Will Earnings Cool This Rally? With Dale Pinkert

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1:35Welcome to Real Vision Daily Briefing. It's Monday, July 17, 2023. I'm Ash Bennington. If you saw Real Vision Crypto Daily Briefing today at noon, you get to hear this twice. The good news is it's as true at 4 p.m. as it was at noon today. I started out that show talking about something that I really care a great deal about. That, of course, is Real Vision. You guys know that Real Vision is more than just a job to me. It's a huge part of my life. It's an honor to get to bring you this content. It's an honor to get to chat with you almost every day here. One of the amazing things about Real Vision is that we're constantly forcing ourselves to grow, always experimenting with new things.

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4:31Do check it out. Just go and take a look at it. Figure out what platform, excuse me, what level is right for you. You can get all of the information there on that page. I think you'll find it extremely helpful. Well, with all that said, we get down to brass tacks for today. And the question is this, will earnings cool down this rally? I'm joined today by Dale Pinkert, trading coach at TradingGate Hub. Dale, welcome to RoeVision Daily Briefing. Really great to meet you, Ash, and how fortunate you are to love what you do and where you do it. Congratulations on that. Thanks, Dale. I really am a very lucky man.

5:08I should have said welcome back to Real Vision Daily Briefing. You've been on this show many times before. It's the first time on with me. But it's really a pleasure to have you. Dale, first question, the floor is yours. Tell us, big picture, where you think we are right now in terms of markets and the economy. Thanks, Ash. I decided to start with the dollar because there's a lot of talk. You know, we have the brick currency coming at the end of August where, you know, we have people talking about with good inflation news, the Fed's going to pivot and ease and that's going to work to the detriment of the dollar.

5:42And then if you're a classic technician, you look at the dollar chart right here. You have that big break from 114 to about par in big round numbers and move sideways for many months. and what happened last week classical technicians would call a breakdown and this is how they get some of their lower objectives is you just take 1400 points and the breakdown happens at par 50 and subtract 1400 points from there and you're talking about 85 and a half or so in the dollar index. So that's the way conventional people would look at it. I early on in my career used to listen to a guy named Joe Granville and one of his expressions was, he's not with us anymore, is that is what is most obvious is obviously wrong.

6:36Although I am very surprised at times how the obvious works, but the obvious position for the dollar right now is bearish. People have been bearish since the top. We've been hearing about the death and destruction of the dollar my whole career. And as you can tell, I've been doing it a few years. So the action I'd be looking for would be for it to do a little work here for a couple of weeks. But if you see the red line is the 200-week moving average in the dollar. So I'm going to be getting long against that. That comes in at the 98 level and risk weekly close underneath. So I actually think that there's going to be not just a low and a little bounce, but a pretty good rally.

7:24We really never had a shakeout of the bearishness in the dollar since the top. So I think that people at times, positioning gets too extreme one way. And can you think of one reason yourself, Ash, you've been around markets for a while, why you would want to be long the dollar? Well, you know, it's a great question. I think that the big open question right now is where we're going in terms of central bank policy and the questions that we see in front of us about inflation. So I would kind of flip that one back to you and ask, Dale, what do you think the implications are for where we are right now from inflation?

8:05Obviously, we're down now about a third on CPI, where we were at peak around 3%, still above the 2 % target, but significantly below 9%. What does that mean for the Fed? And what are those then implications for DXY and other metrics of the dollar? I think SPX means more than CPI to the Fed. And people will be surprised that the Fed isn't going to like non-inflationary growth, which we should be embracing with both hands. But the numbers we've been getting last year against comps, it's like a stock. If you had bad earnings for two, three years, just a small beat is a big deal. So the comps of inflation, you know, we're talking about we had$100 oil, we had$12 wheat, every commodity market a year ago was higher.

8:58So to have these comps of 2%, 3 % inflation doesn't mean that we're back to where we were. It means we're not accelerating from that level. And recently, some commodities have started to turn up. And I still think, even though yields could drop a little bit more, like the 10-year to maybe 360, 350, that we'll be looking at new highs in the 10-year yield going into year end. So that's my take on yields. and the Fed is going to go at least once, maybe twice. Let me ask you about this. You make this point, and it's a very interesting one, that the Fed cares more about the S &P 500 than they do about CPI.

