Decline and a loss of momentum in the market overall. Steve, this is one of those situations where over the last couple of weeks there have been folks who have said the market has been hot this year its due for maybe a breather. Is the problem right now the idea that there is no nearterm catalyst to propel things back towards the upside yeah, but you could argue there were no nearterm catalysts to propel it to the upside from the beginning of the year in fact, there are negative catalysts that should have propelled it downward. I dont think its necessary catalysts. The market was tough to figure out all year this is the easiest part of the market to figure out, because it had a big run, were in the dog days of summer, volume is lighter and its typically when the market takes a breather. I dont think you can draw anything from the direction. Im so tired of hearing about the 50day moving average. Hearing about it every 10, 15 minutes. It Means Nothing it may mean something for shortterm technical trades, but for fundamental investors, it Means Nothing. Lets stop with the 50day moving average but folks are using levels like that to figure out its a talking point. Its a talking point, and if theyre looking to pull back to a certain level, they say i want to step in and buy more on sale, sometimes people use those moving averages. Sometimes some people do. Its a smaller segment of the market its mostly algos. Some technical traders if i see a stock particularly cheap, im not going to say i have to see if this breaks the 50day moving average. Bill, theres also a positioning factor at play you watch a lot in the derivatives markets. You check out whats happening with futures, how traders are positioned, long or short futures markets, options, contracts. Is there anything youre cleaning right now with regard to whether or not theres a momentum shifting around in thee upside or the down side . The bias is for healthy consolidation. I do disagree, there was a catalyst to start the year, it was the underpositioning it is the negativity that was there. Earnings were really they were pricing in the trough that was here to come i think that now its the total opposite everybody is really buying into this rally, putting money to work june and july seasonality. This is the dog days of summer now were seeing consolidation this is a healthy consolidation. We were saying a 5 pullback, right now its about 4 . Its moving into the 50day moving average this is healthy, though. Im looking at this as being very healthy now as carl points out and mike santoli as well, were not that far away from that price its not that this is one factor that is going to dictate the entire direction of the market, but its a milestone its a marker along the way that people look at karen firestone, i would like to bring you into the conversation. Steve brought up the idea that fundamentals are an important part of the picture as to why the markets are trading the way they are do you feel as though some of the fundamentals that weve seen at least, so far this earnings season, have justified the valuations at current levels or do you feel as though this particular part of the market maybe is due for the pause because the fundamentals are just about where they should be . Sure. Thanks, dom. I think that what bill said is absolutely true. The market was cheap it was down at its low for the s p in october and december. 28th was the bottom for the nasdaq remember, the stocks that were talking about, the mega cap names were up between 36 and 48 on average but you had names like meta up its still up 150 they were cheap stocks these stocks got crushed during 2022 they deserved to go higher now that theyve gone higher and people have piled into them, because with so much market cap available, its easy to buy these stocks theyre wellknown names so, they perhaps have gone a little ahead of themselves if you look at, you know, alphabet, for example, its below a market multiple. These have not been such fantastic stocks that you say, my god, theyre 75 times earnings we think a pause is healthy because the rest of the market is up single digits. If you look at sectors other than consumer discretionary, technology and Communications Services that are all up in that 40 range, youre really talking about the rest of the market up low single digits. If the rest of the market starts to show earnings that can sustain multiples in a 15 to 20 range and they should if the earnings start to improve and we dont have a recession, i think we can see more growth in the market after weve had this pause. Maybe a month or two the market is still only 7 from its alltime high right now. So, shannon, theres been a dynamic that maybe steve, also bill and karen just alluded to, the idea that theres a consolidation happening right now. What does the consolidation look like to you . Were seeing signs that theres traders and investors who are in essence maybe mini rotating, if you want, out of names into technology and into places like energy and health care is this the beginning of at least a bit of a mean reversion trade back towards some of those value parts of the market . Well, i think one of the things that you have to remember is that coming into this year, those two sectors that you mentioned, energy and health care, were tops on the list for many investors in terms of which sectors they thought would outperform this year clearly we have not experienced that so, i think, number one, just looking at it from a portfolio construction standpoint, taking some gains off the table, there has been significant money made in this top 7, 10, 15 stocks, whatever you want to call it i think rotation makes sense in terms of energy, certainly the economic environment is supportive of a rotation back into Energy Stocks i think thats what youre seeing there with health care, there are a number of different facets of health care, whether its managed care, drugs or disposables. Health care is a very wide, varied sector. We talk about this regarding industrials earlier