Episode 218: Broad Market

In this week’s episode, David and Ian discuss the market rebound above 5400, the long-term environment, and the concept of a “broad market”. Is Growth vs. Value the same for all pieces of the market? What have been the ripple effects of a weak dollar? Is “insider” selling something to concern yourself about?

Transcript

david_11_08-16-2024_111227 0:27

Welcome back to the Weekly Trend Podcast. Today is Friday, August 16th, 2024., S& P 500 currently sitting at 55. 49. I'm David Zierling. I'm here with Ian McMillan. I paused Ian because I was going to throw a nickname, but I thought better of it. It's good to be back on here with you.

Ian McMillan 0:47

Was it an inappropriate nickname?

david_11_08-16-2024_111227 0:49

no, no, I don't mean it from like, it was going to be derogatory. It's just, I had like three different things going through my head and I'm like, I already stuttered over S& P 500. I'm feeling a little underneath the weather. It didn't know if I should throw something out out there. So sorry, no nickname this week. I think, I think everybody will get over

Ian McMillan 1:07

I mean, under the weather. Hey, still got, I mean, a big week for you. Get your second oldest moved in

david_11_08-16-2024_111227 1:16

Yeah. Indic off to college. Off to college.

Ian McMillan 1:19

two out, two still in the nest.

david_11_08-16-2024_111227 1:21

Mm hmm.

Ian McMillan 1:23

That's big. That's

david_11_08-16-2024_111227 1:23

You're gonna love it, Ian.

Ian McMillan 1:24

rats.

david_11_08-16-2024_111227 1:25

I know, I know you just celebrated a birthday in your, in your

Ian McMillan 1:29

Two, yeah, we had five in one. Yeah.

david_11_08-16-2024_111227 1:32

yeah, just crazy. Enjoy every moment, man. It goes

Ian McMillan 1:35

Connor starts big boy school on Tuesday,

david_11_08-16-2024_111227 1:39

Woo wee!

Ian McMillan 1:40

going to kindergarten.

david_11_08-16-2024_111227 1:41

Oh, it's gonna

Ian McMillan 1:42

yeah, today is his last day of daycare. So

david_11_08-16-2024_111227 1:46

Yeah. And you know what's crazy, Ian? It's like, growing up as a dad, and that's an appropriate phrase, I think, growing up as a dad.

Ian McMillan 1:55

very

david_11_08-16-2024_111227 1:55

That, that, there's, there's phases where I'm like, You know, your kids are young, they'll sit on, you know, sit with you by the couch, you snuggle up, you might read a book you might play a game together, you go in the backyard, you, you kiss them goodnight, and tuck them in, and you're like, man, I never want this phase to end, but I'm telling you, like, the next, the next Phases that are coming. They're just different chapters. Like that chapter is amazing. The chapter you're in right now is an amazing chapter of the book, but then the next chapters that are coming. Are just going to be as amazing. Like the inquisitive adult conversations about how things work and how do this, what's, what do you think about this relationship and life you're just going to cherish every bit in this college phase for me is while I'll miss my daughter, of course. I'm so excited for her to be like, starting to really gain that independence and I don't know, like there, every phase, it's almost as if God made parenthood to be able to enjoy these different phases. Cause I no longer have that sense of

Ian McMillan 3:02

And she'll, and she'll be an athlete in college, which is a, which is a totally like different added, you know, kind of. Perspective and thing to live through for her, for y'all.

david_11_08-16-2024_111227 3:17

Yup. For sure. And there's all sorts of things that come with that, right? Your number one priority at school is to get good grades. And then I would argue, meet new people and then sports. And so it'll be interesting. You know, she's kind of the top dog for her team in high school. It'd be interesting to see how it shakes out in college, but I'm, I'm proud of her. She's made it her sport and we'll see what the Lord does with it. He's definitely given her gifts and. Now you just kind of hand it over and you kind of watch and you love her regardless of the outcome because she's your daughter and she's a redeemed child of God. But all I'm here to say is like, it's all there. I'm sure there's phases you're in right now where you're like, man, I don't want this to change. But when it does change, you're like, I like this new chapter. I don't, you know, like some around sixth grade, fifth grade, somewhere in there, I would say, you know, like 10 year old is huge. Then like this middle school age is huge.

Ian McMillan 4:14

Oh, we had a, we had a procedure done. So Connor will stay five forever. It's perfect. Also, also the big question is I mean, is your daughter aware that we're above 5, 400?

david_11_08-16-2024_111227 4:29

Yeah, she actually,

Ian McMillan 4:30

She brought it up, didn't she?

david_11_08-16-2024_111227 4:32

yeah, she, she, when we were saying our goodbyes.

Ian McMillan 4:34

knew she brought it up. She's like, dad, you're still bullish. Right. And I was like, yeah, I guess I'm bullish again.

david_11_08-16-2024_111227 4:39

Exactly. Yeah. She was just like, hey, you know, I know we're going to miss our time together at home, but if we had to exchange that for 5, 400, we would do it. Right.

Ian McMillan 4:51

And you're, and you both nodded in silence.

david_11_08-16-2024_111227 4:53

Yep. Well,

Ian McMillan 4:54

tear, a little tear fell from your eye and you're like, she

david_11_08-16-2024_111227 4:57

yeah, she actually sat me in my place. Ava said, you know, there's rising 200 day moving averages everywhere.