9:44Obviously, that's something that, at least in theory, is outside of their statutory mandate. S &P 500 up, call it 18.25%, 18.5 % on the year, red hot relative to historical performance, but you see decelerating inflation. When you see those two things, I guess, in your view, kind of coming into conflict with each other when you have this notion of non-inflationary growth, that would seem to be something that the Fed would like. How do you think about that? How do you weigh those sort of two separate legs? Well, I believe that the Fed is going to induce the recession. They want a recession. And they're going to induce it.

10:27And the market being at these levels gives the Fed room to keep tightening. If the market was under duress, it would be a different story. But with the market not under duress, it gives them room to go ahead and make sure that it's not like the 70s, where we had many inter-cycle peaks of inflation during the 70s before we got to the rip-roaring part. of the inflation cycle in the 70s. So the Fed had to start and stop and start and stop three times before Volcker got very draconian. And I believe Paul has this in his head and doesn't want to repeat that. And he's going to overshoot to that side thinking he could self-correct when things begin to weaken.

11:23In fact, while we're picking up on your history lesson there, One of the things that we hear very often is that this Fed Chair, Jay Powell, has learned the lesson of Arthur Burns, who was involved in that stutter step hike of rates that did not contain inflation in the 1970s. Right. That's right. And that's what he doesn't want to repeat, although his legacy will not be for not being able to contain inflation. His legacy will be a massive deflation and liquidity crisis and risk off in many markets of liquidity. The Fed will cause this liquidity event. And they have room. I think they're going in July.

12:09There are many other factors that could lead to a weakening stock market. Let's see how earnings are, how they come in next year. We had great bank earnings Friday. They sold into them. They're rallying today. But I also think that the dollar could be part of it. And one thing that people are really not taking into consideration, Ash, is Ukraine. Things are escalating. you know, there could be F-15s in that theater. Okay, there are cluster bombs in that theater. There's a counter offensive going on. Things, I don't believe Russia is going to sit there and not escalate. And I'm not sure what they're going to do to escalate, but I hope it's not nuclear.

12:59But it could be. I don't think that the war that everyone just, you know, trade your S &Ps and trade your earnings, an event like that would make me uncomfortable being in Euro. You know, it is on their continent. We're separated by an ocean. So I think the Euro peaks at about 113, 113.50. I'd like to see it pull back because just like the dollar, it's confirming. I think cable peaks at 32 and a half, 133, and we get a big dollar rally that's going to come in around the same time as risk off. What changed last week and the big story in FX rather than the dollar is the action in the end. So we had over an 800 pip decline in a week.

13:50That's big in a week. I remember before we were coming off, I was advising people to short it over 44. Those sales look pretty good here. And people were starting to think that they may have to intervene again when we were trading 145. And everyone was waiting for the BOJ to be checking rates because 149 looked like a layup. And I think what's changing there is it traded pretty much in line with the Nikkei. And I do believe that the market is smelling that they're going to, the Japanese, the BOJ, they're going to come off yield control. And the problem with the yen appreciating, and if you look at it, I'd sell any rip to 141 or so, 142.

14:47I think that we're going to see at least the low 130s. And if we have a quality from the break that we had from 152, you could be talking about a 120 US dollar yen. And the problem with that is it's a carry trade currency. Okay, so how can the market break? A lot of traders use other low interest rate currencies to fund their trade. So as the yen appreciates, and the yen's bouncing a bit today, but if we get another wave down, I think that's going to coincide with a peak in the market as carry trades get more expensive to hold. And you know, there was a time the yen was a safe haven currency. and I think we're going to get a taste of that again.

15:42Hey, Dale, let me pick up on that thought of safe havens. I want to talk a little bit here about gold, particularly in relation to a show on Real Vision Buy Side meets Sell Side, how to trade recession risk. This is Andreas Steno-Larsen chatting with Hugh Hendry, aired July 14th. That is, of course, three days ago. Let's take a look at that show. And then, you know, to quote the gospel of the great, the genius of Stan there are always asset classes in a bull market there's always something going up he'll take you through the 1970s was it defence stocks was it oil stocks was it consumer non-discretionary there's always something maybe it is AI Stan's got an allocation there there'll certainly be a handful of if you're a stock guy There'll be a handful of areas which will continue to rise.

16:42Now, the only concern I have is that, you know, it's like you have to own gold. But I mentioned gold in the sense that I don't like investing in perceived riskless or perceived assets which perform well in recessions before the liquidity event. All right, Dale, talking about safe havens and gold, gold still not above the 2000 mark, something of a psychological level there. I thought Hugh Hendry ended this clip in a very interesting way by saying, essentially, he doesn't like buying perceived riskless assets until after the liquidity event, never before. Interesting point. Yeah, and I agree with you.