this week. Its true for health care as well theres lots of different places to play in health care a number of those have not participated if youre thinking about just from an overall risk standpoint taking some of your winners off the table, taking some of those gains and reallocating to places where if we do experience a broadening out, there is relative value from a multiple perspective, its easier to find in those sectors like energy and health care than it is in other parts of technology. Steve, do you feel as though after seeing what we saw with the Consumer Price index data, and then what we saw with the Producer Price index data, so retail and business level inflation, do we feel as though theres no such thing as an all clear in the market. But do we feel as though the macro picture is stable enough right now where people can feel good about where they are in the market as opposed to fearing for a surge in inflation again and higher Interest Rates on the back of that and Everything Else no. I think theres something for bulls and bears in numbers you had a revision so, it was a little hotter this report when you factor in the revision downward from last month, youre basically hitting consensus. You have to look at it on an average basis. Clearly inflation has come down quite a bit, you still have Services Inflation which is being stubborn i dont think you look at the market in isolation. As we talked earlier, we have Credit Card Debt thats going a lot higher our economy is driven by the consumer its plain and simple. Twothirds of it thats true of most economies. I think you could have comfort i dont see a deep, dark recession, but youve also had some little dents in the goldilocks scenario where youre trying to thread all the fed tightening with a soft landing what set up for that, as bill talked about, what got you to these levels, which, by the way, markets didnt get where it is on fundamentals. It got where it is on momentum its coming back now momentum is reversing. So, no i think you take as much comfort today as you took yesterday, if youre a bull. As little comfort today as you did yesterday if youre a bear thats what makes markets. Steve brings up an interesting point with regard to some of the drivers. He mentioned the Services Side of things. One other part that gets attention is housing, property value, owner equivalent rents. Basically the cost of living from a housing and real estate perspective remains stubbornly high and it has not really pulled back to a certain degree that can kind of aid that inflationary story the Housing Market as a part of the overall stock market has been a momentum trade for various parts of the year. Do you think that housing story is in a consolidation or transition phase as well right now . Housing is a challenging area in that longerterm this is not actually dissimilar to energy, but longer term theres an undersupply, particularly for Residential Housing in the United States. On the back of that secular trend and inclusive of the fact that millennials are beginning to accelerate household formation as they move past the household payment part of their life cycle, there will be fits and starts in the housing story. This constant give and take, if you will, as it relates to supply is offset, particularly in this environment, by the challenge of affordability so, if we look at the Housing Market, what we really need to see, we need to see a reset of expectations in terms of affordability and Mortgage Rates going forward, which probably means we need to see expectations for rates to come down modestly in order to increase that affordability. I think as it relates to housing, theres a mobility aspect of this that remains somewhat unclear if youre thinking about, yes, were building houses, and who is buying those houses, in many cases it will be have to be new entrants into the Housing Market, not existing home buyers because they are anchored to very low Mortgage Rates. I think trying to figure out, you know, specifically where this housing growth is going to come from, how these companies will be able to monetize that and what types of customers and clients going after, you know, with some of the highend homes, for instance, where you would be required to sell an existing property and move into that, Mortgage Rates are prohibitive right now to support an en masse trade. What drives the economy typically are housing and auto sales, two major pillars of the economy. We heard about housing auto sales, used car prices are showing some decline if you go to trade in your smart car, your cute little smart car that you own thats what i got or your wife goes to sell her ferrari, the ferrari will hold the price because its luxury but your cute little car, you will get less for it thats a positive for inflation but you have to get through Services Inflation bill, heres what i want to say. We have talked about some of the ideas that there are maybe some fissures or cracks developing right now, nothing panicky or nefarious, but im curious about the momentum as you see things in technology. You did make some moves in your trading side of things we talked about the idea that you had some hedges on against your triple qs position against the nasdaq 100 yep can you take us through what you did and why . Leading up to the end of july, i was talking about looking at this summer doldrum, well go through seasonality so we got ahead of it. At the end of the july, we raised about 10 cash netted ultimately when we did that, it was the big tech names we sliced off. We cut totally tesla and amd, but doing that it was netting 10 because we also added to chevron, added to pioneer, opened amgen as a new position its been a rotation that weve done but theres still cash now now that the market has sold off, im looking at it as an opportunity to go shopping i want to be patient here. Its important to be patient right now every rally is getting slammed. It seems like every time this market rallies a bit, people are selling into it. The way i looked at the qqqs as protection, last year we would do a 1 to 1. 