Some Good News on the Stock Market

0:00I once interviewed the CEO of a credit bureau and he confessed that his assistant has a better credit score than he does. Why? Because she's more organized. Yep, even the head of the credit bureau can use a little help in the credit score department. If you can too, then listen up because Chime has a card that can help you do just that. Chime turns everyday spending into real rewards and progress. Not like old school banks that charge you overdraft and monthly fees. Built for you, not the 1%. Imagine cash back and credit building with your own money finally on the same card. No annual fees, no interest, and no strings attached.

0:34And when you get qualifying direct deposits, you get 1.5 % cash back on eligible Chime card purchases. Chime is not just smarter banking. It is the most rewarding way to bank. Join the millions who are already banking fee-free today. It just takes a few minutes to sign up. Head to Chime.com slash MNN. That is Chime.com slash MNN. Chime is a financial technology company, not a bank. Banking services, a secured Chime Visa credit card, and MyPay line of credit provided by the Bancorp Bank N.A. or Stride Bank N.A. MyPay eligibility requirements apply, and credit limit ranges$20 to$500. Optional services and products may have fees or charges.

1:05See chime.com slash fees info. Advertised annual percentage yield with chime plus status only. Otherwise, 1.00 % APY applies. No min balance required. Chime card on time payment history may have a positive impact on your credit score. Results may vary. See chime.com for details and applicable terms. Your financial journey shouldn't be a solo mission. Am I right? I am. You need a banking partner who's genuinely invested in your success story. U.S. Bank gets it. They don't just show up for your account opening and then ghost you. If you're saving for that engagement ring, they're cheering you on.

1:31If you're buying your first home, they're right there with you. If you're planning for retirement, they're still your biggest supporter. It's about having a financial teammate who believes in your potential and backs it up with real tools and real people who actually care. See what genuine partnership looks like at usbank.com because together we're unstoppable. That's the power of us. Equal housing lender. Member FDIC. Trademark 2025 U.S. Bank. I recently went on a quick beach trip with my husband for a little couple's time, and it was perfect. We sat in the sun, swam in the ocean, and generally just tried to get to that place of deep relaxation where your shoulders actually drop a few inches.

2:11Do you know what else can give you that feeling? Co-hosting with Airbnb. Trust me on this one. Hosting your home on Airbnb while you're away from home is a great way to make some extra cash and make sure your home is working as hard as you do. But knowing where to start can feel overwhelming. That's where co-hosts come in. These are local experts who can help make hosting even easier by taking care of all the little details back home while you're off enjoying yourself. Co-hosts can handle everything from staging your space to communicating with guests to offering on-site support so nothing interferes with your time away from home.

2:47Whether you're living the digital nomad life or just taking a well-deserved reset, I love this for you. Looking to get started? Find a co-host at airbnb.com slash host. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

3:15After some really messy economic headlines for the last month, which has really felt more like a decade, we might actually have some good news ahead, which is awesome. So to break it down, I'm joined by Ryan Dietrich, the chief market strategist at Carson Group, whose voice you might recognize from his many, many, many features on CNBC. Today, Ryan shares some signs that he's seeing in the market that nearly always indicate there is good news ahead. yay, and whether this time could be different. Ryan Dietrich, welcome to Money Rehab. Thank you for having me. I'm excited to be here, and I hope we have something to talk about.

3:48It's been boring out there. I wish. I kind of want a little bit of boring in my life right now. That would be a welcome change. Yeah, I guess with markets, it's not giving it to us, but I hear you. And at least, you know, if we would have done this a few weeks ago, we'd have one thing to talk about. Now we've got maybe some positive things to talk about, so that's a nice change from that point of view. We do. We've been seeing some bullish signals lately. So let's start with an easy one. The S &P 500 was up one and a half percent three consecutive days. Okay, S &P, what does history tell us about that?

4:18Is that a good indication of momentum? Jim? Yeah, we think it is. Now, let me start like this. You know, I've done this for, oh, gee, over 25 years, I guess. And it feels like every time we start a new bullish phase, those first couple of days, everybody comes out of the woodwork and says, well, it's just a short covering rally. Well, it's just a bear market rally. It's going to roll over. And what we're going to talk about now and maybe even a couple more rare breath thrusts that we've seen. So just know the lows are likely in. I mean, that's our base case. And one of them, like you just said, is up three days in a row, one and a half percent.