Ian McMillan 5:03

and you're like, you're right. You're right. I shouldn't, I shouldn't be stressed.

david_11_08-16-2024_111227 5:06

Yeah. Thank you for

Ian McMillan 5:08

I should have expected that. I guess we're still in a V bottom craze because again, we're, we're not to new all time highs yet. So it's kind of hard to call this. bottom. But yeah, again, I said, we're back above, we're back above the island.

david_11_08-16-2024_111227 5:26

Yeah. Dial in there. 5,

Ian McMillan 5:27

short, intermediate, long term. I mean, long term, like you said, rising 200 day, we're still above 4, 800, which we never even gotten close to yet. I want to, I don't want to jinx that. But a harsh drop, especially going, you know, two Fridays ago, two Mondays ago. And now we've had a, what, six, we're on, are we going to have a seven day winning streak here? Seven straight green candles. Oh,

david_11_08-16-2024_111227 5:57

And I mean, from, from the July high to the mid August low, we're talking about almost 10%, you know, just shy of it on using the S and P 500. Again, something we've talked about on this podcast before is that's perfectly normal behavior. And it's, it's not like we're out of the woods in the sense of, We haven't recorded a new higher high, but we definitely, we definitely got a price reaction here and it's all within, it's perfectly normal with the context of an uptrend markets consistently have drawdowns during the year of five to 10 percent frequently, and sometimes as much as 15%. And so volatility is the premium we pay to be involved with an uptrend when we have uptrending markets. And you have an average return of a market that's nine percent, but your average drawdown to the year is minus ten That's a painful exchange, right? You have to sit through Minus ten in order to earn plus nine by the end and august is a perfect example of this and I will say

Ian McMillan 7:05

that part hurts though.

david_11_08-16-2024_111227 7:07

Yeah, it does. It does. Especially if you think in nominal terms. You know, if you think in terms of dollar terms rather than percentage terms, 10 percent for some is way more painful than others.

Ian McMillan 7:18

Nominal terms is a big I think that's a big behavioral finance. We talk about biases and things, but dollar terms on a statement, you know, logging into your account have a massive impact on psychology

david_11_08-16-2024_111227 7:38

Absolutely.

Ian McMillan 7:39

yeah, losing 10 percent in your twenties is, you know, a bigger deal than losing 10 percent in your sixties.

david_11_08-16-2024_111227 7:50

Ha, ha, ha. It can be.

Ian McMillan 7:53

It can

david_11_08-16-2024_111227 7:53

can be at the same time. I would say there's 60 year olds that deal with a balance size that a 10 percent move In dollar terms is larger than any one year of salary they ever earned

Ian McMillan 8:05

So, and, and there's where the nominal thing becomes. So tough

david_11_08-16-2024_111227 8:11

exactly It's an education process. It's it's living a percentage life rather than a nominal life

Ian McMillan 8:17

big big numbers

david_11_08-16-2024_111227 8:20

Yeah,

Ian McMillan 8:20

and you want to put them into the context of gosh. Well, my second job I was making 30, 000 and now you're losing 120, 000 on a common market correction and an uptrend. That is a huge, that can take a lot of getting used to. Yeah,

david_11_08-16-2024_111227 8:43

saying i'm not here to say that that feeling isn't natural, here to restate the environment from a different perspective, right? How many times in life is a different perspective provided to us and you have that aha moment? In investing, the nominal to percentage viewpoint is that aha moment of, oh, this is perfectly normal because we're thinking, we need to be thinking about this in percentage terms.

Ian McMillan 9:12

I've been through this before. I've been through this multiple times. My 401k has been through this. I've been through this with my advisor. This is no different than, you know, and, and great for you that your wealth has grown to that amount, that it is a, that it is kind of shocking. There, and I think it's, like you said, I think the best To view it is, it is super natural. Dollar amounts are dollar amounts. And that it's, it can be intimidating.

david_11_08-16-2024_111227 9:46

It can be, it can be, but it, but once we normalize everything, once we normalize the price behavior of a market using percentage terms, using logarithmic rather than arithmetic Then, then we get an understanding of, Oh, this is normal type turbulence.

Ian McMillan 10:07

Mm-Hmm. I lost, I did lose X on this correction, but I actually Oh wow. I still outperformed the s and p

david_11_08-16-2024_111227 10:14

right, correct. You know, those are that, and that's, these are important perspectives to have. And it's also hard, right? If you don't use technical analysis, the study of supply and demand and use charts, that the minus 10 percent that happened in the first part of August is normal in an uptrend, and I want to stress that we're in an uptrend. Versus the minus 10 percent that happens once a downtrend has been established.

Ian McMillan 10:44

Yeah. In August, 2022.

david_11_08-16-2024_111227 10:47

Right, correct. Different environment, different environment, like volatility to the downside. We should absolutely respect that. We should absolutely have a process for that. It's why we use tools such as the supporter of this podcast, the Adaptive Select ETF, which uses trend identification regimes to

Ian McMillan 11:06

Good for them.

david_11_08-16-2024_111227 11:07

trends. And the Adaptive Select, say that, say it again.

Ian McMillan 11:11

something.

david_11_08-16-2024_111227 11:12

Yeah, and so the Adaptive Select ETF, which is listed on the NYSE under ticker ADPV, helps investors access two of the most prevalent factors in markets, momentum and relative strength using proprietary identification methods. The Adaptive Select ETF attempts to own the strongest 25 large cap stocks when the market is in an uptrend. And since not all market environments are the same, there's Adaptive Select seeks to prevent extended declines by moving short term Treasury bills and cash during long term market downtrends. Investors can find out more, including how to invest in ADPV, by visiting ADPVETF. com or calling 1 833 880 5200. Investing involves risk, including possible loss of principal, distributed by Quasar Distributors LLC. And so here we have an uptrend that's on our hands. It seems to be reconfirming itself. Again, you never know the end of a trend in real time.

Ian McMillan 12:09

You don't,

david_11_08-16-2024_111227 12:10

the hard part about markets is they never ring the bell. I wish they did, Ian.

Ian McMillan 12:14

golly, I would love that. I would, I'd be filthy rich if they did. But yeah, we broke below 5, 400. I think that was a pretty fair line in the sand. We talked about that with clients, I believe in the client newsletter. And you draw your line and you, and it is what it is. And so you say, okay, you know, if we're going to be back above 5, 400, I definitely want to be involved again. We did that on, I think it was Tuesday. Okay. Tuesday, we recapture 4, 400. And so, I love it because it was a decision that was made two weeks ago, Dave, that's why I love it.

david_11_08-16-2024_111227 12:56

It's, it's kind of like baseball, right? You're sitting 2 0, he's throwing you two balls. If he throws one in your favorite spot, you swing. It's a decision that's made pre pitch.

