Markets Change...Humans Do Not

DAREN BLONSKI CFP®: Well, Chris, it's just us on the live stream today. Happy July 10th, everyone. I'm Darren Blonsky. This is On The Market. It's joined by Chris Sipes, On The Market. Our faithful, sexy radio voice, Dan, isn't with us today. So this is just like back to the days of COVID with you and me, Chris, when we started doing these things. And so I guess we'll have to struggle through it because we don't have the finesse of Dan.

CHRIS SIPES CFP®: That's right. So if you tuned in for Star Wars and or NFL memes and stories, probably going to be lacking on those this week.

DAREN BLONSKI CFP®: Yeah, exactly. But we'll try to keep it entertaining nonetheless as we dive into the Markets and what's happening out there. Again, kind of a doldrums summer week. Nothing crazy. It's sad that, you know, we were dropping bombs on Iran this week and the market just like meh. That's just standard course, but interesting nonetheless that that continues and we're going to talk all about it right after this.

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DAREN BLONSKI CFP®: All right. So there's quite a bit going on out there, but also nothing at the same time.

CHRIS SIPES CFP®: Markets at an interesting spot in a core inflection point i'm going to get to in my section when we talk about the candlesticks but what's going on fundamentally yeah you're right it's another week of kind of back and forth with the Iran situation it really feels like the market's been completely desensitized to that for better for worse what used to be big news and big market moving news really Next to no impact.

CHRIS SIPES CFP®: But this week, I think we'll kind of start out panning out a little bit and just thinking about where we are kind of bigger picture. You know, this week, last week, I guess, being on vacation for the 4th of July and thinking a lot about the 250th anniversary of the United States and all that's happened since then.

CHRIS SIPES CFP®: And just kind of I think it can be useful to step back for a second and look at some different eras and what other people went through. What's that saying that our friend Chris, was it Chris Chivaco that we used to listen to sometimes, Darren?

DAREN BLONSKI CFP®: Oh, Chivaco Capital Management.

CHRIS SIPES CFP®: Yes. And he had that saying that, you know, history isn't the same, but what's informative about it is that you can see what other people how other humans reacted in similar situations, right? Because, you know, the theme of this week is that human nature doesn't change, but Markets really almost are constantly changing.

CHRIS SIPES CFP®: And so, how can we learn from the past to try to avoid some of those mistakes, capitalize on some of of the opportunities that seem so clear in retrospect. So this is a great, quote from Ned Faber's new book, Investing in America. I'm waiting on my copy. I purchased that ahead of time, Darren. Ahead of time?

DAREN BLONSKI CFP®: Wow.

CHRIS SIPES CFP®: I was really looking forward to when I got back from vacation, it being on the doorstep, but it's not arrived yet. I guess there's a lot of demand for the book, but really looking forward to that. But this is from Burton Malkiel and he says, it's not hard to make money in the market. What is hard...

CHRIS SIPES CFP®: What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges. It is an obvious lesson, but one frequently ignored. And all throughout history, that has repeated itself. Another great book that I'm just starting, but heard Dr. Moore on a podcast this week. Dr.

CHRIS SIPES CFP®: Joseph Moore has a new book out called How to Get Rich in American History. He studied 300 years of American history as well and took some lessons. I forget how many there are in the book, but there's several things that have worked repeatedly over time and also things to avoid. If you think via negativa, where what can you remove?

CHRIS SIPES CFP®: To be successful as well. And I think that's one of them is avoiding the hype of whatever it is in your time, because no matter what time it was, there was hype. And this from Derek Thompson, talking about a similar time that America was going through so much change, 100 years ago in 1926. So Derek Thompson.

CHRIS SIPES CFP®: Was rewinding back to the 150th anniversary of the U.S. And they were reminiscing at the time. And so he says, here's some facts about life in 1926. Farming is collapsing. Agriculture's employment share fell from 50% in 1870 to less than 25% in 1926. The price of cotton and corn fell 50% after World War I.

CHRIS SIPES CFP®: Manufacturing productivity growth is insane in 1910 it took about 15 hours to put together a model t but by 20 1926 a new car rolls off an assembly line every 10 seconds a vehicle that costs the average worker two years of wages before world war one cost about three months in 1926 Americans are obsessed with cars 1920s kansas had more vehicles than france, so pro this one, this one really got me prohibition killed a lot of people.

CHRIS SIPES CFP®: 20,000, sorry, 12,000 people died in 1927 alone from drinking industrial alcohol that the feds had poisoned on purpose to discourage consumption adjusted for population. That'd be the mortality equivalent of 30, 60,000 people dying in 2026, which is roughly the number of car deaths. So. That's pretty crazy. They poisoned the alcohol to try to keep people from drinking it.

