Welcome to real visions trade ideas today. We're sitting down with John called a voz of macro risk advisors
It's great to have you here. Thank you for having me
So you were here about six weeks ago and you're quite bullish on the S&P 500
You saw it in this long-term trend channel, you had a year-end target of thirty sixty five and a stop loss at twenty fifty
Since then we've had a lot of things going on in the markets. We had the sell-off in May
It's rebounded up past twenty nine hundred
Could you give us a little bit of an update as to what your levels are right now? Okay, sure first and foremost
Thanks for having me again. And number two. I would say yeah, my objective for the sp500 is still the same
Alright 3065 could even see it as highs 3100
The pullback that we saw in May was just that I pull back a minor correction
We saw an acceleration in downside momentum
But not enough to tilt Trent
So trend is still positive and I'm still want to stay on the side of trend in terms of staying on the side of trend
What technicals are you looking at right now? Sure
so I'd say the this market strongest attribute here right now besides trend is
sentiment right and I would say that sentiment is so bearish right now that is as bearish as it was back at the
Cyclical bear market low of 2016 and one indicator that I look at is the AAI
Bluebear ratio and that is like I said at the same level as it was back in 2016
We're only a couple percentage points away from a new all-time high yet sentiment is as if we were at a you know
multi-year low
So to me
I want to look at the other side and be contrarian to a sentiment is quite compelling
Also on a sentiment front the Pacal ratio during the the may pullback reached
You know about three standard deviation levels you you want to be on the other side of that?
So on a protocol basis that was quite quite high
Also the bond VIX right the move index
Also hit about a three or four standard deviation level when you have the combination if you put call
Spiking and you move into X spiking you tend to have very positive forward returns
For the S&P 500 so sentiment would be the other indicator that I've been looking and the another category of indicators
I'll be watching closely would be my she closes momentum. Okay, so as we came down to around that
2700 level and the sp500 during the May pullback
It was a market almost responded exactly was supposed to okay
I wrote in my reports that the markets move and and as part of a three act play, right?
you have an initial down move, which is act 1 act 2 would be the
Oversold rally and then act 3 would be the lower low
Okay
And that's what correction sorry tend to be a three part sequence and the way you measure the detection will come of the measured
Objective or whatever and you get down to around this
2700 level that's where we got to in the market we spotted off of it and they want to respond it off of it
He was spotted off with a very robust price momentum, right and also with very strong advanced decline ratios
We had like a 90 percent day right off the low we were able to shoot up higher to to about where we are
Right now so price momentum has been very very strong and then lastly
How is this pull back to when we had a may different than what we saw back in?
2018 and I think this is important to think about is that if you were to
Overlay the pullback that started in may actually pull back to turn into a bear market
With knocked over with what we see right here in May. They're almost more than the same. They both broke down from wedge
Formations and they both went through this 1-2-3 sequence act one two
And three what happened in 2018 is that we actually had breath their Virgin sees like the ad line right was already declining
While the market was going up
Okay
Currently when the market made a new high all-time high breath confirmed soda mark was on a stronger footing
Now than it was then so I'm inclined to be buying this pullback
Versus what happened last year, so I'm looking at breath and welcome momentum, and I'm also looking at sentiment
Okay
And right now do you see that rally potentially happening?
Sooner than later or do you think for a while we're just gonna kind of muddle through
I think it's gonna be a little bit of a muddle through we have snow summer seasonality to deal with
We have a lot of catalyst ahead. We have g20 meeting. We still have the phase coming up in a couple days
So there's a lot of that going on
We also have the July employment data that used to come out market has to figure out what to do with that
so I think would be
muddled along but it eventually will make the higher high and make a push up to 30 65 is your
Stop-loss still in the same area at 28 50 it is it is actually is
28 60 it adjusts a little bit, but we'll call it 2050. It's fine and technicals there
Is there a point that people should be watching for in the stock market to say I got it back out?
Yeah
I believe underneath 2060 will prove to the marketplace that
The correction we went through in May is still ongoing and that a break underneath that level will tell us what you know
What we need to go back down to around
2,700 and test the level that I would have been
Distressing support so anything underneath that 2700 level we start questioning the trend models
I was referring to earlier that perhaps we need to become a little bit neutral ish. If not come
Okay, so if you were looking to trade this in the SP Y what levels would you be looking? So SP Y that's approximately
310 on the SP
Why is a target and for the stop would be around 285 given that we are kind of?
potentially gonna see sort of a muddle through period
Would you consider putting a hedge on that trade?