17:28And, you know, that liquidity event that he's talking about is probably a stock market correction with a strong dollar risk aversion. I'd like to make the point that the VIX hasn't made a new low since the solstice on June 21st. But gold, you have to be pretty disappointed. Silver was the trade. I got long around 2242, if you follow my work at TradeGateHub.com. And I'm out. So I think Gold could rally to 1970, maybe 2000. But I think that they're between the combination of a dollar rally and a risk-off event that Gold could trade at$1 ,800 or lower. And that's probably when you will be interested in it, you know, maybe even under$1 ,800.

18:23Silver, I think, has a hard time between here and$2 ,530 or so. I don't think the silver squeeze guys are going to be rewarded. But I do think this next break, should it happen, and it's across the board, you know, everything goes up and down together with the dollar. So when the dollar is bad, you can buy the world. And when the dollar turns good, not much else is. Even the kitchen sink will be sold to raise cash. Okay, so the dollar is really the fulcrum of the wheel. So pay attention to that. And the gold shares, you know, we rallied from 30 to 32. We could go 33. I think GDX could trade 27.

19:12And I think it's maybe a month or two away, August, September. More towards September, I think I'll be getting ready to buy these metals and the miners. lower than we are here. Time will tell. Joe, let me bring together two points that you've made on this show, and I'm curious how they hash together in your mind, which is this idea of what's happening in Europe and Ukraine as almost, I mean, I heard you describe it as kind of the ultimate tail risk for these markets. What do you think the implications of the cross currents are between Ukraine and gold? Well, I think that there could be a lot of gold being sold to finance the war.

19:55I mean, Russia has people in Africa that are taking gold for their oil. So, you know, I think that gold is going to be a safe haven. I tie risk more than gold. You would think that if things escalated, gold would go higher but we might get risk off first I really think the biggest tail risk is not Ukraine but China not that they're launching a new currency, the brick new currency backed by gold I hope that that's all they're launching in August if you know what I mean I think I do know what you mean and it's quite ominous why don't you unpack it You know, I think that they're getting ready. And, you know, it's not if, it's when.

20:50And, you know, I mean, when our president is talking about we're low on munitions to justify sending cluster munitions to Ukraine isn't exactly a message of strength that we're sending to the world. We're having all kinds of problems with our military. It's becoming political just to get appointments made. Congress is stopping that. I think that our enemies are looking at what's happening here and think that it might be a good time to go. And probably Russia would also like to see Joe Biden not win another term. So I think that's part of what could have the timing. I think 24 is going to be a real rough year, Ash, in that we're setting the stage the last half of this year for a pretty substantial bear market in equities and huge bull markets and things like grains.

21:56I'm very bullish on the grain market. The Fed can't print corn or beans. And when you talk about gold, beans are protein gold. So I really like the agricultural commodities in the super cycle in the 70s. They were stars. And I think they are too. All you have to do is look at the weather map all across the globe. And I talked about Grande El Nino last time I was here. And beans have really started to rally. Um, Russia is not going to extend the grain deal for, um, Ukrainians to get their wheat out of there. And there aren't large carryovers. Uh, there are years where we have stockpiles. I, I tell everyone go build a silo.

22:50Not a bomb shelter, a silo to store wheat and grain. And I think it could be a great investment and be able to help others when things get lean. Seven years of plenty, seven years of naught. I think we're heading in the second direction. Yeah, it's one of the reasons why it's so great to have folks on who've been watching these markets for as long as you have, Dale. when you talk about the grain super cycle, soft commodity super cycle in the 1970s that was concomitant with the inflation that we saw during that period of time. It's such an interesting take on potentially framing out how this market might shake out in the future.

23:29Dale, we've got about two, three minutes left here before we're going to go to questions. You've got three charts. You call them the good, the bad, and the ugly. NVIDIA AMD Advanced Micro Devices and the Invesco KBW Bank ETF. I'll leave it to you. Which one of those charts is most compelling to you? Well, the comet, the good, and even the good is starting to show signs of not confirming at new highs. Usually the leader making new highs. The market's been made a new high today without NVIDIA. I'm not saying I can't probe that 480 level. Sometimes you could get a fractal up there. But this is a pretty classic inform three drive to a top formation.