DAREN BLONSKI CFP®: Doesn't seem to be.

CHRIS SIPES CFP®: So anyway, you know, it's like when you sit back and you think about the amount of change that we're going through right now and everybody's really feeling the impact of the accelerated change. You take yourself back 100 years ago and really think about the rate of change for those folks. It's kind of similar, you know.

CHRIS SIPES CFP®: And the upshot is that we made it. There were reasons to be optimistic. There were reasons to think that things were going to get better. I don't think anybody 100 years ago would have even dreamed of where we'd be today and the amount of conveniences that we all use on a regular basis that are just kind of expected for normal life.

CHRIS SIPES CFP®: So it does give you hope for the next 100 years, what's life going to be like for our children someday. And, you know, I think that the human, the human condition, the progress will continue, although there'll be bumps in the road, along the way. But, but likely the, the trajectory is up into the right as it has been in the past.

DAREN BLONSKI CFP®: Did you see that headline this week that the New York City mayor, mom, Donnie didn't recognize little Italy as one as like a geographical area in the city. And like all the uproar that's creating. No, I miss that. Yeah, it's pretty interesting. And one thing I keep thinking about is all the changes and how different the experience.

DAREN BLONSKI CFP®: This summer, Chris, I've been in New York, Washington, LA, and I'm about to be in Boston. Like in a very short amount of time. So seeing all these different cities and what's going on and it's just really stark. The experience of living in the city, being in the cities versus where I live in the country.

DAREN BLONSKI CFP®: And it's, I think, two different worlds, right? So when Americans don't quite understand each other and don't quite understand why they're voting and thinking the way they are, I think it's really instructive to go live in those environments where each of the peoples live and to see.

DAREN BLONSKI CFP®: What's even more interesting is all the gerrymandering going on between the different parties where like now the same representative represents Santa Rosa that represents the people up in the foothills. There are totally two different lifestyles and approaches to things.

DAREN BLONSKI CFP®: And I see that as the fabric of American society asking these important questions about who are we? What's important to us as we move forward into the next? Iteration of our existence. It will be really interesting to see as these pieces start pulling apart at one another, if we can still find commonality to continue on. Which unfortunately history doesn't shine too brightly on.

CHRIS SIPES CFP®: Yeah, absolutely. Now with us being so connected to the Bay Area, the seat of the modern economy, didn't make the slides this week, but when you look at the size of California, California's impact on agriculture, on GDP, I mean, it's unbelievable. I forget what the exact stat is, but... It's like the eighth or ninth largest economy in the world.

CHRIS SIPES CFP®: It's just in California. And it made me think of this stat, which I brought this up before because I'm from Ohio. I remember my grandparents kind of driving me around the Akron and Cleveland area and showing me where all the factories used to be and where this and that. And here's where this happened.

CHRIS SIPES CFP®: When you read about Rockefeller back in the day being... Being from Cleveland and, and how in the fifties, the forties and fifties, that was the Silicon Valley of its time. Right. And so going along with the only constant in the market is change, right? This, this showing in 1949, four of America's seven richest metro areas were in Ohio.

CHRIS SIPES CFP®: And so you look at Detroit. Cleveland, Milwaukee, the kind of the Rust Belt, and that was the Bay Area of its time. And so it makes you wonder, gosh, you know, when we're looking out, you know, 50 years from now, where's that next seat going to be in America?

CHRIS SIPES CFP®: And, you know, where's the, or will it be somewhere else, right? Is that area going to change? And what happens to the Bay Area over that period of time because, you know. It's been a while since I've been in Detroit, but a lot of those areas in Northern Ohio were just completely hollowed out when those factories left.

CHRIS SIPES CFP®: And I think it follows kind of a normal cycle of like you get very competitive, you produce a lot of things, you do really well, and then suddenly the complacency starts to creep in. And over time, the competition just kind of takes your lunch, right? And there's all kinds of stories of excess in those factories, right?

CHRIS SIPES CFP®: Kind of led to, to the decay. And I think it's a natural going back to the human nature, right? We're, we're animals that are very routine and, and we get, we get comfortable and it's easy to, to, compete those things away. So just an interesting stat. I think most people wouldn't expect Ohio to have been such a hub back in the day.

DAREN BLONSKI CFP®: What's interesting too, is like, We've talked a bunch about Ohio getting all this. $280 million or $50 billion from the federal government to build semiconductor chip factories out there. What you're seeing happening is the U.S.

DAREN BLONSKI CFP®: Realizing that, oh my gosh, we're completely dependent on Taiwan to produce these chips for all this technology that's in all of our homes and lives now. And wait, if China takes over Taiwan, we're in trouble. It's why the U.S. Can't allow China to take over Taiwan in any meaningful way, but they also can't allow them to start blowing up factories in Taiwan.