4:50You can have one day, two days of big moves, but to see three is really, really rare. Went back to 1950. It's happened 10 other times, only 10. Six months later, S &P has hired nine out of those 10 times and a year later, higher, 10 out of 10 times. So never lower a year later after three straight days of one and a half percent gains. And the average returns like up over 20%. Now I'll just layer one more on here. During those three days on the NYSE, more than 70 % of all the stocks on the NYSE also were higher. So that's three straight days of a lot of market breadth. When I took a look at that, take a wild guess.

5:26That's only happened eight times. One year later, this might sound familiar, higher every single time with well over 20 % average return. So there's lots of stuff. Don't ever blindly invest in just one stat or one statistic. People see a lot of the stuff I share and say, well, you said this. Well, you have to layer these things on top of each other. But like we're going to talk about here, We really think that there's multiple buying thrusts that we've just recently seen that are not the hallmark of a bear market rally, not the hallmark of just a bear market. They're the hallmark, honestly, of the end of week phases and likely higher prices and better returns.

5:57And I get the headlines. We get the concern. But the market's going to tell us what it wants to do. And honestly, what we've seen is a really positive sign in our view. OK, so we're going to double click on the breadth thrust business and breadth with D-B-R-E-A-D-T-H. but before that you mentioned short covering if somebody doesn't know what that is can you just quickly explain that when we turn positive sometimes people will say well those are you know people covering their short good point it's usually put it this way if i hear it it's like a backhanded compliment to the bulls is the way i view that when i hear that but you know most people buy a stock right well if you buy a stock someone also on the other side of the head to sell it and there are something called short sellers which are people who in essence sell a stock first in essence wanting to buy it back at a lower price.

6:41If you hear someone shorting a stock, that simply means they're betting against it. They want it to go lower. Now there will be a certain time when they can't take it anymore and the market starts bouncing a little bit. Those shorts get scared and they'll cover in essence. They'll buy back those shares they already sold. So you think about it, that's like more buying pressure. I say it's like a beach ball. You put a beach ball way under the water. Once you let go, it really gets moving. And if there's a lot of bearishness out there and a lot of negative sentiments like we've seen, obviously, the last, well, really all year, to be honest, but specifically with a lot of the shorts and things, those shorts cover and that can rally the market.

7:21Now, what I'm getting at when I say just a short covering rally, the view is that's just a short term bounce. Like they cover, then you're just going to roll back over. So, again, it's kind of like a backhanded compliment to a strong day. So again, we think all this negativity has been a positive, but that's what we mean when we say short covering rally. Yeah, the beach ball is a good analogy for that one. And so let's talk more about the breath thrust. Hard to say. And there's a weird one. Add this one to the mix. Zweig breath thrust. How'd I do? What the heck is it? Yeah, it's confusing to say, I guess.

8:01There's a guy, an old school guy, and people could Google him and look him up. I'd highly recommend it, named Marty Zweig or Martin Zweig, a famous trader from a long time ago. And he discovered some of this stuff. I mean, he discovered this like 40 years ago, right, the Zweig breath thrust. We'll keep it real simple. You can Google it and look up more details. But he looked at the NYSE, so New York Stock Exchange, and he looked at how many stocks are going up versus down. And we look at a 10-day EMA, okay, exponential moving average. And, again, keep it simple. What we're looking for when this triggers is extremely oversold conditions.

8:33So again, think where we were just a couple weeks ago when this market was getting crushed. And then within a 10 trading day period, so a short time period, you go from extremely oversold, most stocks being down, to extremely overbought, most stocks being up. That's kind of, again, maybe that beach ball effect or a pure flush out, right? If everybody's thinking alike, somebody's thinking, General Patton, it's like everybody's bearish, Everything's terrible. There's only one way to go. We were hearing that on April 8th. April 8th, we were hearing that because the market was down 19 % from the peak.

