Bubble Popping Now: ‘Unhinged’ Market Warning — David Nicoski

[00:00:00] Speaker 1: I don't expect Staples to lead unless this market were going to come, you know, on hand. Markets, you know, crash from oversold levels. I think the pressure on AI is going to continue. [00:00:13] Speaker 2: It's Friday, October 23rd, and it's a mixed bag today in the stock markets. The Dow opened 500 points lower while dip buyers are testing the tech sector. After the Nasdaq's worst day since June on Thursday, chip stocks are bouncing this morning. Is it time to buy the dip? That's the theme of our conversation with our next guest, who's going to reveal to us which companies are worth bottom feeding, so to speak, and which still have a lot more downside. He's going to go over the technical indicators we should be watching to decide if something is worth buying the dip or not. We'll also get his outlook on where the main stock indices and bonds are headed. David Akoski joins us. He's the chief investment officer of Vermillion Research. In his last appearance on the show in September, he called a historic rotation between sectors, which is playing out exactly right now. And right now on Kaushii, traders are predicting a 31% chance that the S&P 500 index will be above 8,000 before December 1st, 2026. A $50 trade on that outcome could yield $88 if you agree with those odds, and you're right. This video is sponsored by Kaushii, the largest prediction market in the United States. Unlike a sportsbook, you're trading peer-to-peer on real-world events from economic data to political outcomes, and the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here and use my code LIN. New users who use my code can get $25 in app credits when they trade $25. Kaushii is CFTC approved and available in all 50 states, including California and Texas. Welcome back to the show, David. Good to see you. [00:01:46] Speaker 1: Hey, great to see you, David. [00:01:48] Speaker 2: The tech sector has been falling for two consecutive days now. On Friday, some of the stocks recovered, but basically we had earnings reports come out earlier this week. Some have beat expectations, but then if you looked under the surface, like Meta, for example, the revenues went up 26% year-over-year, beating expectations from Wall Street. But then they reported a free cash flow of negative $3.1 billion, which suggests to them that they're earning money still, but paying more on AI data center investments that they're actually bringing in, which spooks some investors. So you've got that AI worries and the build-out worries paired with escalating tensions and the war situation in the Middle East, and then you've got a very volatile situation. But I think the theme for the last 48 hours, based on the comments that I've seen and some of the reports that I've seen as well, is that good news has stopped being good for stocks, which in itself is a bearish indicator. What's your take? [00:02:40] Speaker 1: Yeah, I think the tone of the market changed dramatically. After the CPI never came out, you saw, you know, we rose somewhere around 14, 15 basis points, erased it all on the same day, and actually closed, you know, the yields on the 10-year down dramatically. I think that swing, I think it was around 34 basis points, like was enormous. You don't tend to see that. I think that was a gravitation for safety and that, you know, the inflation is running rampant, but it's also a sign that investors rotated funds, you know, out of the equity markets, and a majority of that is in tech. So I think that was kind of sounding the horn. You had, you know, tech was leading up until, you know, October 2nd on a relative basis. Most of the old economy sectors became oversold. You saw it in the XLF, you saw it in the staples, you saw it in consumer discretionary. Since that day, you know, just every single sector outside of tech has actually outperformed tech from 10-2 to present. And, you know, looking at the meta, you know, earnings, you know, I'm a technician, but when you see that type of rotation out of a MAG-7 name, you know, you break a lot of charts and everything in the AI, you know, handbook is being taken out to the woodshed. You know, you have CoreWeave, you know, blowing out in terms of credit spreads. And it's happening across the whole spectrum. You know, I know Jensen came out and said everything's fine at CoreWeave. Apparently the bond market doesn't know what Jensen knows. But, you know, there's a great deal of concern out there that, you know, perhaps AI is not, you know, getting the growth or at least the profits needed to continue to escalate the build-out. [00:04:41] Speaker 2: Yeah, well, CoreWeave is one of their biggest, not the biggest, but a big client of NVIDIA. As they use NVIDIA chips for their cloud computing service. CoreWeave is an interesting story in itself. Since you brought that up, I can pull up a chart here. It's down about 40% just in October alone. This, to your point, the