Ian McMillan 13:08

It is. And you live with it. Yeah,

david_11_08-16-2024_111227 13:11

yeah, if you're sitting under center as a quarterback and you've got third and three, it's a run play, but if you got linebackers sitting in the A and B gaps. Okay, maybe I'm just gonna call an audible here and just throw a quickie to the tight end. No problem So like these are rules that are set in advance and so 5400 being one of those rules We can use price to our advantage and identify. Okay, maybe sellers don't have control of this market if we're back above 5400 That's kind of what you're saying.

Ian McMillan 13:40

no. And again, another aggressive VBOT. I mean, similar to what we saw in October, 2023 like Halloween. Very strong move. Now we were, we actually did dip below a 200 day there for a bit. Same with what we saw in March, 2023 and what we saw, I mean, obviously we talk about COVID, but the the demand, really, I mean, we're kind of going on two years here of demand really stepping in pretty quickly, pretty aggressively every time we get a sell off,

david_11_08-16-2024_111227 14:20

in it's it's that's a great point because This is a really important time to highlight for our listeners that we're talking about Economics 101, Supply and Demand. It's the auctioning process, right? So if, if I can, I'm going to do my best to paint a picture here, Ian, bear with me. I'm not giving nicknames today, so I'm going to, I'm going to tell stories. So, you're at a farmer's market. You're selling watermelon. know I was going to use, you know I was going to use watermelon, because that's, that's,

Ian McMillan 14:48

I love this.

david_11_08-16-2024_111227 14:49

Yeah, it's what it's what you got you start selling them for 10 bucks a piece

Ian McMillan 14:54

Okay. Right.

david_11_08-16-2024_111227 14:55

Ton of demand you're you're running low you start raising the price to 50 And there's some demand there, but you're like, oh i'm i'm not selling as many the crowd's kind of dissipating So i'm going to drop it to 20 and the crowd rushes back We continue to see the buyers show up earlier and earlier at higher prices for stocks

Ian McMillan 15:15

Higher lows, yeah.

david_11_08-16-2024_111227 15:17

That's, I mean, and so, as an example, from the, you call it late October lows, through the late July, so late October 23, to late, or mid July 2024. When we look at the exchange between buyers and sellers, what we would call a volume profile and the point of control, we call this the point of control from that, in that timeframe, the point of control was at 45, 66. So the majority of volume interaction on price was at 45, 66,

Ian McMillan 15:53

that. I see that.

david_11_08-16-2024_111227 15:55

because of what's just taken place in August, we've now pulled up the entire auction process. Where the point of control is now at 52, 52 50 ish. So the, the market,

Ian McMillan 16:09

to pay more.

david_11_08-16-2024_111227 16:10

yes, the market participants have confirmed that they are willing to pay more for stocks using that S and P 500. And so here this August, while. Painful on nominal terms normal in percentage terms is also great for confirming Yeah, the buyers were real the buyers were real before

Ian McMillan 16:32

technically, I think, and this is according to, I think Dietrich says we average 1. 1, 10 percent corrections a year. We didn't even, we set from intraday high to intraday low. I mean, we did, we got close. I mean, it's yeah,

david_11_08-16-2024_111227 16:54

10 percent

Ian McMillan 16:55

what no we did it. It was nine spots 74

david_11_08-16-2024_111227 17:00

Yeah,

Ian McMillan 17:00

yeah use a buffer there or whatever, but we didn't I mean we technically Technically didn't even get a 10 percent So this is not gonna show up on those like yes strong man. It's a strong market out there it is

david_11_08-16-2024_111227 17:16

And, and so we know that August and September are seasonally weak. We know that we have a presidential race that is a non traditional approach. We just had the price response that we had. You and I are not saying it's smooth sailing from here.

Ian McMillan 17:37

And, and to, I'll put an asterisk, NASDAQ had basically 16%. Correction.

david_11_08-16-2024_111227 17:44

And, and so while we've made a nice recovery, we're not at all time highs. So we're at an in between stage and we could be building out a range. So it's not like volatility is over. We're not here saying, well, the, you know, the coast is clear, like it's smooth sailing. We don't have to worry about anything. There could still be some volatility in here. There could still be a range that's built to confirm this auctioning process. But the event that just took place in beginning of August was actually very beneficial from the market, from a structural standpoint. Right. On proving where the buyers exist and here we have proof that there seems to be a point of control or value near 5250. That's worth that's notable. We have a moving average using S& P futures. That's near 5100. We have prior highs that sit at. 5320. We have a prior low from April that sits at 5, 000. Now we're starting to really define the levels of engagement for the remainder of the year.

Ian McMillan 18:49

We

david_11_08-16-2024_111227 18:49

that's great. Like, I don't know how you do that as a fundamentalist. I don't know how you do that with GDP. I don't know how you do that with an earnings report. I don't know how you do that with a balance

Ian McMillan 18:57

now you do with the Schiller CAPE, Schiller, every time the Schiller CAPE ratio gets. You know 15 16 that's when you buy now dave There's you know, you might miss out on a 200 run in the smp But we want to get good value We want to bust when the when the shiller cape is low

david_11_08-16-2024_111227 19:18

Oh, that's so funny.

Ian McMillan 19:20

Or all these things price to book price all this stuff who cares?

david_11_08-16-2024_111227 19:25

right. And, and, and, and it's. It's a, it's this balancing act of delivery when we

Ian McMillan 19:31

I've never had a, I've never had a client that asked me, why are we so aggressively long when the overall market PE ratio is high, so high. Never had that happen.

david_11_08-16-2024_111227 19:45

Yeah. And, and I would say too that when you look at historical price levels of the s and p 500 and its associated price to earnings, its PE ratio. If you were to use the rule of buy when the PE is low and sell when it is high, you would've never gotten back in the market in oh 8, 0 0 9, 0 9

Ian McMillan 20:10

Oh, I believe that. Yeah.

david_11_08-16-2024_111227 20:12

Because your P. E. ratios were all out of whack and same thing on the flip side, you might have been out in 06 and owned all the way through 08. It it's, you just can't use fundamentals in a vacuum. And the interesting thing that people seem to forget is that price includes the opinion on P E from investors. Price includes the opinion on GDP, CPI, all your letter soup that you can come up with on fundamental metrics, the opinion on those things by the smartest people on the planet, managing billions and trillions of dollars is included in price. And even the irrational ones, the ones who sell because they don't like the taste of something, or they they're selling it because they just want to remodel their kitchen, which that's not a fundamental opinion. That's just, I need cash.

