[Music] to kick things off uh just taking a step back here why is it so important for Traders to uh stay in tune with the market and kind of what the O where where we are in the overall Market cycle whether that's uptrend downtrend laid uptrend you know start or beginning of a correction why is it important to stay in tune with with what's going on so you're saying even while you're while you're in a correction and when when maybe you think you should take a vacation yeah yeah exactly yeah because that's the time where you really got to roll up your sleeves and do the work and find out what's holding up well what maybe those next leading groups will be and um and as I'm about to show you in just a second that's where you're going to get the potential leverage going forward so this is when I actually spend the most time really digging in and really doing a lot of screening and trying to find the stocks that are some of the better uh performers during the correction yeah perfect and I asked people on Twitter what they most like to ask you here and I know you pay a lot of attention to what how stocks are performing how many setups there are but uh they were curious if you use any other market indicators that help inform you about the overall health whether it's breath metrics Trend indicators stuff like that so uh anything like that that you you take a look at so I'm always trying to gauge the participation as to how much participation there is for you know as you mentioned breath um so that's how strong the market is how much of an engine you know is beneath the surface and also so you know where that participation is coming from so this this is a good segue right into a few slides that if you've been following me on Twitter you've seen I've been talking about this stuff for quite a while um but if you go back to the and uh back to the correction before we had this correction of course I had a sell signal I gave a sell signal on November I guess it was 22nd 2021 and part of that a large part of that was because of the Divergence here is the percentage of stocks above their 200 day moving average and this is the NASDAQ Composite uh so beneath the surface and this is something that we just saw happen just recently where you got this big glaring Divergence and in my 40 years I've never seen the market survive when you get this scenario without at least a correction and that's when you get below the 50% number uh particularly in the 30s that's if you get down in the 30s where you're hitting new highs or you're you're diverging uh for a period of time uh usually you have to have a correction or if you've been going up for a long time in a bull market usually enter into a beer market and you can see right here as we're hitting new highs we're well below and we're way above the 200 day moving average and more recently you can see we ran up here off the lows we had a really nice run here and then you're getting that Divergence you're below the 50% Mark and then even when you're you're well Above This level um you're starting to improve and it looks like okay maybe you know we're improving here we get above that 50% we correct here and now we come down into the 30s so if this Market as it's rallying back get gets back into new high ground you're just going to diverge even more so you could pretty much see that the participation is getting weaker and weaker and now as you come back up to those levels you see you're you're in the 30s now and that's what led to this pullback where now we're going to get the indexes to pull back probably near the 200 day and agree more with these stocks that are the grand majority of them are already below the 200 day moving average so something that I tweeted about uh and also the 50-day moving average I look at the 50-day moving average percentage of stocks above the 50 and the percentage above the 200 day while it's not a magic formula it will tell you the participation versus the indexes and the reason why is because of this chart right here right now we've got an amazing situation where you've got just five stocks in the S&P 500 and this goes for the NASDAQ too the mega caps um are are accounting for about 25% of the the index the market cap and just 20 names are accounting for 42% of the indexes so the mo the indexes are being moved by just a very small handful so there's not much breath there and and quite frankly when you get to the point where you're calling the uh the Fang stocks The Magnificent Seven that's the new name that tells you right there that all the juice is out of the lemon that you're it's like the back in uh the in the 60s the 70s you had the nifty50 um you know you had the same thing in the 90s where you had the qualcom and the Dell computers and Yahoo they the same situation all over again Market moving up on a small number of names can't sustain that we need we need to broaden out and just jumping in here with a question um do you recommend uh Traders also take a look at you know other indexes other than uh just the S&P 500 like the the Russell the Iwo as well just because that gives kind of a better picture of how small and midcaps are doing and it's not quite as dominated by these Mega caps yeah yeah I mean you can look at equally weighted indexes you know I'm I'm looking at the 400 I'm looking at the Russell 2000 the S&B 400 the Russell 2000 um and and that again now that gets to the other point where okay we want to know the how broad the participation and then where the participation is so I mean just looking at the IBD 50 if you do you look at the IBD 50 it's near its lows and the relative strength line still hitting new lows so that tells you that if you're that momentum growth investor those stocks are not performing very well right now you're getting you're getting it in this these very few names that are waiting the indexes and you're not broadening out even even in the narrow index like an IBD 50 uh but if you start looking even broader you look into the