rotation started around the beginning of October. But even before then, it's been falling. I think it's down about 80%, sorry, 64% since May. Now, I want to stress that this problem is unique to CoreWeave. It's not every single tech company having their credit spreads blown out. CoreWeave's bond deals have risen to 15% to 16%, while their projected return on investment capital is 8.9%. So that's a bad situation for them. But just from a technical perspective, do these things look oversold to you, even if the fundamental credit conditions are deteriorating? [00:05:46] Speaker 1: You know, you could be oversold, but that's often where crashes also happen. I'm not bullish on CoreWeave. It can get a bounce, but that's a trade. It's not a long-term investment. If you look at the longer-term chart, you have actually a major descending triangle. If you connected the tops and the lows, we've just taken out the low. So, you know, that, at least from a measurement standpoint, from a technical perspective, measures considerably down from here. And I'm talking the teens. So I'm not a buyer of it. I have no interest. The area in tech that looks most compelling, believe it or not, hardware is getting decimated. And what really stands out there is looking at the software side. We've been highlighting, you know, names like HubSpot, Monday.com, you know, Adobe. There's just too many software names that look much more compelling from a technical perspective than what the SMH or the SOX index looks like. [00:06:49] Speaker 2: Yeah. Speaking of the SMH, wow, perfect segue. Either I read your mind or you read my mind or something happened, but it's on my screen right now. It's been trading range-bound. The Korean chip stocks have been falling not as badly as they did in July. Although they have been falling. And now the SMH is falling once more. But if you look at it all the way back to May, it's basically just been trading range-bound. Is it waiting for a breakout? [00:07:14] Speaker 1: I see that more as indicative of a top. I think you can get an oversold rally here. But you also have, you know, high-yield spreads. We're up at 351 as of yesterday's close. During that March sell-off, if you look at the markets during March, you know, you had high yields moving up to about 340 basis points. You know, I'm expecting pressure on the, you know, high beta side of the market. I think a lot of good news is baked on. You're not going to have the same growth rates that you had in the last quarter, especially with what we see happening within the AI. You know, what's interesting is you look at the food chain in AI, you know, pull up the chart of STRL. They build data centers. You know, this was a call I made back in July of 22 to go long, all of the E&C stocks. And it's simply looking at a relative strength versus the, you know, the market. You were actually breaking out in early July, mid-August timeframe on every engineering and construction stock. When you look at these, and these are the food chains that build data centers, every single one of them is down 50 to 60% from the recent high. You know, ECG, Cardinal, CDNL, you know, pull up CDNL as another, you know, example of what, you know, what it looks like, you know, 96 to 13. You know, this is what I'm seeing all over the data center side. These are the people that build it. And, you know, if they look like this, you know, we have some problems that funding isn't going through or, you know, the inflation that we're seeing is really caused by the advent of AI, more so than anything else in the economy. And when so much, you know, it depends on it, it really tells you that there's a problem out there that either these things are not getting approved or they don't have access to power, but that's causing a dramatic slowdown in everything within that, you know, the build side. And that gives me pause, you know, there's other better places. [00:09:35] Speaker 2: I've overlaid, I've overlaid Sterling with CDNL just now. And, you know, they're, they're, they're in the same sector, but they started falling around the same time. Was there something around the summer that, that basically woke investors up to infrastructure companies here? [00:09:53] Speaker 1: Well, you know, I looked through, you know, the, the earnings release on Sterling. And one of the things that they said that, you know, their cost pressures to, to, to, for all the ingredients to build, be it labor, electricians, be it plumbers, that, that they're demanding such high prices that, that their margins are absolutely collapsing. Not, not to mention, you know, steel, because they have to fabricate specialty steel for these. So you're, you're seeing the, the, you know, the aspect of that we're seeing in the CPI it's happening, you know, much more significantly in the AI build out area than any other place. And I, I think that's going to continue. Um, but you're also getting pushback on where data centers can be built. Uh, you, you don't have