Market Now More 'Trigger-Happy' & Unpredictable Due To Uncertain Liquidity | Tom McClellan
Summary
Market Volatility: The current market is described as "trigger-happy" and unpredictable due to uncertain liquidity conditions, making it more vulnerable to news events.
Liquidity Concerns: A key question is whether the market will return to a good liquidity situation as the seasonal calendar turns, which is crucial for stability.
Technical Analysis: Tom McClellan highlights the importance of technical analysis in navigating current market conditions, emphasizing the role of data in understanding market movements.
Seasonal Patterns: The discussion includes the significance of seasonal patterns in the market, particularly the potential for a bullish phase starting mid-October, despite recent bearish divergences.
Interest Rates: Long-term interest rates are expected to rise significantly, suggesting that those considering refinancing should act quickly.
Gold and Oil Insights: Gold prices have been rising, indicating potential upward pressure on long-term bond yields, while oil prices are expected to follow gold's upward trend with a lag.
Investment Strategy: Investors are advised to be cautious with gold investments due to stretched valuations and to consider opportunities in the oil sector as it may benefit from upcoming trends.
Market Divergences: Several market divergences are noted, which could indicate potential corrections or opportunities depending on how they resolve in the coming months.
Transcript
But yeah, it's a trigger-happy market and markets get even more trigger-happy when liquidity starts to dry up. Um, you know, if you're if you're playing musical if you're playing musical chairs and there's a hundred chairs in the room and four people competing, uh, there there's you I can find a chair when the music stops playing. When the numbers chairs starts dwindling, then it gets a little bit more panicky and and that's what it happens when liquidity starts to dry up. Ili liquidity makes things more vulnerable to news events. Um when you have a perfectly liquid market with the Fed throwing a trillion dollars uh a month at it as we saw in 2020 right after COVID the market can absorb anything. Uh when when you turn that off and when liquidity starts to dry up then you start to have problems. The question is are we going to get back to being in a good liquid liquidity situation now that the seasonal calendar is turning and that's that's really the essential question that we have to analyze the next few days. [Music] Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagert. When markets are as volatile as they've been the past several weeks and the macro outlook is as uncertain as the year ahead currently looks, turning to the data and navigating by what it's telling us is often highly useful. Which is why we're fortunate to have one of the best technical analysts in the industry, Tom Mlelen, joining us today to share his latest interpretation of the current market action. Tom, thanks so much for joining us. >> Good day, Adam. >> Hey, Tom, it's wonderful to see you again. Um, thanks so much for joining. Um, well, look, you know, kind of a kind of an interesting time. And before we turn the uh the camera on here, you mentioned that um, you know, kind of it's been keeping you on your toes uh, as well. Um, I'm just curious, how would you categorize kind of this moment in the markets right now given the scope of your, you know, professional perspective? >> Well, uh, and we should we should emphasize for the audience that we're recording this on Monday the 13th, uh, at the day after the big drop on Friday the October 10th. And so, uh, the big drop on Friday, October 10th was a moment of focused uh, investor enthusiasm for lack of a better word. Uh, and uh, All the more so for anyone involved in crypto on leverage. They got they got to be f familiarized with the old principle of a margin call. And uh so it was a kind of a sympathetic episode where one thing fed on another. And if you can't sell what you want, then sell what you can. And and it all cascaded down together and then people realized, oh, maybe it's not so bad over the weekend. And so we're rebounding. So that's background as we as we head into this this discussion. >> Okay. So that's the immediate background. Now and of course what really threw the markets into their fit of despair and then pulled them right back out of it of course were a few presidential um pronouncements um sort of unofficial ones that President Trump made on his truth social accounts. Um, but I'm just curious, does it is that a marker of um, you know, a market that is maybe more vulnerable to surprises? Um, there've been a lot of people, you know, who've been saying, look, uh, this market is really stretched from a valuation standpoint and therefore anything that kind of causes the market to feel like, oh, it's not going to be absolutely perfect from here, uh, puts the market into kind of a panic, you know. So do do we do we have a more I don't know what you want to call it sort of trigger happy market that's you know when new news comes out it's it's uh uh fire ready aim >> yes um but uh we have had a trigger happy market all this year everybody remembers the tariff crash in April and uh other things along the way uh that um I'll be discussing with some charts I prepared but yeah it's a trigger-happy market and markets get even more trigger-happy when liquidity starts to dry up. Um, you know, if you're if you're playing musical if you're playing musical chairs and there's a 100 chairs in the room and four people competing, uh, there there's you I can find a chair when the music stops playing. When the numbers chairs starts dwindling, then it gets a little bit more panicky and and that's what it happens when liquidity starts to dry up. Uh, and the best indication of liquidity is when if you have a a somebody wants to sell or to buy and they come to the market to do that, then the price doesn't move very far. E e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e either way, when the price starts to move really far or the incremental buyer or seller, that's when you know you're in a an illquid situation and ill liquidity makes things more vulnerable to news events. Um when you have a perfectly liquid market with the Fed throwing a trillion dollars uh a month at it as we saw in 2020 right after COVID the market can absorb anything. Uh when when you turn that off and when liquidity starts to dry up then you start to have problems. The question is are we going to get back to being in a good liquid liquidity situation now that the seasonal calendar is turning and that's that's really the essential question that we have to analyze the next few days. >> Okay. Well, I'll give a quick little preview. So, um, we're talking a few days here before Thoughtful Money's fall online conference and we'll have Michael How there uh this this time around. Uh, and he's, you know, his whole brand is built around tracking liquidity. So, I won't let the cat out of the bag in terms what he in terms of sharing yet what he thinks, but he will be revealing all in terms of his uh crystal ball outlook for liquidity in just a couple days at the conference. So, if you haven't bought your ticket yet, folks, uh, run don'twalk and go buy them at thoughtfulmoney.com/conference. All right. Now, Tom, you mentioned that you were kind enough to put a a number of charts together in preparation for this discussion, and I've got some questions for you, but I think maybe the best thing to do is just to let you start walking through them. Um, it'll be the best way to sort of visualize for the audience what you see is most likely for the road ahead, and if it's okay, I'll just interject every so often. >> Sounds great. Hopefully that's working now. And uh we're at we are at the seasonal turn and that's what makes this an important point for discussion. Um this is the annual seasonal pattern for the Dow Jones Industrial Average just because that's what data I had to put together. You chop up the market data into one-year slices. You average them together and that's what you get to see. And if you look at it from end to end, the correlation has not been great this year. you you've had these weird events coming along where uh Trump gets elected and gets installed and we start having tariff warries and the market is going down much more so than than the seasonal pattern suggests and we had the big tariff crash in early April which was not at all part of the annual seasonal pattern. Once you get past those though then the market tries to get back on the normal seasonal pattern going up when it's supposed to correcting sideways when it's supposed to. We had the bunker buster bombing in Iran that brought a whole bunch of optimism that oh maybe we're not going to ever have nuclear worries with Iran anymore and that market rallied which was not when it was supposed to according to the average pattern but once you get past that news then the market tries to get back on track again. We had uh the Fed we had Joan Powell's Jackson whole speech where he hinted that rate cuts were coming and so that caused the market to rally but once that news event is passed then you see the correlation starting again. So end to end the correlation has not been great but moment to moment you see the correlation working like it's supposed to as it has been in September and now into October and we are right now at the seasonal inflection point the midocctober end to the to the typical bearish seasonality pattern uh when we haven't seen the market trending down like it's supposed to during that period because of these exogenous news events but we are now at the end of the bears argument that we should that they should in charge now and we're starting the the best six months period that Jeffrey Hirs, my friend from stock trader man that he talks about starts in mid-occtober and goes into into May and into actually into July. Um we're starting that now. So the the essential question is does seasonally seasonality still matter? uh or is is it is it all wet this year or has the market just been so strong that it's been able to overcome any bearish seasonality and now that seasonality is working in the bull's favor they can come roaring back. We have this focused event that we talked about where everybody's suddenly worried about Trump imposing 100% tariffs on China and they're going to shut down all shipment to the US and charge our ships extra docking fees and and and that kind of abated over the weekend. So the market's rallying which is not yet factored into this chart. The question is, can we get a a meaningful return of bullish seasonality or not? And that's the essential question for the next few days. >> All right. So, um I want to ask the question, so what do you think is more likely from here to the end of the year? I'm going to guess though maybe some of the charts we're going to go through with we're about to walk through will, um we'll clarify that for folks, but it sounds like you'll be looking at the next few days pretty closely as to whether this this rebound from Friday sticks or not. >> Exactly. Right. because there are still some problems, but those they're not unresolvable problems. And so we have to see, can the market do it? Can the market get up off the mat and answer the bell? Um, one of the things that that this selloff has brought uh is a little bit of humor from McDonald's. They're they're posting billboards saying, "Hey, Crypto Bros, who we're hiring." >> But it also brought a big a big >> Did they just put that up since Friday? >> Yeah, that was over the weekend. That is amazingly fast. >> Apparently in Europe uh one of the things that it brought was a big oversold condition and the MLAN oscillator. This is the indicator that my parents developed back in 1969 looking at the acceleration that takes place in the advanced decline statistics. It's the difference between two exponential moving averages of the daily advanced decline difference. And so a negative