Ian McMillan 21:09

when insiders and c suite executives sell stock, it's only because they They clearly know that the stock has gone too far. It's the kid could never be because they have a personal life and they have things that they pay for.

david_11_08-16-2024_111227 21:25

Yeah. A C suite executive could never possibly sell shares because they just bought a lake house.

Ian McMillan 21:31

Nope, no. It's because

david_11_08-16-2024_111227 21:33

possibly.

Ian McMillan 21:34

they know earnings are going down. That's why. And whenever they sell on people, it's always like 1 percent of their total like shareholding.

david_11_08-16-2024_111227 21:44

Right.

Ian McMillan 21:44

Oh, my kid had tuition due. Cause it's August.

david_11_08-16-2024_111227 21:48

Yep.

Ian McMillan 21:48

Like, I mean, The things that people come up with to sell content or write an article or it's all, as you said, it's all taken care of. And when there's trillions of dollars thrown around, I mean hourly at this point, probably I mean, all of that gets scooped in and it is a, it is a needle drop, but are, you know, I just, a drop in the bucket and people want to make something out of it. It's.

david_11_08-16-2024_111227 22:22

And everything, everything's in context with that one. Is the CEO in Twilight Years? Is the CEO new? Is the CEO just unlocked a share value because of performance?

Ian McMillan 22:38

it a three year lockup and he had to check eight boxes and he checked all of them and yeah, maybe he deserves to have a 10 million to exercise his options of 10 million payout and buy a third, like it is what it is.

david_11_08-16-2024_111227 22:55

It is. And to me, the whole like insider selling, I'd be more, I'm, I'm, I'm speaking off the cuff here, but I, I'd be more inclined to value when is the insider buying?

Ian McMillan 23:10

And I think all star charts does a good job with that.

david_11_08-16-2024_111227 23:13

Yeah. Like if you, if, if you're, if you have discretionary income as a CEO and you're buying, you know, basically invigorating the credit stance of the company, Because you believe in it, that speaks more volumes to when you're selling. Cause like you said, selling could be that's part of your comp there's compensation packages out there where you're getting diminished, de minimis amounts of salary. And the majority of your comp is shares or like you said, life events, or you've created, you've unlocked a certain amount because you've created so much shareholder value. I get the insider selling. I get why it's sexy to talk about, but insider buying, I think that's more valuable to me

Ian McMillan 23:57

I agree. Especially when it's a founder owned company.

david_11_08-16-2024_111227 24:00

for sure. Yeah,

Ian McMillan 24:02

I think there's a good, there's a, there's an ETF out there that only it owns. It owns companies that are still like either the founder is still the CEO or owns a majority stake.

david_11_08-16-2024_111227 24:15

Oh, okay.

Ian McMillan 24:17

And I think it's done. I think it's outperformed the market.

david_11_08-16-2024_111227 24:21

Yeah. I mean,

Ian McMillan 24:22

Which I believe, I mean, I, I get that.

david_11_08-16-2024_111227 24:25

wonder what its ticker is

Ian McMillan 24:26

We'll have to look it up on Market Call.

david_11_08-16-2024_111227 24:29

Yeah. I

Ian McMillan 24:30

So let me get your opinion. We've had a lot of market volatility. We'll use it. We'll use that simple phrase, a lot of shakeouts, a lot of, you know, even in relationships. So we can talk about absolute charts, but even in relative charts, we've had some big moves. So I'm big on, you know, I feel like for years I've, I've really started with the precipice of growth versus value.

david_11_08-16-2024_111227 24:58

Hmm.

Ian McMillan 24:58

So, right. And cause you can really, in a, in a top down approach, you can, for me, it starts with growth versus value. I'm not saying it's always that simple. I'm not saying there's times where technology and financials aren't both outperforming or underperforming or whatever, but so do you have a change of opinion based on the last, we'll call it four weeks? And coming off a pretty heavy growth period, I would say. I think that's a fair statement to make. Okay.

david_11_08-16-2024_111227 25:30

I'm I'm gonna, what I'm going to say next probably is going to sound like a cop out. But I'll put it this way, I think there's something developing that's a both and. So, I'll use RPG versus RPV. So,

Ian McMillan 25:49

Your growth per value.

david_11_08-16-2024_111227 25:51

pure value. So, false breakout. In June Slash july where we had this really nice breakout It looked like it was just going to be a growth train And again, you can't take all these things in a vacuum, right? Because you could use spy g versus spy v on those type of things. However Some other proxies that you could use for growth versus value and I'll have to see whether you agree with this is if I take Tech versus financials, XLK versus XLF, right? That we could argue that that's a growth versus value proxy.

Ian McMillan 26:26

Sure.

david_11_08-16-2024_111227 26:27

We're we're still sitting in a range. That goes back to mid 2023 in that relationship. And then when you do the homework, which our adaptive team does so well, you and Kevin and Dan on going through each, what we call workbooks and digging into each sector on a weekly basis and digging down into what's happening in that sector. It's really interesting to see that while tech hasn't kicked the bucket per se, meaning like it's done and there still could be some opportunity there, that there is, there are things percolating underneath the surface in something like financials. And so I'm giving a, a, a, a long winded potentially could be viewed as a cop out statement where It's not like growth is over, but there might be some really tremendous opportunities in value.

