APR 29 TTTs

APR 29th Important Things:
1.) RATES
2.) OIL
3.) VOLATILITY

Episode Transcript

Speaker 1 (00:00):
Now here's your care for my wealth guy, Chris Klin,
Good morning. So today's things that are standing out to
me or identifying themselves as important. I should say a
little bit of a rehash, I guess of what was
really important yesterday. So yesterday I talked a little bit
about interest rates and how they were dancing around some

(00:23):
very very important levels. Today, interest rates still very important.
You'll find that the world's largest market, the bond market,
has a lot of very smart things to say when
you're trying to understand macro movements as they exist in
the grand scope of our economic cycle. And the two
year treasury is this thing that we call a FED

(00:45):
front runner, if you will, and it just continues to
signal bearish trend and when we look at the signals
of this thing, and again when I talk about signals,
I'm just simply talking about a process that we have
accessed that is essentially the rate of change of a
combination of price, volume, and volatility. Everybody just wants to

(01:07):
look at the price of something like the yield of
this or the price of that stock, or the price
of that commodity, and that's all well and good. When
identifying your life and how you live. But if you're
going to be an investor, you have to think more
deeply about how the various aspects of what makes markets
move are intertwined. And there are no more important things

(01:30):
than price, volume and volatility. And right now, when I
look at the signal for the two year treasury, that
signal is now on the low end three point five
eight percent, which is signaling to me that it wants
to revisit cycle lows ahead of this week's very likely
negative GDP report for Q one. Now, does that mean
that the whole market's just going to collapse on itself

(01:52):
with a negative GDP report. No, In fact, we might
find the exact opposite. We might find that it's a
cell the room or buy the news kind of thing.
You know, Oh, hey, the Q one GDP that's negative
is now behind us, hallelujah, let's run and people buy.
That's possible. It's also possible that people think, oh, no,

(02:12):
here it comes, it's going to get worse for Q two.
Let's get out of the way while we can. So
we have to be very careful about some signals. And
I'm going to go over a couple more as it
relates to the stock market in just a moment. But
for bonds, the two year treasury is our FED front
runner and it is signaling lower lows, and it is
suggesting to us that the Fed still is going to

(02:32):
cut interest rates this year by somewhere to the tune
of three to four times. So we'll see if the
markets continue to price that or change it as we
move forward. It's also highly likely that when we get
into Friday, the labor report shows a slowing Now, the
Fed does not like a slowing labor report, so that

(02:53):
could increase the probability of a Fed rate cut, which
of course markets would like. So if we see labor
slowing more quickly than what people anticipate or expect, then
you probably get a you know, a bounce on that.
Yesterday I talked a little bit about the ten, twenty,
and thirty year treasuries and how they were the yields.
That is, we're dancing around trend, and again, trend is

(03:16):
the same thing. It's rate of change of price, volume
and volatility, but over a period of time that's longer
than three months. When you hear me use the term trade,
it's just rate of change of price volume and volatility
with the time series of less than a month. It's momentum.
It's what the machine chases, and right now we're just
still kind of in this neutral stance. The US tenure

(03:38):
treasury yield could tap all the way down to four
point one seven percent and still hold a more bullish tone,
more more of an upward bias on yields. So we're
not seeing a collapse in yields, which suggests to us,
at least at this point, that we're not seeing the
market anticipate or expect a recession or massive recessionary conditions

(04:00):
for equities. That's a good thing, So we'll see how
that plays out. One thing that maybe speaks against that,
or at least continues to speak towards slowing growth. Imagine
we can have growth, but if that growth is slowing
on rate of change terms, markets will pick that up,
and that's what they'll play off of. It's often not

(04:20):
the number that markets care about. It cares about whether
or not it's a rate of change acceleration or deceleration
from its comp and its comp Where it's comparable is
usually the year over year number. Sequentially, we'd look at
it quarter over quarter, But right now, oil is suggesting
there's no trade deal progress with China. It's not showing

(04:41):
up in the CRB Commodities Index, and it's not showing
up in oil signals because this morning oil was down
one point seven percent. That's not a small amount, and
it's still in bearish trend, so a downward bias. But
this drop this morning just takes its current cycle drop
down like twenty four percent from its previous cycle peak