Yeah
I would actually and what's quite interesting when it comes to gold for instance
I think is one hedge we can put on one thing
I've been telling the clients and even my written reports is this if you would use just to cover up, you know
The price, you know the label for gold right and you're on your Bloomberg chart or wherever and so what is that?
It's quite compelling. It's an interesting chart should be long it regardless of what asset class it is
so when a short-term basis gold looks very interesting to me, but it's only a
Tactical ideas only a hedge. It's not a strategic long-term
idea, and the reason being is if you were to look at a long term picture of gold it's been basing for about four or
Five years. Okay underneath this 1350 to 1375 resistance level
It's a base and technicians get very excited about these bases
But it's still a base until it breaks out and hasn't broken out yet
So from a tactical standpoint
I think we can push up and test those levels and maybe can
A little bit of the show to momentum that we seen but a longer term it's hard to become bullish on
Gold until we break out
above that level and one last thing is that with gold if you would look at the ratio of stocks to gold right this
Dr. Gold ratio that is actually giving a tactical sell signal
Okay, so I do want to be hedged a bit when gold is outperforming stocks, which it is right now on a short-term basis
So just to follow up on that chart that you mentioned of stocks versus gold stocks are underperforming gold on a short-term basis
But what about a long-term a long-term basis?
no stocks are still outperforming gold a great indicator that technicians have used for four decades is
To look at the stock to gold ratio on a monthly basis and you overlay it with the say a 50 month moving average
Okay, if that ratio is above trend you're in a secular bull market below trend you're in a secular bear market. So while
Stocks have lost momentum relative to gold if the trend is not negative
so I just want to make it clear that you know on us on a structural basis stocks are still on an uptrend and and
down the road if things start to turn south for stocks
I'll be watching this quite closely to tell me whether or not you know
Maybe stocks are turning into more of a prolonged bear market or not and looking at a price chart of gold
You have mentioned and notes that even a gold rally up to
1700 would still mean that there's a secular bear market for yeah, it's pretty it's right
so even last I was here we talked about oil how I think oil think you need to move low or why because it's a
Secular bear market and same with gold right gold I believe is in a secular bear market
So if gold were to break out and say above this 1375 level it counts to 1700. It's a nice rally
it's a strong move, but it still would keep gold within the definition of a bear market a secular bear market a
Decade of just volatile
Sideways trading and it would be very similar to what we saw back in the eighties
So is this gold trade just a short-term tactical trade rather than watching it get up to seven tracks
Yes, I wouldn't be surprised to see it get up that high on a sustained breakout
But as of right now I'm treating strength right now and gold as a tactical position, okay?
So what would you be looking forward to actually see it get up to? Okay, so there is actually an inverse relationship
Gold and real interest rates
Okay
So gold is bumping up against major resistance around this 1350 1375 level the real rates on the ten-year
Okay has has a strong support at around 30 basis points right now
so for gold the breakout real rates would really have to break down and that
Market right now is supporting interest rates at that level
Okay
If the Fed does continue is if that does cut and let's say they continue to cut it's quite possible
Real rates head closer to negative and that would be a tailwind for gold, but I want to wait for confirmation
From gold breaking out to position better for the 1700 and also look for real rates to confirm the breakout and what about your stop-loss?
So for for gold I would say the stop and actually I came prepared more to talk with the GLD
I would you the target of GLD be around 137 to around
140 with the stopping at around 123 and are there other?
Asset classes that you would use to hedge, I would be looking at at bonds as well
Okay in particular I think individuals can be long the TLT just a small position
I think given the uncertainty that we're in right now
Having some sort of hedge on I think is totally fine. Okay
and the reason being is you kind of think about it the market only really gives us a
tremendous buying opportunity once every couple years and I believe that buying opportunity happened in December of
2018 now, we're much much higher. Okay. Now you have a little bit more
Careful guess about your spots and how you play it. But also we're almost at a new high. Okay for the market
I think the markets really gonna
Test, you know, the participants will whether or not they're gonna allow it to breakout
So I think it's a good idea just to kind of keep a bit of a hedging the TLT
What would be would be one? So what technicals are you looking at until t TLT?