access to power. So you can't, even if you built a data center, it's an empty building until you can get power. Um, you, you, you see names like Caterpillar down, you know, 35% from their high and you see that across the whole spectrum of the power side as well. Many of their charts are breaking and, and to top that off, you know, I made a call here about a month ago that, you know, Goldman Sachs and Morgan Stanley, all of the brokers were breaking down. The IAI index is the broker dealer index. Um, you know, when you run your relative strength charts on it, or look at pattern recognition, you know, you had some major breaks and, and then uptrend violation goes back a lot further. So if you were to pull that chart back several years, you know, you're, you're kind of in a dilemma of, is it going to break that longer term trend from 24? Right. And that's, that's the unknown at this point in time, but you have a, you know, the, the yield curve is compressing, right? It's flattening and that's not good for banks. [00:11:48] Speaker 2: Yeah. [00:11:48] Speaker 1: It's not good. You can't even get a bid in bank of America city group, you know, across the, the board of the, uh, of the larger banks out there. And, and it's because of that compression and the yield curve. [00:12:00] Speaker 2: So Jensen Huang did say actually that, uh, CEO of NVIDIA, he did say that capital is scarce. He said there's, you know, the, he said there's tremendous demand for neoclouds like CoreWeave, but then capital was scarce to fund them, to fund the buildout, uh, which illustrates your point. Suppose we have a slowdown of the infrastructure side and data centers begin to slow down their, their expansion. You know, is that good or bad for the stocks market? It's the stock markets because on the one hand, you can say that the funding is slowing down and that could slow down the entire sector, but maybe that's what investors need. A little less, uh, capital, um, uh, a little less capex, more capital intensity, a little more efficiency and better earnings. [00:12:46] Speaker 1: Yeah. I mean, you, if you look back at history, whether it's the railroads, whether it's the telecommunications industry, whether it's the.com era, whether it's the TV, the radio, the phonograph, you know, you go through boom and buzz cycles. It doesn't mean it disappears, but you know, if we start looking at it, you know, in depth and I, I'm a technician, but yesterday I hosted a few spaces, you know, I looked up how many series offerings there were for anthropic. 15, okay. 15, okay. If you've ever looked at the private industry and looked how many funding rounds a company typically do, the number is five. You have, you have open AI has done 14 rounds and, and you, you know, if, if anthropic is reducing their market cap from 2 trillion to 1.5, you know, uh, 1.5 trillion. You probably just took the last round of investors and they probably are underwater because those previous rounds were, you know, a guaranteed win. And when you start to cycle that, you know, you come up with a big problem if you need to come up and raise money again, especially if the last round is now underwater. So, you know, the history is so ripe with boom in Boston and again, the internet never went away. Railroads never went away, right? You're, you're overbuilding. You're spending too much capital before they, before they can become public. And the problem that a lot of these didn't, you know, compute in is higher rates. And when you have the, the higher rates environment, it compresses your ability to raise capital because you're competing against bonds. And when you have high yield blowing out and you have credit or, uh, uh, uh, credit default swaps in a number of these companies escalating to junk level status, it becomes a lot more difficult to raise more capital. [00:14:39] Speaker 2: Let's go back to the beginning of October. You said everything changed after the last CPI report. It actually started even before then. So if you take a look at the, uh, NASDAQ, uh, this is, yeah, it's down about 6%. Let me pull up some of the, um, uh, other sectors you mentioned utilities. Uh, actually, I think you mentioned, uh, consumers. So let me, let me do that. So, uh, everything, you know, these, these things that have underperformed, so consumer staples, utilities, uh, healthcare, these sectors that have underperformed all year started outperforming the NASDAQ. As of three weeks ago, like you said, uh, it's been three weeks though. Right. So, uh, you know, is this rotation over? [00:15:16] Speaker 1: I, I think it's just getting more legs. I think you're getting a, you know, a temporary reprieve today. It seems like the market's a little bipolar. You know, they'll run into one area of the market and the next day they'll reverse it. And the next day it'll be the opposite. I, I, I think there's still room to go to the, you know, the upside on some of these oversold areas, especially if you get a bid in, in bonds to