reading means that you had a big downward acceleration in the breadth statistics and that matches the downward acceleration that we saw in prices. Not surprisingly, when you get down to a reading that's this low, you don't see very many of them uh in the course of a year. And uh you know, we saw them at the tariff crash in April. We saw it uh um at the end of the year when when the when the Fed actually cut rates and that caused everybody to worry. um you saw it uh in in the late July when there was a momentary selloff. All been great buying opportunities, but the question is does it come with a retest? The one back at the end of 24, early 25 did come with a retest. The one in uh at the April crash low had an immediate bounce and some retesting effort. The one in in July had no retest. So, are we going to get a retest this time? Are we going to just start marching straight back up to positive territory, show positive acceleration? That's the essential question right now. Um, one of the problems that that comes with negative breath if you look at it longer term is that you start to run out of liquidity. This is a companion tool to the Mlen oscillator that the summation index and the the summation index changes every day by the value of the oscillator. So when the oscillator is negative, that pulls the summation index down. When the oscillator is positive, the summation index goes up. In this case, it's look I'm looking at the ratio adjusted summation index. So it factors out changes in the number of issues traded over time. And the important thing that this thing does when you get it to go above plus the plus 500 level, it says that there's gobs of liquidity uh and you should expect higher highs. Uh we've saw it go above plus 500 earlier this year coming out of the tariff crash low. That was a sign that liquidity was strong. But now we've seen it make a divergent lower high compared to prices and we have seen a a higher price high with the the ratio adjusted summation x below 500. Normally you get a a big failure indication when the the summation x goes below below this 500 and then fails to get back up. We have not yet had the failure to get it back above 500. It's going to take some more time to do that. But all the way back in 2018, we had an example of new highs in prices and the ratio adjusted summation index falling and below 500 and it was a big warning sign of trouble. It's not clear which way this is going to go yet. This has the potential to be really really bad. It's not guaranteed though. The market could recover from this. That is possible. So we're going to have to watch uh what happens the next few days. But as this is happening, we're seeing lots of bigger divergences that are causing a a big problem or are a big concern. The the most noteworthy of these is the divergence that's now taking place between the New York Stock Exchange daily advanced decline line and prices. We've seen new price highs. The the advanced decline line peaked on September 18th and has been going lower. That is not good news. that says that the majority of stocks have been going downward even before um last week's enormous decline. When you see a divergence like this, it's a warning sign of trouble. Uh we saw one at the end of 2021 leading leading into the bare market of 2022. That was a big ugly thing you want would want to avoid. We saw it uh earlier this year right after inauguration. the the advanced decline line failed to make a new higher high and we saw the big ugly decline on the tariff news. But a divergence like this can get rehabilitated. We had a divergence in mid 2024 where you had lower highs in the advanced line and higher highs on prices and that got resolved by having the advanced line start doing better. So it is possible that a divergence can be rehabilitated. We don't have the evidence yet. That is the point to watch out for. But this is not the only divergence that we're seeing. There's also a divergence in high yield bond advanced decline data. Uh high yield bonds trade like stocks. They're not traded on the stock market, but they trade very much like stocks do, and they draw from the same liquidity pool. So when these guys start doing poorly, uh that's telling you that the runts are dying. the the big pigs in the in the litter might still be doing okay and pushing the indices higher, but when these guys are doing doing bad, that's a sign of trouble. We saw that um back in 2024 and in early 2025 before the big tariff crash um selloff, we we that we had an illquid situation going on. But as with other divergences, divergences in this one can get rehabilitated. That is possible. Taking a longer look at this same indicator. This is high yield bond advanced decline line. This goes all the way back to 2021. It was telling us a huge warning sign at the end of 2021. Big divergence, but it took a while before it finally mattered. And there was another divergence along the way when prices made a higher high, but this one said, "Nope, that ain't happening." It told us about a divergence in 2023 ahead of a meaningful correction. uh wasn't wasn't the mother of all bear markets, but you definitely want to be uh out of that if you can. And it told us about a divergence here in late 2024, early 2025. So, it's a big warning sign, and we're starting to get it now. It is very young, this divergence. It's very fresh. It's only not even a month old yet. And there is no uh clock on this thing to tell you when it's going to start to matter. It can matter immediately. It can take several months. uh it doesn't have to matter just because we noticed it right now and it can get rehabilitated. So it's very important to watch how the market's going to do as we make the seasonal turn through a bullish phase. Can these divergences get rehabilitated? Can we overcome these? And is the market going to be able to do well? >> Um okay. So Tom, I mentioned in the intro here that uncertainty is quite high right now in terms of what the next year is going to look like. And uh I would say of late um I have talked to a lot of analysts who are sort of falling on both you know either side of the line of uh hey look uh you know any weakness in October is just a dip to be bought and we're going to scream into the end of the year and any any any dip again is a buying opportunity. And then I've got just as many if not even more people on the other side saying, "Hey, this market's way overstretched. It's super vulnerable." And um you know, we could be seeing the initial signs of of cracking that's going to lead to you know, some some big pullback here at least, if not a larger correction. And >> I'm in both of those camps right now. By the way, it is a buying opportunity. This dip in October we've had. Whether it's going to be leading to a sustainable uptrend or not is a separate question. So, it's a buying opportunity of one scale, but not yet necessarily of another scale. >> Of another scale. Right. And it seems like a lot of the data you're showing here is is, you know, they're they're kind of divergences. Some are saying, "Hey, this could actually turn around pretty quickly." And some are saying, "Well, no, this could actually be the beginning of a dip." So, it's interesting that your data is is sort of corroborating uh the the the difference of opinions here amongst the macro analyst community. And I would love it if all my data gave me all perfect indications all the time and I never had disagreements in the data. That's not the world that we get to live in though. And so we have to grapple with the these levels of uncertainty and look for ways to confirm what's happening. And that's the task that we have. >> That's the task that we have. So um I know you have more slides here. So oftentimes I imagine when you're saying I'm seeing data kind of on both sides of the line here then I should just look at more data. >> Yeah. Well and this is markets data. This is price and breath data. There's other divergences that we're seeing. Um, let me get to the next slide. Um, this is data on the spread between US Treasury 10-year notes and the equivalent German bonds. They're known as bunds because bundis means federal in German. And so a a German bund is a is a federal bond issued by the German government. and that has a yield and our debt has a yield and so there you can calculate the difference between the two. Most of the time that spread moves with stock prices. So if the spread is increasing meaning treasuries have a higher yield and it's increasing that's generally a bullish condition. And when it's contracting uh where the the the treasury yield is not at as high of a premium versus um the the uh buns then you it's you see it contracting and that's generally bearish. What we're seeing now is a big divergence hasn't mattered yet. Um and sometimes divergences in this particular comparison they can get rehabilitated. That is possible. But right now it's a big fat divergence and it's coming from a very high level where we've had a very big premium on US Treasury yields versus German bund yields. And so there's a lot of room for it to fall. We haven't ever had a negative spread since 2009. uh if you if you ever get to the chance to see one of those uh boy that's a great buying opportunity as long as you can stomach the less parts of the bare market. Uh but boy those are great buying opportunities. And you'll notice that I stopped this chart going back in 1991. I was actually happened to be stationed in Germany from 1987 to 1991 when I was a helicopter pilot in the army. So I was there during the fall of the Berlin wall and the and the beginnings of the German reunification. uh it was quite an amazing time, a bit of history to live through. The this indication doesn't work before 1991. Before German reunification, it just didn't work at all. After German reunification is when this comparison started to work and you say, "Well, that's that's only 34 years." Well, that's a lot of time, and it's been working pretty well over 34 years. And so, that's that it I believe in this, but again, it's a it's a divergence now. It's a problem now, but it could get rehabilitated. That is possible. But this is another among the signs that I'm seeing. And if we go outside of markets completely, here is data from this the SLLE. That's that's the coolest acronym, the senior loan officer opinion survey uh of domestic banks. And they look at they ask the the loan officers at these big banks, are you tightening or are you loosening? And that data goes uh when it goes up, it's they're loosening. when it goes down or tightening. Not surprisingly, tightening conditions are bad for the stock market. Loosening conditions are good for the stock market, but it works with a lag. I've shifted the this data plot forward by six months to show how it works with a lag where the the moment of maximum tighteningness uh preceded the bottom in in stock prices back in 2009. They this moment actually happened in 2008 and it started getting better but the lagged effect mean it didn't start working for the stock market until March of 2009 >> and Tom sorry to interject with a question here but uh so the market lags the slle and that would make sense right because yeah >> bankers start tightening their lending less money goes out there to stimulate the economy but you don't see that for a couple of months you don't see the effect of that for a couple of months correct >> right it's when you let off the accelerator on your car, you don't immediately stop the car. You start coasting down, but you're still moving. Uh, and letting off the accelerator is a precondition towards stepping on the brakes. Well, they're they're letting off the accelerator, and they're moving toward the brakes, and that's going to have a lagged effect on the stock market unless it gets rehabilitated, which is possible. Now, I should emphasize these data in this charter only through Q2. We're not going to get the Q3 data, which you know, data for July through September. We're not going to get it until the till the government reopens and the