Can Tech Take Stocks Higher? with Tony Greer

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1:24And now to the top analysis of today's markets.

1:33Can tech continue to lead stocks higher? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Tony Greer, editor of the Morning Navigator newsletter. Hey there, Tony. Maggie, how are you doing today? I'm okay. I'm okay. I just put in the chat, we all have massive storms swirling around us. We're going to cross our fingers and hope the weather gods are with us and that we don't lose power. But we can't because there's so much to talk about, right? Ton going on. We have another stock rally, batch of economic data out, Fed decision tomorrow, earnings coming fast and furious, including Alphabet and Microsoft any minute now after the close.

2:10So what's top of mind for you as you look at everything going on in these markets? Matt, yeah, I was able to get away from the screens for about 10 days, and I came back to an energy breakout that I've been sort of praying slash wishing for, starting to get confirmation across the complex, both in WTI and in E &P stocks yesterday, where they're closing back up above their 200-day moving average, which means recovery of trend, as you know. The energy market's got a really interesting dynamic to it now. We've even got a big loss in the rearview mirror when Pierre Andoran posted another big loss when oil was on the lows.

2:51We have a rejection of a breakdown to a new low of the range that has now returned to the top of the range. And what's amazing is this time it's being driven by gasoline. You know, the gasoline market's tightened up. Crack spreads are rallying. We just saw September, October gasoline trade from$0.16 in May to$0.30 at its peak in July. The WTI crude oil calendar traded from$2 to$5 in the month of July alone. So there is a real, real tightness issue going on in the energy market. And that's driving things in a direction that nobody has the position on. So it's getting really exciting. Well, I think, first of all, love that you broke down all the things you look for, because this is really what you do, right?

3:39You're sort of agnostic. You look across markets, and you're trying to find where there's going to be an action and opportunity. So you just listed a whole bunch of things, I think, that you were waiting for that are making you sound bullish. Because you've been on the sidelines. You haven't been in energy, right? Not at all. I just complained last week to Rao that you guys keep putting me up with the moniker of TGD Oil Bowl. And I was like, can we change that? I'm not bullish oil. I haven't had an oil contract on in months. And then sure enough, I go away and come back. And I'm like, oh, here's the breakout that we've all been hoping for, I think.

4:13So, you know, that irony is not lost on me. Yeah, it is funny. Well, you and I have certainly been talking and you have not been touching energy. We've been talking about tech stocks the last few times because that's what was moving. I mean, that's where everything was in the action. And we'll obviously talk about both. But so and you had said all along that you had to see a certain number of things to get back in. And I think you thought a lot of people that this might happen, right? This was kind of your scenario, but you just weren't getting any of the confirmation. Exactly. That's why I wouldn't trade oil for the longest time, because it wasn't doing anything exciting.

4:48And there was no underlying story to get you excited. You know, we kept failing at moving average resistance and backing right off. We have a chart, I think, right? Should we put the chart up? Because I think we have a chart of WTI. Is that what you're talking about, about this sort of failure? Yeah. And just not able to make it? OK, I think Brian's - Yeah, if you can look at it, it kept failing. It's 200-day moving average, which is the yellow solid line on the upside. And we're just breaking above that now. What's different this time is that it's totally different this time, right? We've got gasoline leading the market, crack spreads rallying again.

5:24Most importantly for me this time, crude oil open interest is literally at the bottom of its historic range, which tells me that there are no big spec length positions to worry about. If crude oil open interest was much higher than it is now, I wouldn't be actively looking at the trade the way I am. Can you explain that? Why, Tony? Why would that put you off? Why is that something that you pay attention to? That's a great question, Maggie. Let's talk about why open interest is so depressed. I think open interest is so depressed because the speculators on both sides have been sort of frustrated by several months of Biden SPR versus OPEC, right?

6:07Nobody was winning that battle for months at a time. Oil was 72 bid at 78. And everybody was lulled to sleep. So there's no reason to have a big long or short on. So everybody kind of pulls their cards back closer to their vest. And the only people that are trafficking in the futures are the merchants who actually have physical deliveries to hedge against. So when that becomes the case, the markets become very thin. And that's usually when everyone loses interest, sentiment hits a bottom. And when sentiment hits a bottom is usually when you find the relief rally. And it just happened to have the spark this time of a super tightening gasoline market that has just taken place this month or in the last two months, I would say.