DAREN BLONSKI CFP®: Because that would shut down all our manufacturing because we need the chips to, heck, to make the coffee maker work these days, right? And so we have to have that happen, but they got to build these fabs and they're building Arizona and Ohio.

DAREN BLONSKI CFP®: I feel like on some level, this complacency that you're talking about is kind of what's happened in California, where it was Silicon Valley, right? It was... The place of the place for what was happening in tech. But more and more, that's migrated to places like Austin or even I think a lot of it's migrated into Colorado and Ohio.

DAREN BLONSKI CFP®: Like it's starting to spread out more. And I wonder if at some point there'll be this realization. And Sonoma in particular has really impacted positively in the last 20 years, right? Like every other House that's a second home in Sonoma is someone who got rich in the tech.

DAREN BLONSKI CFP®: Business right and i mean totally changed the fabric of the town in Sonoma right it turned it all into this second House community it's not the community it used to be 30 years ago that's for sure for good or bad i mean i could argue that both ways but the we're we're kind of seeing that so i've wondered a lot if Silicon Valley stops becoming this like hub of tech innovation because the politicians got complacent about what it meant to keep companies here, then...

DAREN BLONSKI CFP®: Because there's far more companies than I think they ever lead on to leaving when I look at the data than they're starting in California. And we just, I don't know if you just saw this, Chris, too, but California just passed the largest tax increase in its history. And the tax increase is for downloading any software.

DAREN BLONSKI CFP®: So now anyone who downloads software online, you're basically going to pay taxes on whatever you download. It's a digital tax. Wish. Be really interesting to see what happens with that. But again, like you, at some point, if you, you, you know, put the hands around the peripheral neck and squeeze, how long does, can you do that before people start saying, Hey, I'm going to find something different.

CHRIS SIPES CFP®: Yeah. Yeah. And so kind of looking at where, where are the hotspots today? So fast forward from 1949 to, I believe this is 2025. As of 2025. So where, where are the hotspots for real estate today? Of course, California, you've got New York, Massachusetts and DC and, maybe in Hawaii.

CHRIS SIPES CFP®: So, so, you know, the spots have definitely migrated, to those areas, DC, of course, because of the size of the government and, and how much that's ballooned in that, in that period of time. And then you've got the coast with New York and California. So yeah, it's going to be an interesting, interesting thing to see.

CHRIS SIPES CFP®: But I think that if you go back to, you know, what does that mean for you as an investor? Well, you, you always want to, you always want to be thinking about things that don't change. Right. And to me, these cycles will not change. And there's, there's always going to be a cycle up and down and invest accordingly.

CHRIS SIPES CFP®: And try to be aware of that. Nothing stays the same in the Markets over time.

DAREN BLONSKI CFP®: Nothing stays the same in life, and yet somehow we think it stays the same in the Markets. Talk about cognitive bias and behaviors that get you in trouble. And SpaceX looked no further this week, which is starting to look like a pretty dire, ugly thing. Interestingly enough, this is kind of what we thought would happen. It went faster than I thought, which you get this big pop and then it just bleeds out.

DAREN BLONSKI CFP®: I'll show that. That's just a precursor of what's to come.

CHRIS SIPES CFP®: Foreshadowing. Foreshadowing.

CHRIS SIPES CFP®: Okay, so where's investor sentiment this week? Kind of back out. Like you said, the doldrums of summer were just kind of... Been in flowing here, kind of back to normal with the AAII survey. The CNN fear and greed index is at neutral at 47, almost dead center.

CHRIS SIPES CFP®: Up a little bit from last week, which was 37 fear. Then we've got Bitcoin still on the higher end of extreme fear, but at 22 extreme fear, a little higher than last week, 19 extreme fear. Been kind of sideways there, not much happening. So.

CHRIS SIPES CFP®: If we look at what's kind of driving Markets, and if we go to the next slide, you'll see, I think, some of the undercurrents with interest rates. So under the surface, interest rates have stayed stubbornly high and have seemed to be heading higher. Now, interest rates go higher, like any price.

CHRIS SIPES CFP®: Interest rates, if you think of price as the price of money, prices are driven by supply and demand so if you if you have the same supply and more demand more people want it the price is going to go up so so more demand for money now who's who's demanding money well you've got the hyperscalers building out you know the large basically the largest infrastructure build out since the railroads so you've got a lot of demand for capital there.

CHRIS SIPES CFP®: And then you've got the government. They're showing the U.S. Debt to GDP by a percentage rate. And we are breaking through. We've now reached a higher level than what we were at coming out of World War II. So basically just finishing a world war. Now we have a higher level of debt per hour.