Fed starts compiling these data again. So, we don't know what Q3 is, but this is just data through Q2. And Q2 is when we were having the tarot crash uh and in April. So, that may affect this a little bit. So, we don't know how it's going to turn out, but it's a warning sign for now. So, there's there's lots of these warning signs, some market price based, some outside. Uh we're seeing unemployment uh numbers not looking good. Manufacturing employment has been declining for a couple years, not in a huge way. Uh but it's it's not looking good. So there's lots of signs of recession uh and and liquidity problems, but they're not fatal signs yet. >> All right. Um so obviously at some point in this discussion, Tom, we're going to lead up to, you know, what's what's the totality of this telling you? Is it making you more or less optimistic about the markets as we head into 2026? But I know you've got some more charts ahead, so I'm just going to bite my tongue for the time being. >> I do. There's a few other things to to share. Um, I'm seeing a big problem coming for long-term Treasury bonds. Um, years ago, I discovered a cool insight that the price movements of gold tend to get echoed about 20 and a half months later in long-term bond yields. In this case, I'm using the Treasury yield index, which is the yield on whichever of the the 30-year bonds is the most recently issued one. And so, it moves down as bond prices go up. It moves up as prices go down. And the yields echo imperfectly, but really darn well, the movements of gold prices 20 and a half months prior. Well, uh, 20 months ago, gold was at 2,000. Now, it's at twice that level, and it bottomed right here. And that equates to a bottom for yields in the first week of November. And then we start the big climb that gold has done. I'm not showing all of gold history because I wanted to zoom in on just the the smaller movements to so that people could see exactly how good of a correlation it is. It's not perfect. Sometimes it goes off track. We saw that when Bank of Japan doing some rate action back in 2024, it got off track for a while and then it got back on track again and has tracked very nicely since then. It's always a risk it could go off track again. uh if the Fed or a similar agency around the world decides to get really crazy, but it's saying we get a big inflection point beginning in November and a big the start of a big up move and gold has been trending higher for the last 20 and a half months. That doesn't mean that yields have to double because the exchange the the the the beta the the movement of gold doesn't equal one to one movement of interest rates. But the direction is gonna is should be upward assuming that this continues. So long-term yields are about to start heading higher. Shortterm though, the Fed is still behind the curve. Uh it is it it just cut rates last month, but it still has another half a point to go to catch up to or catch down to where the two-year has already gone. The two-year is the best guide I have found. Better than the Taylor rule, better than the 400 PhDs at the Fed. The two-year knows ahead of time what the FOMC is going to do and the FOMC causes problems when they think they're smarter than the bond market and and know what to do better. They have been lagging in their rate cutting. They and when they have done that before uh that like in 2006 and seven we got the mortgage crisis and and that spread into the stock market and in the banking system. They were lagging back in 2000 when the internet bubble was popping and interest rates were falling and they took their sweet time to get around to cutting. They were lagging in 2019 and we started seeing signs of a of a recession then even before COVID. And that finally led the Fed to cut rates and even start what Chairman Powell told us was not QE. If you anybody remembers not QE, we had QE1, QE2, QE3. We had not QE and then when CO happened and we got QE4. So, I don't know if they're going to do QE again this time, but they're still a half a point behind. They could cut a half a point right now, uh, this afternoon, and it would be nice if they did, and that would only catch them up to where the two-year already is. Uh, if the Fed would stop thinking they know better and would start listening to the two-year, they would stop creating bubbles and magnifying the crashes that we've seen. But they all have very expensive degrees in economics. And because they spent so much money on those degrees, then the things that they know must be a whole lot more important than what the bond market knows. >> Well, here let me ask a couple questions here. So, um, in many ways, this is not out of the ordinary historically, right? To your point of of the Fed always sort of being behind the curve, slow to react, >> and and the two-year leading the way. So, right now, the the two-year is lower, as you said, and the momentum of the two-year is downward. Um, how low will it go? We don't know. But we can definitely see at previous moments in this chart history here when the Fed has hiked and then plateaued and then the two years started to head down, the Fed has had to chase it down and chase it down pretty far. So, I guess something would have to be quite different this time for that not to happen. But it sounds like from this data here, Tom, you think the the probabilities seem to be suggesting that short-term rates will go down, long-term yields will go up, and so we'll have a a pretty severe steepening of the uh of the yield curve in a way that I'm not sure a ton of people are expecting right now. They're expecting the short end to go down further. Um, but I don't think too many people are really planning on the long end going up in yields. >> I would say that's true. Yeah. and a steepening of a yield curve, meaning the the short end gets lower and the and the long end gets higher. That is generally a good condition for the economy when it happens. Um, but who knows how long that steepening is going to occur. Uh, the two-year has the advantage over the FOMC and that the two-year is very responsive to news and and so as a result, it's a lot noisier data. Uh, you see that noise in the green plot. It's just a lot furer looking than the than the very smooth and slowly to react FOMC rate, but it doesn't waste any time thinking about whether to react. It reacts right now. And and so if the Fed were to cut like they should, and then the two-year moves again, well, then the Fed could move again. But right now, they're still thinking that they know better and they're keeping rates too high for just in case. And they they really ought to learn better. But I don't have any optimism that they're ever going to. >> Okay. Now, look, we don't know what's going to happen here. So, let me again preface that. But if this rhymes like previous moments in history where we're here where the two-year yield plunges, the Fed chases it down, usually that's when the next recession is backdated to and it's usually where the market has a pretty big correction, right? And then and then the market correction, you know, ends at some point and then usually the market starts taking off because it's anticipating that the economy is going to start uh benefiting from the lower rates and any potential central planning stimulus that comes along with it. Um presumably too if the long end of the curve starts moving up concurrently, I mean that could really panic a lot of people. So, you know, you can you can make a pretty good argument from all this that like wouldn't be a shocker if we saw some sort of notable market correction next year for these reasons. Again, probably, you know, uh painful, but but probably short. Uh and then then there would be a time after that to start getting long. >> Yeah. And I need to reemphasize that gold doesn't tell us how far long-term rates are going to go. Uh just because gold doubled uh from 20 months ago doesn't mean rates are going to double. It doesn't work that way. >> Doubling doubling inter but doubling of rates would be I mean >> yeahic to many people right now. But but I think even just above 5% would make a lot of people break out in a cold sweat. >> Yeah. Well and and if interest rates go from 4% to 8%. That's that's a big deal. Well, if they go from 4% to 6% that's not as big of a deal. But you would still want to be positioned for either of those outcomes uh in the same way. You don't get to tell the market how much of it of the move you're get get to make. You just want to make sure you get all of it as it's going in that direction. And so forget about how far it's going to go. Don't let that worry you because we're not going to be able to predict that very well. But it we're able to predict the timing of the and the direction of the move pretty well based on what gold has told us. The hard question though is whether gold's message has been skewed by all of the central bank purchases of gold. Are they putting a thumb on the mark on the scale of the market and disrupting its nice message? That's a real question. And I'll give you a perfect answer about five years from now. But in the meantime, we have to go with the information that we have. >> Got it. And and I I guess my only question on that, and we don't we don't have perfect information right now, is >> I mean, they've been putting their thumb on that scale for a couple years now. So, is there any any reason to believe they put their thumb on the scale a lot harder in the past, you know, six months than they were doing before, or is this new buyers coming into the gold market to join the central banks? >> Um, I don't have information on what all the central banks are doing. And even if I had information, I wouldn't necessarily trust that it was legitimate because they tend to like to be secretive. So just don't know that about it. I I know what the price is and I know what it's been doing and it's been doing amazing things uh a little bit too much. And in fact, one of the things that it's been doing is it's been driving the move up in gold and in now in silver has been driving up the shares of the mining stocks in a huge way. This is the the NY Arca gold miners index. Uh it uh is an expanded version of the old Philadelphia XAU. It has both gold and silver miners in it, a much broader portfolio than the XAU has. Um and I'm comparing it to something called the 1% trend. It's like a 200 day exponential moving average. And you know it the price is way above that exponential moving average. So if you measure that spread with a 1% trend deviation, you can see uh numerically the distance of this spread. It's just very big right now. Well, when you get up to this big of a spread, that's a blowoff top. Um it may not be at the final moment yet. It it might keep blowing off a little bit longer. Uh it did that back in 2015 uh for a little bit longer, but boy um you're going to get a big correction out of this at some point because that's what's always happened before. uh you always get uh after one of these big ex big spikes, this 1% trend deviation indicator always gets back down to zero. And that's not a pleasant time to be an owner of a gold mining stock. So if you're just one of the recent gold uh stock chasers right now saying uh it's the next gold rush, we got to jump on board. Understand that from history where where you are in the in the sequence of this and that it's really really stretched. The thing about gold that's different from the stock market, uh, generally speaking, the stock market tends to make spiked bottoms and rounded tops, like the path of a bouncing tennis ball. Gold does the opposite. It makes spiked tops and rounding bottoms. >> Uh, and it all has to do with the nature of panic. When when we are in stocks and we panic, we panic out of stocks and into cash. People panic into gold. That's what causes the spike tops. They don't panic at gold bottoms because they can just hold the gold and wait. That's why you get very rounded bottoms in gold. But you get panics and spikes tops because people are panicking into gold just like they panic