24:11And I think that the bulls should be rooting for me to be right so they could buy NVIDIA back into that gap around 320. So I'm looking for a pretty big shakeout. And AMD is not making new highs. The banks still do not look good to me, especially the regionals. And even Apple making new highs today, Microsoft, Amazon, they're all putting in non-confirmation highs. So be careful. It doesn't mean you have to go out and short, but it is a sign to take something off the table up here and book profits. If you're not aggressive, there's nothing wrong with bringing the register when momentum is not confirming price.

24:56Del, talking about Apple, first question comes to us from Luke from the Real Vision website. He says, Coach, love your thoughts on Apple, price targets and time frame. Well, we're making new highs here. And I think that during the kind of correction that I'm looking for, first order of business would be to close under 180 and then 170. But I could make a case in a bear market for 120. Next question from Robert from the Real Vision website. Dale, great call, he says, on USDJPY. You've called a peak at 140 to 143 and then a short, which has worked extremely well, he says. Do you see a continuation of the slide here?

25:39And what do you make of euro-US dollar strength? Okay, yes, I think that the yen is a short on strength. 141 is a level I'll be looking at. That's about halfway back from a recent high of 45 to 38. Euro should pull back a little bit here and then make an attempt at new highs. I don't have any divergences there, but I think the euro is going to peak about 113 to 114 and then trade back near parity. Here's a question from TrillionXMacro from YouTube. I think it's a question you've partially answered, but I'm going to throw it out anyway because I think it's a good one. Dale, do you think we are in the middle of a melt-up of the S &P 500 and that it is part of financial repression to keep long-term yield artificially low?

26:29It's definitely a melt-up. And whether it's financial repression, I think the Fed was going to answer your question in a few weeks. So in melt-ups, you never know how wide the rubber band can stretch. but I'd be surprised to see S &Ps close over 4 ,600. If that's the case, then okay, 5 ,400 new all-time highs. This is Custer's last stand for the bears. Right in here. Nelson Babe on YouTube, do you think the BOJ will abandon your yield curve control given your USDJPY view? If not, how do they balance the two amid inflation above the target? I think they're going to make the adjustment and abandon yield control, tweak it.

27:24Next question comes to us from SBD758 from YouTube. Does Dale believe in an H2 oil rally? You're talking about second half. WTI on my screen right now trading a little bit, a few clicks north of$74. No, I could see, you know,$79, maybe mid-80s. but I don't think that was the major bottom in oil. I think it'll get caught up in risk off. I think China's still weak. You saw the numbers here. Copper under pressure today. The China reopening needs to be restarted. They need to do more aggressive fiscal stimulus here. And I'm not confident in China. And that's why I'm most worried about what they do.

28:13because if the economy is bad, that's when dictators wag the tail and get people's attention on something like an enemy or a military geopolitical win because they can't do it economically. Yeah, sobering words. Dale, we've covered a tremendous amount of ground here, talked about a lot of different areas, answered a lot of questions. I wanted to give you the opportunity to stitch it all together. Final thoughts, key takeaways that you'd like to leave our viewers and listeners with. Don't get too bear it up on the dollar down here. I'm not saying that the bears can't be right. But if you don't like to bottom pick a market, you can just sit and wait for closes, not interday trades, back above par 50, which will make this whole breakdown turn out to be a breakout failure.

29:06You don't have to try and catch a knife like I do. Or, you know, you'll look like me when you're 40. So you can just wait for the market to negate the recent negative action by getting back above par and a half. It's just my nature to anticipate it and look for entries to do so before it happens. Dale, great show. I really enjoyed this conversation. You are a man who is not afraid to make a call. Really appreciate that. Deeply respect it. Thank you so much for joining us. Really great meeting you, Ash. Thank you. And congratulations on I've watched Real Vision from the beginning. Much luck and success with the new website.

29:50And what a great idea for people to be able to interact with each other. And because it's all about a community and you have to talk to each other to have a community. But I don't envy anyone who has to moderate it. you said you said that so well i feel like i'm about to be out of a job that was perfect well you'll probably be moderating it so uh anyway ash uh really nice meeting you thanks for inviting me well thanks for joining us and thank you all for listening or watching the show real vision daily briefing returns tomorrow same time 4 p.m eastern time have a great afternoon everybody rick rule rick rule is a favorite of the real vision community if you'd like to meet Rick and get a masterclass from the master himself, you'll want to head to the Rick Rules Symposium on Natural Resource Investing in Florida July 23 to 27.