compress yields down. Tech isn't liking the lower, you know, when you, when you can't push tech up with lower yields. It tells me that it's, it's too many people are in the names. The other thing that's interesting. Um, I, I did a space with Michael Cantrell the other day. Um, you know, when you're looking at a lot of these each sector ETFs, they are not realistic, um, views of the market. They limit how much an equity can be in that ETF. So it's not a real world. If you looked at the XLK or technology, it's up 30%. The XLK is up 15%, you know, so they're, they're not a true reflection of what technology stocks have done. As a matter of fact, you've underperformed owning, owning the sector ETFs because they limit their exposure in some of the mega cap stocks that have had tremendous runs. [00:16:38] Speaker 2: Yeah. Yeah. Bond yields have been falling ever since the beginning of October. That coincided with this, uh, rotation that we talked about. And I'm looking at the chart and honestly, I, I, you know, maybe you can help me explain this, but, uh, I, I, I was confused as to exactly why that happened to your point. Tech stocks didn't rally on lower bond yields and get defensives did why not? What, what, what, what happened there? [00:17:01] Speaker 1: I think it's a crowded space. It's market concentration. You, you know, if, if you look at the semi and semi suppliers, we, we, we hit a level of 44% of the technology sector was in those two segments. Um, but just to give you an idea during the.com, we were around 23%, you know, so if everyone's there and there's no one else left to buy, you, you, you run into complications. You know, you, you saw a lot of people moving into, you know, the memory stocks because they had low PEs. It's a cyclical industry, you know, and the value of a stock is the, is what, you know, all of the investors as an aggregate total, what they put into it. You know, you, you, you can have very inexpensive stocks that go down. Right. And that's what you're seeing. It was too crowded. Everyone made the same bet and everyone levered up on it. [00:18:03] Speaker 2: All right. U.S. 10 year yield. Uh, here we go. Now, most people have been, that I asked have been a little hesitant to call the top on the 10 year, even at 5.34. Um, meaning I've asked them, has this been the peak for the bond yields? And, um, and, and no one wants to put a firm answer to it. Uh, I have talked to a few people who have gotten bullish on bonds at the end of September. So that was very good timing. Uh, are you bullish now still with, uh, with bond yields haven't fallen down, uh, from, yeah, go ahead. [00:18:43] Speaker 1: Yeah. I, you know, like when, when you broke out to that, you know, five, three level, you're at 25 year highs. Right. And we, we broke 40 year downtrends on bond yields back in, you know, 22, 23. You, you shouldn't expect that bond yields will go down to the levels we've seen before. Um, you know, I discussed this with Michael Cantrell. The only way that you're going to get that is through a market correction, in my opinion, um, where you can compress yields, you know, significantly below the five level. Um, but it, it's, you know, or you get unemployment to go up, but that will in itself pressure equity markets down as well. So the, the, the market is front running where we have a compression of cycles that we've never seen before, um, when it comes to guessing what rates are going to do and, and where's an opportune time to buy. That was a great short-term opportunity. You know, when you look at the yields, you can see they started going parabolic, right? And you still haven't broken the uptrend in them. So we may just be marking time. And then from a short-term standpoint, you know, we rattled the equity markets and bond yields went down, um, you know, so that's the cause and effect, but it, it, I don't want to say that that's the, the high in yields. We, we can retrace back to that five area bounce off of it and we still have inflation, you know, energy is still moving up considerably. There's many people that don't want to try to guess what, uh, energy is going to do. It's been our overweight for, for, you know, quite some time here. Um, but I think that I, I can't tell you when the war is going to end. I can't tell you when the Houthis are going to stop, you know, uh, blocking or shooting at one out of every 10 tankers, or if it's on Tuesday or Friday. Right. Um, I, I think that's the biggest risks of the market that we can, you know, continue inflation. If, if oil continues to move up, there's a trade actually on the prediction markets. [00:20:45] Speaker 2: When will the S and P 500 index be above 8,000? Uh, it's currently at 76, 48. So 8,000 is not too far away. 31% chance. These thoughts are funny. 