midcaps and the small caps they're performing horribly I mentioned this just recently to my members that Stan Weinstein who's a good friend of mine and you know he's the one who turned me on to the the the uh the trend one two3 four uh Trend stages uh just a couple weeks ago he was talking about a head and shoulders top a little head and shoulders top forming in the Russell and we sure enough we broke that neckline and we've been coming off since yeah perfect and when you start to notice these type of signs uh that you know the Market's weakening the leaders are breaking down a little bit what what actions are you taking in with regards to your own trading to kind of adapt to a correction are are you sizing down more trying to take less trades what are you kind of doing to to handle that yeah so this is really important because a lot of people they think well you know the market starts rolling over so you start raising cash well actually even if the Market's rolling over I'm not raising cash unless my stocks are not performing well because you don't know when you're in a correction that you might be in a pull back in the market and all your stocks hold your stops so there's no reason to sell unless you're starting to see deterioration in your own Holdings and your own watch list so that's really what's going to get that's my lead indicator now if I'm seeing distribution in the market and we're seeing there's been a lot of since we topped back in July here there's been virtually nothing but distribution days there was like two accumulation days and right after 4 days later and six days after the two uh accumulation days we had distribution came right back so there's no signs of accumulation well now I got to look at the individual stocks and say okay what's going on there and if the I get the two if we get stocks aren't acting right and you're getting distribution in the market this is just a straight O'Neal Bill O'Neal analysis you're not going to get too far off track if you just stick with that and when and when you're seeing accumulation uh you get a follow through day you're seeing accumulation days off the lows and stocks are starting to set up and you're getting stocks breaking out of bases you're going to be in a you're going to not going to get too far far off track being in the next uptrend so that's really you know keeping it simple is uh you know is the best way as far as I found instead of getting into I show all these indicators and stuff but they're really secondary to the stocks themselves perfect and uh one more question sorry do you have any do you have any goals for uh keeping your Equity curve within a certain percentage of of highs and and uh I know you talk a lot about the merits of selling it to strength to try to keep at new highs um I know a lot of people were curious about any guidelines you have uh to to try to do that to sell into strength so th those uh those Corrections don't give back you know all those gains that you've made during the uptrends if you're selling as into strength as the stock is hitting its highest point since you've owned it let's say you I say you bought it it goes up you're up 10% 15 or you're up 20% now you sell it up 20% you sell it into strength well you're selling at the highest of the of your Equity curve in that stock so there's no volatility there's no there's no downside draw down so if you can keep stair stepping that up you're going to have very little volatility now if you play for a much bigger move you might have to go through some corrections and that's going to create that volatility and and a lot of times you'll get Corrections or you'll get um these movements will come in bunches so you'll get a lot of stocks will move together and now if you get yourself fully invested you don't sell into that strength you play for a bigger move well now you might have a good number of your names give back a lot of your game then you're looking back and you're saying oh boy I wish I sold I should have sold when I was up 25% now I'm only up 5% some of my stocks are are stopping me out so here's the Here's the the the the ISS the problem and here's the answer the problem is is that Traders don't Define themselves as whether they're going to be a Trader or they're going to be an investor or even going into a stock whether I'm going into this name I'm going to play it for a big move or I'm just playing it for a trade and if you are going to just play it for a trade then you have to realize that you're going to sacrifice the bigger move and if you're playing it for a big move you're going to sacrifice the shorter moves and you're going to have to give back so there's a price to be paid on either side but what happens is we get into this regret you know indecision when the Stock's up and then when it we make the decision and then it moves against us now you regret it you wish it did it differently and now you're zigzagging all over the place emotionally and and and you run into a lot of trouble because you didn't have a real plan and your Monday morning quarterbacking so okay so again some of these things get misinterpreted and that's why we try to put graphics and explain it as best we can because when you're in a correction in particular bare Market you're in a bare Market sometimes stocks are breaking out of bases and they're trying to emerge when you just start the bare Market the first leg down you might have some stocks that move out but there's just not enough uh uh you know broad participation and they pull back and the volatility is too high and you get whipped around but those aren't names that you should be chalking off your your list because those are the names that are trying to get into new high ground and then you watch them so there's three areas when you're when you're in a correction there's three areas that I'm watching one is what I call predictive it's be while the Market's in correction and looking for the stocks that are trying to emerge the other is