5 position sizing on puts. We were on a downtrend now were in an uptrend. Just to be clear, you basically own the qs and owned puts on the qs we owned the stocks we owned individual stocks but you then bought the puts on the qs. Yes we did raise cash, but prior to raising cash, we had a 50 position in tech we raised about 10 cash, call it 40 , 35 in tech still. Thats my fear, if the market starts to sell off, tech will be leading the down side. Having the 40 basis point put position is just a cushion to digest this. Well have inflation numbers, jobs numbers as we look at these numbers that have come out, inflation is cooling but its supposed to cool we couldnt rally yesterday or hold the rally the market ended up slamming down i cut these puts earlier in the week because it did what i wanted it cushioned this move here. We can go through a bottoming process as the market digests things it shows how fickle the market is when you get a ppi number today that was still high. The thing about that ppi, the market reacted to that but it couldnt hold the rally to a softer cpi the producers, these Producer Prices, who are the producers . They are the public companies. These this uptick it was pretty much disinflationary up until today. These companies will be quantitative easing lower. This is good news to see a bit of an uptick in ppi, while cpi is trending lower. Then we get Michigan Consumer data today i thought it was a terrific read it came in at 3. 3 as Inflation Expectations chairman powell talked about i over and over and over again that Inflation Expectations are a selffulfilling prophecy if people thinkinflation will go higher, it will rise. Karen, one more road to you before we accelerate this conversation the tech trade weve been talking about right now, do you feel from a fundamental analyst standpoint that the Technology Trade is still worth buying at these levels even with the pullback in elevated valuations . I think this depends. If you look across the landscape, you can find names selling for under the market multiple with strong Growth Prospects over the next couple of years the chip cycle has been very hot it continues to be nvidia is an expensive stock its coming down theres a price at which people might want to buy it amd, same thing. Component companies. There are technology is very broad as a sector. Im not suggesting that its all oversold overbought some of it is, some of it is expensive. Its important to stay committed to the names that we dont think are expensive and look for some ideas that might be becoming less expensive now i would say its not a trade now. There could still be some weakness its pretty much in balance. As an investment, i think you pick up the ones that are reasonably priced. If youre investing, you cant pick the bottom. Or just leg in in dollar cost exactly right the nasdaq 100 is breaking below that key technical level this week, that could mean more down side ahead according to our next guest lets bring in jonathan krinski. You see all of these charts, lines and levels take us through why you think there could be could be hypothetically danger ahead. So, theres you guys have been talking about some of the moving averages. For us, moving averages are more a gauge of trend the fact we broke under the 50day moving average, there could be some issues there thats not the key reason that concerns us. The two key reasons are the volume profile that we talk about. Most people look at volume on a time series, how much volume trades any given day we like to look at it on a price basis, how much volume trades at each given price level over the last three years what weve found is around the 369, 370 level, there is a significant amount of trade. The fact we broke over that opens a down side volume pocket. We accelerated so quickly from the upside in late april when the qs were around 320 we rallied 16 from late april to late to midjune when the qs were around 370. That quick move on the upside can often be unwound on the down side that is the issue, the significant volume pocket. The other issue is momentum. If you look at weekly mac d, specifically the xlk, were switching from a sell signal, positive territory you have momentum leaning starting to roll of and a significant break of what we consider key supports. All that suggests down side risk ahead to us. Jonathan, weve made a lot and talked a lot about this idea that certain parts of the Technology Trade have been more impacted from a Downside Momentum standpoint than others. You highlight the semiconductors i wonder if there are other places in the market that youre watching now that are starting to show signs of deterioration or perhaps a pick up, if you will, even if there is such a case is it in Cloud Computing or software, cybersecurity or fintech or the multitude of different places we know tech is a broad umbrella to cover all these industries under. Clearly semiconductors are at the heart of some of the down side momentum. They were the leaders on the upside the way tech has traded for the last two years, its broadbased. You could differentiate the faang names from the smaller cap tech names its pretty broadbased some of the sell signals semis are Vulnerable Software is probably vulnerable. After you get that shakeout and pull back, thats when you can differentiate and start to see some relative strength from that pullback on the flip side, there is some positive momentum that were starting to see in the commodities space, energy has been a leadership area while tech is sending weekly sell signals, energy is seeing a buy signal we like energy versus tech here. Weve been talking about that for the last few weeks all right energy versus tech thats the from you. Thank you very much. Well see you soon thanks. If tech is rolling over, where do you want to be . Jonathan said energy is showing signs of life. Bill baruch is rotate nothing an industrial name. We added caterpillar this week caterpillar i like where they are. Theyre across the scope