6:49And so that's driving things right now. And it's driving things in a market where nobody's long the oil contracts and then nobody's long the stocks. So to me, that's sort of a double incentive there. I have another chart that I think I sent to Brian that you may be able to put up that's been going around the internet that shows fund flows in the last 12 months. And the jaws that I see opening up at the top are the inflows in technology versus the outflows of energy. So now if you want to pile into energy stocks, You know that the funds aren't sitting here long waiting for them to go up. You know that the funds have all lost interest, sold their positions, and they're waiting for somebody to tap them on the shoulder again and say, hey, guys, energy stocks are rallying.

7:36We might have to get back in. And so - Yeah, that chart is, that divergence between tech and energy is extraordinary. You see everything else kind of bunched up, but my gosh, they couldn't be worlds apart there. Right? Their worlds apart because tech is an outlier buy flow, and energy is its own outlier sell flow. So everybody just pulled their money out of the energy markets thinking that there's no opportunity there whatsoever. Let's go chase AI. And while I get it, and while AI is very definitely a real trade, it looks like the markets may be a little bit overdone and ready for a pullback. And that's not a dig against AI.

8:18That's just a market observation. So it looks like we're in for a bit of sea change here, where what I used to call the great rotation can come back to life. And the great rotation is nothing but commodities divided by the NASDAQ. And right now, we've got commodities, the BCOM, for example, Bloomberg Commodity Index, sticking its nose above its 200-day moving average, which we haven't done since September of last year. So we've been in a nine-month bear market in commodities. it feels like things want to change. And we'll see what happens to the tech market. If that backs off, so be it. But I'm not really counting on that leg of the trade as much.

8:56So, Tony, I want to get back to the point you made. So there's data supporting the demand side potentially, too. You made an interesting comment about not necessarily, it sounds like you were saying maybe not betting against tech, just thinking energy's in its spot. Talk to me about the push and pull with technology, though. So are you getting negative on technology, or are you still going to watch that with interest, but just be paying more attention to the opportunity in energy? That's a well-phrased question, Maggie. My job is to always have my clients in the sectors that I think are going to perform best from where they are.

9:38We were able to catch a ride in energy, excuse me, a ride in technology on the long side that we picked up at the beginning of the year. And at this point, the rally has gone on long. We're watching sentiment grow more and more bullish. We're watching the VIX get buried at 14. So we're definitely stepping into the phases of a more complacent market. And that's when a sell-off generally happens. Now, we're talking about AI becoming investment religion, right? Because earnings, excuse me, valuations are massively blown out. So we're talking about people that are getting into the sector simply because they want to be in that sector and put price aside for now.

10:24So that can go on longer than I can remain bearish. So I'm generally in the position now of kind of expecting a little bit of a reprieve in tech, but not willing to put a short out with that kind of a belief, if that's fair. Because I feel like we can have a number of days, just like we're seeing today, where maybe technology isn't in the lead anymore, but because we're seeing new leadership across sectors like basic materials, metals and mining, gold miners are rallying today. If that stuff starts supporting the markets on a regular basis, which it has not been, then maybe that end technology can continue to drive higher.

11:07You know what I mean? We've got the SP pushing up against the high of the move here above 4 ,600. It certainly doesn't look like it's going to pause for any reason unless the Fed shakes us up tomorrow. That's always a wild card that we don't know about. But left to their own devices, it looks like we're in a bull equity market where the VIX can stay buried and people can stay complacent until something totally unforeseen happens and we unravel that. But if you look at the way the fund flows have been demonstrating themselves, in my opinion, if we see a huge washout of technology, people are going to put their money back into the energy market because they're so underinvested there.

11:49And it just might be one of the few commodities on the board that's observably rallying that they can get their hands on. So I'm not going to be afraid of staying long energy in the face of an equity sell-off. But I'm also not willing to bet with my money on tech backing off right now because that's not my kind of trade. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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13:20Yeah, really, really well said, Tony. And as you're saying that, Alphabet out after the close, 7 % increase in revenue on cloud sales. There'll be a lot more details coming out. That stock is up right away after hours, over 6 % right now. So this is the peril of trying to short technology right now. Wow, bingo, Maggie. As a trader, that's your biggest nightmare, right? I go home short queues, and Alphabet comes out and blows out earnings. And now I'm done tomorrow before the bell rings. Yeah. And I think this is important because people hear you talk about energy and commodities, and I think they naturally think you're sort of anti-tech, getting married to some sort of narrative.

