Fundamentals & Technicals
March 19th, 2021
Join Chuck and Ken while they discuss the current state of the market on the Money Life Network.
Transcription
| Chuck: | It’s time to talk technical analysis here on Money Life. And my guest, well, he’s actually kind of a non technical, technical analysts is a guy who mixes fundamentals and technicals. His name is Ken Berman. He is a strategist at Gorilla Trades. It’s GorillaTrades.com. for more information. Ken Berman great to have you back on Money Life. |
| Ken: | Thank you, it’s always a pleasure Chuck. |
| Chuck: | Well, like you said with your methodology, you do kind of a mix of fundamentals and technicals. Let’s start. I guess with the fundamentals. We’ll hold the technicals for last. But, generally when you’re looking at the market right now what do you see happening. |
| Ken: | I’m looking at sentiment and it’s decisively bullish right now despite, you know, the brief dips we hadn’t February and again in March. They both mark great buying opportunities in my opinion. Well, it might not be the best time to jump in for investors, you know, with regard to the major indices. The bullish long term trend should definitely still provide tailwinds individual stocks, in addition, I look at the VIX. Its stock above twenty. This suggests that the wall of worry remains intact and despite the valuation worries that some have. The re opening in the stimulus fueled bull market have plenty of room to continue. I believe. |
| Chuck: | So, that’s big and broad in about market sentiment. What about sort of market themes? I mean, I got a lot of people are talking about things like, rotation, on the show and what have you. But, what do you see as kind of the the underlying theme right now for the market. |
| Ken: | It’s interesting you said rotation because investors are likely to continue to hear the three R’s a lot in the coming weeks and months and that’s reopening, re inflation and like you said rotation. Spring, in beginning of summer, we’re almost certainly see huge surges in economic activity. It can be caused by the re opening push and the historic stimulus packages. Although, investors have been adjusting their views. The new reality of a victory over the virus with the vaccinations. I believe the economy will outperform the consensus even with the recent upgrades and not just this year but probably in the two thousand twenty two. Also, simply do to the size of the stimulus. |
| Chuck: | With the size of the stimulus being one thing that’s pushing it the other thing that’s pushing as well has been the Fed. The Fed, of course, meeting this week. How do you see that playing out in the market? |
| Ken: | You know, The Fed is in a particular situation right now. The economy is rapidly improving its outlook but been rally in yields and then mix in the dollar straight so should the fed simply ignore the situation for an extended period of time? We could see a quick ramp up in the race and in a pullback in stock with a larger drop in the growth names like we’ve been seeing. You see, the Feds, they linguist they use earlier this week and the lack of concrete goals could mean that long dated yields will actually remain volatile as the economy improves. I still believe that at some point the Feds are going to announce “Operation Quit Another” to push down the long end of the yield curve. For those who don’t know what that is, it’s simply the buying of long dated treasuries and the selling of short needed ones in order to stabilize the long end of the curve. However, it just seems like the Fed wants to wait as long as possible before doing so. |
| Chuck: | While it’s waiting, what is that doing? I mean, how much of a problem is that? Because, of course, we’re watching the yield dance right now and every time there’s even a hint the treasury yields are going up the markets get Nicci. |
| Ken: | I think the fed will eventually solve this issue. If you look from the start of the year the ten year yield has risen from just below one percent too now that’s just above one point six percent this week. And despite the recent overbought, pullback in tech stocks the market is absorbed the rising rate very well. So, a sustained massive rise in yields looks really unlikely despite the current short term pressure. But, to sum it all up, the fear that rising rates will crash the market is overblown but definitely an impact, don’t get me wrong. But, other factors such as burning the economy, stimulus and technicals are much more important. |
| Chuck: | So, that brings us the technicals. A great place for us to be because, well, that’s what we promised the audience that they’d be getting we haven’t even gotten there yet so let’s use the rest of our time. What do you think the technical picture is right now? |
| Ken: | You know from a short term perspective the key momentum indicators are neutral in the wake of the recent pullback. Look at the DOW is slightly overbought. So, the current rally could easily continue should Covid related improvements continue and while the bull market might appear stretched to some, from a long term perspective. Keep this in mind. Do to the fact we’re in a deep into unchartered, physical and monetary territory. The bull market in my opinion could reach extreme heights compared to historical examples before the bull market come to an end. |
| Chuck: | Well, that makes it sound like we’re inflating a bubble. From a technical standpoint is that what you’re thinking is going to happen here? |
| Ken: | I don’t necessarily see a market crash per se. However, I do see the market, the bull market eventually coming to an end. I don’t consider the brief, several month period we had after the pandemic as a bear market like some did. To me the bull market is been running close to fifteen years now and it’s getting a bit tired and as interest rates rise, if you’re looking at the long term effect stocks will probably pull back but, I don’t, I don’t look for a crash. |
| Chuck: | This is happening in what kind of time frame? I mean it sounds from everything else you said that you think we’ve got room to run but that as we’re running we’re basically creating this market top. |
| Ken: | Yeah, I think if you look back through history most market tops happen with an extreme move at the end. I don’t think we’ve seen that yet I mentioned earlier I think that you’re going to be surprised how high the market goes before the bull market ends and you’re asking me. “When it ends?” I don’t believe it’s going to happen this year and it might not happen next. Two thousand, twenty three could be a little problem. |
| Chuck: | I know that we’ll check in with you between now and then to see how you’re adjusting where things are changing and more. Meanwhile thanks so much for joining me again on Money Life. Stay safe come back and do this with us again soon. |
| Ken: | I will for sure. Thanks for having me Chuck. |
| Chuck: | That’s Ken Berman everybody. He is strategist at Gorilla Trades, GorillaTrades.com, on Twitter @GorillaTrades too. |
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