Ian McMillan 27:23

So I think that is a great summary and two things I would like to add is So we talked about SPYG, SPYV. So that's going to get your large cap view. So if we look at mid cap valve or mid cap growth versus mid cap value, MDYG versus MDYV never got a breakout. And if we look at small cap growth first value, so that's IWO versus IWN.

david_11_08-16-2024_111227 27:58

I like this.

Ian McMillan 27:59

Never got a breakout. So it was there, it was there in the year, in your mag seven, the growth thing was there. It never really appeared any, and I mean, really like, let's look at small cap growth, small cap value. I mean, we're flat since April, 2023, technically small cap values outperformed since the broad market lows. I

david_11_08-16-2024_111227 28:25

right.

Ian McMillan 28:26

it's. So yeah, the growth versus value, I think you put it a great, it really depends what you're looking at. And if you're looking at outside of large cap growth really hasn't advanced as far as you think it has

david_11_08-16-2024_111227 28:45

Yeah. Outside the mag seven.

Ian McMillan 28:47

outside the max seven. And I think it goes back to what we've talked about for a few weeks. Financials have really held up well and they're again the top sector today But still above it's a flat relative to under day. We are still above a 200 day relative to under day They've held up. Well compared to other quote unquote Value they've held up better than materials held up better than industrials You Energy. So you're, I think, I think financials are kind of your canary in the coal mine, so to speak, of there being some potential second half strength and value.

david_11_08-16-2024_111227 29:33

Yeah, for sure. I mean, the it's a fancy word market there. You could argue there's some bifurcation. You, you have your, you still have your magnificent seven, although they've pulled back and some of those on a relative basis have, you know, Broken down sounds a little harsh, but they're below some important horizontal levels. Then you have your rest of tech, and then you compare that versus your value areas, and then you include things like biotech. It's, it's not, it's what I would call outside the index level. Meaning there's, there's opportunity. That's happening outside the index level. And that's good. These are, that's a good characteristic to have, right? Cause your, your index is basic, your average return. You have your extremes to the positive extremes, to the negative, the things that sit in between, and that gives you your average, there's. Opportunity that's happening in areas. So you bring up like small cap financials or like financials in general, how bad is the market? How bad is the market of financials are doing fine? How bad is the market? If biotech, one of the smaller areas of the market is doing fine. So that's the type of analysis that we have to do as, as market historians and market analysts is where is the strength and we're seeing strength in areas that, Aren't pre events. They aren't like these things that you go. I think we got some trouble here Right if we were selling off financials if we were if we were de risking and getting out of biotechs That would be a little bit. Okay. We got some issues here. And maybe that's the case six to 12 months from now I don't know but it isn't right now and so I think we're both saying the same thing which is there's some things here happening in value And especially if we're talking about financials, if they're doing well, how could, how could the rest of the market be that much trouble?

Ian McMillan 31:24

And I want them to, I want, I'm ready for value. I think there's a lot of people that like some Some things to choose from not that breadth hasn't gotten better. It's certainly better than it this year than it was in 2013 But you know we talked about s You know large cap growth and large cap value and mid cap growth and mid cap value and small cap growth and small cap value now the other side of that is if you're gonna, you know, whether this is personally or professionally if your Benchmark is the S& P. Well, then I mean You Small cap value and small cap growth being in line is cool. But if small cap or if large cap growth and large cap value is going to be your big mover, right? That's going to have a way bigger impact on your benchmark or quote unquote what the broad market is doing which maybe we should change. Maybe we should lead the charge, Dave, on. The concept of the broad market

david_11_08-16-2024_111227 32:32

Okay. I'm listening.

Ian McMillan 32:34

we talk about the broad market, but it's really not The broad market

david_11_08-16-2024_111227 32:42

Oh, okay. I think I know where you're going with this.

Ian McMillan 32:46

and so right you're held accountable. I think all people should be held accountable There's some type of benchmark, but the broad market Has set like over the last decade has just evolved into the S and P.

david_11_08-16-2024_111227 33:02

Well, yes. Yeah. I think I know where you're going with this. That's the popular benchmark.

Ian McMillan 33:06

and it's, I'm not saying it's not wrong. I'm not saying it's not a fair, I'm not saying it's not fair, but is the actual term broad market applicable to the S and P 500. Cap.

david_11_08-16-2024_111227 33:24

Yeah. I think, I think that's fair because you're, you're simply seeing the SOP 500 as we know it. Which is a cap weighted version, which is a momentum product. So the larger get larger. Whereas if you look at like an equal weight and that's only, that's still equal weight as a P 500, still only 500 stocks,

Ian McMillan 33:44

or yeah, and you move yourself down the the market cap spectrum

david_11_08-16-2024_111227 33:48

right?

Ian McMillan 33:48

and you're like, yeah value actually When we look at the other 4500s when we look at the other 70 80 percent the market mark values out of well when we look but then there's this tiny little 500 out of let's call it 5, 000. I don't think we're still we used to have the Wilshire 5, 000 I don't think we have 5, 000 still Maybe like in the mid four thousands.

david_11_08-16-2024_111227 34:16

Yeah. We're, we're off the 5, 000 mark, which that that's a whole nother discussion. Probably it's a whole nother podcast about credit markets and sentiment,

Ian McMillan 34:25

yeah,

david_11_08-16-2024_111227 34:27

you know, like,

Ian McMillan 34:27

a lot fewer stocks than we had 25 years ago. Tell you

david_11_08-16-2024_111227 34:31

so right now the wheelchair 5, 000 is 3, 403 stocks currently.

Ian McMillan 34:36

there you go.

david_11_08-16-2024_111227 34:37

And it used to be over 5, 000. Now that again, that's a sentiment statement based on how do we raise capital as a company? Are we going to the capital markets or are we raising bonds? Are we doing a bond placement? So

Ian McMillan 34:53

Or private debt, right? We can just give a private equity company.

david_11_08-16-2024_111227 34:56

Yeah. Yep. Which that's probably all changing. I mean, my, my guess is if you, if you're rising rate environment, capital markets become a lot more appealing environment to raise capital. Go ahead down your, your,

Ian McMillan 35:07

Well, it's just not, we talk about, we use the N 500 stock sounds, it's certainly better than 30 and the Dow, and it's certainly better than 100. And then NASDAQ, which we know is. Heavy in tech

david_11_08-16-2024_111227 35:20

Right.