CHRIS SIPES CFP®: Percentage of our GDP than we did at world war two. So, essentially, in the modern era era, at least this is the, this is the highest amount of debt we've had. So there's a lot of demand for money from the government. They borrowed a lot of money and it takes a lot of capital just to keep it running. Meanwhile, we have not seen the same growth rate, where you see the GDP growth rate coming out of World War II.

CHRIS SIPES CFP®: Was commensurate with that debt. And now we're getting less bang for our buck, if you will, which is a normal outcome. If you read the book, This Time is Different by Ken Rogoff and I'm blanking on the other author. But essentially, they say when you reach a certain level of debt to GDP you start to get diminishing returns for every dollar you put in.

CHRIS SIPES CFP®: You're not getting more than a dollar of growth. There's a certain level of growth where you're borrowing and you can outpace that borrowing, but that deteriorates the more you borrow. And is the US there? I don't know, but we're definitely further away from where we've been even as recently as the year 2000. So only 25 years ago, our debt to GDP was under 50%. We're knocking on the door of 200% here soon.

CHRIS SIPES CFP®: So we'll see. But that is a pressure on interest rates. The more demand across the board for money, all else equal, is going to drive interest rates higher.

CHRIS SIPES CFP®: Now, we talk a lot about the yield curve, and I thought it might be helpful to actually visualize it. This is the yield curve as of yesterday. And what we mean by the yield curve is starting on the left-hand side of this graph is the short-term, so represented by one month.

CHRIS SIPES CFP®: This is the bond market, fixed income market, sometimes referred to as. And when you borrow money or corporations borrow money or the government borrows money, they can do so all along this curve, different timeframes. And this is mapping the different interest rates of...

CHRIS SIPES CFP®: The government's cost to borrow money at different timeframes. It's a little confusing because the left axis there is pretty compressed. So it's not, you know, these timeframes are off a little, but you get the idea that that is the yield curve.

CHRIS SIPES CFP®: And it kind of represents, it sort of looks like a Nike swoosh in a typical environment because it costs more to borrow money for a longer period of time in a normal environment. When that gets inverted, that's typically a sign of something's off. Although this last inversion, we never got the official recession that that typically signifies.

DAREN BLONSKI CFP®: So that red line is what the inversion looks like. Yeah. Might be self-explanatory, but the idea that you're literally paying more, you're getting paid more for less risk is kind of a financial freak thing. Like, that shouldn't work. Why? So it usually doesn't last long, and it's when it re-inverts. That it becomes a bigger deal. That's when you actually see the recession.

DAREN BLONSKI CFP®: I feel like there's a lot of social engineering these days, though. So it's hard to say. That was like one of the last holdout indicators of a recession that didn't work. Just to go to show, don't believe anything we say for sure because we don't really know.

CHRIS SIPES CFP®: Yeah, there's nothing for sure. That's... And so if we look at interest rates, these are various rates across the curve year to date. And the war started at the end of February, which was the low point in interest rates for the year.

CHRIS SIPES CFP®: You've got the five-year impacted the most. So shorter-term interest rates have gone up the most, while longer-term rates are still up, but not up as much relatively. So it's flattening the curve. It's what they call a bear flattening in this situation.

CHRIS SIPES CFP®: And so far, at least, this year has been a rising rate environment, partially driven by the war, but I think probably more so driven by those other two areas that are also demanding money, the infrastructure build-out for AI and the massive amount of... Borrowing from the U.S. Government.

CHRIS SIPES CFP®: Now, the so what of that for the most, you know, the average person is, well. The biggest asset that most people own is a home. And existing home sales have just been on the mat since what, 2024. We're back down to the same levels that we were in the depths of the great financial crisis in 2009. We've been there for about a year now.

CHRIS SIPES CFP®: This, this is very close to I think the worst on this chart would be what, 2011 or so, which kicking myself that we didn't buy a House in 2011. But in hindsight, you know, talking about- Well.

DAREN BLONSKI CFP®: That's if you could have bought a House in 2011, because even if rates are down, the competition in 11 was stiff for buying a House, right? People were outbidding each other. Right. So that's the other thing that I think people get caught in this, like, well, I'll just wait till rates go down to buy the House.

DAREN BLONSKI CFP®: Well- Yeah, maybe, but when rates go down, the inventory is going to go down too. And there won't be as much, and more people will be chasing it because now you have more buyers that step in the market and can afford to buy.

DAREN BLONSKI CFP®: Whereas, right, not saying you should or shouldn't, but if you can afford to buy a House when rates are higher, you're going to have, like right now, it's clearly a buyer's market. There's a lot more On The Market than there's ever been, but you have to run the risk that rates never go back lower and that you can't refinance that thing.