right off the lows when you get follow through action and you're coming off the lows what's breaking out what's coming out of bases what's emerging first What's going at the new High Ground off the lows and then the final is what I call confirming that's when you finally have troughed out in the market you've marked up a bit and now you've get you you you start to broaden out and more stocks participate and you start to come out of bases and it becomes more obvious so I'll just show you how what that looks like amen was a name that uh was setting up uh and really held up quite well during what at the time this bare Market in 1990 was a really treacherous bare Market uh percentage wise I think it was maybe down 25 30% on the uh the the S&P of the Dow but everybody was calling for the end of the world as a matter of fact this is where I met Stan Weinstein I met him on October of 1990 at a conference um a and that was the first time we met and talked about the four stage analysis but I had already read his book um so we came off the lows here and had a follow through day and at that time Amron was coming out of this base that was really just holding up while the market was well below its 200 day moving average and well below its 50 this stock didn't even go uh uh you know much below the 50-day and came right back was going into new high ground so I bought it I bought that stock right here um and that turned out to be a big winner went about 360% over the next I guess year year and a half or so but if you take a look here as the market started correcting you can see that it was trying to go into new high ground and the volatility from the Beer Market was whipping around a bit and maybe you would have got jostled around but finally it it got nice and it tightened up and the time was right once you started coming off the lows and this is where this is how O'Neal would apply follow through day analysis to actually buying stocks based on a follow-through day and and and a simple O'Neal rule is to buy uh something you know when you get a follow-through day if if if big big if if you have stocks setting up right if you get a follow through day you don't just buy anything you still have to have stocks coming out of bases nice tight right sides and but if you do have it don't don't get be afraid that you know oh this is just a bare Market rally and the news is telling me that the end of the world is coming trust the stocks go in there and buy something maybe you put on 5 10 15 20% exposure you take a few positions they start working then you can add some more right here this is where amen is breaking into new High Ground I'm buying AMJ right here at where everybody at this time is calling for the end of the world this is like the you know everybody's saying there's going to be a 1970s style bear Market this is just a a brief rally here meanwhile a whole bunch of stocks are breaking out of basis I'm loading up here and and and I had a huge year that year so you know like I like I said I break things down into the weekly the daily and the 65 minute but at the root of all of it and this this works on every time frame I mean at the end of the day this is like the 1020 EMA um I kind of built this nomenclature for myself that that that helps me kind of identify where we are um as far as where whether we're near the beginning of the move or for getting a little more extended in the move but basically you know when a stock tops out it's typically you know extended from the 10 week and the 10day and it's got what I call an exhaustion extension it's had a big move and it's just kind of stretches into the stratosphere there's typically big volume at turning points so there's typically like a lot of volume here a lot of chasing everybody's obsessed with the name uh you know there's usually somebody very loudly talking about how it's going to the moon or or something like that and then it's like the the the airs let out of the balloon and it just comes comes back in quickly and it's like an exhaustion it's like everybody who's going to buy that stock they bought it and there's nobody left stocks top when there's nobody left to buy and they bottom when there's nobody left to sell um so there's an exhaustion typically the stock will come back into the 20 period moving average it could just be the 10 period moving average and then it will kind of wedge up you know could happen over the course of a couple weeks or in some cases you know maybe just a couple days you know if it's if it's if it really kind of popped um and then it'll have what I call a wedge drop and a wedge drop is in reality is what it is if you took all the moving averages away because at the end of the day even though I have the moving averages here they're just kind of like a guide we're really trading the price bars um so think of an exhaustion wedge up just kind of has no power no volume and really it's setting a lower high and then it breaks down off that lower high and it starts a downtrend because now you have a lower high and a lower low when it when it takes out that retest of the moving averages it drops the moving averages and then it has what I call an EMA crossback what's an EMA crossback stock moves down it has its expansion to the downside so that's really all I'm doing is playing expansions and then it kind of contracts it wedges back up into the moving average and then the sellers come back after it and they sell it back down and then you know we have what I call a basin break which same deal it's just like a consolid ation and then the sellers come back in they sell it down but now the opposite of the exhaustion is just you know you've got this fear everybody's selling out of it you know the guy who said it was going to the moon at the top and wouldn't admit he was wrong you know now he's kind of walking on eggshells and and they capitulate so I call it a reversal extension but it's really just a cap capitulation extension to the downside um and why is it