(05:03):
in January, so really no change to oil. It still
bears trade and trend again, that's in rate of change
terms for price volume and volatility, and generally speaking, natural gas,
energy stocks, all that sort of stuff. They also remain
pretty much bearish at this point too on a trending basis,
so we'll see how that goes. This morning, we are

(05:25):
getting a small by signal showing up in natural gas,
so a counter trend bounce here wouldn't be surprising for
natural gas futures. If they broke above three dollars and
sixty three cents, you probably could see a change to
the bear signal. But you know, summers around the corner,
so are people really going to be using a lot
of natural gas in the summer? Not usual? Right last

(05:49):
thing I want to chat about is volatility. And you're
going to hear me talk about volatility a logic because
it's so valuable to help to understand what's happening underneath
the surface of price of markets. And you'll hear me
talk about it in terms of what you can see
if you want to look at it. And that is
vis vix, something that you've heard me talk about in

(06:10):
the past. I don't want to delve into it too
deeply today, but it is something called dealer gamma. And
when dealer gamma is negative like it is now, you
get some pretty big price movements, both up and down.
You get these quick again sometimes large swings on an
intra day price basis, and we saw a little bit
of that yesterday. Markets were down three quarters of a

(06:31):
percent and the next thing you know, they closed slightly positive.
There is a lot of complacency still priced into the
market when you look at short term equity options, and
basically what that basically gives us an indication of if
we see an implied volatility discount on anything that trades
compared to its thirty day realized volatility, it suggests that

(06:54):
there is complacency. In other words, people aren't buying puts,
they're not buying protection. That is, you buy protection when
you can, not when you have to, right, So what
does that all mean? It just means that that if
we're seeing these large implied volatility discounts, puts her cheap.
If people wanted to buy protection right now, now's the

(07:15):
time because it's cheap to do so. Now, is this
to suggest we're going to see a big massive drop
in US equity markets? Probably not a huge massive drop,
not a swoon, if you will, and you know, of
course it's market, so anything's possible. But with the S
and P five hundred right now, it's it's testing a
level that is actually very very important. And the level

(07:36):
that it's testing is fifty five twenty. So if you
look at the S and P five hundred, fifty five
twenty is a really really important level because it's trade
momentum number one, and that's an important level because the
machine likes to chase stuff that breaks above trade momentum. Again,
price filming, volatility, you know, rate to change stuff, mathematical

(07:58):
nothing crazy. Machine likes to chase stuff that breaks above
trade momentum. But that level also coincides with trend. So
it's a really, really, really important level. If the US
stock market, the S and P five hundred in this case,
breaks above fifty five to twenty and holds there for
longer than a hot second, chances become really good that
it wants to run and test fifty nine hundred. Now,

(08:20):
is it going to go on a straight line? No,
it never, It never does the first stop. If it
breaks above, that would would more likely than not be
an area where a gap showed up on April the
second into April the third. So the first test would
be fifty five seventy one, fifty five to seventy two,
right in that range. So if we can break above

(08:41):
fifty five to twenty hold it there for longer than
a hot second, I usually like to see it hold
for at least three days, and sometimes it shoots above that. Right.
If that happens, well, okay, great, that just increases the
probability that we not only close that gap from April
the second, but we run all the way up to
its next resistance at roughly fifty nine hundred. So we'll

(09:02):
see how that goes. Remember, we have a breadth thrust
that was triggered last week and the accuracy of the
previous seventeen breadth thrusts that have been triggered going all
the way back to the fifties have one hundred percent
accuracy rate in terms of identifying positive market returns over
six and twelve months. Now that's a pretty good indicator.

(09:23):
We've got some short term weakness that can happen here.
But if we start to look out just a little
bit farther, you know, put ourselves past the social media immediacy,
things look fairly good. So don't get hung up on
all the negativity, all the riotous talk, all the negative
stuff that's being bantered about on US TV and you know,

(09:47):
different social media posts and of course magazine articles which
I spoke of yesterday. Let's just think about the details
of what's happening. Let's put numbers to it and ask
ourselves what's next. So that's what's on my mind today.
Thanks for joining. I hope you have an amazing, wonderful,
blessed day. If you have any questions, feel free and
reach out info at care for my wealth dot com.
Info at care for my wealth dot com or eight

(10:08):
six six five nine six ninety eight eighty six. Have
a great day