Ian McMillan 35:21

and But it's and well small caps or there's two. Yeah, there's two thousand small caps, but they're small, you know screw so we talked we talked about this 500 stocks being the broad market and speaking. It's the furthest thing. It's ever. It's the furthest period it's ever been from representing a broad market

david_11_08-16-2024_111227 35:42

Right. Yes, correct. Because it's so, tilted towards large cap and momentum, right, the big get bigger,

Ian McMillan 35:49

Momentum. Yeah,

david_11_08-16-2024_111227 35:50

and therefore it's tilted a certain direction that you can often lose sight that there might be opportunity on the other side of that spectrum. And when you look at, and to your point, I think what you're slamming home here is you look at something like RSP, equal weight, S& P 500, or even something like EQAL, equal weight. Russell 1000. And again, we're not even talking about 3000 stocks. We're just talking about those. There's still opportunity here. We're talking about two measurements where we just cleared all time highs, have staged a sideways range and a retest in something like RSP, equal weight S& P, and EQAL, which still hasn't cleared all time highs yet, that the other stocks in the universe outside the S& P 500 or are not captured the same way. Representatively, there's tremendous opportunity out there.

Ian McMillan 36:44

there is

david_11_08-16-2024_111227 36:46

that a fair statement to what you're saying?

Ian McMillan 36:49

100 percent agree There's opportunity out there, but this microcosm of, you know, and it'll be, I mean, we're going to have to unravel what is, I'll say post, I say this, I'd say the growth thing really kicked in and you can pull up a chart and look at this, pull up an SPYG, SPYV chart and long term, long term, pull up a weekly chart for you at home. And so I'd say for sure post I mean, financial value just got crushed in 08, 09 cause of the housing and financials, but I'd even say, I'd say 2015, 2016 is when the, and maybe a better example of this would be tech versus SP, SPX XLK versus SPX, probably a better view of what the point I'm trying to make here. But 2016 2017, I mean, we're, we're really into 7, 8 years here of extreme growth outperformance. Extreme growth outperformance. I mean, just look at the right side of this relationship.

david_11_08-16-2024_111227 38:02

Right. Yep.

Ian McMillan 38:03

It's gone down, it's gone up, it's quitting out. 2000 through 03 moved fast. But we've rebuilt the entire thing. And it's just, it's gonna be a weird flip if we do get away. And I think you're starting to see the cracks. I start, you're seeing your Amazons underperform. You're seeing your, you know, I shouldn't put Microsoft in this category. You're seeing your Apples underperform. We can talk about Apple, but we want to talk about Apple on over the last four years. Not that, I mean, on a relative basis, you could have been in the S and S P Y and done just as well. And so you're starting to kind of see this slow down. And I mean, God forbid we move back to buying regional banks, Dave

david_11_08-16-2024_111227 38:58

Well, and it's an interesting, everything you're, you're, you're highlighting is so interesting because you're talking about these household names of Apple, Google, Microsoft, Amazon, Meta, Netflix, the one in there that I I still am not sure is a household name. That was a little bit of a clue during this pullback, the things were still

Ian McMillan 39:23

know what you're going to say. I know what you're going to say. It starts with an it, doesn't it? Yep. I knew it. Yep. Semis

david_11_08-16-2024_111227 39:30

when you look at like, okay, what, so when you have a market cycle advance as technicians, we should be looking at, okay, what led us out of that bottom in late 22, early 23. Well, the video is one Eli Lilly was another one. There's several others that we monitor internally that I'm not going to get into. But when you look at the video, Eli Lilly still held up really well during this correction. And that's your clue. Like is. Is this cycle like over now? We're talking about two different durations here because it is important to highlight what you're highlighting Which is apple which has been a darling since this the secular bottom way back Like i'm not talking about 22 23 i'm talking Well over a decade apple's been the leader that that's now moving sideways Is information worth paying attention to? Same thing with Microsoft and Google and Meta and Amazon, right? Because Amazon is still on a relevant basis, not performing all that well, but you have an area like semiconductors, which is doing well. And this gets back to that bifurcation, that differentiation of what's going on within the market. So your leaders out of the Go ahead.

Ian McMillan 40:47

are doing well.

david_11_08-16-2024_111227 40:48

Yeah, like semiconductors are still holding up. So if we're buying semiconductors Financials and biotech. How bad is this market?

Ian McMillan 40:58

And gold. Gold. All time highs.

david_11_08-16-2024_111227 41:01

I mean

Ian McMillan 41:02

Bitcoin, not all time highs. Bitcoin needs to I don't know. We'll see. Bitcoin, not, Bitcoin, not very high on my list at the moment. Could be

david_11_08-16-2024_111227 41:10

wouldn't that be wouldn't that be something Ian if When we look back at history and we observe Bitcoin ETFs were approved In early 2024, and that from that point forward, you saw gold outperform, outperform Bitcoin,

Ian McMillan 41:30

Yeah.

david_11_08-16-2024_111227 41:31

so it's, it's worth paying attention to, I mean it, I'm not saying that that's what's going to happen, I mean I, I'm, I'm not anti Bitcoin, I'm not anti gold, I'm just anti really strong opinions about things that you have no control over. And so if you're a bitcoin

Ian McMillan 41:49

Mark Yusko is going to be real upset. I

david_11_08-16-2024_111227 41:52

say that again

Ian McMillan 41:53

said, Mark Yusko is going to be real upset, Dave. Do you remember that? Yeah.

david_11_08-16-2024_111227 41:57

Yes. Yes.

Ian McMillan 41:59

You're not a fiduciary unless you have at least 1% of your clients in Bitcoin. We'll see.

david_11_08-16-2024_111227 42:07

I mean and and and I I would say what what's awesome about gold bugs and What do they call them maxim maximalists bit bitcoin?