31% chance before December, 95 before January. So something's going to happen in December. And then 67 before February. Um, so people are really bullish on January 1st. Anyway, um, the, uh, the, the outlook for the S and P is a dependent on, uh, individual sectors that we, that we've talked about that are rotating. Um, or causing this rotation, uh, or do you think that the index stays flat and then we just see specific sector outperformance continue? [00:21:29] Speaker 1: I, I think we're stuck in a trading range. Um, you, you have tech at such a, a, you know, an extreme in terms of its weighting. You have the mag seven, you know, in my opinion with the, with the, you know, if you look at the mags ETF, you are breaking the uptrend. 7240 was an important level. I, I had posted on X, you know, about a week and a half ago, um, you have taken that out. I, I think you're going to put pressure on these mags. It can compress, you know, at least the tech indexes down. Um, but in reality, as long as the breath continues to improve underneath the surface and, and the oversold areas without investors throwing in the towel on them. Um, you know, we, we, uh, in my view, I think we go sideways. I think the pressure on AI is going to continue. Um, I don't, you know, you calling a V reversal is, is, you know, like me getting a hole in one on a par four course. It's never happened. Right. [00:22:28] Speaker 2: Okay. I wouldn't know. I don't follow golf, but I trust your, I trust your analogy there. Um, uh, oils broken back up to the upside again, uh, David, uh, I wonder how much of the squeeze that we're seeing in the Dow. Uh, and to some extent, the S and P is caused by higher oil, uh, 103 on the WTI, 112 on Brent yesterday, uh, as tensions really start to heat up. And if you look here again, this, this, it, this is very interesting how oil has been starting to, uh, rise ever since the beginning of October. You see this downturn, uh, that started in the beginning of, uh, middle of September, then a trough around the beginning of October. And then bond yields diverged from, uh, from the oil price, which was the first time it's happened this year to my recollection. Uh, what does that signal to you? [00:23:20] Speaker 1: Well, I think that's more of the sector rotation on the, on the bond yield side. Um, and that's where, where investors, again, if you can't lift tech with lower yields, it's telling you that there's a problem. Um, I think investors are seek, seeking safety. That's why you have a, you know, divergent since October 2nd of 22% between the XLP and the XLK. You know, that's a, that's an, like annualized that it's what three weeks ago, you know, that's pretty, pretty significant. So, uh, I think, you know, within tech, I would try to play the, you know, the, the software names over the hardware doesn't mean you don't get a bounce. I think trying to pick a bounce is, is an opportunity to sell into on the hardware and semi side. [00:24:10] Speaker 2: The consensus is from my show and other media is that oil isn't coming down anytime soon, especially distillate products, uh, any impact on financial markets, uh, from here on now, or do you think markets have already basically normalized $100 a barrel? [00:24:25] Speaker 1: I, I think the markets have normalized at this point, but if we, if we continue moving up, I think that's going to put pressure on the equity market. You, the E and P stocks have been absolutely incredible with their run. The, the area that's lagged and I, I threw a piece up on my sub stack the other day is, you know, the laggards on the OIH, they're starting to move, you know, considerably here. I think most people don't believe the energy move or have been burned in the past, but you remember back in 22, energy was up 85% as a sector and the S and P was down 25%. And that's why I don't like to pick out like where I think the index is going. I try to find the areas of relative strength that regardless of whether it's a bull or bear market, you're owning out performance and shifting at, you know, at those inflection points. [00:25:15] Speaker 2: Okay. Uh, let's go over one of your charts from your report booster shots dated October, uh, 21st. So two days ago, uh, the first slide is called bottom fishing. And we're, we're looking at bottom fishing candidate here, um, HubSpot Inc. Now this is one particular example where potentially you might get in, um, and you're looking for a bottom, not so much for the other stocks and indices we talked about, but, um, tell me about what's interesting with this chart that we're looking at. [00:25:47] Speaker 1: Well, it's, you know, it's in, it's in the software or at least, you know, an area, um, that, that is improving. You know, if you, if you put this relative to a tech stock or even the S and P, which I posted on there, you know, you're building a base. You made the lows, you know, at the end of June, um, and you have ascending, you know, reactions and that, that, what that means is you have higher lows that are taking and progressing throughout the chart. So, you know, the, the tape action, at least, you know, I, I look at a stock chart as a voting mechanism and you, the longer