out of stocks. Okay. Very. It's super interesting and I've had a lot of discussions over the past couple weeks on this channel, Tom. uh uh you know talking about how far and fast the precious metals have moved and um you know just looking at it if if we just if we just took away the the name of what the asset was right you could look at it and say okay this thing's pretty stretched um and uh you know I've definitely given my personal opinion that um considering hedging in some way shape or form whether that's simply by selling some profits um reducing positions, whether it's putting on a hedge like maybe you know buying a put option on a mining index or something like that um you know is looking increasingly prudent given how stretched things are here. Now, there are people who are saying, you know, hey, Adam, this is this is different. This is the world repricing gold as a monetary asset, and you know, this thing is still going to the moon. And the honest answer is is none of us know for sure. But what I'm hearing from you is from a technical historical standpoint. We're in the territory where fairly sharp pullbacks tend to occur. And I'm guessing, I don't want to put words in your mouth, but I'm guessing you would say, "Yeah, considering some sort of hedge here, especially if you're sitting on big minor profits, probably something worthwhile to consider." >> And the the point to know about the way that gold makes spike tops is that the slope downward out of them tends to match the slope upward into them. Uh doesn't necessarily give give back all of the ground that it that it gained during the blowoff. uh and and the pullback could stop at any time, but it's it it's ugly once it gets started. And you cannot reliably use a trailing stop in gold. Um if you say, "Oh, okay. Well, if it pulls back x percentage, I'll just have a stop order and I'll get out." Your stop order is a market order. Uh as soon as it gets hit, and the market may have gone way beyond where your stop is by the time it gets filled. That's the nature of gold. it it likes to make violent counter trend moves to to catch all the to run all the stops and then that really triggers an an outpouring and so I can't say the day that it's going to happen. Um it's definitely an impressive trend. It's continuing even now. Uh but we are the rubber band is officially stretched and so know that that's the game you're playing. You're you're dancing up here and like dancing up here or dancing at after a rally like this. the slope downward is is really uh quite scary and not to be not not fun to be part of. The thing that you can do is use the information that gold gives you to know that uh bond yields tend to rise about 20 and a half months after the start of a big rise in gold. Crude oil prices tend to rise about 19 months. And so I'm expecting big move up in crude oil prices to match the big move up we've seen in gold prices. So, I'm personally long u the the oil play and the oil services because I think that those are going to continue doing well where other things are not going to continue doing as well. >> So, Tom, do you have any slides here on oil? Because I want to make a point on oil, but I can I can wait until you get there. >> I didn't bring one for today. >> Okay. No, no worries. Um >> I I can tell you though that that prior to the commitment of traders data getting shut off by the government shutdown, we were seeing very very low readings for the commercial trader net short position. Now I need to define that a little bit. A commercial trader is someone who produces a commodity or use it uses it in their trader business. So Exxon is a commercial for for gold for oil futures. The the commercials are are net short of oil futures almost all of the time. They've been continuously net short since 2009, but just recently, as of the most recent data a couple weeks ago, they were net short to the lowest degree in years. Now, what does that mean? Typically, a producer of oil will use the futures market to lock in pricing on his future production. So, he can sell a futures contract for a year and a half from now for the oil that he knows that his well is going to produce. And he can lock in today's pricing. when they are net short to a low degree that means that they don't want to lock in these prices. They think they can do better and that is a sign of a bottom for crude oil prices. >> Okay, that's really important information. Um so a couple things the day we're talking here talking about how you said gold's continuing to the upside right now. Um both gold and silver have jumped to all-time highs the day we're talking here. Um Tom gold's at 4,100 over 4100 now at least. gold futures are um I can't believe these words are coming out of my mouth because I probably wouldn't have believed them at the beginning of the year. Silver is now um over 50 now. Silver futures, in fact, I think spot, someone was telling me just a few hours ago, is over 52 right now. Um >> there's a bit of a a squeeze in the spot market because they can't find enough supply to fulfill a delivery on all the people wanting to take delivery on their futures, >> right? And again, you know, this gets emotional, right? You were talking about the shape of panics and things like that. the people who are fortunate enough, wise enough to have positioned themselves into silver right now are saying, "Yes, this is exactly what I was expecting." And the the London vaults are breaking and you know, this is this is going to go to the moon, right? And and folks, I have no idea how high this is going to go and I'm rooting for it to go higher as a precious metals owner myself, but I'm very cognizant of what Tom is talking about here. And um this the these these extremes u you know can can and and often do throughout history turn on a dime um when the news changes. And so uh again I I just want to say I know it feels wonderful right now uh with this stuff going up. um it may feel equally uh bad um if if if if you end up holding beyond the peak and we do have a a big correction like Tom says we tend to get when we're at this level above the the trend deviation now who knows but but going to um going to oil um I I had been very bullish about silver Tom um especially I was waiting for it to make that that breakthrough of 35 an ounce and many of the technical analysts like yourself who, you know, I've listened to have said, "Hey, look, once it breaks $35 an ounce, there's not a lot of resistance between that and $50 an ounce." And that very much played out. So, kind of playfully when silver futures hit $35 an ounce, I gave myself silver eyes on uh on X, you know, you know how everybody was giving themselves laser eyes during the the Bitcoin heyday. Um, and hey, lo and behold, got lucky. You know, like I said, silver's now past 50 bucks an ounce. Um I'm I'm starting to look at oil um which is on the day we're talking here still below $60 a barrel um and which is you know getting close and I think for some producers might even below their average cost of production um and beginning to say wow this this very critical industry seems to be kind of just getting left for dead right now. So to hear you talking about some of the positive correlations that you've seen in the oil markets, I I had like I think the last week sort of tongue and cheek said, "Wow, maybe I'll give myself oil eyes next on X." Um but you're you're making that be a good thing to do. >> Well, maybe for Halloween. Yeah, but that sounds kind of disgusting actually. >> I know. A little too creepy. But but the point being is, you know, I'm I'm sort of beginning to feel the same way about oil uh and the oil producers, the way in which I was feeling about silver when silver was, you know, below 30 um and seeing all these potential tailwinds coming up. >> Well, you you the worry then is are other people people going to start feeling that way? because uh I don't know too many people who are starting to think bullishly about oil like I am. But if I start hearing that everybody is and I'm going to get worried about my own opinion about it and I have to reevaluate that. >> Yeah. I I I I think general public wise I I and clearly Wall Street wise they're still not really that that interested. I will say several of the analysts that I've been talking with on this program recently are starting to have the similar like Yeah, I'm looking at oil more and more and I'm thinking that that's probably a good place to start putting capital. >> Yeah. >> I don't know if that makes you nervous or not. >> So I hopefully I'll be able to get out before everybody starts piling into oil just like they've been piling into gold. >> Yeah. Well, we'll see. >> Well, we should have a few months of that. And I'm sure there's some interesting oil gold ratios that that you could pull up for us at some some future time to come on the program, Tom. >> Well, the oil gold ratio in real time is not as important as the lagging relationship where oil movements tend to match gold movements with a lag time of about 19 and a half months, much like they do with yields. It's just it's just that oil follows in gold's footsteps. So calculating a ratio of their prices in real time misses the point that it's a lagged relationship. >> Okay. But interesting. So, I know you're talking with a broad brush here, but this would suggest that in a year and a half from now, so what we're talking mid 2027, there could really be a big oil price spike. >> Um, an oil price uptrend. I don't know about spike. Uh, and we're getting into the, you know, definitions of words, uh, but words are important in my business. And so yeah, I'm I'm looking for oil prices to go higher to match the movement upward in gold prices over the last 20 months. >> Okay, >> I don't have an end date. I don't have a price target and date in mind. Uh uh I just think it's going to go higher and so you what however long that trend goes. So you want to ride that trend. >> Okay. Well, next time you come on, let's let's go through some oil charts. Also, too, because I'm remembering you have some super spooky correlations with the oil price and and delayed lags on where the economy goes, where the markets go and and I mean, these are these are crazy. What is it like a 10-year delay or something like that? >> Yeah. And that has not been working. um oil prices started crashing 10 year 11 years ago from a peak in in mid 2014 uh down to a January 2016 low. So that should have meant that this whole year for the stock market should have been a down year until January 2026 and it hasn't been working that way. Maybe uh Trump supporters say it's it's the Trump economy, baby, and that that it changes everything. Maybe. Or maybe it's a uh making a zigzag that's uh gonna postpone getting the work done and we're going to get it we're going to cram it all into the last few months between now and January. That's still a possibility and that that actually fits with the hypothesis of what we're seeing from the breath divergences that fits saying another leg down. The argument against that is it goes against bullish seasonality. So we get to see which of those two forces is the is the stronger one. Well, it'd be fascinating to follow. Okay, so let's start landing the plane here. I know you got Well, there you go. Bottom line, and let's let's let's learn where Tom's uh you know, mind is right now in terms of where the odds lie from an investing standpoint. >> Well, seasonality was due to make a bottom in mid-occtober. It was supposed to have been going down all during August and September to get to that October low. It didn't go down like it was supposed to until the very last minute. So like a college student who tries to cram for the final exam on the night before, the market waited until the last minute to get all the work done. Uh but but even with apart from the big one down day on October 10th where we saw the two and a half% decline in the in the S&P 500, we were already seeing bearish divergences starting up. And that's a that's a bigger term problem. It's not an unresolvable