Bulls on Parade? with Mark Ritchie II

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1:30Our stock's poised for a bull run. Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Mark Ritchie, the second manager of RTM3. Hi, Mark. How are you? Great, Maggie. Lots to talk about. Thanks for having me back. Oh, my gosh. There is a lot to talk about. We had a Bunch of headline, a bunch of news for investors to come through today. One of the bigger ones being right out of the gate, another tame inflation reading, a lower than expected PPI, really confirming that CPI release that got things going yesterday. And we have all the major U.S. stock markets, treasury yields continuing to back up, and the dollar, the U.S.

2:06dollar moving lower. So when you look across the landscape, Mark, what's really top of mind for you right now? Well, for starters, if I wasn't put a headline on this, I would say bullish confirmations across the board in terms of really for our work at Minervini Private Access, which is what we use at RTM, confirms everything that we kind of thought in terms of a major market bottom potentially in January. And if you remember, you and I talked about that back then. And really, over the last four or five months, it's been, I would say, a matter of question whether or not this is just a cyclical rally versus the start of a new bull market.

2:46And, of course, the reality is nobody, you know, I don't have a crystal ball here. I never have. When I make these calls, I'm using them on a variety of different indicators and then watching how things play out. So sort of changing my view one card at a time as it comes out of the deck. And I'm saying what we've seen over the past four, five, six weeks has all been confirmations, in my view, that we're in a new bull market for potential risk assets. Now, why do I say that? What am I looking at? Which one of those do you want me to get into in what order? You know, dealer's choice. And we'll see how much time we have and sort of go from there.

3:24So let's start with, and it's interesting that you say risk assets. I think that's going to be really important because we've got questions kind of across the asset classes today. We're going to get to all of them. So risk on. Let's talk about stocks first because, you know, it's been interesting. I mean, we do, you know, we're talking about a bull run. And we said it that way because, I mean, you know, we've seen stocks that up four days. But you look at the NASDAQ year to date. I mean, everybody's been watching this kind of thinking, you know, are we going to pull back? Is there going to be a pullback?

3:55When is the pullback? Is that my opportunity to get in? It doesn't look like it's happening at this stage. So how are you feeling about stocks, and why do you feel so bullish? Yeah, I'm quite bullish. I'm as long as I've been in quite some time, certainly over 12 months. And look, I'll look to get even longer from here should things continue to improve. And look, the short answer is improving breadth. And we talk about this all the time. And here's the funny thing, right? And I was talking to Brian offline about this beforehand. And he would say, hey, great call you made in January. And I said, listen, the reality is, though, the market was quite narrow.

4:32For a short period of time, we had what looked like a broad-based advance, which triggered that sort of, I talked about this in January, that momentum breath thrust off the lows, which usually signals a major bottom. But then, especially after we had the Russell roll over really hard with the regional banking crisis. And it looked like the rally at least was maybe DOA or in severe timeout. But the reality is we didn't roll over. And now over the last five weeks, breath has really improved. And the first thing I would use to highlight that is the Russell's gotten back in gear. But if you look at the NYSE, and I think I sent you guys a chart of this.

5:12I think we have it. Yeah, we'll try to pull New highs relative to new lows is finally breaking into sort of new high ground for the first time over the last, really since the beginning of the bear market, which means we are seeing a massive improvement under the surface. The percentage of stocks in the NYSE above their 50-day moving average is currently at 80%. That's quite bullish, where a few weeks ago it was much, much lower. Could we still see room for improvement? Yes, but even over the past couple of weeks, you mentioned the NASDAQ, which is a really good point. Clearly, that's your leader, but leadership within the NASDAQ has been very narrow.

5:51Everyone has talked about this. And that's the thing everyone's been so skeptical and hating, right, is that it's been like three stocks carrying it. Right, right. Yeah, the NASDAQ's being held up by six stocks, and the entire S &P is only being held up by, you know, okay, that became old news. And the reality is that's true. But in a market that's bottoming, and Raul made this point actually this week even relative to crypto, where are asset managers going to go first, the place where they're most comfortable? You want to see that broaden out. And over the last couple of weeks, the mega caps took a rest, and the rest of the NASDAQ started to play catch up.

6:25So the herd started to expand. We saw semis break out and hold those breakouts. And I think the biggest thing for me is I look at lots of different groups and how our names that are trading sort of near their 52-week highs acting. This entire bear market, even stocks or groups that were holding up well, they would break out and then the money would rotate. Institutions would sell into those names and buy names coming off the lows. And you'd have this sort of like wash and rinse cycle where you just couldn't grab a hold of any trend. That dynamic has really changed over the last four or five weeks.