the trend being broken, the more important it is. So when I look at something like that, you know, if you're a tech, if you're in tech and tech is going to, you know, if I ran that versus XLK, you're far outperforming. So again, finding the stronger names within a sector or a group is key to finding pivot points of outperformance. [00:26:43] Speaker 2: Okay. Let's just take this as a live example here. Uh, I'm going to overlay HubSpot with, uh, with CoreWeave, uh, just to illustrate the point. So if you take a look at my screen here, um, this is HubSpot Inc. Yeah. This is the right chart. So, yeah, so we've got, so bottom fishing is a, is a, is a topic that a lot of people are interested in. We always want to know when is a good time to start bottom fishing. Um, to your point earlier, CoreWeave is not one such good example. So let's just compare the technicals of these two companies side by side. And you can explain to us why one is a good candidate and one is not. [00:27:26] Speaker 1: Well, what, one is actually breaking a longer term downtrend, which is HubSpot. CoreWeave is breaking to new lows, you know? So, uh, and if you ran them, I don't know if you can do relative strength on them as a ratio. [00:27:42] Speaker 2: Uh, I haven't tried that, but I can definitely do RSI. [00:27:47] Speaker 1: Um, no, it's not, it's not that it's, uh, let's see if you've got it on there. I don't see, there's got to be a way to do a ratio on there. [00:27:59] Speaker 2: Hmm. [00:28:02] Speaker 1: Uh. It's, it wouldn't be RSI ratio though. It's relative strength, just RSI. Relative strength. RFs, I mean. Yep. [00:28:14] Speaker 2: Strength. Hmm. Relative strength. Uh, no, I think that's right. [00:28:22] Speaker 1: Let's see what we end up with. Okay. So that that's giving the relative strength versus the SMP for HubSpot. [00:28:31] Speaker 2: Yeah. [00:28:31] Speaker 1: Okay. Yeah. So as you look at that, you see, it's curving up. You're actually breaking out versus the SMP. You're taking out the highs going back to last November. You see that line, that blue line on the bottom? [00:28:45] Speaker 2: Yeah. [00:28:46] Speaker 1: Yep. So if you, if you drew a line right across. [00:28:50] Speaker 2: Yeah. [00:28:51] Speaker 1: You would, again, so you're, you're sitting at one year highs versus the SMP. [00:28:58] Speaker 2: I see. And the other one is just, it's just sinking. So if we were to do the same thing for just core weave, uh, you would see that, uh, the RSI is relative to the SMP is. We'll just call it RS. Don't, don't call it RSI. Sorry. Yeah. It's relative to SMP. The relative strength, uh, is just. Yep. Nowhere close to, uh, uh, all time highs. Okay. Um, does that, okay. So how do we read relative strength though? Um, isn't a very low relative strength, uh, a buy indicator? [00:29:32] Speaker 1: No, no relative strength is telling you it's the ratio. If you take a stock and divide it by the SMP and it's moving down, you're underperforming. That's all that's telling you. I see. If you did it versus Nike, it was trending down for two and a half years. It doesn't tell you to buy it when you inflect and break a downtrend. That's what's important. [00:29:53] Speaker 2: Okay. Yeah. Well, good clarification. Thank you. Any other, um, sectors or stocks you think would be good bottom feeding potentials right now? [00:30:03] Speaker 1: Um, I, I would say, you know, even in staples, whether it's general mills, craft Heinz, you know, Procter and gamble had a monster move. If you started looking at the XLP, I don't think they're long-term leadership, but they have, you know, dividend yields. Some of them six, 7%, right. Um, I, I think it's a tactical trade because, you know, I, I don't expect staples to, to lead unless this market, we're going to come, you know, unhinged and, and that, that's where correlations move to one, uh, that that's, you know, markets, you know, crash from oversold levels. We're not oversold on the market yet. Um, because you have so many other sectors picking up the slack. Um, so if they started to turn South, I would be much more worried about, you know, a dramatic decline. Okay. I would say energy are long for me. I'm bottom fishing the, the oil services names like Schlumberger, Halliburton, Weatherford, Tidewater. Um, those are the areas that I see have been, you know, that no one in energy wanted because the EMPs are not, you know, spending money to, to seek new oil, right. They're just pumping what they have. Um, there's names out there like Transocean, which, which I own, I've been recommending, uh, that one's coming out and breaking out above a major base today. Uh, I think that's a very compelling long-term play as, you know, more and more countries have to move to secure their own energy. Um, you have stock levels dropping, you know, whether it's RSPR or anywhere around the world that has to be refilled. And we don't, no one knows how long the war is going to take or how long it's going to last, but I think