problem, but it's a concern for now. The Fed is creating that problem by keeping rates too high. Uh the market has told the Fed, you need to be a half a point lower than you are already, even with the last quarter point cut. And the market is the Fed is not listening. The longer that they wait, the more damage that they cause each and every day. Um long-term rates are about to start a big rise. So, uh, if you are going to get your home re mortgage refinanced, you have about another three weeks to get it done or you're going to be regretting, uh, not getting that done. Uh, gold is really stretched. Uh, doesn't mean it cannot get even more ridiculously stretched, but understand that that if you want to bet on that happening, you're playing at the end of a long uptrend and it's a dangerous game. >> All right, I got to ask you about the long-term rates. So, if if mortgage rates really start climbing higher from here, I know you're not a housing market analyst, Tom, but you probably know enough about the housing market to know that, you know, it's it's it's been in a compromised state with, you know, lowest transactions ever pretty much and and inventory starting to really spread across more and more states and prices starting to come down. I gota imagine you would you would think that that would only bode um orally for the future of housing prices in 2026. Correct. >> Yeah. Uh there's two ways that homes become more affordable. One is that the mortgage rate gets lower or the two more is the the purchase price gets lower. Those are the only two ways to have it happen. Uh we've seen an outflow of population out of our country. So there is housing supply in terms of bed space uh that has now suddenly been freed up. But that's at the lower end of the market. It doesn't change the prices of m mansions in Miami. But uh you send two two million people either on on US planes or on their own deporting back to wherever they came from, that's going to change uh some of the demand for housing stock in this country. And at the same time, if we're heading into a recession like some of the divergences are saying, that's an an additional problem. and then to have if gold is right about a big rise in in long-term interest rates coming. Yeah, that's going to affect mortgages. So, um not necessarily a great time to be a home buyer right now. Um these things are cyclical and they are there are swings. So, if you miss it now, you may get a better time later, but if you're if you're waiting to pull the trigger to refinance your your mortgage, I' I'd go ahead and get that done now. >> Yeah. No, I think that makes sense. Um, from a a a home buyer standpoint, um, yes, bad if if mortgages go up, but might be good if mortgages go up in a way that's bringing purchasing prices down, um, into a place where you can get them. Um, and and I I I just, folks, I'm I'm digging into this because I just released, um, a video the other day with housing analyst Nick Jurley, uh, who gave a phenomenal and very datarich, uh, outlook on where what's happening in the housing market and, what he thinks is going to happen next year. and he actually thinks that that it's really going to start to accelerate to the downside uh in terms of prices and his outlook is not predicated on mortgage rates moving much from where they are. So if they start going up materially well that's just going to pour fuel on that fire that he's he's talking about. And if if going back to the chart of the two-year and the Federal Reserve being, you know, behind uh the curve, if history repeats itself and we go to a point where there actually is a pretty decent market correction at some point, well, obviously that creates a negative wealth effect uh that's going to spill over into the housing market as well. So, you know, all these things are interrelated. So anyways, very much appreciate you you sharing your opinions on that and you know, who knows what'll happen, but Tom, I look forward to having you back on here in a couple months to give us an update. >> That sounds great. And if anybody wants to see charts like these or learn more, you can go to our website. We have a big learning center that's all for free. Lots of material in there. You can sign up for the free weekly chart and focus email. Uh we don't sell our lists. You won't get spammed by signing up. It's just a way to get an article on whatever I feel like talking about that that week. And if you want the good stuff, get our newsletter daily edition. >> So, you beat me to the punch. This was the most important question I was going to ask, which is where can folks follow you and your work. The answer is right here. For those listening on on audio, uh, it's mcosscillator.com, all one word. Um, I get Tom's newsletter. I get it daily. Uh, it's a fantastic resource. If you've been intrigued at all by his charts here, um you're going to absolutely love what you get on a daily basis with this report. And then his monthly report uh is just uh I mean you really got to sit down with a a large drink uh to to make it through that uh because it's just so dense with all the data that Tom packs in there. 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Uh lastly, if you would like to get some help from a professional financial adviser on how to position your financial portfolio for, you know, the whatever lies ahead for us, but especially if it follows the the trajectories that that Tom thinks it may, highly recommend you get that uh advice and guidance from a good professional financial adviser. importantly, one that takes into account the macro issues that both Tom and I talked about and that the other experts on this channel who come on here talk about with me. If you've got a good one who's doing that for you and managing your your portfolio for you, fantastic. Don't mess with success. But if you don't have one, you'd like a second opinion of one who meets those criteria, then consider scheduling a discussion with one of the financial adviserss that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out. 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Market Now More 'Trigger-Happy' & Unpredictable Due To Uncertain Liquidity | Tom McClellan
Summary
Transcript
But yeah, it's a trigger-happy market and markets get even more trigger-happy when liquidity starts to dry up. Um, you know, if you're if you're playing musical if you're playing musical chairs and there's a hundred chairs in the room and four people competing, uh, there there's you I can find a chair when the music stops playing. When the numbers chairs starts dwindling, then it gets a little bit more panicky and and that's what it happens when liquidity starts to dry up. Ili liquidity makes things more vulnerable to news events. Um when you have a perfectly liquid market with the Fed throwing a trillion dollars uh a month at it as we saw in 2020 right after COVID the market can absorb anything. Uh when when you turn that off and when liquidity starts to dry up then you start to have problems. The question is are we going to get back to being in a good liquid liquidity situation now that the seasonal calendar is turning and that's that's really the essential question that we have to analyze the next few days. [Music] Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagert. When markets are as volatile as they've been the past several weeks and the macro outlook is as uncertain as the year ahead currently looks, turning to the data and navigating by what it's telling us is often highly useful. Which is why we're fortunate to have one of the best technical analysts in the industry, Tom Mlelen, joining us today to share his latest interpretation of the current market action. Tom, thanks so much for joining us. >> Good day, Adam. >> Hey, Tom, it's wonderful to see you again. Um, thanks so much for joining. Um, well, look, you know, kind of a kind of an interesting time. And before we turn the uh the camera on here, you mentioned that um, you know, kind of it's been keeping you on your toes uh, as well. Um, I'm just curious, how would you categorize kind of this moment in the markets right now given the scope of your, you know, professional perspective? >> Well, uh, and we should we should emphasize for the audience that we're recording this on Monday the 13th, uh, at the day after the big drop on Friday the October 10th. And so, uh, the big drop on Friday, October 10th was a moment of focused uh, investor enthusiasm for lack of a better word. Uh, and uh, All the more so for anyone involved in crypto on leverage. They got they got to be f familiarized with the old principle of a margin call. And uh so it was a kind of a sympathetic episode where one thing fed on another. And if you can't sell what you want, then sell what you can. And and it all cascaded down together and then people realized, oh, maybe it's not so bad over the weekend. And so we're rebounding. So that's background as we as we head into this this discussion. >> Okay. So that's the immediate background. Now and of course what really threw the markets into their fit of despair and then pulled them right back out of it of course were a few presidential um pronouncements um sort of unofficial ones that President Trump made on his truth social accounts. Um, but I'm just curious, does it is that a marker of um, you know, a market that is maybe more vulnerable to surprises? Um, there've been a lot of people, you know, who've been saying, look, uh, this market is really stretched from a valuation standpoint and therefore anything that kind of causes the market to feel like, oh, it's not going to be absolutely perfect from here, uh, puts the market into kind of a panic, you know. So do do we do we have a more I don't know what you want to call it sort of trigger happy market that's you know when new news comes out it's it's uh uh fire ready aim >> yes um but uh we have had a trigger happy market all this year everybody remembers the tariff crash in April and uh other things along the way uh that um I'll be discussing with some charts I prepared but yeah it's a trigger-happy market and markets get even more trigger-happy when liquidity starts to dry up. Um, you know, if you're if you're playing musical if you're playing musical chairs and there's a 100 chairs in the room and four people competing, uh, there there's you I can find a chair when the music stops playing. When the numbers chairs starts dwindling, then it gets a little bit more panicky and and that's what it happens when liquidity starts to dry up. Uh, and the best indication of liquidity is when if you have a a somebody wants to sell or to buy and they come to the market to do that, then the price doesn't move very far. E e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e either way, when the price starts to move really far or the incremental buyer or seller, that's when you know you're in a an illquid situation and ill liquidity makes things more vulnerable to news events. Um when you have a perfectly liquid market with the Fed throwing a trillion dollars uh a month at it as we saw in 2020 right after COVID the market can absorb anything. Uh when when you turn that off and when liquidity starts to dry up then you start to have problems. The question is are we going to get back to being in a good liquid liquidity situation now that the seasonal calendar is turning and that's that's really the essential question that we have to analyze the next few days. >> Okay. Well, I'll give a quick little preview. So, um, we're talking a few days here before Thoughtful Money's fall online conference and we'll have Michael How there uh this this time around. Uh, and he's, you know, his whole brand is built around tracking liquidity. So, I won't let the cat out of the bag in terms what he in terms of sharing yet what he thinks, but he will be revealing all in terms of his uh crystal ball outlook for liquidity in just a couple days at the conference. So, if you haven't bought your ticket yet, folks, uh, run don'twalk and go buy them at thoughtfulmoney.com/conference. All right. Now, Tom, you