Takeaways From Chris Verrone Presentation

Tuesday night I had the pleasure of attending this month’s New York Chapter meeting for the Market Technicians Association. Chris Verrone, Head of Technical Analysis at Strategas, was this month’s guest speaker. I wanted to share a few things he brought up that I think are important.

First thing is that he seemed extremely bullish on US Equities. Verrone isn’t a big fan of price targets, which I can appreciate, but definitely on the bullish side. Although he admitted not being in the camp that this is the beginning of the next secular bull market for US Stocks, he pointed out that nobody thinks that. He asked the audience who believed we were already in the next secular bull, and 1 person raised their hand.

When talking about this recent move in the Nikkei, Verrone showed a plot graph comparing previous rallies in the Nikkei throughout history. And although everyone is in awe right now with what’s happening in Japan, the graph showed how normal this recent move has been. In fact, when compared to the up move between 2003-2007, this is really nothing. It’s not even close. Also he pointed out that he believes every single wall street desk missed this move. So there are still plenty of potential buyers out there that have not participated.

Treasuries were an interesting topic as well. He said that he has given this a lot of thought – whether the US Government was manipulating the bond market, and therefore some of the intermarket relationships. And he made some good points. Think about a big hedge fund, PTJ or Stanley Druckenmiller buying so much Intel that it drives it through resistance and to new highs. How this any different than what the US is doing with bonds? They are technically buyers right? So they are market participants at the end of the day. Valid point I thought.

I think that his process of analyzing the market makes a lot of sense. Verrone’s favorite habit is to rip though every single stock chart all at once. It usually takes him 5-6 hours. And when the pile of good charts is bigger than the pile of bad ones, he leans bullish. When the bad pile gets bigger, he gets more bearish. I definitely appreciate the simplicity of that thought process.

From a sentiment perspective, I agree with him that we should be a bit more creative than just looking at surveys. There’s a lot of noise when it comes to these things and they’re really much more valuable and indicative when they reach extremes. Newspaper headlines and general conversations are a great place to look as well. He pointed to the lack of bullish headlines lately as markets make all-time highs.

Within the US Stock Market, Verrone sees strength continuing to come from Healthcare and some of the insurance companies within the financial space. Although REITs have had a great decade, he’s a better seller than a buyer there these days. He also brought up a chart of how many times a specific stock is mentioned in news articles. Apple still rules although the stock has been crushed. He doesn’t see a bottom here and laughed at how many people stopped what they were doing last time they reported earnings to watch the screen for a few minutes. It reminded him of the OJ Trial and how everyone remembers what they were doing at that moment. I thought that was funny. Also Google, gets much less mentions, but is making all-time highs and coming out of a multi-year base. Symantec is another name bullishly coming out of a big base that he mentioned several times.

In the intermarket world, he admitted that the lack of strength in Aussie, Kospi and Copper was concerning. He didn’t really have a good answer to that, which is fair. I also asked him about whether the weakness in Europe and the 2013 downtrend in emerging markets bothered him at all. He had a great answer. He said, “listen, if you want to short China – short China. I don’t think that has any impact on Johnson and Johnson”. I can’t argue with that…

So all in all, I thought he gave a great presentation, as expected. If you’re in the New York area and would like to attend any future meetings, make sure to go check out MTA.org and sign up. Also if you have any questions, you can always reach out to me as well.

 

Tags: $JNJ $AAPL $GOOG $SYMC $NK_F $EEM $HG_F $AUDUSD $XLV $TLT $SPY


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