9:06Everybody was bearish. And then April 9th happened. They got some good news. I don't know if it was really even that good of news. Got some news on trade. We had a 9 % rally, and it's kind of been honestly off to the races since then. But the Zweig breath thrust triggered just recently. Now, what does that mean to the listeners? Well, again, looking at data, and I've got data going back really far from our friends over at Ned Davis Research on this according to ed davis research 19 times since world war ii the zweig breath thrust has triggered and again it just triggered recently one year later you're ready i know it sounds familiar one year later higher 19 times six months later you're higher most of the time strong outperformance is consistent after a zweig breath thrust then you lay on top what we started the conversation with three days in a rope one and a half percent 70 percent of the stocks higher You know, we just had a six-day rally in the S &P 400 where the S &P gained 7 % over those six days.

10:00Okay, that's another one. It's only happened a handful of times, I think eight times off the top of my head. Once again, higher a year later, eight times. When you stack a lot of these, Nicole, on top of each other, not just one by themselves, but on top of each other with the other things we're going to get into in this conversation, we're of the opinion the lows are in for this year, and the bulls are hopefully going to have some more fun, clearly, than they had the first four and a half months of this year. So net-net, it's a very bullish indicator. It's basically saying we're in the final push of this downward trend.

10:32Yeah, in essence, the downward trend is over. In essence, is what it is saying. Yeah, I mean, that's kind of what it's saying. You know, on, I guess it was April 9th was one of the first big, that was the 9.5 % gain, big, huge up day. But on April 22nd, we had a huge, huge day also in terms of most stocks up, most stocks volume up. So I took a look again, call this the rule of 89. There were 89 % of all the stocks that were up on both of those days and 89 % of all the volume that were up on both of those days. When you have two days like that, that close to each other, that extremely strong, and that's extremely rare to have that.

11:05I found five times we've seen something like that. I was going to guess eight. Yeah, well, exactly. Tell me about it. Tell me about it. But only once did we see something like that, and did the market go on to make new lows? Okay, it's very, very rare to see these signals that we're seeing. I can get into more, and I know it's kind of geeky. I understand. But these are the things that move markets, right? I'm an old school. I have a CMT behind my name means chartered market technician. Yes, I look at fundamentals. Yes, I look at valuations, look at trade. End of the day. Yeah, yeah. I mean, that's how I was brought up.

11:34I can I can talk any game you want to talk. But I think what matters more are buyers and sellers. What is the market doing? What is the, you know, the attitude of the market? What's happening underneath the surface? What's sentiment telling us? What is momentum telling us? What's the overbought, oversold indicators. When you stack those things, those to me are what tend to matter more. I mean, the four most dangerous words, Sir John Templeton, this time is different. I get it. This time is different because we've got a Fed that can't cut. We've got potential higher inflation coming because of the tariffs.

12:06We've got drama out of Washington. But we don't really know what all that stuff means. I mean, that's the honest answer. We don't really know what that stuff means. What we do know are these signals that I've been talking about are consistent going out in history, We're going about generations that, again, suggest likely be open to the idea that better times could be ahead. And that's how we manage billions of dollars at the Carson Group. My team does. And that's how we're positioning ourselves. Yes, we are overweight equities coming into this year. Clue that has not been a fun year, but I know we're going to talk a little more about it.

12:35We've been diversified. We've had some other areas. You know, I mean, literally the time we're doing this, Germany is hitting an all-time high. It's hard to get super bearish when other parts of the globe are doing well. Yes, the U.S. has struggled. India has struggled. U.S. and India led the last two years. So it kind of gave the baton back and forth. But there's some real positive things that are really taking place. And I get the headlines, but listen, we're about making money. And there are still some positives out there. Yeah, honestly, I've become more into the charts with all this craziness, because I think in the midst of all of the emotion, when you boil it down into charts and graphs and math and stats and history, it feels like something you can actually tackle.

13:17Like it just it takes out all the drama from it. And so I've appreciated charting much more this year than ever before. Well, I love hearing that. I think it tells a story, right? I mean, I'm a market technician, not that different than a lot of other market strategists, market technicians you see out there. But, you know, people gravitate to stories. I'm not just about telling stories. I'm about looking at history, right? History doesn't repeat itself, but it often rhymes. I love that quote, Mark Twain. We can show a lot of times in history what's happened before and not necessarily what's going to happen because nobody knows what's going to happen.