14:01This is a very important thing to avoid, right? You can have your thesis, but you have to stay anchored in what's happening in the market. And that is something that you do. So I think people have that wrong about you a lot, Tony. Yeah. My money goes where the market tells me it's going, Maggie. We were on early in January, February, observing the technology breakout saying, man, that might be a good place for your money for the first half of this year. Sure enough, it was. We caught that in the newsletter on the View Matrix, et cetera. And then it was time to pivot again. So that's the way we're always going to stay on our feet with whatever has the most potential from last sale.

14:39Yeah. So if we are looking at this on the commodity front, we were talking about W-China. It sounds like oil is the one making the move. Is it across the commodity sector? Do you feel the same way? Or is oil just first? Or do you have to really start to distinguish here? You really have to start to distinguish, Maggie. That's a great question. Now, what's really interesting about this rally in oil now and the Bloomberg Commodities Index all of a sudden waking up and testing a major moving average is that a couple of weeks ago, we were watching the bond market saying, man, the bond market is picking up some kind of inflation impulse that I'm not really seeing yet.

15:24Yields are popping higher. The market-based inflation expectations were rallying. And it seemed like we had this inflationary scenario that you couldn't really pinpoint. Then I get back from 10 days away from the screens, and gasoline spreads have tightened. Crude oil is starting to rally and take over moving averages, and nobody's in those sectors. So it's interesting, but I think oil is leading the move this time. The grain markets are susceptible because of what's going on with global trade and also with growing conditions here in the US. And then I think eventually, if crude oil starts running, copper is not going to get left out.

16:04And so if copper starts going with crude oil, then maybe the base metals complex can wake up. And as you can tell, I am not excited about the base metals complex. This has done nothing yet to say that we need to be in that space. Today is the first day in a while that we're seeing metals and mining on the top of the leaderboard, basic materials, Freeport-McMoran having a big day. So today is really the first responders day in the metal space that we're just getting to see. So we'll see if that picks up from here, but it has not been showing signs up until now. Yeah, we got a couple of first responders in the chat, I think, as well.

16:39I lost the question, but I think we already answered it. We'll get it back in just a second. Since we're talking about inflation, just want to flag to folks that you know this has been a big debate, right? Will inflation come back or won't it come back? We're going to talk about it a lot tomorrow around the Fed conversation. But we had an interesting interview on the program, a peer-to-peer, where Colin Roche sat down with Richard Kuh, chief economist and strategist at Nomura. They're talking about the global economy. And they touched on this as well, especially this idea that would a rise in energy prices reignite inflation.

17:16And Richard had a really interesting take on it. I just want to play a clip for that. Well, during the 1970s, the option of moving factories to Mexico or to Southeast Asia did not exist. So once the labor supply is kind of exhausted, the wages start rising very, very rapidly, and that created the wage price spiral. In this period, that is no longer the case, right? Japanese can always move factories to Southeast Asia, Americans can move it to Mexico, and the Europeans can move it to East Europe. And the globalization is still very much in place, even if China may be a little bit out of the picture.

18:03And so once the initial supply shock from the COVID-19 or reopening after COVID-19 is absorbed, then my guess is that inflation rates will come down to much more reasonable levels because there's still a lot of emerging economies who love to get into the action of globalization, attract factories from abroad, and ship cheap products to develop the world, which will keep inflation rates down. And that full interview on the global economy is available on our website. Just scan the QR code, and you can jump on one of our trial offers. So, Tony, how are you thinking about inflation as it relates to the markets?

18:50Well, that's a good question, Maggie. I'm interested in inflation and the headline readings again, which is exciting. Because as a trader and as a tape reader, we had inflation at 2%. We've got inflation all the way up to 9%, call it. But as a trader, we've had a 50 % pullback to about 4 % or 5 % inflation. Now, as a trader, I'm looking to buy that dip. This is the level that everybody is kind of throwing the baby out with the bathwater, thinking inflation is going to be tamed entirely. The Fed has been fairly hawkish, saying that they're going to keep raising rates until they get it down to that two-handle.

19:29But nothing about the executive orders that have slowed down US drilling, that have driven fossil fuel prices higher, has really slowed down except the narrative. We took the spotlight off$5 gas. It backed off to$3.50. That's terrific. Where is it going to go from here? And so I kind of wait for that upside surprise in inflation data that kind of sets the bond market off on a little bit of a sell-off, right? where rates spike higher in response. So as a trader, that's what I kind of wake up and look at the screens expecting on headline inflation day, because I know that one of these data points is going to be, comes out 5%, expecting 3.5%.

