JUL 30 - Oil, Earnings and Volatility!

What's Oil (and other Commods) saying?  What's MSFT saying?  What's VIX saying?

Episode Transcript

Speaker 1 (00:00):
Now here's your Care for My Wealth guy, Chris Klin. Hey,
and we're back. This is the Care for My Wealth show.
I'm your host, Chris Klin. I come to you from
Capstone Wealth Management. You can find out more about us
online Care for my Wealth dot Com. Care for my
Wealth dot Com. Okay, My hope again was to do
these a little bit more frequently and a little bit

(00:20):
more condensed, to not bore you. How about that? Hey,
So what's on my mind right now? Oil oil is
still trading in a bearish intermediate term trend condition, and
that trend level is at seventy eight dollars and thirty
four cents a barrel. That's WTI West Texas Intermediate crude
longer term trend is at seventy four eighty two now

(00:42):
right now, based on volatility metrics, oversold, overbought conditions, stuff
like that. Currently there's a higher probability that we get
some kind of a bounce, and it might bounce all
the way towards seventy nine bucks a barrel, but I
think it breaks down again these when you take a
look at oil and bearish conditions, what we're seeing right
now simply helps substantiate a current economic cycle that's marked

(01:05):
by a deceleration in growth. And you don't just have
to look at oil. I mean, my goodness, just look
at commodities in general. They're all just kind of not amazing.
But one of the most important elements within the commodities
structure is copper. So copper you've got down, you know,
just if you just take a look at what copper

(01:26):
has been doing over the past oh goodness, even the
past couple of months. But in the last month it's
down over seven percent. In the last three months, it's
down over ten percent. You know, all on the backs,
of course, of the NonStop narrative of it's a new
electrification and you know the world is different. Now, well,
that all may be true, and it all may be coming,

(01:48):
but right now copper is just signaling along the same
lines of what oil is signaling, and that is a
deceleration in growth and copper just can't catch a bid.
And so the action that's going on in copper is
not bullish for the economic cycle on a global scale.
Now what do I think. I think it's very easy
to see copper. And when I say copper, I'm talking

(02:11):
about copper futures right. So it would be very easy,
I think, to see copper bounce towards four forty five
a pound on the copper futures structure, but that probably
generates more selling because that would end up getting very
very close to its trade resistance. And again, when I
say trade, remember it's not just a verb, it's a

(02:31):
it's a noun. It's a thing. It's price volume and
volatility on a rated change basis for less than a month.
It's what the machine is paying attention to, what it's
staring at. And if it heads up towards that four
to forty five a pound type of a type of
a number and fails, well that's a trade resistance failure.

(02:53):
And this has been happening since May, so nothing new there.
How about earnings, Well, we've got forty e three or
so percent of the SMP five hundred companies that currently
have a reported an aggregate year over year earnings per
share growth rate of about six six point three percent.
So is that good or is that bad? Eh? Okay, fine,

(03:14):
it's it's growth, but it's probably a little softer than
expected given that when you look at the economic cycle
that we were in in Q one was more of
a goldilocks environment where you had growth accelerating and inflation decelerating. Well,
things are different right now, at least on a macro basis.
You got Microsoft coming up after the bell tonight. So

(03:35):
I'm recording this at eight forty six am Central Time
on Tuesday, July thirtieth, and tonight Microsoft reports their earnings
expectations are for earnings of two dollars and ninety four
cents a share on sixty four zero point three eight
billion dollars in revenue. Now, if they post those numbers,

(03:58):
that'd be a fairly healthy ex acceleration on a year
over year basis. Right, So fundamentally, it's probably pretty easy
to be bullish on Microsoft. However, the rate of change
of price volume in volatility is telling a little bit
different of a story. Currently, if you look at Microsoft
through this lens, the lens of price volume and volatility

(04:20):
on a rate of change basis, if you look at Microsoft,
it's trading in a bearess condition, and it broke trend,
which is price volume in volatility again, rate of change
basis on a time cycle of more than three months.
Right broke that trend level last Wednesday, and right now
it's now four days below that trend, which is just

(04:41):
usually not a great sign. Ordinarily, if I see something
that trades for three days below its trend level is
enough to say, okay, something, something's different, And we've got
that on Microsoft. Now, the fact of the matter is
is that it is bearish, it is below its trend level.

(05:02):
Those are not great signs. However, it is coming out
of an oversold condition, and volatility metrics suggests that we
could see a little bit higher pricing in Microsoft, at
least in the very very near term. Caveat things do
often crash from an oversold condition. Now my suggesting Microsoft

(05:23):
is going to crash, No, I'm not. It's just that
when you look at the rate of change of price,
volume and volatility for different time series, in this case
less than a month, more than three months longer than
you know, a hot second kind of scenario, these just
are not wonderfully bullish conditions. However, if they just blow

(05:48):
away their earnings number tonight and the stock trades above
it's trade level, which is four forty right, okay, then
it goes back into a phase transition to a bullet condition,
and it could very easily do that. My expectation at
least based on what the market is saying because of
how it's trading. It's price, volume, and volatility. Again, you

(06:11):
hear me say that a ton but it's so, so,
so important. Its current trade range for the day is
four thirty six ninety one. Its intermediate term trend level
is four forty twenty five. Hmm. What's that telling me.
It's telling me that the trade range, at least the
expectation for the movement of the stock for the day
is below its trend level. That's a lower high. I'd