capitulation because everybody who was there who wanted to sell the stock they hit out um and maybe you get some undisciplined shorts who say oh I should have shorted this up higher when I knew it was a short I'm going to do it now um you know I used to trade for big Hedon that happens a lot of the time um and then is what ends up happening is the opposite of an exhaustion extension it kind of reverts a reversal it reverses back and it comes up into the moving averages you know typically the 20 EMA um there's a lot of volatility it might get rejected from the 20 EMA and look like it's going to turn into a bare flag a lot of the time that's actually when I get bearish is right is right around then when it's going to put in its higher low um but then it kind of contracts its ball and it tightens up a little bit and it and it builds what does it build it builds a higher low right so stocks top out when they have a lower high and they bottom out when they have a higher low um that volatility contracts and then you have what I call a wedge pop which is just like a move back up through the moving averages but again it's just like we built a higher low and now we're going to turn the trend back up we expand higher we contract via some tight sideways action it you know it supports at the moving averages but really it's like supporting at the moving averages just know it's building its next higher low and it just so happens a lot of the time not all the time um but these moving averages you know they they do a pretty good job of tracking those those higher lows and then we expand higher and you know hopefully we have you know an explosion higher and then we build a new kind of you know maybe two to three week base or so a Bas and break we break higher um a real good Trend an intermediate term Trend you know something in the kind of four to 10 week range will'll hopefully have like two Basin breaks um and then you kind of do it all over again the Euphoria sets in the stock goes parabolic [Music] and it kind of bursts um and so typically you want to try to do your buying around the wedge pop which is the ideal buy area or around the EMA crossback that kind of first higher low um the reason being for that is that the time period between the reversal extension and the wedge Pop there's typically a lot of volatility and so like you know there were times where I've like picked the low in the stock you know the reversal extension like I I knew it was capitulation and it ripped up and like I I did really well and I should have just taken my profit because then it started to set up like a a bare flag and it looked like it wanted to break and I you know I would get scared and sell and i' I i' you know make like maybe like 30% of what I should have made but then all it does is kind of put in that higher low contract and then when it has a wedge pop is when you kind of get that more uh you know trending Type move versus that huge you know reversion tons of all so we want to try to trade the low volatile you know kind of trending part of the move and then kind of Step Aside you know at the at the major turning points um and so another key here is you want to try to identify stocks that are in their weekly upcycle which can last you know years you know you could have like an 18month upcycle um and then when you have a daily down cycle within a weekly up cycle meaning you're below the 1020 day moving averages but you're still above the 1020 week moving averages a lot of the time that down cycle will be very compressed and choppy it won't be like a massive move down it'll just be a stock that got too extended and needed to kind of reset up rebase get back into the 1020 week or the 50-day you know the 50-day about lines up with the with the 10 week um and then you want to try to get on to situations where both Cycles are aligned and is what I mean by that is we're in a weekly upcycle we want to try to play The Daily up cycle and then and then get out of the way for the daily down cycle um because it can just be choppy not massive gains now now if you're really good like I know some people are really good at shorting those exhaustion um you know it's not it's not my number one thing I'm pretty good at selling them but I'm not I'm not the best at at shorting him um you know that can be actually a really really kind of quick trade but then the actual move back down can kind of you know it's just like you're better off you know look if you're if you're if you're good at it and you're good at you know kind of fading the the the weekly move then have at it but I find it's best to align the weekly and the daily I'll just kind of leave it at that um but that is is is what I'm you know trying to do um you know at the core of it all um and the way I go about that is by combining the weekly daily and 65 minute chart to kick things off U though David I just kind of want to set the scene here um and I'd love to hear your take on on you know the current bare Market that we're experiencing and and how you've dealt with it um we last talked and did an interview uh back in fall of 2021 and I I think you had some caution um cautionary words back then so I'd love to hear you know how you've dealt with it and what were the signs that you were noticing that we could potentially be entering a correction obviously we never know how bad it's going to get uh but what were the signs that you were kind of looking at well the the the signs were a lot of a lot of great stocks actually topped back in February of last year and a lot of grow stocks did uh but the market there was so much money in the market and the government was dishing out so much money that uh that it just kept on rotating into other other groups and then with their with so much money in the economy prices started moving up so Commodities started moving up oil and gas started mov so so a lot of growth ended in in February of last year I mean if you just looking at um just looking you know at Zoom video