it's going to continue to push countries to, you know, get their own security. And Transocean is one of those names that would do it. [00:31:58] Speaker 2: Boeing, Locks, Locks, uh, Lockheed Martin, uh, Raytheon, uh, what, what are those stocks on your radar as well? Following the same thing? [00:32:05] Speaker 1: Lockheed Martin is, Northrop Grumman is, Boeing, Boeing has only outperformed the S&P 500 for three years over the last 20 years. To me, it's not a stock to buy and own. It's, it's been a relative underperformer. Even when you look at the defense stocks as a whole, they have not outperformed the market over a long duration of time, only short moves. So is it a tactical move here into Lockheed or Northrop Grumman? And yes, uh, most of those areas are breaking down and underperforming. So it's a stock by stock selection. [00:32:43] Speaker 2: Yeah. Our mutual friend, George Noble is very bearish on core weave and Tesla, by the way, we haven't spoken about Tesla. Let's just close off here. Uh, he said the stock is basically the product is a stock. Um, but, um, are you, are you, are you bullish at all about the, um, transition from cars into robotics and, um, and what Elon is building? He probably wants to merge X with Tesla at some point as well. So, um, it's one of the companies that came out with earnings this week. Also beat earnings. Also went down. [00:33:10] Speaker 1: Yeah, go ahead. Yeah. You know, like I'm not, um, when it comes to Elon stocks, I, I don't mess around with them. I don't touch them. I think they're, the evaluations are egregious. Um, and here's, you know, some food for thought since 21, Tesla has underperformed the market by 50%, five, zero, I would rather play in other names that are actually moving up. You know, we went over Sterling. I think it moved from $20 to a thousand dollars. Those are the names that everyone wants to own. That is way outperformed Tesla. So I, I don't try to, you know, characterize myself as anti-Elon or pro-Elon. You can, you can definitely, it's a cult area that I wouldn't bet against. And I wouldn't bet for, because I'm just looking for names that actually, uh, outperform. And like I said, Tesla is underperformed. SpaceX doesn't have enough history for me to make a comment other than you outperform for a month and underperform for a month, right? It just, there's not enough information there. [00:34:15] Speaker 2: All right. Well, uh, good analysis. Before we talk about where to follow you, can you just, for those of us who may not have followed your work already, summarize your trading strategy in one or two sentences. What do you look at, uh, before you, I guess, rotate from one thing to another? I guess this is my question. [00:34:33] Speaker 1: Well, I, I do a lot of relative strength analysis, be it, be it on sectors and groups. I do all my own group work, um, and have my own formulated group structure. So I don't use JIX codes. I, I break, you know, groups down into large cap, mid cap, small cap, and micro cap, for instance, like the, you know, biotech. Um, so I have my own groups. I don't use what they use on wall street. I think there's a better, uh, way to break down the market than what ETFs do than what, you know, many other products do. I look for the relative strength inflections. The longer the, the inflection, for instance, something breaking a five-year downtrend is a lot more important than something breaking a three-week downtrend, right? Those are secular changes. Uh, the example I gave before in the engineering and construction stocks, I don't care which one you bought in 22, you far outperformed the market and some of them have outperformed NVIDIA. So, uh, you know, that's, that's what I try to, you don't get a secular inflection every day. So, you know, you have to limit yourself to looking at two year charts and what's, what's moving, you know, as I said, HubSpot, Monday.com, you know, GoDaddy. Um, most people probably haven't looked at this, those areas, but you know, they're, they're starting to show relative strength performance. [00:35:51] Speaker 2: Okay. Excellent. David, good to see you. Good to have you back. And, uh, we'll follow you where? [00:35:57] Speaker 1: You can follow me on X at Dave Vermillion. Um, I have a sub stack, sub stack also called Vermillion research, um, that you can find me on there. Those are probably the two best places to find me. [00:36:11] Speaker 2: All right. We'll put the, uh, social links and Vermillion links down below and, uh, please do follow David there. Welcome back to the show. We'll speak to you again soon. [00:36:19] Speaker 1: Thank you. Appreciate it, David. [00:36:21] Speaker 2: And thank you for watching. Please do like subscribe, use my code, Lynn, L I N. When you sign up to Koushi, remember new users who use my code can get $25 in app credits when you sign up and trade $25 link down below. We're scanning the QR code here. We'll see you next time. [00:36:35] Speaker ?: Bye. Bye. Bye. Bye. Bye.