13:48But what happened before, what did happen after that? And when you do some of these things, it's incredible. I mean, listen, when Liberation Day took place on April 2nd and those next two days, the S &P 500 fell more than 10 percent for one of the worst two-day drops in history. Everybody was looking around trying to figure out what was going on. Because what we knew when President Trump held up that piece of paper or that sheet that had all those, what the reciprocal tariffs are going to be, it was shockingly higher than anybody. I don't care if you were bearish. Nobody thought 25 % effective tariffs were going to happen.

14:16And then you see it, and that's why the market just sold off. And then the bond market started freaking out that next week. And then they dialed things back a little bit. But what's not going to change is everything under the sun we've seen, emotion, right? There's trading. There's this or that. There's still emotion. Emotion moves markets. When everybody's bullish, that's when you're probably going to look around and worry a little bit. But when everybody's bearish, I know it sounds crazy to say, but that's when, especially I know a lot of younger listeners and a lot of people who might have decades potentially to invest.

14:42Those are when you're going to make your money. That's when you're going to do really, really well because when everybody else is freaking out, panicking, if you've got time to invest, it's an old saying. It's not about time in the market. Or it's not about timing the market, sorry. It's about time in the market. That is the edge that longer term investors have is let the hedge funds, let the algorithms try to fight over pennies in front of a steamroller or nickels in front of steamroller. For the rest of us that have time and a lot of listeners to this podcast have time, it's a beautiful thing.

15:12I hate to say a bear market's a good thing because I don't want to come off and say that. But honestly, if you're young and you've got time to buy things when it's cheaper, to buy things when they're lower is a wonderful thing. The last little kind of cheeky quote that I like to use, the stock market's the only place where things go on sale, but everyone runs out of the store screaming. You know, remember that. And when you want to buy some shoes on sale or a jacket or, listen, you want to go to a steakhouse and it's on sale, sure, we do that. For whatever reason, the way our brains are wired, most people that might have loved a stock at 100 hated at 75.

15:43Why do they hate at 75? Because TV told them it's scary because there's this happening, that happening. And that's how our brains are wired. We can't help it. That's back to caveman times, right? Get in. There's a saber-tooth tiger. Go hide. You know, that's how we're wired. And it works that way with markets, too, thousands of years later. But that's why we have to rewire ourselves and learn some of these things. And honestly, you learn by making mistakes. I've made tons and tons of mistakes, but I've seen throughout my career so many times people panic when they can't take it anymore. I can't tell how many people got out of the market those two days after Liberation Day because it was terrible what was happening.

16:14And then you blink, and now we're above where we're on Liberation Day just a month later. I mean, kind of wild, but that's how history works. And by the way, I don't think we've talked about this, but that poster board or whatever was held up. It was wild. Like whose job was it to go to Kinko's or Staples? Just imagine if someone saw it first. Yeah, they shared it on like, look at this. It gets out there first. But yeah, I mean, because remember that day, the market popped because President Trump said something like, oh, 10 percent. Everyone's all 10 percent across the board. Good. And then we zoom in and look.

16:42And then, yeah, it was wasn't too fun after that. I mean, but I think people, you know, in theory are down with the idea of a bear market if you have time. But I think, you know, you get antsy because you don't know how long the bear market is going to last. So what would you say to people who are feeling really scared about the bearish headlines coming out? Like Miller Tabak is saying that there is going to potentially be a decline on the S &P 500 in the coming months to around 4 ,000. You know, a fall to 4 ,000 is close to 30 % down from where we are right now. JP Morgan is putting the recession odds at 60%.

17:19So layer on these stats with the ones that you're mentioning. And I think looking at historical factors is really, really important. And it helps us understand that history does indeed rhyme. But what about when we factor in the unknown? Like, we don't know if there could be another poster board with some scary stuff coming out from the White House tomorrow. Well, let's hope not, first off. But why do you say that? Because you said, you know, a bearish market is good if you have time. Right. Well, I hear. I'm making a joke. I mean, they don't need that much drama with the market. But I see what you're saying.

17:53So what we're doing with our models, right, the money we run. I mean, if someone's really worried about things, there's things you can do. You don't have to just be in, like, MAG-7, right, the large technology. names, which has obviously struggled so far this year. You can diversify. We say when in doubt, diversify it out. That's what we're doing. I mean, we have more international exposure right now than we've had in a long time. Because again, the issues are with the US. You look around the globe. I mean, listen, Germany's about 23, 24%. China's up double digits. Lots of countries in Africa are up double digits this year.