Ian McMillan 42:16

Bitcoin maxes,

david_11_08-16-2024_111227 42:18

Yeah, bitcoin maxis is they both like to hold or hodl and they're both Super adamant about their particular thing and they both could be right And at various points, they're both going to be wrong.

Ian McMillan 42:31

it's like politics.

david_11_08-16-2024_111227 42:33

yeah, exactly. Crazy. Like, we don't have to like, marry our opinions. This is America. We can, one of the, is it not a benefit to have a flexible brain? A brain that can comprehend different things at different times and adjust to the scenario? I'm not, I'm not here arguing that there's not an absolute truth. There is an absolute truth. For example, I'm a sinner. That's an absolute truth. I need a savior. That's an absolute truth. But as far as like, do I need to own gold or do I need to own Bitcoin? I don't know. Show me a chart and I'll tell you which one I'm going to own. This isn't that hard. The market's hard enough to begin with. Why overcomplicate it? And so what I still think it's interesting that you have stocks and gold doing well together. Isn't it awesome that we get to divide one by the other to determine which one we should be involved with? I think that's great.

Ian McMillan 43:23

I do too. More assets to choose from

david_11_08-16-2024_111227 43:26

Oh, golden age of investing, man. It's fantastic.

Ian McMillan 43:30

except for they took away our commodity ETFs. Well, our

david_11_08-16-2024_111227 43:33

I was going to say,

Ian McMillan 43:35

K one free commodity ETFs. Sad.

david_11_08-16-2024_111227 43:38

yeah. Yeah, K1 free.

Ian McMillan 43:41

I've grieved enough that those have been gone. I've grieved.

david_11_08-16-2024_111227 43:44

you know, there's still some out there. It seems like energy has been holding up the best and precious metals,

Ian McMillan 43:52

They have been

david_11_08-16-2024_111227 43:52

but we But beyond that, it's, it's not crazy commodity time. And we haven't spent a lot of time talking about the dollar Ian,

Ian McMillan 44:01

dollar golly, we talked so much about 104. We are where below See and here's the thing. We got our weak dollar And so and this goes back to week. There's always this market participants get caught in these periods of Is a weak dollar good or is a weak dollar bad for stocks or is? And then you can break it down. Is it good for this? Group of stocks but better for this other group of stocks and yada yada yada so we're definitely in a weak dollar environment dollar peaked Let's say late june for this most recent downtrend, but then we also had a sell off Well, like six months ago when people were begging for a week I mean you could have told me this was going to be incredible especially incredible for small caps But it hasn't I mean Yeah, stocks have bottomed here the last couple weeks You But I don't know. I mean, it just goes back to like, I don't know what the dollar weak strong dollar means for anything. Sometimes

david_11_08-16-2024_111227 45:09

Yeah, correct. There's things that go into in correlation out of correlation. There's no guarantees.

Ian McMillan 45:16

it's been gold for good. Hasn't been gold for bitcoin. Good for bitcoin though.

david_11_08-16-2024_111227 45:20

No. Yeah. You would think,

Ian McMillan 45:21

what's so explain that?

david_11_08-16-2024_111227 45:24

right. We've got, we've got a half a month of a, of a, well, maybe a little bit more than that of a week dollar, right? We'd go back to the end of June. Right. So more than a month, month and a half of a week dollar, why has that not materialized the dot the Bitcoins? Not really done anything during that.

Ian McMillan 45:46

Hasn't done anything. Hasn't done anything since March. It's been sideways. Now when I say sideways, we're in a 40 percent range. So let's keep that in context. It is it is high beta. It's a high beta range. But yeah, the the dollar weakness, which everyone begged for, has really shown up in gold. I would say precious metals in general. Not the Russell 2000 and not Bitcoin.

david_11_08-16-2024_111227 46:15

Mm hmm. Yeah for sure And it like you said precious metals and not even in industrial metals You know your aluminum's your tins those have weakened against the dollar as well

Ian McMillan 46:28

Yeah. Look at copper.

david_11_08-16-2024_111227 46:29

And then and I mean it is worth noting copper weakness. I'm not I'm not sitting here ignoring copper. I think People are familiar with us on this podcast. Hopefully you are that there's no such thing as a market that checks all the boxes. There are times where the market sets the table. And again, this has the sense of setting the table again, meaning we had a breath flush. We had a Vic spike. We have

Ian McMillan 46:59

Copper went down to, yeah, it went down to four bucks.

david_11_08-16-2024_111227 47:02

Yeah, you got copper in a flush,

Ian McMillan 47:04

Mm hmm.

david_11_08-16-2024_111227 47:05

you had a spike in the put call ratio, you had premium spike for, you know, optionality. Is this really where you're gonna, this isn't one of those momentous occasions where you say this is where the bottom falls out.

Ian McMillan 47:23

Well, I mean, even like two weeks ago you were on the podcast. You're like, is this really where you're going to short?

david_11_08-16-2024_111227 47:29

Right.

Ian McMillan 47:30

And yeah, that would have been a horrible to sit in the right now. Right. This is. We only get the price that we get. But yeah, it would have been a bad decision.

david_11_08-16-2024_111227 47:38

And, and, and so the, it's, it's not as if, for example, we don't have a bullish percent sitting in X's in the 80s and 90s,

Ian McMillan 47:48

Correct.

david_11_08-16-2024_111227 47:48

everything's been part, everything's been participating to the upside for months on end. We don't have an environment where the VIX is completely collapsed into the 12s. I'm not saying it hasn't

Ian McMillan 48:01

What would be your most recent? Like, January 2018?

david_11_08-16-2024_111227 48:05

Right. Yeah. Like January 2018 or even like. Right. late 21,

Ian McMillan 48:11

I was gonna say late 2021. Yeah. But even that, you had had breadth fall off, remember? Breadth fall off, fell off in like February, March.

david_11_08-16-2024_111227 48:23

Right,

Ian McMillan 48:24

And

david_11_08-16-2024_111227 48:25

but we did,

Ian McMillan 48:25

mean, even that wasn't perfect.

david_11_08-16-2024_111227 48:27

but isn't that the last time we reached 80s and 90s in bullish percent?