mentioned that you were kind enough to put a a number of charts together in preparation for this discussion, and I've got some questions for you, but I think maybe the best thing to do is just to let you start walking through them. Um, it'll be the best way to sort of visualize for the audience what you see is most likely for the road ahead, and if it's okay, I'll just interject every so often. >> Sounds great. Hopefully that's working now. And uh we're at we are at the seasonal turn and that's what makes this an important point for discussion. Um this is the annual seasonal pattern for the Dow Jones Industrial Average just because that's what data I had to put together. You chop up the market data into one-year slices. You average them together and that's what you get to see. And if you look at it from end to end, the correlation has not been great this year. you you've had these weird events coming along where uh Trump gets elected and gets installed and we start having tariff warries and the market is going down much more so than than the seasonal pattern suggests and we had the big tariff crash in early April which was not at all part of the annual seasonal pattern. Once you get past those though then the market tries to get back on the normal seasonal pattern going up when it's supposed to correcting sideways when it's supposed to. We had the bunker buster bombing in Iran that brought a whole bunch of optimism that oh maybe we're not going to ever have nuclear worries with Iran anymore and that market rallied which was not when it was supposed to according to the average pattern but once you get past that news then the market tries to get back on track again. We had uh the Fed we had Joan Powell's Jackson whole speech where he hinted that rate cuts were coming and so that caused the market to rally but once that news event is passed then you see the correlation starting again. So end to end the correlation has not been great but moment to moment you see the correlation working like it's supposed to as it has been in September and now into October and we are right now at the seasonal inflection point the midocctober end to the to the typical bearish seasonality pattern uh when we haven't seen the market trending down like it's supposed to during that period because of these exogenous news events but we are now at the end of the bears argument that we should that they should in charge now and we're starting the the best six months period that Jeffrey Hirs, my friend from stock trader man that he talks about starts in mid-occtober and goes into into May and into actually into July. Um we're starting that now. So the the essential question is does seasonally seasonality still matter? uh or is is it is it all wet this year or has the market just been so strong that it's been able to overcome any bearish seasonality and now that seasonality is working in the bull's favor they can come roaring back. We have this focused event that we talked about where everybody's suddenly worried about Trump imposing 100% tariffs on China and they're going to shut down all shipment to the US and charge our ships extra docking fees and and and that kind of abated over the weekend. So the market's rallying which is not yet factored into this chart. The question is, can we get a a meaningful return of bullish seasonality or not? And that's the essential question for the next few days. >> All right. So, um I want to ask the question, so what do you think is more likely from here to the end of the year? I'm going to guess though maybe some of the charts we're going to go through with we're about to walk through will, um we'll clarify that for folks, but it sounds like you'll be looking at the next few days pretty closely as to whether this this rebound from Friday sticks or not. >> Exactly. Right. because there are still some problems, but those they're not unresolvable problems. And so we have to see, can the market do it? Can the market get up off the mat and answer the bell? Um, one of the things that that this selloff has brought uh is a little bit of humor from McDonald's. They're they're posting billboards saying, "Hey, Crypto Bros, who we're hiring." >> But it also brought a big a big >> Did they just put that up since Friday? >> Yeah, that was over the weekend. That is amazingly fast. >> Apparently in Europe uh one of the things that it brought was a big oversold condition and the MLAN oscillator. This is the indicator that my parents developed back in 1969 looking at the acceleration that takes place in the advanced decline statistics. It's the difference between two exponential moving averages of the daily advanced decline difference. And so a negative reading means that you had a big downward acceleration in the breadth statistics and that matches the downward acceleration that we saw in prices. Not surprisingly, when you get down to a reading that's this low, you don't see very many of them uh in the course of a year. And uh you know, we saw them at the tariff crash in April. We saw it uh um at the end of the year when when the when the Fed actually cut rates and that caused everybody to worry. um you saw it uh in in the late July when there was a momentary selloff. All been great buying opportunities, but the question is does it come with a retest? The one back at the end of 24, early 25 did come with a retest. The one in uh at the April crash low had an immediate bounce and some retesting effort. The one in in July had no retest. So, are we going to get a retest this time? Are we going to just start marching straight back up to positive territory, show positive acceleration? That's the essential question right now. Um, one of the problems that that comes with negative breath if you look at it longer term is that you start to run out of liquidity. This is a companion tool to the Mlen oscillator that the summation index and the the summation index changes every day by the value of the oscillator. So when the oscillator is negative, that pulls the summation index down. When the oscillator is positive, the summation index goes up. In this case, it's look I'm looking at the ratio adjusted summation index. So it factors out changes in the number of issues traded over time. And the important thing that this thing does when you get it to go above plus the plus 500 level, it says that there's gobs of liquidity uh and you should expect higher highs. Uh we've saw it go above plus 500 earlier this year coming out of the tariff crash low. That was a sign that liquidity was strong. But now we've seen it make a divergent lower high compared to prices and we have seen a a higher price high with the the ratio adjusted summation x below 500. Normally you get a a big failure indication when the the summation x goes below below this 500 and then fails to get back up. We have not yet had the failure to get it back above 500. It's going to take some more time to do that. But all the way back in 2018, we had an example of new highs in prices and the ratio adjusted summation index falling and below 500 and it was a big warning sign of trouble. It's not clear which way this is going to go yet. This has the potential to be really really bad. It's not guaranteed though. The market could recover from this. That is possible. So we're going to have to watch uh what happens the next few days. But as this is happening, we're seeing lots of bigger divergences that are causing a a big problem or are a big concern. The the most noteworthy of these is the divergence that's now taking place between the New York Stock Exchange daily advanced decline line and prices. We've seen new price highs. The the advanced decline line peaked on September 18th and has been going lower. That is not good news. that says that the majority of stocks have been going downward even before um last week's enormous decline. When you see a divergence like this, it's a warning sign of trouble. Uh we saw one at the end of 2021 leading leading into the bare market of 2022. That was a big ugly thing you want would want to avoid. We saw it uh earlier this year right after inauguration. the the advanced decline line failed to make a new higher high and we saw the big ugly decline on the tariff news. But a divergence like this can get rehabilitated. We had a divergence in mid 2024 where you had lower highs in the advanced line and higher highs on prices and that got resolved by having the advanced line start doing better. So it is possible that a divergence can be rehabilitated. We don't have the evidence yet. That is the point to watch out for. But this is not the only divergence that we're seeing. There's also a divergence in high yield bond advanced decline data. Uh high yield bonds trade like stocks. They're not traded on the stock market, but they trade very much like stocks do, and they draw from the same liquidity pool. So when these guys start doing poorly, uh that's telling you that the runts are dying. the the big pigs in the in the litter might still be doing okay and pushing the indices higher, but when these guys are doing doing bad, that's a sign of trouble. We saw that um back in 2024 and in early 2025 before the big tariff crash um selloff, we we that we had an illquid situation going on. But as with other divergences, divergences in this one can get rehabilitated. That is possible. Taking a longer look at this same indicator. This is high yield bond advanced decline line. This goes all the way back to 2021. It was telling us a huge warning sign at the end of 2021. Big divergence, but it took a while before it finally mattered. And there was another divergence along the way when prices made a higher high, but this one said, "Nope, that ain't happening." It told us about a divergence in 2023 ahead of a meaningful correction. uh wasn't wasn't the mother of all bear markets, but you definitely want to be uh out of that if you can. And it told us about a divergence here in late 2024, early 2025. So, it's a big warning sign, and we're starting to get it now. It is very young, this divergence. It's very fresh. It's only not even a month old yet. And there is no uh clock on this thing to tell you when it's going to start to matter. It can matter immediately. It can take several months. uh it doesn't have to matter just because we noticed it right now and it can get rehabilitated. So it's very important to watch how the market's going to do as we make the seasonal turn through a bullish phase. Can these divergences get rehabilitated? Can we overcome these? And is the market going to be able to do well? >> Um okay. So Tom, I mentioned in the intro here that uncertainty is quite high right now in terms of what the next year is going to look like. And uh I would say of late um I have talked to a lot of analysts who are sort of falling on both you know either side of the line of uh hey look uh you know any weakness in October is just a dip to be bought and we're going to scream into the end of the year and any any any dip again is a buying opportunity. And then I've got just as many if not even more people on the other side saying, "Hey, this market's way overstretched. It's super vulnerable." And um you know, we could be seeing the initial signs of of cracking that's going to lead to you know, some some big pullback here at least, if not a larger correction. And >> I'm in both of those camps right now. By the way, it is a buying opportunity. This dip in October we've had. Whether it's going to be leading to a sustainable uptrend or not is a separate question. So, it's a buying opportunity of one scale, but not yet necessarily of another scale. >> Of another scale. Right. And it seems like a lot of the data you're showing here is is, you know, they're they're kind of divergences. Some are saying, "Hey, this could actually turn around pretty quickly." And some are saying, "Well, no, this could actually be the beginning of a dip." So, it's interesting that your data is is sort of corroborating uh the the the difference of opinions here amongst the macro analyst community. And I would love it if