(06:34):
rather not see that. It's really not a super bearish
or excuse me, bullish condition that would make me get
super excited about buying into the stock at this time
and at these levels. And some of that has to
do with volatility. If you take a look at VIX,
there's just no change currently to the bullish trend that
exists in VIX or in Nasdaq volatility. And you can

(06:57):
look this one up as VXN, but you have to
look at it through what's taking place in the institutional
trade bucket. Consensus has had to bid up super short
dated volatility ahead of the Microsoft report tonight, and Microsoft
is important. I mean, it's got a seven percent weight
in the S and P five hundred. Obviously there's reasons

(07:19):
behind why people might want to bid Microsoft up to
get spies spy SMP five hundred, proxy move and higher.
So that's a big deal tonight, and we'll see what happens.
Then on Wednesday tomorrow, we've got the FED rate decision
at one thirty, and then Meta comes out with their
earnings numbers after the close, and Meta is trading and

(07:41):
looks on a price solumon volatility basis, rate of change,
looks just like Microsoft, Bear's conditioning trade range below the
trend level. All these things are in place, right and
then after that we get Amazon. Now this one's a
little different. They're still bullish trend, but it's flirting with
a break. It's gotta it's got to pick up its

(08:01):
bootstraps and move higher from where it's trading right now. Apple,
same thing, and they report on Thursday, and then on
Friday you get non far non farm payrolls. Now, yeah,
non farm payrolls. Oh gosh, what can I say about that?
Is it manipulated? I don't know. I certainly don't think
that they're giving us all the details when the details

(08:22):
come out. You know, the statistical anomaly of having the
revisions every single month and the revisions are have been
lower for as long as they have is just well,
it's just odd. It's just not right. So any rate,
what do we got. We've got a week that's definitely
filled with all sorts of catalysts, while VIX is still

(08:43):
in a bullish condition on a trend basis, and dealer
gamma is negative. Now again, remember gamma. All that's telling
us is that if it's positive, the probability of increased
volatility comes down, and if gamma is negative, the probability
of increased volatility goes up. It's the way to look
at it, all right, nuff said, don't need to well
the ocean over it. VIX conditioning right now suggests that

(09:06):
if we saw fifteen, maybe even fifteen and a half
on VIX, it could very easily bounce and move itself higher,
giving everybody a freakout condition. Just like what happened last
week on Wednesday and Thursday, mostly Wednesday, when VIC spiked
over twenty two percent in the day. Right, well, why well,

(09:28):
it broke up above its trend condition on Friday, July
the nineteenth, and then it came down and tested it
twice on the twenty second and twenty third, and then
rocketed itself higher on the twenty fourth, a little bit
higher on the twenty fifth, came back down on the
twenty sixth, kind of stayed in limbo land on Monday

(09:48):
the twenty ninth, and then today it's just kind of
just kind of hovering, right. So fifteen fifteen and a
half on VIX is a pretty important level. If it
can break that, then it's going to want to test
thirteen fifty five. And if it got down to those
levels during that timeframe, you'd likely see stocks do pretty well.
But if it held that, that's holding trade range for

(10:11):
the VIX, and that would be a very bullish condition
for VIX, which would not be bullish for the overall
equity market in general. So again, all this stuff is
just simply pointing to an increased probability of some increased volatility.
But remember, and this is important, the thing to remember
about volatility, especially when we're talking gamma, right, is that

(10:36):
it moves in both directions. You can get high degrees
of volatility with markets moving up and high degrees of
volatility with markets moving down. It just so happens that
in most cases, when VIX is bullish trend condition and
you have negative gamma, which increases the probability of volatility itself,

(10:58):
it creates an environment where it puts pressure on the
market's pricing. Okay, enough said about that is what it is.
We'll see what happens. Recognize that we've got the FED
coming up on Wednesday, and that of course is going
to be very interesting to the market at large. And

(11:19):
right now the two year Treasury is saying probability of
some rate cuts are coming, most likely this fall. So
we'll see how it rolls. But for right now, two
year Treasury is still below trend. Trend is at four
forty two, and it's trading below that, and so as
long as it keeps trading below that, it's going to
keep signaling the same thing, and that is rate cuts
coming again. Last time, be careful what you wish for.

(11:42):
Rate cuts are not in and of themselves over a
longer intermediate term timeframe. Uber bullish. Now, they might be
bullish right out of the choot. People get excited about
that stuff and chase things, and then a lot of
pros start selling into it. So we just have to
watch price fund of volatility on a rate of chain
basis on different time series for what we would call

(12:03):
trade and trend less than a month and more than
three months, and then look at the longer term cycles
and if things are breaking down in the midst of
a rate cutting cycle, should we see that this fall,
then that points to some no pointal things, So we'll see.
We'll just we just have to pay attention day by day,
one thing at a time. All Right, that's a short
twelve minutes, but it's a good update for you. If

(12:25):
you have any questions, feel free and reach out to
me via email. Info at care formwealth dot com. Info
at care formwealth dot com, or check us out online
care formwealth dot com. That's care for my wealth dot com. Hey,
I'm your host, Chris Klin. Thanks so much for joining
me here on the care for My Wealth Show. We'll
catch you next time.