20:16Holy shit. Why did that happen? I don't know, maybe because oil just rallied 15 bucks, right? Or something like that. And so obviously, we're going to have higher inflation numbers coming based on July, right, when we get there, because we're talking about higher diesel and gasoline prices. So maybe, you know, that reading is the one that's the upside surprise. So it's very interesting to be sitting here as a trader with risk on in these sectors and how the inflation data is going to affect it. Yeah, you're absolutely right. And we know that the markets have really moved on inflation data as well.

20:50We've seen an enormous amount of bond volatility around that. So just what everybody's sort of talking about, a Goldilocks soft landing again, potentially going to be a market mover. I want to get to some questions. I want to cycle some questions and just want to let everybody know, though, that Microsoft out as well. You all have your computers. You can see the numbers. It sounds like a little disappointing. I mean, they look like they're in line or slightly better, But when you're priced for perfection, you've really got to knock it out of the park and snap getting murdered. So this is going to be really dependent on what these companies, how much they beat by and what they say on the conference call.

21:28Conference calls coming up. That's going to be important. But a little bit of a divergence when it comes to the tech names. It's not a home run for everybody today. OK, so Boris asking, hello from Germany. Hi, Boris from Germany. My question to Tony is, do you have an opinion on the healthcare sector? Any signs that the massive underperformance this year might come to an end? Is it maybe a good entry point as a contrast to the tech rally? Many thanks. I wish I could help, Boris, but I have to be honest and selfishly. And because I'm not smart enough to be able to follow the healthcare markets, I really, that is one sector that I generally stay away from.

22:11I don't know much about it. I'm not comfortable with how it trades or what drives it. So I wish I had a better answer. But as a trader, I can only ever be honest, especially somebody calling in with a great question from Germany. I just don't have a good answer for you. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

22:37So, but this highlights something, just because something underperforms, Tony, doesn't mean it has to, you know, like sort of snap back. Right. Yeah. Don't get sucked in just by looking at it and saying it's cheap. That that's not that's not the reason, perhaps. No, not at all. I'm trying to see where health care is on the year here. I'm trying to find Ralph knows you well. He said health care looks good, but not a Tony trade. That's Ralph's opinion. Nothing we say here is investment advice. If you're in the chats, you only you know your risk profile. But this is a sector, though, that has its own sort of specifics, including FDA, drug approval, regulation, a lot of that kind of stuff.

23:13So you have to do your homework. What's really interesting, Maggie, is that it is the only sector that is dead flat year to date right now. Wow. That's the only observation I can make. Maybe I'd call up a chart and say, yeah, maybe it gains on other sectors. Maybe it loses versus other sectors, but that's the only way I'm capable of looking at healthcare, unfortunately. You know what, Boris? Because I think there are some specifics to healthcare, Brian and the team, we're gonna look for somebody who looks at healthcare because you may not be the only one with this question. Sure. We certainly know people in our fantastic community.

23:46And if you don't see Ralph in the chat for us, it's because you're not a member. You're on the YouTube chat. We have a lot of smart members. But that's a really interesting, if it's so flat, what's the prospects for that as we look into Q2? We'll do something on that. Or we'll tackle it in the Academy sessions where we have members come on and ask questions to Roger or Andreas or Tony, any of our experts. So we'll pick that up. So stay tuned, Boris, and we'll try to get you that answer. TrillionX asking, how do you explain that analysts keep revising EPS down for the energy sector while WTI broke the 200-day moving average on the upside?

24:23I think you probably love this question, Tony. I do. I do. Why are the analysts revising numbers down for the E &P companies? Because they're getting memos from their economist departments that are saying that we're heading for a recession. And recession, therefore, naturally means demand destruction. So they've all got their little propellers out and the bean counters out. And they're saying, OK, weaker demand based on economic weakness means less purchasing of jet fuel, of gasoline, et cetera, et cetera. Let me adjust the bean counters down for all the energy stocks. And despite the fact that they're near 52-week highs, or near certainly the highs of the move, they too are flat on the year.

25:06So it's easier for them to say, yeah, this sector is going nowhere. We've got economic weakness projected down the pike, which everybody's been wrong on. And that's all the more reason for me to buy energy stocks. I would much rather be buying energy stocks with the street downgrading them, preferably lowering numbers and telling people that they cause zits. But the reality is that's when you want to be buying these, when the street is downgrading them. So that's why I'm even more bullish than I was without the street downgrading them. I had a feeling that would be one of your criteria that you've been looking at.