on that we're using you know this was actually this was actually in the fall of of 2020 long long before the market was topping out uh but a lot of other things started topping in in February here's Shopify well this well I guess Shopify actually went a little bit it it went until uh you know November December but really you didn't make much progress from from the high in in February of 21 so I saw that going on and we kept on rotating into different groups and all the cyclicals were moving and fertilizer stocks were still in a great uptrend up until March of this year um but then you did get the the indexes starting the to to top out in in January and February so here's here's really the beginning of the year and uh you know then then I mean you can you can start seeing look at the volume starting to pick up on the downside how many days in a row you had as the market was topping look at all these volume spikes are coming in on the on the downside up in here and then you started breaking moving averages and look and the the rallies started getting lighter on lighter volume every time you rallied even even through this Great Rally from 420 to 460 which lasted only three weeks the volume you had one day above average daily volume and then the volume started picking up again again onto the on the downside and you get huge spikes down and so this this you're really in a series of it's a downtrend where you get two to three week rallies and the rallies come on on weak volume even yesterday you look at you look at the spiders it had a great day but the volume wasn't even bigger it I mean yesterday was kind of sorry Thursday was a stalling day but yesterday you you still had lighter volume now you can probably you can play these ra rallies if if depending on your time frame if you have a very shortterm FR you could try to play these rallies but I'm and and and I actually started buying a few things down here for just a trade that maybe will last a few days into the 50-day moving average or maybe it goes a little bit longer because so many people are negative but you until these moving averages start trending back up you have to treat everything with a a real a lot of caution perfect and there's a great question here from Roy um asking about your experience as a hedge fund manager so uh David when you ran the hedge fund for 15 years uh did you ever go through periods where you were 100% in cash during bare markets uh for instance in 2000 2002 and 2007 2009 uh yeah absolutely um uh because when I ran my hedge fund if you uh if we if you look at the monthly I'll show you where I started I actually I think I started in this is a monthly and so I started right here Market sold off into the fall and then had one final move up into a high but then corrected 50% and another 50% twice while I was running the hedge fund I I ran it until about this period 2014 but I went through two 50% corrections but I lost very very little because I went to cash and that's so what great about operating with a discipline is if the the discipline should get you in as the market is turning and stocks are starting to show up with the right characteristics and it should also get you out when the market is rolling over and there's nothing left to buy and so during these periods I went to I was 90% cash maybe 95% cash I had very very little in the marketplace and my my clients loved me because they see I think in in 200 I maybe it was 2007 2008 I think I might have been down like five or six% for the year while they look at their other portfolios and they're down 30 or 40% uh but I see no reason I there's I mean there are times where you should be 100% out of the market on IBD live I said you know especially for people who are new to this this is a great time to study and to just sit on your hands because the opportunities are so small your chances of of making a money making a lot of progress are very very small perfect and David I know you said you keep things really simple and just look pretty much at the market and leading stocks but do you look at any kind of indicators like the advanced decline line that gives you a sense of you know the market breath or or you know the percentage of stocks above the 200 day moving average stuff like that or it's really just the indexes and the individual stocks themselves yeah I I I look at indicator s I've got I've got some indicators that I I look at um on stock share I've been actually keeping the mlen oscillator well I actually don't do it by hand but I used to do it by hand the Mullen oscillator and summation index which really is just a moving average on advances versus declines right and um I've been watching that since the early 80s and um and I I look at that but a lot of it's those are all a lot of those are just kind of secondary uh secondary indicators where yes I I put value into it but most of what I get is just looking at priced volume on the indexes and the individual stocks perfect and uh I know you're a lot of your presentation was about how the same patterns repeat themselves and things are never really change but has has kind of the pace of things in the market gotten a little bit faster over the years what what are your thoughts on that you know maybe maybe the the the intraday moves are faster but it seems like if you step back the the move still you know a stock usually has a nice move over a year and a half to two years um bull markets last longer you know let's say two or three years before before you get a major correction they they they I I would say maybe just more the interday movements are faster than uh than they have been in the in the past and and maybe that maybe that's because also a lot of stocks trade at much higher prices than they they did in the past in the 80s and '90s there was very few stocks that traded uh above $100 a share most everything was below that and most stocks split when they got too high now very few stocks split I mean I guess more have been recently um but