7:01And anyone who trades directionally, if you've been playing in the market at all, can tell you off the lows, it was easier to make money in the index itself unless you just went overweight NVIDIA or a few of the key leaders, which is very difficult to do, myself included. And I was bullish NVIDIA. So I didn't have a big enough position because there wasn't enough overall participation. And I'm saying that has dramatically changed over the last couple of weeks, which is why all of a sudden I find myself longer and getting a little bit longer. And we're starting to see, again, managers go out the risk curve the more they get comfortable.

7:37The reasons why for me aren't even as important. We can get into potentially why it is, of course. But I think even the action you mentioned off the top, the last couple of days is very telling in my view. Last week, we had what looked like a scary ADP employment numbers, and all of the macro bears went short stock, short bonds. We're getting ready to put in a short-term top in the equities, depending on how you look at rates. Make new highs in rates, lows in price. Then what did we have yesterday? We had a complete reversal of that dynamic. But what was interesting and what you saw through really nine to 12 months of the bear market was any time equity prices kind of made these knee-jerk reaction new highs, they would shake out the highs and then go sideways and go lower.

8:30Well, we've seen the complete opposite of that. And I think this market just steamrolled everybody who basically said, well, let's get short and use last week's highs as a stop. And we're continuing to follow through. we closed, I didn't check the last five minutes, but pretty close to near new fresh highs, say in the S &P and the NASDAQ. And rates look like that may have been a bear trap, bolt trap, depending again, bullish on rates, bearish on price. So and I think if rates are even going to stay in this range, that's certainly potentially good for risk assets. And if we're near, of course, near the end of the tightening cycle, like a lot of people potentially think.

9:13Again, I think that's bullish for risk assets and stocks, growth, momentum, crypto. All right, we're going to go through all of those. We're going to go through all those. S &P 500 and Nasdaq close at their highest level in 2023 is the headline crossing. S &P up 0.85%, 4 ,510 is the level there. And NASDAQ up 1.58%, 14 ,138 for those of you who are really watching those levels. So Michael asking, it's summer. Oh, well, he's commenting, it's summer. Traders went to the Hamptons. Well, not if they were on the wrong side of that trade, Michael. But Michael earlier said, no one talks about earnings, just as I was thinking about earnings.

9:56So we are sharing the same thought bubble today, Michael. But so we're about to get into earnings. We're going to get the first ones trickling out. Mark, do you think this presents an opportunity or is there headline risk involved there? Or you don't care? Well, I certainly care. You don't watch that. You're watching the technical. Well, listen, the reality is we're already, I think Yahoo Finance put out an article today saying that we're already in a technical earnings recession based on two contracting quarters of earnings. and and this particular quarter is forecast to be worse than the prior two and i think uh according to their work i haven't double checked this myself but it is something like the worst you know earnings contraction in terms of stock earnings since uh 2020 i want to say either you know the the major decline we had uh either it was a q2 or q3 of 2020 um okay what happened to the stock market during that period of time.

10:59We went higher. We didn't go lower because it was already priced in. So should even earnings come in better than the potential expectations? And Maggie, I think you and I talked about this. I think I talked about this with Asher last time. I mean, this is the most potential telegraph recession we've ever seen. Do you think that CEOs and heads of corporate companies aren't aware of this potential risk? All discussions of a potential soft or hard landing aside is what I'm saying. The market is sending you a powerful signal. You can choose to ignore that all you want. I'm saying that's not my process.

11:32Look, I love to have armchair macro views, but I lose them quickly when I'm losing money. And my goal is, listen, I'll be the first one to say, could I be dead wrong about risk assets going higher? Sure. That's what risk management's for. But right now, everything I'm seeing is telling me higher. And now I can look for some other, what I'd rather share, what are some confirming things you want to watch for to tell you that at least my thesis is continuing to play out? Because it doesn't really matter what anyone thinks if they don't give you at least some form of a script or a playbook that has any predictive power or value.

12:10And I'm saying, this is how I've done it really in every cycle. And I've been waiting for an opportunity like this to get long and then look to get even longer. We'll see how we shake out from here. But yeah, I'd rather, I can give one or two scenarios though too. If you look at the 2015, 2016 equity bear market we had, this was the exact same argument I made then. And it reminds me a little bit, we had an earnings recession in stocks and all of your macro economist guys were saying, economy's going into recession, we're gonna have a recession. Never showed up. Then the market started moving higher in mid 16 and everybody doubted it.

12:46Then we broke out post-Brexit and everybody doubted it. Then we ripped higher after Trump and everybody said it's a Trump bump and it's a Trump short squeeze. And that rally went on for another 12 to 18 months. It was a full-on new bull market because the earnings recession never led to a full-on economic recession. Well, you need to hold that at least as a possibility. And you and I had talked offline, too. There's other possibilities as well, which I think we can get into. As Mark alluded to, we try not to have the show before the show, but we're all so darn excited about all this stuff that we start chatting and then we lose ourselves and then we have to.