all my data gave me all perfect indications all the time and I never had disagreements in the data. That's not the world that we get to live in though. And so we have to grapple with the these levels of uncertainty and look for ways to confirm what's happening. And that's the task that we have. >> That's the task that we have. So um I know you have more slides here. So oftentimes I imagine when you're saying I'm seeing data kind of on both sides of the line here then I should just look at more data. >> Yeah. Well and this is markets data. This is price and breath data. There's other divergences that we're seeing. Um, let me get to the next slide. Um, this is data on the spread between US Treasury 10-year notes and the equivalent German bonds. They're known as bunds because bundis means federal in German. And so a a German bund is a is a federal bond issued by the German government. and that has a yield and our debt has a yield and so there you can calculate the difference between the two. Most of the time that spread moves with stock prices. So if the spread is increasing meaning treasuries have a higher yield and it's increasing that's generally a bullish condition. And when it's contracting uh where the the the treasury yield is not at as high of a premium versus um the the uh buns then you it's you see it contracting and that's generally bearish. What we're seeing now is a big divergence hasn't mattered yet. Um and sometimes divergences in this particular comparison they can get rehabilitated. That is possible. But right now it's a big fat divergence and it's coming from a very high level where we've had a very big premium on US Treasury yields versus German bund yields. And so there's a lot of room for it to fall. We haven't ever had a negative spread since 2009. uh if you if you ever get to the chance to see one of those uh boy that's a great buying opportunity as long as you can stomach the less parts of the bare market. Uh but boy those are great buying opportunities. And you'll notice that I stopped this chart going back in 1991. I was actually happened to be stationed in Germany from 1987 to 1991 when I was a helicopter pilot in the army. So I was there during the fall of the Berlin wall and the and the beginnings of the German reunification. uh it was quite an amazing time, a bit of history to live through. The this indication doesn't work before 1991. Before German reunification, it just didn't work at all. After German reunification is when this comparison started to work and you say, "Well, that's that's only 34 years." Well, that's a lot of time, and it's been working pretty well over 34 years. And so, that's that it I believe in this, but again, it's a it's a divergence now. It's a problem now, but it could get rehabilitated. That is possible. But this is another among the signs that I'm seeing. And if we go outside of markets completely, here is data from this the SLLE. That's that's the coolest acronym, the senior loan officer opinion survey uh of domestic banks. And they look at they ask the the loan officers at these big banks, are you tightening or are you loosening? And that data goes uh when it goes up, it's they're loosening. when it goes down or tightening. Not surprisingly, tightening conditions are bad for the stock market. Loosening conditions are good for the stock market, but it works with a lag. I've shifted the this data plot forward by six months to show how it works with a lag where the the moment of maximum tighteningness uh preceded the bottom in in stock prices back in 2009. They this moment actually happened in 2008 and it started getting better but the lagged effect mean it didn't start working for the stock market until March of 2009 >> and Tom sorry to interject with a question here but uh so the market lags the slle and that would make sense right because yeah >> bankers start tightening their lending less money goes out there to stimulate the economy but you don't see that for a couple of months you don't see the effect of that for a couple of months correct >> right it's when you let off the accelerator on your car, you don't immediately stop the car. You start coasting down, but you're still moving. Uh, and letting off the accelerator is a precondition towards stepping on the brakes. Well, they're they're letting off the accelerator, and they're moving toward the brakes, and that's going to have a lagged effect on the stock market unless it gets rehabilitated, which is possible. Now, I should emphasize these data in this charter only through Q2. We're not going to get the Q3 data, which you know, data for July through September. We're not going to get it until the till the government reopens and the Fed starts compiling these data again. So, we don't know what Q3 is, but this is just data through Q2. And Q2 is when we were having the tarot crash uh and in April. So, that may affect this a little bit. So, we don't know how it's going to turn out, but it's a warning sign for now. So, there's there's lots of these warning signs, some market price based, some outside. Uh we're seeing unemployment uh numbers not looking good. Manufacturing employment has been declining for a couple years, not in a huge way. Uh but it's it's not looking good. So there's lots of signs of recession uh and and liquidity problems, but they're not fatal signs yet. >> All right. Um so obviously at some point in this discussion, Tom, we're going to lead up to, you know, what's what's the totality of this telling you? Is it making you more or less optimistic about the markets as we head into 2026? But I know you've got some more charts ahead, so I'm just going to bite my tongue for the time being. >> I do. There's a few other things to to share. Um, I'm seeing a big problem coming for long-term Treasury bonds. Um, years ago, I discovered a cool insight that the price movements of gold tend to get echoed about 20 and a half months later in long-term bond yields. In this case, I'm using the Treasury yield index, which is the yield on whichever of the the 30-year bonds is the most recently issued one. And so, it moves down as bond prices go up. It moves up as prices go down. And the yields echo imperfectly, but really darn well, the movements of gold prices 20 and a half months prior. Well, uh, 20 months ago, gold was at 2,000. Now, it's at twice that level, and it bottomed right here. And that equates to a bottom for yields in the first week of November. And then we start the big climb that gold has done. I'm not showing all of gold history because I wanted to zoom in on just the the smaller movements to so that people could see exactly how good of a correlation it is. It's not perfect. Sometimes it goes off track. We saw that when Bank of Japan doing some rate action back in 2024, it got off track for a while and then it got back on track again and has tracked very nicely since then. It's always a risk it could go off track again. uh if the Fed or a similar agency around the world decides to get really crazy, but it's saying we get a big inflection point beginning in November and a big the start of a big up move and gold has been trending higher for the last 20 and a half months. That doesn't mean that yields have to double because the exchange the the the the beta the the movement of gold doesn't equal one to one movement of interest rates. But the direction is gonna is should be upward assuming that this continues. So long-term yields are about to start heading higher. Shortterm though, the Fed is still behind the curve. Uh it is it it just cut rates last month, but it still has another half a point to go to catch up to or catch down to where the two-year has already gone. The two-year is the best guide I have found. Better than the Taylor rule, better than the 400 PhDs at the Fed. The two-year knows ahead of time what the FOMC is going to do and the FOMC causes problems when they think they're smarter than the bond market and and know what to do better. They have been lagging in their rate cutting. They and when they have done that before uh that like in 2006 and seven we got the mortgage crisis and and that spread into the stock market and in the banking system. They were lagging back in 2000 when the internet bubble was popping and interest rates were falling and they took their sweet time to get around to cutting. They were lagging in 2019 and we started seeing signs of a of a recession then even before COVID. And that finally led the Fed to cut rates and even start what Chairman Powell told us was not QE. If you anybody remembers not QE, we had QE1, QE2, QE3. We had not QE and then when CO happened and we got QE4. So, I don't know if they're going to do QE again this time, but they're still a half a point behind. They could cut a half a point right now, uh, this afternoon, and it would be nice if they did, and that would only catch them up to where the two-year already is. Uh, if the Fed would stop thinking they know better and would start listening to the two-year, they would stop creating bubbles and magnifying the crashes that we've seen. But they all have very expensive degrees in economics. And because they spent so much money on those degrees, then the things that they know must be a whole lot more important than what the bond market knows. >> Well, here let me ask a couple questions here. So, um, in many ways, this is not out of the ordinary historically, right? To your point of of the Fed always sort of being behind the curve, slow to react, >> and and the two-year leading the way. So, right now, the the two-year is lower, as you said, and the momentum of the two-year is downward. Um, how low will it go? We don't know. But we can definitely see at previous moments in this chart history here when the Fed has hiked and then plateaued and then the two years started to head down, the Fed has had to chase it down and chase it down pretty far. So, I guess something would have to be quite different this time for that not to happen. But it sounds like from this data here, Tom, you think the the probabilities seem to be suggesting that short-term rates will go down, long-term yields will go up, and so we'll have a a pretty severe steepening of the uh of the yield curve in a way that I'm not sure a ton of people are expecting right now. They're expecting the short end to go down further. Um, but I don't think too many people are really planning on the long end going up in yields. >> I would say that's true. Yeah. and a steepening of a yield curve, meaning the the short end gets lower and the and the long end gets higher. That is generally a good condition for the economy when it happens. Um, but who knows how long that steepening is going to occur. Uh, the two-year has the advantage over the FOMC and that the two-year is very responsive to news and and so as a result, it's a lot noisier data. Uh, you see that noise in the green plot. It's just a lot furer looking than the than the very smooth and slowly to react FOMC rate, but it doesn't waste any time thinking about whether to react. It reacts right now. And and so if the Fed were to cut like they should, and then the two-year moves again, well, then the Fed could move again. But right now, they're still thinking that they know better and they're keeping rates too high for just in case. And they they really ought to learn better. But I don't have any optimism that they're ever going to. >> Okay. Now, look, we don't know what's going to happen here. So, let me again preface that. But if this rhymes like previous moments in history where we're here where the two-year yield plunges, the Fed chases it down, usually that's when the next recession is backdated to and it's usually where the market has a pretty big correction, right? And then and then the market correction, you know, ends at some point and then usually the market starts taking off because it's anticipating that the economy is going to start uh benefiting from the lower rates and any potential central planning stimulus that comes along with it. Um presumably too if the long end of the curve starts moving