uh yeah so I think the the movement at least maybe on a price basis is a little faster in day but not not overall perfect and there was a question I can't find exactly who asked it but it was basically have you noticed any kind of differences in the success rate in buying breakouts um you know now versus back in the past back in the 80s 90s um or is it really about you know there's a right time a right environment to be buying breakouts and a lot of the times you know when we're in a correction like this they're not going to have you know great success rates yeah in in a market like this I mean the amount of stocks that break out and and have a great move are very very small I mean and in a market like this if you're going to trade them it's much better to be buying weakness as it's starting to turn than it is to buy a strength of a stock that has already come up you know is already up 20% from its low and now breaking out um but yeah no they they'll work a lot better when you're in an uptrend and when when things start turning you a lot more will start breaking out and going but this is this is not that environment right now and and we might be in this environment for for a a while longer until inflation cools off and and rates have have gone up um yeah and the one other thing on indicators and stuff I I I know a lot of people they look for the follow through day the follow through day follow through day uh that O'Neal has written about and when you get in a market like this a lot of those fall days through days don't work and I don't put that much I I I say you know I I look at the follow through day but I put so much emphasis on can I find the individual stocks to buy and if I see the market following through but I I look around and there no setups then I go how far is this really going to go if I can't find individual stocks so uh you have to combine the two and get the whole picture of what's what's happening so in early 2000 you can see on the NASDAQ we had the D top and stocks had had a tremendous move and uh from 1998 to 2000 we had what was known as the internet bubble you had dozens and dozens and dozens and dozens of stocks that went straight up that blew off that had no earnings it just anything that was associated with do went up companies were changing their names and adding pet.com they were adding at to the end of their corporate name and any of those companies that did that the stocks just took off and so it was a really it was a bubble and it was a Feeding Frenzy and in fact at this particular time we had just had five years of 20% returns and uh just to show you how bullish the sentiment was and how excessive it was everyone that you did uh that you conduct surveys with during that time expected another five years of 20% returns and so anytime it gets that good for that period of time you can you can understand that we're going through just an irrational period of time and that that's not going to last the market is going to revert back to the mean and the mean is you know the market is averaged what 8 n% for the last 80 years you know on average despite 14 to 16% pullbacks that you can be assured of that you'll get once a year so here uh the bare market last in two from 2000 to 2002 and we'll take a look in from that March 2020 uh 2003 day because we we are utilizing these uh patterns uh and to look at currently to see well how does this compare to the 2003 turn and also the 2009 turn so we've you know we that's important information for you to look at so this is the first half of the year in early 2000 you can see the downtrend and so again with that double top you would have been kicked out of the leading Stocks by the time the downtrend was uh in force but again you didn't you know in this particular case the NASDAQ Dro from 55,000 to 4500 before you uh you know before it triggered and so you know you're not going to because you're Trend following it's going to be a lagging indicator when you look at Trend you're not going to get out exactly at the day of the high but uh you can see that you got out within within 5% of the high and here you can see the market then went was in this downtrend and notice you can see when you're in a downtrend you can have brief two to three day rallies but you know if you're trying to trade those you must sell those it's very very difficult to trade and particularly your entire portfolio for three or four reflex days rallies in a bare Market it's just uh it's just it's Psych logically defeating and it's uh it's fatiguing and it's exhausting as well that's why we think it's important to just avoid these downtrends and just participate in the uptrends you know as much as uh as reasonably feasible so you can see here the uptrend took place you know months you know a few months later you've AO you avoided all the Carnage that took place from that downtrend to the market bottom boy this was uh this was amazing and uh uh I mean this is uh I mean this was just this was amazing obviously this was the co covid crash of 2020 and notice in this particular case see you had the break of the 50-day on volume notice and this is a wh will you illustrate that on the chart there in February of 2020 over there thank you so you can see the 50-day debris and there's your exit point to get out right there on the break of the 50-day and then the trend followed a couple of days later and uh this was the most brutal and the quickest bare Market that we've ever experienced you know over the last four decades in my view where you were down 35% in a month in you know in four to eight weeks and you recovered the entire move you know in the next you know eight weeks it's I mean it's very very very rare to ever experience something like this and this is when the news headlines of course at the bottom was as bearish as I've ever seen it in my career so we had the follow through day you can see a after the bottom and then the market went into an uptrend after that and you know if you're not