CHRIS SIPES CFP®: Yeah. Yeah, absolutely. I mean, in 11, we were just coming out of a recession. A lot of people didn't even have jobs to be able to go borrow money. The banks were very apprehensive to lend, given that we just went through the shock of the financial crisis. A lot of people didn't want to buy. They're like, I don't want to buy a House.

CHRIS SIPES CFP®: Everybody just went bankrupt from doing that. Different situation now, but kind of the same, same outcome in terms of home sales. So As those interest rates are higher, it's really locked up the housing market, which is kind of what the Federal Reserve wanted when they started raising rates.

CHRIS SIPES CFP®: Although I feel like that was to try to impact inflation and they raised rates really quickly and tried to slow down the housing market because it has the biggest impact on inflation. Whereas now they're not, I don't think they're really focusing on the housing market per se as much. In terms of trying to slow it down. It's just a byproduct of the interest rates being higher.

CHRIS SIPES CFP®: And so far, the market is saying the interest rates need to be higher regardless of what the Federal Reserve is doing or is not doing. So now that leads to kind of, you know, the theme that Markets are always changing, right? And you never know. You never know ahead of time. It always looks crystal clear in hindsight, but ahead of time, you never know. This showing the 10-year annualized returns of the S&P 500.

CHRIS SIPES CFP®: And when it says real return, that means net of inflation. And what you'll notice here is that it tends to cycle different time periods. Those cycles happen for different time periods. But You often hear like, oh, the S&P averages 10% a year. Well, the yeah and to that is that that average is made up of many years of more than 10% returns and then many years of zero.

CHRIS SIPES CFP®: And that's what this is illustrating is that cycle. So 1980, for example, the prior 10-year return, real return was negative. 4% and 3.97% annually. In 2010, the annualized rate of return was negative 5.93 there. So versus where we're at today, things look really rosy. Everybody feels very comfortable investing in stocks.

CHRIS SIPES CFP®: There is a major near all-time high allocation to the stock market for most people. A lot of people are saying, hey, the S&P 500 is the US's pension system, which makes me very nervous to even say that. But that's what a lot of people are saying. And you just wonder, as the change continues, how will that flow through? What will be the human response to that?

CHRIS SIPES CFP®: What's the human nature response to that as we move forward? And so I think the... The prudent approach is to try not to get caught up in the day-to-day and try to remain diversified, try not to get too over your skis in terms of how much you've got allocated to any one area because that change is constant and you never know when it's coming.

CHRIS SIPES CFP®: And, and so, you know, trying to stay long-term trying to, look bigger picture is difficult, but that has been the, the, you know, a good route to go.

CHRIS SIPES CFP®: Now, another sign of the times is from Charlie Bielo. He says us deal value over the last four quarters at 1.89 trillion, the highest level on record. The last two major spikes were September of 2021 and March of 2000. Both occurred near market peaks.

CHRIS SIPES CFP®: Reminder, dealmaking tends to surge when confidence and optimism is high and discipline starts to fade. And that's really what we were talking about a lot with the SpaceX IPO, with the Anthropic IPO coming up, and open AI, and all the hype around the amount of... Of dealmaking that is happening.

CHRIS SIPES CFP®: Those are not things that happen in the real estate market in 2011. The frenzy is not there. That's not things that happened in the dull dreams of 2009. There's not all this dealmaking going on. Those are signs of maybe not a frothy market, but definitely a market that is longer in the dealmaking.

DAREN BLONSKI CFP®: Well, it's people trying to unload, right? I mean, let's be real, what it is, it's what IPOs are.

DAREN BLONSKI CFP®: I think it's actually a good sign that open AI is like, oh, we're not going to IPO. This year, we don't think. I'm like, oh, okay, great, we're not going to. I feel like if they all ran to the door to IPO at the same time, we'd really be in trouble for an AI bubble pop.

CHRIS SIPES CFP®: Yeah, yeah, I saw that they were kind of pausing that. Did they mention some reasons why?

DAREN BLONSKI CFP®: I didn't read anything. I did see, interestingly enough, that interestingly enough, there was a, Elon Musk said this week, he's just like, yeah, clearly Anthropics, the leader here.

CHRIS SIPES CFP®: Interesting.

DAREN BLONSKI CFP®: I thought it was kind of interesting concession on his behalf. All right. So let's get a look at the candlesticks.

DAREN BLONSKI CFP®: So let's start off with the S&P 500. So for those new viewers, the S&P 500 is the largest 500 US-based stocks out there. So when we say the market, quote unquote, it's kind of a way we talk about the market. There's lots of ways to look at the market, but that's one way to think about it, right? That the market could be. Like the Russell 3000, it could be the Dow Jones, it could be much larger.