18:25There's a lot of other opportunities. So you can diversify. You don't have to just be in 100 % stocks. I mean, you can be in bonds. Now, bonds haven't done all that great this year. But look at gold. I mean, gold is done incredibly. Now, listen, gold's awfully, awfully overstretched, I think, in the near term. So those are all some things that we've done in some of the models. Like we made a name for ourselves at Carson Group this time two, two and a half years ago, early 23, most of 23, saying there'd be no recession, say there'd be a bull market. I know it's like, oh, OK, you said that. Trust me when I say this.

18:52That wasn't popular. People hated that. I mean, I don't know why people hated that call because they were promised a bear market promised a recession we went against it we had like 91 to 92 percent overweight equities or equities in our unconstrained tactical models that we run i know it's a mouthful that's just saying we had a lot of stock exposure because we thought stocks do really well the last couple years we have dialed that back a little bit we're like 74 75 equities right now we do have some gold this is like all year this is like all year you know something we just did we did this coming into this year we added some international exposure we added some treasuries for the first time in a while.

19:24Because again, if you're a little after just after a 70 % rally, like we saw in the S &P 500 from October 22 to the February 19th peak this year, you got to say to yourself, that was awfully, that was nice. That was great for investors, but it might not always be that way. It might be rocky, right? We didn't have a 10 % correction last year. The odds of a 10 % correction this year were very high. We were on record as saying we probably have a 10 to 15 % correction at some point this year. No, we did not think it'd be a near bear market down 18.9%. We also didn't think that Liberation Day would be as aggressive as it was, but it is what it is.

19:56So that's some things that I think people can think about and do is to diversify themselves. And the other thing, I've done this a long time. Some of the best investors I've ever met are the people that set in and forget it. By that, I mean every two weeks in a 401k or every two weeks in somewhere else, an IRA or something, they just put money in. And I know it's hard, but they close their eyes and you wait. And 10 to 15 years later, if you were buying dollar costs, averaging in, following the plan when it's red out there and everybody tells you how bad everything is on tv that's when you want to hunker down right the time to plan for the storm is not during the eye of the storm i mean we have to plan for the eye of the storm way before it comes and you mentioned the uncertainty i mean unfortunately 2025 is not the first year in history where every day is green and there's no uncertainty we've had uncertainty throughout history i mean just last august right we that was a great year last year was a great year our stocks gained 25 give or take You know, we had that yen carry trade unwind.

20:49I know hopefully most people remember what I'm talking about. But trust me, that first week of August was really uncomfortable. Market didn't crash, but market pulled back a lot in three days. And there was a lot of fear. Most years are going to have those scary headlines. You can do yourself a big favor by coming into the year just expecting a 15 % correction at some point during the year. You know, bear markets happen every three and a half years. We had two bear markets start of this decade. And believe me, a very, very close bear market just a couple weeks ago. So those things do happen, but sure enough, now we blink and we've come well off those lows.

21:20And I get the negative sentiment. I get the negative calls that people have made. There's always some bulls. There's always some bears. But I think when we look at the entire picture and backdrop, there's still an economy that likely avoids a recession. It slows down. We just got a negative GDP print, right, just last week. Got a negative GDP print in the first quarter. Well, that's not great, but then you peel back the onion. It's because a lot of companies bought a lot of stuff ahead of time, ahead of tariffs. inventory sword trade exports imports exports took out like five percent of gdp so if you look at something called final demand which is like spending from households and businesses it was like 2.3 i'm not saying 2.3 is great but i'm saying that's fairly that's a fairly solid economy heading into all this tariff stuff is it slowing down absolutely the economy is slowing down but it doesn't mean you have to go into a recession and in recession is when you tend to get those really big 4 000 number that i forget who you said said it but whoever said 4 000 on the sp i mean That's calling for a recession, right?

22:14I guess I'm not in that camp quite yet. Yeah, but also a reason that you don't want to pull your money out or go the other way when there's a sale happening is because I think it's what every 19 days or 20 days, historically, there's been a new high in the market too. So you miss out on that ride. Hold onto your wallets. Money Rehab will be right back. and now for some more money rehab