looking at these tools and you're licking your wounds uh you you know and if you got out and you've got and it's okay to it's okay to get out but you have to know when to get back in and when do you when are you forced in to get back in when are you forced you're forced when the trend changes now in reality as you study and you go back and you look during all these time frames go back and look at who were the biggest stocks during that you know during the bull markets and you can see that many of them you don't know in the bull market who they the new bull market who they're going to be so in many cases it is easier to just buy the indexes like the NASDAQ or the SNP when you have you know when the trend first changes so it's okay to get Market exposure if you you know if you're not following individual stocks or you don't know who those leaders are sometimes itn't happen simultaneously when the market bottoms you don't have stocks that break out to brand new new highs they typically happen the next you know four to six weeks after the lows take place so there's an incubation period where the setups take a little time to present themselves and you know so it's interesting go back in 2020 for example and look at the Tesla bottom when the market bottomed here on 2020 look at Tesla look at Shopify uh and uh uh you and you know go back and and look at some of these stocks and you can see uh where they looked on the charts they weren't at new Highs at that particular time but they they were setting up to launch themselves to make a major move over the next two to two to three years that transition from cash to when we're in a new uptrend how do you guys go about it how quickly do you guys look to um go back to close to fully invested or you know how much you guys want to be invested um and what kind of things you look at in terms of uh you know if you have any rules about hey I can't change my exposure levels more than 20% in a day or something like that now what we did was we ended up selling and taking a lot of profit and uh like selling we you know we sold half of a lot of our winners we incrementally moved out right and what we did was the stocks that we sold and we sold stocks like DraftKings and Uber and you know other stocks we sold them correctly and then we bought them back as they came in but they didn't hold and so we found that you know on the pullback we were buying on the pullback and they didn't hold and we got C we got kicked out because you know you know we had probably you know five to 8% losses in them and uh then we had to you know we had to Pivot and determine well who are you know who are going to be the the new leaders in the uptrend normally the stocks that were leading the up Trend they're going to in a pullback like this it's going to be the same leadership but you just need time for those leaders to breath bre and uh and set up for two and three week tyght patterns for example like right now we had uh you know we had this Market that made a new high on Friday and you had a potentially a key reversal day you open strong closed weak what does that suggest well Wes is going to take a look at on the next slide about macd and a couple of things and we're not getting into using tools a lot you know in terms of dialing down into the specifics in terms of looking and pulling that up right now but you can see that the M momentum is somewhat waning just a degree but we think this is setting the stage to pause for semis and we think that you know that semis aren't necessarily over but they're breathing and they're going to pause here while other groups like software is coming back into favor and some other stocks are rotating you know again you know small caps and midcaps were up on Friday and we think a potential rotation may be taking place there but we waited for that for the last two years right for that quote rotation to take place but uh you know until you know large cap Mega cap stocks are going to lead until they don't but it is important to watch them right now to see well do they have another leg up to go you know are they going to participate in this AI Bonanza or is it over we think that there by no means is this over it's we think that you're just getting started in Ai and the ramifications of uh indoctrinating AI through but you know through our whole society and we think that's going to lead to Great productivity higher prices in the market higher valuations uh better better earnings and U uh you know a better Market environment for the second half of the Year fueled by also the seasonality of the presidential election year and other things yep and well Richard I was just going to mention something about that question I think you said you put on the cues maybe the tqqq I think we do the same thing a lot of times especially on a follow through day when everything's kind of beat down and you know because of Fallout through day right coming off of the low there aren't a lot of stocks of course going to new highs so um you know we find that definitely index exposure is just a a good way to get that exposure I think on this day too where we broke above the 50-day I think Nvidia was probably breaking above the 50-day I think we were looking for a number of those to kind of you know not necessarily be at new Highs but the leading stocks would recover their 50 days first um so that was I think that was probably a those were a couple actions I bet we took that day and then you see when the trend the short-term Trend changed right there over the next five days it did give you a lot of time to see things and you can see the market was consolidating and having this sort of short handle shallow handle I'm sure a lot of stocks were doing the same thing but I would say we're not going from zero to 100% either exposure in a day it's it's certainly going to be more measured I bet 30% changes would be like the most we would do yeah in a day maybe going from 0 to 30% would be could be reasonable for us [Music]