Ian McMillan 48:32

yeah. Late

david_11_08-16-2024_111227 48:33

So we have, we haven't even had a move of participation that's gotten extended. We've had fits and starts. We've had breath for us going back to, you know, October and November of last year,

Ian McMillan 48:45

Yep. Last spot at in the low 80s was late, I mean, really late 2020. You were diverging. I mean, even in the late 2021, you were in this like 60s for bullish

david_11_08-16-2024_111227 49:02

right? But you had, you had, you had reached the 90s before that.

Ian McMillan 49:06

Yes, you had. Yeah, you had.

david_11_08-16-2024_111227 49:08

Yeah. And so you had this massive expansion in breath. We saw the start of the race back in October, November. We haven't seen this and some might be like, well, that's actually a negative. Well, I, I'm not sure yet because we continue to make higher highs and higher lows, we have rising 200 day moving averages. We continue to have these breath resets. We haven't had this move and I, the table is set for late this year for that to happen that you could have this massive expansion where everybody's going to get involved, right? You're going to have this October, November, December, January, February, March, six month period where things are getting busters. It's easy, things are expanding, and that's when you should be getting narrow. That's when you should be getting back to the index. We haven't had that yet.

Ian McMillan 49:52

No, I think we're still kind of in this, like, we're nickel and diamond and down the field. Yeah. No, we're not. We're not in a spread offense. Five wide. We're not an air raid trying to pick up 2030 yards. We're still scoring touchdowns, but we are doing it and efficient. We're picking up 567 yards and we're just advancing. We get, you know, like you said, we get the breath thrusts and they seem to come. Just when you need. They seem to come on a third and I, to be honest, but we get them.

david_11_08-16-2024_111227 50:27

And that's what good teams do is they convert. Yep. And so you, you have this, you have this market environment where, and again, it's important to paint context, August and September are notoriously weak. We still have that at our doorstep,

Ian McMillan 50:43

we do

david_11_08-16-2024_111227 50:44

our bullishness in this episode, please don't interpret it as near term. It's more longterm, very healthy. The auction process that happened the last two weeks helped raise the point of control of the market by it proved that buyers were willing to buy stocks at higher levels, very constructive. Yep. You could see that auction process continue for another 45 days or more where we're in this

Ian McMillan 51:08

even know go ahead

david_11_08-16-2024_111227 51:10

I was just going to say in a sideways range that exists before between 5100 Using round numbers and and and 5650 i'm using s& p That you could be range bound for two to three months here While frustrating would be perfectly normal and frankly awesome to set up the final part of the year,

Ian McMillan 51:29

And here's the thing, when we look at our August September correction, like, I don't even know, I mean, it's super in line with what you would expect. If we go back to our no incumbent, Election year seasonality, which we've talked about, talked about it on here. I believe we put it in the client letter two months ago. So yeah. And then, yeah, you, and to use your friend, like we're still not out of the woods, we haven't got to new highs yet. We absolutely could be building a range with, you know, two Mondays ago as our It

david_11_08-16-2024_111227 52:10

Well in in 50 5400 probably could be revisited again and be Perfectly healthy to go see are the buyers real there, right? We gap below that level surge back above it. That's information, but also perfectly normal to go see are the buyers real there. And meanwhile, you see the leaders continue to lead the video and Eli Lilly. I'll just give those two clues. We have more than that to look at. And then you talk about the things that you highlighted, Ian, with some of the value that's percolating underneath the surface with financials. And some of the high risk areas like biotech, and we didn't even get it. I mean, we're up against our time here and we haven't even talked internationally. And there's things there where you say, okay, that's not risk off. I mean, goodness, we haven't talked China in forever, and you still have Argentina and India sitting there.

Ian McMillan 53:03

for sure. The two. Yeah, China's held in, I mean, China's trying to put in a base.

david_11_08-16-2024_111227 53:10

When you look at two of the largest ADRs, you know, PDD and Alibaba,

Ian McMillan 53:16

BD is not doing very well. Yeah.

david_11_08-16-2024_111227 53:18

mean, the table continues to be set for further upside in Q4. Time will tell. I mean, if we're back below 5, 400, if we're below a 200 day. We'll change the tune of this podcast. That's fine. Not a problem. We'll adjust. Not married to our opinions. But, as you're fond of highlighting, there's plenty bricks in the wall of worry. Whether it's the yen trade, rate cuts, the yield curve, politics, civil unrest

Ian McMillan 53:49

The yield curve,

david_11_08-16-2024_111227 53:50

presidential candidate field, I mean, international unrest, there's plenty of worry. And the market just continues to climb. So with that Ian up against the end of our time, anything else I want to make sure that you're heard the, the, you know, anything else you wanted to highlight for our listeners before we ask them to give us a high ranking?

Ian McMillan 54:10

No you know, 5400 is the, we'll call it intermediate term line in the sand. I still think your longterm lines are the same as they've been for months. 4, 800 and a 200 day moving average. So the, the March continues on and like we said, Hey, the, the growth first value trade, if that's what you are looking for, is it's different depending on where you want to look on the market cap spectrum,

david_11_08-16-2024_111227 54:47

I think that's such a good point.

Ian McMillan 54:48

could be some, which could be some clues.

david_11_08-16-2024_111227 54:51

Yeah, I think, I think that's one of the main takeaways hopefully for our listeners is that if you get too index focused and you could, you could miss out on some of the things that are happening from an opportunity perspective. That's why we use technical analysis. Why we're so fond of studying supply and demand is it, it shows us where that strength is, and there are some minute and opportunistic shifts that are taking place that could benefit our clients towards the end of the year. And so, you know, I appreciate you being on here as always. Thanks for, for dealing with my cold. You've covered the times I've muted the podcast very well. And I appreciate everybody that listens. I hope you guys share it with your friends, with your family. Give us a high ranking. It's the one way you can pay us back for providing what we think is useful information to you. Ian. Thanks again for being on here.

Ian McMillan 55:44

Have a great weekend, everyone.