13:21But you don't miss anything. We do it all in front of the camera, too. So very interesting. Colin, I laughed out loud when I saw this. You somehow always make me laugh at this. But Colin made the comment, this is getting ridiculous. What's going on? Asking for a friend. And it's very funny, but I think it's true for some people because it's been confusing. So in addition to that headline we mentioned earlier, just about the movement in stock and the economic data, we also had the Actors Union voting to go on strike, shutting down production across Hollywood. We've been having a lot of conversation about wages when we see these kinds of collective bargaining moves.

13:59St. Louis Fed President James Bullard, for those of you who didn't catch it, one of the more outspoken regional Fed governors and someone who's been hawkish as of late, not always, because he's been there for 15 years. He used to be really, really dovish, actually, but he's stepping down mid-August. So there's going to be a change at the Fed. Raul and Julian Brigden of MI2 Advisors talked about the Fed, financial conditions, and the sort of confusion that a lot of people like you feel, Colin, on their show, on their monthly show today, Macro Insiders. I want to just play a little clip from that, and then we'll talk on the other side, Mark.

14:32Normally, markets bottom after the Fed starts cutting rates. Why is it different this time around? Cash. It's just, I mean, by markets, I think you mean liquidity. And, you know, it's our view, and it's been our view, and it's our view, right? It's all our view that the only thing that determines asset prices is liquidity. we've actually seen a emergence of an amazing event where you have a negative correlation between bond yields and rates essentially and equity prices. This never, ever, ever, ever used to be the case prior to QE that equities would rally as bond yields rallied. But now equities rally because they're driven by liquidity.

15:27OK, and bonds generally sell off when liquidity is rising because it's reflationary. So you have this bizarro relationship. So we have now truly fucked up the macro feedback loop whereby central banks think they control it. And so the only way for them to address it is drain liquidity out of the system. As we've seen, the Fed has struggled to do that because of what Treasury's done with the TGA, because what they had to do with the banking program. Right. So to my mind, it's that simple. This is not a normal functioning environment. Hey, everyone, we're going to take a quick break right now to hear a word from our partners.

16:12We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

16:20So that is one point they agree on. But for those of you who watch, there's a lot of other areas where they differ, although they are both also mirroring what you're saying, Mark, about risk assets, maybe looking at different reasons and really plugging into their macro thinking. But we had a robust discussion about the labor market, inflation, and the best place to put your money right now. Fantastic stuff. If you are not a member or if you are not a pro member, which is the tier that show airs on, and you want to check it out, scan the QR code and find out how you can do that and how you can join and or upgrade.

16:55So Mark, super interesting. As we're talking, and this happens a lot when I'm doing anything with Raul, when he starts talking about being positive risk assets, I think it was JG1982 said, everything except the market is doing bad, financial disaster. People hate or are so skeptical of this market because it feels like things aren't good in pockets. It just seems to be hard to believe the entire way up that the NASDAQ has done this. It seems like a market everyone hates. Yeah, and I would start by saying I love that. Markets need a wall of worry to climb. I made this point in summer of 2020 2020 with Ed Harrison all those years ago, and I was very bullish, and there were some extremely negative, pessimistic comments.

17:44And I was just saying, look, I'm following the tea leaves of my process. But the reality is then by the time COVID was over and everybody wanted to buy stocks in late 21, it was over. The market is a discounting, forward-looking mechanism. It's looking out six to nine months, painting a different picture. Now, specifically to the issue of, well, the Fed hasn't started cutting yet. How could risk assets have already bottomed? It's like, listen, first of all, always be skeptical of very small sample sizes whenever you're making these must. This happened, therefore it has to happen again. But there are scenarios where that hasn't been the case.

18:20And 94, 95 would be one of them, which I think would, again, I'm not going to get married to any one of these, but the market ripped to new highs in early 95. And then the Fed started cutting in the middle of that year. There was also this very interesting phenomenon that happened called the build out of the Internet really started getting going, which, you know, say whatever you want. Is the market looking forward to seeing a productivity boom and future, you know, earnings and that type of thing? Potentially, well, what do we have right now with AI? Could we be rhyming with a cycle like that?

18:55I don't see why not. Again, though, I'm going to use risk management in case I'm dead wrong to pivot the other way. You don't have to dig in with your heels either way. And when someone says, like, this is making no sense, that's what should get you to sit up in your chair and reevaluate your potential process and your market worldview, if you will. Again, as I said, as I like to say a lot, it's like, you know, I'm wrong all the time. I just want to be wrong small and write big. And right now, I'm saying the pain trade is potentially higher. Last point I would make that I saw interesting today, I think it was Jason Shapiro.