DAREN BLONSKI CFP®: It just depends. So this is the S&P 500. So a couple interesting patterns, right? So let's put on the daily chart first. You can see on the daily chart, this is the red represents a day when the market was down. A green represents a green candlestick where the market was up. And then the wicking shows you what price moved. So like on Monday.

DAREN BLONSKI CFP®: Or on the 20th, Friday the 26th, it was a very volatile day. You can see because there's long wicks in the market and that ended up being the more recent bottom. We've got kind of an interesting pattern forming. There's something called a double bottom right here.

DAREN BLONSKI CFP®: And so this could mean something to the tune of a double bottom, meaning that this is a bottoming pattern that the market could be looking to really take a move higher. We also have a cup and handle pattern.

DAREN BLONSKI CFP®: Or even maybe another double bottom, you could say, which I think is two positive things from a technical standpoint. And then the third real positive thing from a technical standpoint, you see this downward trend line here, this green line. Let me just change this and make it a little bit more significant.

DAREN BLONSKI CFP®: So this green line's a downtrend line. You can see that it was downtrending, resistance, traded, and we traded up and got rejected and came back and broke above that. Held that today and then closed up above this long-term trend line right here. So if we make this one a little bit clear, that long-term trend line, you can see we closed that candlestick right above it today.

DAREN BLONSKI CFP®: So from that standpoint, that's pretty bullish we're looking at. Now, we still could get rejected. At the neckline. So when we say neckline of a double bottom, you could see this area here is the neckline. So this range. We're still in potential rejection zone.

DAREN BLONSKI CFP®: But the fact that we broke up above an important downtrend and we held above an important uptrend and we've got a double bottom and a cup and a handle pattern, it probably sounds like French to most people, but I think it looks very bullish at the moment. Now, if we get a breakup, it moves higher. Like how high could this thing go? Typically the move. Is going to be something.

DAREN BLONSKI CFP®: It depends where you put this measurement, but sometimes you can argue that when you have a pattern that it breaks up, the move could be pretty significant, right? So in this case, it would be a 3.4% move on the S&P if we break upward. So in the short term, August, perhaps next couple weeks in July, things look pretty positive in the market.

DAREN BLONSKI CFP®: The things that then make us question, though, is, yeah, we're seeing a 1% move in Bitcoin, but we're not seeing it. And Bitcoin tends to lead that front end of the risk curve. So where I would argue against that the market's going to trade up is I would say, well, Bitcoin hasn't moved yet. And typically, Bitcoin's moved first, whether it's down or up, and it hasn't done that to date.

DAREN BLONSKI CFP®: The other thing that's interesting is if we were going to see a... Lot of movement up, it would mean that there was fresh liquidity in the market, that the dollar was easy to get, and we'd be seeing gold go up because of that, because it would be driving inflation, and we're not seeing gold go up. But there could be other reasons for that one, too, that make you like, I'm not sure.

DAREN BLONSKI CFP®: Given that we're going into midterms, right, we are not a political channel per se, but like we have to look at the midterm elections and how that's faring because If they don't spoof this market and make it look really good, Trump will lose in the Senate and eventually probably looks like already he might lose the House.

DAREN BLONSKI CFP®: But if he loses the Senate, then we spend the next two years with him getting impeached, which is not fun for anybody. Whether you like him or not, it's still going to be a difficult process. As we talk about a lot on this channel, it's all about split government, right? That keeps the power mongers in check out there.

DAREN BLONSKI CFP®: When we look at the S&P 500 from a heat map standpoint, you can see NVIDIA having a nice week, nice pop on the chip center, tech driving us higher, the rest of the market looking kind of mixed at best. Again, we've talked a lot about how these big stocks have to do, if they all do well. Then the market goes up and the rest of the market kind of do so-so and it's still positive.

DAREN BLONSKI CFP®: If we look at the one day performance, you can see 4% of what NVIDIA had today was all on today, or this week was all today. So some nice movement on the NVIDIA side today, which dragged the market higher. You know, just perhaps we're going to see this bubble continue to blow itself before it. Goes under. Eventually it's going to go under. I don't know when.

CHRIS SIPES CFP®: Mags really is finally showing some signs of life because they've been struggling this year even though the rest of the market, which imagine telling somebody at the beginning of the year that the Mag 7 was going to lag and be down mid-year, but yet the S&P was going to be up roughly 10% by mid-year without the help of the Mag 7.

