There you go. We've been together several times through stock charts, and he's working with stock charts now and he does great work.

And here's a great example of you find a system, you stick to that system, you become a specialist in that system. And with that level of consistency, obviously all systems go through cycles and at some point what worked great may not work great another time, but for now and for a while now that RRG system has worked well. Why? Because it's on the basis of following the momentum, the leaders that tend to lead will continue to lead.

That is an adage that has been around for many, many, many, many years. But I think even more so in the last year and a half, we've really seen that to be the case. So if he's telling you that we're gonna go into this final quadrant with energy based on all the parameters that you and I are looking at maybe more informally, I'd say he's probably right.

Ian Culley 47:34: Yeah. I mean, I love the RRG charts as well. Those relative rotation graphs. When when when those those, those tangents start to move into that final leading quadrant, that's that's just strong outperformance. And we've seen energy outperform. And I think if you dig a little deeper into the energy sector itself, world refiners have just been by far just outperforming the rest of the space.

I think in the coming three, six months, we start to see rotation out of those refiners down into maybe some E and P names into the services names, and they they take over the leadership roles. Something to look look look at.

Jason Kurz 48:25: Yeah. I love RRG. That's that's something well, it's funny because when I first started, there was a guy who built something kinda similar on a spreadsheet, and I stole it. And I tried to I tried to make it a little bit better. And then I was on stockcharts.com, and I was like, oh, there's this guy who has it completely figured out. So now I'm a big fan of it as well.

Sambo, I think you and I have talked before, if you've seen my page or my work, you see those charts all the time. Energy, it's funny because the way you talked about energy, literally, if you look at one of those charts, it looks like a rocket ship right now, like coming from the laggards all the way to the leaders, it's just a rocketing straight up. And it looks really good.

I think that's the thing, the energy sector, it's gave us a lot of signals pretty early this year and they've just continued. It's like, I think you kind of have to be very open to this energy trade, especially as it's breaking to all time highs, not all time highs, but fifty two week highs and it's continuing higher and higher. And also just looking at those charts, you can also see what regime we're in. I think that's really important too.

So being able to see, okay, like what is starting to lead the way? Where are we seeing relative strength? Well, we're seeing it in energy, we're seeing it in financials. That's telling me we're in a kind of a reflationary style environment. Doesn't mean I make all my trading decisions based on it, but it can help me to figure out where I wanna be positioned, what I wanna be seeking signals in, and how to manage those.

So I really do like those charts as well.

Pavel Kýček 50:00: If I can just quick mention, I don't know r r RRGs but to me, it seems similar to basically rotational momentum strategies that are built on relative strength. And those are, I would say, one of the most robust statistical models that one can trade. So and there are also many papers. So if someone likes statistics like me, for example, you can just Google papers on rotational strategies, and there are there are many.

And, really, they are going far to the past, you can see that they have really strong strong fundamental basis.

Jason Kurz 50:44: Yeah. I think the first person I think and all of us, most of us on this panel, the first person I saw doing some work on that was interesting was probably Meb Faber. Meb Faber did a lot of interesting work on that stuff. And the white papers are still out there. They're still really good to go through. Yes. They're pretty dated by this point, but you can build your models based on what he puts out there.

So if anybody is looking at this and listening to this and trying to build their own strategies to figure out what sector is having outperformance or not, that's cool. Even though there's a very simple strategy of kind of taking the top four sectors at any point as long as the S and P 500 is over the ten month moving average. And this outperforms the market drastically with a lot smoother drawdowns and so on. So I think it's super interesting.

I love that you're looking at that. I think Samuel and I talked once before, he's actually a younger guy. So, I'll talk he'll he'll talk to us in a few years. He'll probably be the richest one out of all of us. I'm always excited because he's always on here and he's very knowledgeable and he knows so much. I'm excited to see you on here, Sambo, and hopefully we'll talk again soon.

Andrew Swanscott 51:59: Right, so I think we've got a hard stop at the top of the hour, don't we, Jason? Were there any other comments or questions in the chat that kind of got your attention before we start wrapping this up?

Jason Kurz 52:11: I just like to the other thing that was said was if you can see where the money is going before it does you win by TWISAI. You know, that's that's honestly the name of the game and what we're talking about when it comes to momentum. And, like, that's what he he said that when you were talking, Mish, so I'm pretty sure that's part of your game as well.