Honestly, they're the first and foremost is just a price trend for the TLT
It is just compelling it broke out of a small base about about a month and a half ago, and she's been trucking along
beautifully since then just like gold people just to hide the
Ticker on your screen and try to guess what stock that was you would think it was a tech company or a biotech company
No, its bonds. All right, so it's very very strong. So really it's trying to momentum that's keeping me on the long bonnes
So talk about some of your levels what's your entry and your target and stop-loss? So sure it for a short-term perspective
I would look at around one thirty four and a half with the TLT there is scope to get to one forty
I know that's a bit aggressive but I would say somewhere around one thirty four and a half would be the initial
Level to look at as first stops
That would say one thirty and a quarter would be a good stop or longer term the 50-day moving average
Okay, I think the 50-day moving average for the TLT
Could be a good trailing stop over time and in terms of time frame for both
TLT and GLD. What are you looking at? I would say just over a course of a couple of months
honestly, like I said
This is a tactical concern, right?
And and as we just back up a little and just think about what other things I'm looking at for bonds
interest rates should in theory try to find a
Floor around here at least temporarily around two percent on the 10-year and I'm saying this before a Fed meeting
But when I look at the price
and I Susu the chart of copper right copper is
Testing a major support level as I mentioned earlier Gold is testing a major resistance level, right?
So my process tells me to respect my levels. All right, I'm going to
Assume that supports going to hold and want to assume that resistance could very well hold okay
And when you combine the two copper and gold you have the cop of gold ratio and a copper gold ratio actually correlates pretty well
with interest rates
So if the cop of gold ratio is oversold and that support then interest rates
it should be oversold in that support and therefore rates go up and then bonds should we eventually find its way lower so that's why
I think it's more of a tactical
Issue being long bonds than a longer-term P because like I said the longer-term support levels or legit for for copper
Now you mentioned the Fed and we have a big Fed meeting coming up
What would be response either way? Let's say the Fed is more hawkish or comes out more dovish
How would you react to that? I'd say it would wait. So the dust settles, right?
We're dealing with an all-time high for the stock market. I think the market is going to
Really test the will of its participants. That's what it's going to do
I wouldn't be surprised to see the market be following ease in both directions. Okay, both on the upside and the downside
I
Think the algos will go one while you know, the minutes after the the statement gets released
I wouldn't act on that immediately. I would wait look at your levels be mindful of your levels and then act
Accordingly after you know after the event happens, it's not a good idea
Usually should you just you know act right away you have to think about him again
I always tell everybody just watch your levels be mindful
and in terms of g20
Meeting how do you see that potentially impacting your hedges or potentially the markets?
Well if it's a positive outcome, all right
We should see gold come in right well should see you know bonds come in and then stock market move up
One thing that I try to do and our clients is that you got to be incremental, right?
There's no rule out there that says on day one
You have to be 500 basis points overweight a position on day one. You can incrementally change your positioning, right?
So if the outcome is positive, right?
Yeah, take back our hedges
and then we
You know stay with our core long positions if it turns out to be a negative event even with the Fed, right?
What was a hedge could eventually evolve into a strategic longer-term position, right? So it's all incremental. It doesn't have to be a binary
Okay, I'm long stocks today and I want to be you know short bonds tomorrow
All right. Can you summarize your entire trade thesis in 30 seconds? Okay
So for the sp500 I would be looking for
Thirty sixty five to thirty one hundred as the upside objective with the stop being at around twenty sixty
I do want to just make it clear as well that that trend to finding support level is somewhere around that twenty seven hundred
Levels so if markers do roll over that will be in a very very important
spot to be mindful of on an intermediate term basis for the second trade will be
GLD right
137 to 140 would be the upside objective with support being at
123 and as for bonds the TLT, we have a short-term objective at 134 and a half
140 is possible with the stop at 130
25mm
127 being the 50-day moving average great John. Thank you so much. Thank you very much
So John is still bullish on the stock market
He suggested buying the spider SMB
580 at current levels with the stop-loss at 285 and a target price of 310 by the end of the year in addition
He's also bullish on bonds and gold and likes buying them as hedges
Specifically, he likes buying the iShares Treasury bond etf
ticker symbol TLT at current levels with the stop-loss at 1:30 25 and
127 and the target price of 134 50 over the next few months
He thinks it could go as high as 140 and finally John suggests buying gold for a tactical trade
Specifically, he likes buying the spider gold ETF ticker symbol GLD at current levels with the stop-loss at 123 and a target
Price of 137 over the next few months just remember this is a trade idea and not investment advice
You should do your own research consider your risk tolerance and investor coordinate for real vision. I'm Justine under health
You