19:32He's been on Real Vision before. Somebody I don't know personally, but I respect him as a contrarian. He tweeted, second half projections for equity performance are the worst in 30 years. Meaning whatever the street is saying, and the street's always wrong, in my view. They are predicting flat to lower. I mean, that is a perfectly mixed cocktail for higher prices. So some great, great questions coming in. So let's go through some of them. And Peter just dropped one that I think is sort of, and a few others along this line, and I think it's really important. So what are the things we have to look at to confirm your thesis, Mark, that we are in a bull market?

20:14Great question. That's a way to lead the witness because that's where I really want to go. So, yeah, what I'm looking for, and I talked about this in January, where I said we had sort of that ZWAG 10-day advanced decline breadth thrust. And we never got the other breadth thrust that I tend to like, which has a good historical track record. And that is the percentage of stocks in the NYSE above their 50-day. That's at 80%. If that pushes to 90%, that has a phenomenal track record. Now, everyone doubted the call in January. And I'm saying if this happens even as far as we are off the lows, that would just tell me the market is accelerating.

20:52The RPMs are revving back up. Now, I want to caveat this by saying a couple of things. One, we're short-term extended. So I wouldn't just run out and chase a bunch of stocks or things that have already ripped higher. I would wait for potential consolidations or pullbacks. But a couple of other things to really watch for. Look at the construction of the Dow. And I sent you guys that weekly chart that, you know, I don't care what your technical school is. That is a bullish construction if we break out of that, you know, where you come lower. Now you're tightening up on the right hand side. You know, I would call it a volatility contraction pattern.

21:33Some people would call it a rising wedge. However you want to look at it. Now, the Dow was only 30 stocks, but it's a good gauge, certainly for the economy. And then if you I'm not I'm not a Dow theorist guy either, but the Dow transports, which I think I also sent a chart, are potentially confirming a potential breakout. That that looks good economically and for the overall health of the general market. I think you want to continue to see the mega caps, not necessarily just steamroll everybody higher. I think that they should some of them should continue to lead. But as they rest, you'll see the market continue.

22:08continue it's sort of it's the rising tide lifts all boats where the last year was the opposite it was sort of this one poked its head up and then rolled over and poked this and then we went the opposite way so you know and then the other thing i would look for is the nyse advanced decline line looks like it's going to break potentially into new highs if we take out the highs uh back in february if that confirms that confirms that the the parts under the surface of the hood are acting well, meaning all the parts of the engine are firing. So your engine's in good health or, you know, that again, use that herd analogy that the herd is healthy and it's not just being led by a few stocks.

22:48The other thing I would say is look for the leaders to continue to act well. And the biggest mistake people often make when they're underinvested is they either buy something that's super extended. And what I often tell our clients at Minervini Private Access is I don't want normal price action to knock me out of a position. Well, if something's extended, pullbacks are normal, and then they get knocked out because they buy it up a bunch and then it pulls back. Coinbase would be a great example of a stock you shouldn't buy right now. We can get into that when we talk about crypto, which I definitely want to talk about.

23:18Yeah, we're going to do that next. The other mistake, though, they make is they buy laggards, thinking, oh, this stock's gone nowhere. It's going to play catch up. That's a good way to underperform. Yeah, just because they think it's cheap, but that's not right. Yeah, and what's cheap stays cheap, and what's expensive stays expensive. Again, though, as I've talked about before, and people that haven't watched the long-form interview I did with Jamie McDonald on Real Vision to get a little more sense for sort of my style and how I do risk management is, listen, you have to use some form of risk mitigation protection.

23:51Yeah, I'm so glad you brought that up, Mark, because as you were saying it, I made a note to circle back to this, because that is as important as everything that you're saying, which, of course, is not investment advice. No one can know your risk profile but you. I always say that. This is just Mark's view on what he's thinking about. But that risk management part is as important as everything else he's saying. And I think for people on different parts of their journey, that's the part that maybe they leave out or they're not. Are you doing that through options? Is that what you guys were talking about in that segment?

24:23Well, I was just talking about specifically just using some form of stops. I mean, you can use options, of course. I use those occasionally, but generally, you know, positioning myself in such a way where I know if things are acting the way they should be, where am I wrong? So just like, you know, just discipline. Well, the gentleman just asked, what should we be looking for, you know, moving forward? Well, if breath doesn't continue to work in our favor, you're probably going to see names, individual names in your portfolio come under more pressure than you'd like. So the first thing is the general averages should not pull back more than mid-single digits, most likely.

25:02And pullbacks should be on at least lighter volume on average. The other thing, like I was saying, the leading group. So take any of that AI-related type area. Now, NVIDIA is wildly extended. I would not be chasing that here. But if it pulls back orderly, you can look to get involved. A name like AMD, the pullback it has had, these lows should potentially hold. That's another one you can look at. There are other names in those types. What about the QQQ? Kevin was asking about QQQ. Would you get long here if you weren't already in the trade? No, I would not buy the QQs or extended. I had a feeling that was in the group.