CHRIS SIPES CFP®: In fact, you Microsoft was going to be down something like 20%. A lot of the Mags are in double-digit correction territory, and yet the S&P is still up. And I know I would not have believed that given the concentration of the Mags in the S&P today. So for the proof, you just never know, right?

DAREN BLONSKI CFP®: And for the viewers that are new, Chris, what's the Mags?

DAREN BLONSKI CFP®: When we say Mags, here's the Mags index.

CHRIS SIPES CFP®: Those are the seven, the magnificent seven, which are the stocks that have kind of been leading this whole bull market around AI. And so you've got Microsoft and NVIDIA and Google and Tesla, the names that everybody knows and loves.

CHRIS SIPES CFP®: And they were kind of leading this, the so-called hyperscalers. We're leading the coming out of the 2022 doldrums in the market up until late last year. And they all announced these huge CapEx programs to build data factories and stuff. And the market really has punished them since they...

SPEAKER 4: With that until here this month. They're starting to show that pop again. So maybe don't count them out yet.

DAREN BLONSKI CFP®: Well, so to my point a little bit earlier, I talked about how we're seeing a double bottom in the S&P 500, right? So this is the double bottom here. You can see the pattern. You can also flip that and have a double top. So there's your double bottom, right? There's your potential cup and handle or double bottom right there. Right, we're pretty bullish.

DAREN BLONSKI CFP®: And then here's what it looks like on the flip side, right? You could see back in May of this year, the Mags, Magnificent 7 printed that double top. I think we talked about this if I remember correctly. And then there's the double top. And then we went down, right, into when I talked about extensions, right? Like how far does it go?

DAREN BLONSKI CFP®: Will you take, you know, kind of the the depth of So like in this case, the top was about 4%. So if we take that and we put it at the neckline, that's kind of where it saw it for support level right here, 4% down that happened to coincide with the double top. And then it found support, but then eventually got rejected further.

DAREN BLONSKI CFP®: So if you take that same thinking over the S&P and say, well, here's a double bottom, which is a bottoming pattern. The other way. And we say, okay, well, let's do something like this, which is basically a 4% to 5% move. If this breaks out, you would expect a 4% to 5% move in the S&P over the next few months. So we'd be printing around a 790 in the S&P 500.

DAREN BLONSKI CFP®: So I think that looks pretty positive. And you look at the Mags and they say, okay, the Mags, this was a double top move. It went down.

DAREN BLONSKI CFP®: Let's go back there clean this up a little bit and then going back to kind of what we talked about with S&P because the Mags are kind of showing something similar where you have this down trend line so this trend line right here make it thicker just so you can see it you know if you do you could do something like this perhaps and you could see the breakout above that could also argue like well maybe we're going to be even more skeptical of this move.

DAREN BLONSKI CFP®: And either way, Mags are breaking out, meaning chips are going higher, which because of the concentration of the S&P 500 in these big chip companies, that's going to drag the index higher. And that's ultimately what we're seeing in the Markets on the S&P. So in the short, medium term, at least until the election right now, it looks pretty strong, unless we get a rejection, right? Something happens.

DAREN BLONSKI CFP®: I feel like up until this week, Trump was waiting for Fridays to bomb Iran. And then we did it during the week this week. So maybe that's the bullish sign that market just doesn't care anymore. I mean, it's kind of crazy. I'm getting used to the idea that after the market closes, that something's going to happen, which is kind of like foolish thinking, but it seems to be a consistent pattern these days.

DAREN BLONSKI CFP®: And what's driving a lot of this is oil, right? And so you can see that anytime we get really above 100, again, this is just speculation. I'm not saying this is for sure the rule, but anytime we get above 100 on oil, it feels like some type of MOU is coming out, right?

DAREN BLONSKI CFP®: No one can afford to have oil super high. But also if we go too low, something happens. So we got to get oil scarcity higher. There's a sweet spot they're trying to keep in.

DAREN BLONSKI CFP®: And that's what you saw this week, like we started tit for tatting Iran, and Iran, in a way, can't afford to let oil go too low because if oil goes too low, they're exporting such small amounts of it at this point, it just wouldn't work for them geopolitically.

DAREN BLONSKI CFP®: So if they can control to keep the oil prices high, that's better for them. Same thing with Putin. I think there's a really kind of significant shift happening with the Russian-Ukrainian War. It's called a war. Actually, I think Putin called it a war this week.

DAREN BLONSKI CFP®: He finally got over the idea that it's just a special operation and he's calling it a war now, but that that could mean that he's going to mobilize, which would make him much more unpopular because he's basically been staffing the front lines of the war with people from far off places that no one cares how they vote because the Russian Federation is so big.

DAREN BLONSKI CFP®: And so that could be shifting, right? Because Ukrainians... Put these drones in place that are starting to hit all the oil facilities. But interestingly enough, like Russia, a lot of their oil is coming offline to the point where there's lines at gas stations internally.