Mish Schneider 52:37: Yeah. Yeah. And you wanna get in there before everybody else does. I mean, that's I mean, I've said this before, but now I have the classic example with gold because for two years I've been telling, I thought of short of sounding like Peter Schiff. I didn't wanna go that insane, but no offense to Peter. I mean, he's actually turning out to be pretty smart about the gold and he's been very convicted, but so was I.

And I've been buying gold since 1200. The $1,200 added to $1,500, know, kept adding in and out, in and out, in and out, then over $2,100 because I knew that was the major breakout. You know? And then when everybody else talking about gold or we used to say on the floor, when you get in a taxi and the taxi driver tells you, I think you should buy gold. It's usually getting me at the top.

that's, that's the herd mentality that when it gets too crowded, it means they're too late. And you're like, thank you very much.

Jason Kurz 53:37: Yes. A good point. Well, Andrew, you wanna end it there?

Andrew Swanscott 53:42: Yeah. That sounds like a good point there, Candace. Who wants to start with how Jason, how about you? How do people get in touch with you, learn more from you? Well, you guys can find me on just about everything at AAO

Mish Schneider 53:56: Research. That's for against all. Just look for the pink day glow. Yeah. Yeah.

Jason Kurz 54:01: Well, actually, what's funny, somebody made a joke about it the other day. They were like, why? You know, this guy has LEDs up there. And it's it's actually a sign. I can't really show you right now, but it's a sign that says better late than ugly on my wall that my fiance bought. So it gives us this nice glow. So but yeah. So it's AAO Research just about on everything. My sub stacks against all odds research, AAO Research as well.

And so you guys can follow me on there, see what I'm up to.

Andrew Swanscott 54:34: Excellent. How about Mish, you're next. Well,

Mish Schneider 54:38: marketminute is my Twitter handle. Very active there. I also am on media a lot. So I'm not always will put what media I'm going to be on, on Twitter or, excuse me, x. But we also I do a daily market. It's called Missions Market Minute. And that you can find at marketgage.com, which is our website. And there I list what appearances are coming up. I put the clips of what has happened plus my thoughts on the market.

And I do that almost every single day. So essentially you can, like Jason, you could pretty much find me anywhere. I'm kind of hard to miss these days.

Andrew Swanscott 55:16: Yeah. Excellent. And Ian, it's great having you on the show today.

Ian Culley 55:21: You so We can find you. Yeah, you can find me at Ian Culley on Twitter and allstarcharts.com. And I jump in and hang out with the guys on stockmarketmedia.com. Is it YouTube? Stockmarketmedia YouTube channel. But yeah, I'm just kicking around Twitter. I write four four columns at all at all star charts. One, gold related on Mondays, the gold rush, and then I cover currencies and fixed income and then commodities every week.

Mish Schneider 55:53: Am now following you, Ian. Oh, yep. As you can see, I'm already following you, Mitch. I did see that, but that wasn't that did not sway my decision, I swear.

Ian Culley 56:06: Is is Market Minute a new app? Is is that a new application? There there's there was a new app I Stockpik.

Mish Schneider 56:14: Stockpik.app. I'm doing Yeah. Stuff for Yeah. I just and I saw you. Yeah. So it was, like, last week. I picked that app up and I saw it. We could talk about that more. I'd love to talk to you some more, actually. Same. I would. I would love And, of course, thank you, Pavel and Andrew. And I know we haven't had the chance to talk. And, Jason, of course, you know how much I love you.

Pavel Kýček 56:35: Pavel, where can people find you? Yeah. Just follow me on Twitter or if if you want to know more about what we are doing for our institutional clients and retail ones, just check robuxi.com/explainer and you can you can learn a little bit more.

Andrew Swanscott 56:51: Excellent. Thank you. And then of course, bettersystemtrader.com and Twitter, YouTube everywhere. So thanks everyone for joining us today. We've got a couple of nice comments in the chat here. This one from Samba. Like, let's end on this one. Thank you for the feedback everyone incredibly helpful. So it was great to have everyone's opinions today and catch us next week Wednesday 4PM Eastern. Yep. 4PM Eastern. You know, we've changed the time.

So catch you then.

Jason Kurz 57:23: Alright. Have a great rest of the week. Bye, Mitch. Love you. See you later. Bye, everybody. See

Mish Schneider 57:29: you.