DAREN BLONSKI CFP®: And we're not seeing oil spike significantly. But it was interesting that we get down here to the $67 a barrel. So this would have been last Thursday. And then I'd have to look, but I think Tuesday was when the Iranians hit those three boats in Strait Of Hormuz.

DAREN BLONSKI CFP®: So Russia and...

DAREN BLONSKI CFP®: Iran can just not afford for oil to go too much lower, although it would be good for summer gas prices for Americans, and Trump would like that. Trump came out, I think it was last week, and started kind of yelling at the distributors of gas, you bring your prices down or there'll be consequences, angry truth tweets or whatever. So interesting that oil's, again, playing the dynamics.

DAREN BLONSKI CFP®: It's a critical part of the economy. It's actually kind of down and settling down, even though. We haven't really resolved either of those issues with Russia and Iran. The 10-year. 10-year has been moving higher. It's a bull flag at this point, telling us rates go higher.

DAREN BLONSKI CFP®: This is what's kind of instinctually leading me to believe that going into the midterm election that the Markets could continue to move and the rates are kind of telling us that, that inflation is not going to back off anytime soon. The pieces that just don't make fit right now is Bitcoin And Gold. So. We'll either see gold turn around, and this is actually a sign that gold is about to turn around for all those holding gold.

DAREN BLONSKI CFP®: But also the fact that Bitcoin hasn't moved, it could be a sign that things in Bitcoin are bottoming at this moment, if liquidity is going to get broader. And what do I mean by liquidity? Just more dollars available around the world. And when liquidity tightens, then Markets go down. But the fact that that SPY double bottom, cup and handle. Looks pretty positive.

DAREN BLONSKI CFP®: It's always possible it gets rejected here at this point, but it seems to be leaning that way. Ag, which is the bond market, continues just to trot along. Ag doesn't seem particularly concerned that rates are going to go much higher, though, because you would start seeing some impact on the ag. It did try to break out of this long-term downtrend, I guess you can call it, or this trend line has been down.

DAREN BLONSKI CFP®: I guess you could argue that it's still... It's still, from a chart's perspective, you could argue that the ag is still broken out and that it's just going to go higher because it broke above that trend line.

DAREN BLONSKI CFP®: But it seems to be in a channel, which would then tell you that rates are probably not going to go higher and that inflation remains capped in a pause kind of zone. I did want to look at SpaceX. SpaceX, kind of plain out, Fiddlish.

DAREN BLONSKI CFP®: Fiddlish, I think that's a new term. I'm not sure.

DAREN BLONSKI CFP®: But if we talk about the double bottom, like there's a massive double top in SpaceX. Like look at that. Boom, all the way up and down and then breaks down. And we close below that neckline, which, oh boy. If you look at, you know, let's just take that move. We'll be on the conservative side. There's another 14.

DAREN BLONSKI CFP®: Based upon the close today, it's going down another 14%, which would take us, I don't know, get my charts to even move that low. It's going to go a ways down. It does not look good for SpaceX, right? Again, why we talked about a couple weeks ago, like this is an addict buy.

DAREN BLONSKI CFP®: Like if you're gonna buy here at the IPO, you just throw it in the attic and forget about it because it's going to be volatile. I don't think it helped that Elon kind of conceded Anthropic this week, that they're the leader, but he kind of conceded Anthropic and said, yeah, but we own all the infrastructure, right? We have the ability to get stuff into the space.

DAREN BLONSKI CFP®: We have Starlink, et cetera, et cetera. But definitely Perfect example, once again, why we don't buy the hype. We don't get excited about the hype. If you're going to do the hype, you buy a dabble or two, but don't go all in hog wild because it's not ever, well, I should not say it's not ever. I should say it doesn't go to the moon.

DAREN BLONSKI CFP®: So all in all, I think those things look pretty constructive on the stock market. The Markets continue to play off of oil.

DAREN BLONSKI CFP®: We'll see where it goes next week. We'll be back next week to wrap it up, like always.

CHRIS SIPES CFP®: With a fiduciary commitment. Learn more at fermata401k.com. Fermata Tax, personalized tax services for yourself, your family, or your business with an emphasis on efficiency. Find out how at fermatatex.com. If you haven't already, like and subscribe to Fermata On The Markets on YouTube, Spotify, and Apple Podcasts.

CHRIS SIPES CFP®: Fermata On The Markets features human hosts, editors, and voiceover talent. Music by Dr. Delight on Soundstripe, voiceover by Joan Alloway Nash. Thank you for listening to the very end. We appreciate diligent viewers and listeners.

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