up concurrently, I mean that could really panic a lot of people. So, you know, you can you can make a pretty good argument from all this that like wouldn't be a shocker if we saw some sort of notable market correction next year for these reasons. Again, probably, you know, uh painful, but but probably short. Uh and then then there would be a time after that to start getting long. >> Yeah. And I need to reemphasize that gold doesn't tell us how far long-term rates are going to go. Uh just because gold doubled uh from 20 months ago doesn't mean rates are going to double. It doesn't work that way. >> Doubling doubling inter but doubling of rates would be I mean >> yeahic to many people right now. But but I think even just above 5% would make a lot of people break out in a cold sweat. >> Yeah. Well and and if interest rates go from 4% to 8%. That's that's a big deal. Well, if they go from 4% to 6% that's not as big of a deal. But you would still want to be positioned for either of those outcomes uh in the same way. You don't get to tell the market how much of it of the move you're get get to make. You just want to make sure you get all of it as it's going in that direction. And so forget about how far it's going to go. Don't let that worry you because we're not going to be able to predict that very well. But it we're able to predict the timing of the and the direction of the move pretty well based on what gold has told us. The hard question though is whether gold's message has been skewed by all of the central bank purchases of gold. Are they putting a thumb on the mark on the scale of the market and disrupting its nice message? That's a real question. And I'll give you a perfect answer about five years from now. But in the meantime, we have to go with the information that we have. >> Got it. And and I I guess my only question on that, and we don't we don't have perfect information right now, is >> I mean, they've been putting their thumb on that scale for a couple years now. So, is there any any reason to believe they put their thumb on the scale a lot harder in the past, you know, six months than they were doing before, or is this new buyers coming into the gold market to join the central banks? >> Um, I don't have information on what all the central banks are doing. And even if I had information, I wouldn't necessarily trust that it was legitimate because they tend to like to be secretive. So just don't know that about it. I I know what the price is and I know what it's been doing and it's been doing amazing things uh a little bit too much. And in fact, one of the things that it's been doing is it's been driving the move up in gold and in now in silver has been driving up the shares of the mining stocks in a huge way. This is the the NY Arca gold miners index. Uh it uh is an expanded version of the old Philadelphia XAU. It has both gold and silver miners in it, a much broader portfolio than the XAU has. Um and I'm comparing it to something called the 1% trend. It's like a 200 day exponential moving average. And you know it the price is way above that exponential moving average. So if you measure that spread with a 1% trend deviation, you can see uh numerically the distance of this spread. It's just very big right now. Well, when you get up to this big of a spread, that's a blowoff top. Um it may not be at the final moment yet. It it might keep blowing off a little bit longer. Uh it did that back in 2015 uh for a little bit longer, but boy um you're going to get a big correction out of this at some point because that's what's always happened before. uh you always get uh after one of these big ex big spikes, this 1% trend deviation indicator always gets back down to zero. And that's not a pleasant time to be an owner of a gold mining stock. So if you're just one of the recent gold uh stock chasers right now saying uh it's the next gold rush, we got to jump on board. Understand that from history where where you are in the in the sequence of this and that it's really really stretched. The thing about gold that's different from the stock market, uh, generally speaking, the stock market tends to make spiked bottoms and rounded tops, like the path of a bouncing tennis ball. Gold does the opposite. It makes spiked tops and rounding bottoms. >> Uh, and it all has to do with the nature of panic. When when we are in stocks and we panic, we panic out of stocks and into cash. People panic into gold. That's what causes the spike tops. They don't panic at gold bottoms because they can just hold the gold and wait. That's why you get very rounded bottoms in gold. But you get panics and spikes tops because people are panicking into gold just like they panic out of stocks. Okay. Very. It's super interesting and I've had a lot of discussions over the past couple weeks on this channel, Tom. uh uh you know talking about how far and fast the precious metals have moved and um you know just looking at it if if we just if we just took away the the name of what the asset was right you could look at it and say okay this thing's pretty stretched um and uh you know I've definitely given my personal opinion that um considering hedging in some way shape or form whether that's simply by selling some profits um reducing positions, whether it's putting on a hedge like maybe you know buying a put option on a mining index or something like that um you know is looking increasingly prudent given how stretched things are here. Now, there are people who are saying, you know, hey, Adam, this is this is different. This is the world repricing gold as a monetary asset, and you know, this thing is still going to the moon. And the honest answer is is none of us know for sure. But what I'm hearing from you is from a technical historical standpoint. We're in the territory where fairly sharp pullbacks tend to occur. And I'm guessing, I don't want to put words in your mouth, but I'm guessing you would say, "Yeah, considering some sort of hedge here, especially if you're sitting on big minor profits, probably something worthwhile to consider." >> And the the point to know about the way that gold makes spike tops is that the slope downward out of them tends to match the slope upward into them. Uh doesn't necessarily give give back all of the ground that it that it gained during the blowoff. uh and and the pullback could stop at any time, but it's it it's ugly once it gets started. And you cannot reliably use a trailing stop in gold. Um if you say, "Oh, okay. Well, if it pulls back x percentage, I'll just have a stop order and I'll get out." Your stop order is a market order. Uh as soon as it gets hit, and the market may have gone way beyond where your stop is by the time it gets filled. That's the nature of gold. it it likes to make violent counter trend moves to to catch all the to run all the stops and then that really triggers an an outpouring and so I can't say the day that it's going to happen. Um it's definitely an impressive trend. It's continuing even now. Uh but we are the rubber band is officially stretched and so know that that's the game you're playing. You're you're dancing up here and like dancing up here or dancing at after a rally like this. the slope downward is is really uh quite scary and not to be not not fun to be part of. The thing that you can do is use the information that gold gives you to know that uh bond yields tend to rise about 20 and a half months after the start of a big rise in gold. Crude oil prices tend to rise about 19 months. And so I'm expecting big move up in crude oil prices to match the big move up we've seen in gold prices. So, I'm personally long u the the oil play and the oil services because I think that those are going to continue doing well where other things are not going to continue doing as well. >> So, Tom, do you have any slides here on oil? Because I want to make a point on oil, but I can I can wait until you get there. >> I didn't bring one for today. >> Okay. No, no worries. Um >> I I can tell you though that that prior to the commitment of traders data getting shut off by the government shutdown, we were seeing very very low readings for the commercial trader net short position. Now I need to define that a little bit. A commercial trader is someone who produces a commodity or use it uses it in their trader business. So Exxon is a commercial for for gold for oil futures. The the commercials are are net short of oil futures almost all of the time. They've been continuously net short since 2009, but just recently, as of the most recent data a couple weeks ago, they were net short to the lowest degree in years. Now, what does that mean? Typically, a producer of oil will use the futures market to lock in pricing on his future production. So, he can sell a futures contract for a year and a half from now for the oil that he knows that his well is going to produce. And he can lock in today's pricing. when they are net short to a low degree that means that they don't want to lock in these prices. They think they can do better and that is a sign of a bottom for crude oil prices. >> Okay, that's really important information. Um so a couple things the day we're talking here talking about how you said gold's continuing to the upside right now. Um both gold and silver have jumped to all-time highs the day we're talking here. Um Tom gold's at 4,100 over 4100 now at least. gold futures are um I can't believe these words are coming out of my mouth because I probably wouldn't have believed them at the beginning of the year. Silver is now um over 50 now. Silver futures, in fact, I think spot, someone was telling me just a few hours ago, is over 52 right now. Um >> there's a bit of a a squeeze in the spot market because they can't find enough supply to fulfill a delivery on all the people wanting to take delivery on their futures, >> right? And again, you know, this gets emotional, right? You were talking about the shape of panics and things like that. the people who are fortunate enough, wise enough to have positioned themselves into silver right now are saying, "Yes, this is exactly what I was expecting." And the the London vaults are breaking and you know, this is this is going to go to the moon, right? And and folks, I have no idea how high this is going to go and I'm rooting for it to go higher as a precious metals owner myself, but I'm very cognizant of what Tom is talking about here. And um this the these these extremes u you know can can and and often do throughout history turn on a dime um when the news changes. And so uh again I I just want to say I know it feels wonderful right now uh with this stuff going up. um it may feel equally uh bad um if if if if you end up holding beyond the peak and we do have a a big correction like Tom says we tend to get when we're at this level above the the trend deviation now who knows but but going to um going to oil um I I had been very bullish about silver Tom um especially I was waiting for it to make that that breakthrough of 35 an ounce and many of the technical analysts like yourself who, you know, I've listened to have said, "Hey, look, once it breaks $35 an ounce, there's not a lot of resistance between that and $50 an ounce." And that very much played out. So, kind of playfully when silver futures hit $35 an ounce, I gave myself silver eyes on uh on X, you know, you know how everybody was giving themselves laser eyes during the the Bitcoin heyday. Um, and hey, lo and behold, got lucky. You know, like I said, silver's now past 50 bucks an ounce. Um I'm I'm starting to look at oil um which is on the day we're talking here still below $60 a barrel um and which is you know getting close and I think for some producers might even below their average cost of production um and beginning to say wow this this very critical industry seems to be kind of just getting left for dead right now. So to hear you talking about some of the positive correlations that you've seen in the oil markets, I I had like I think the last week sort of tongue and cheek said, "Wow, maybe I'll give myself oil eyes next on X." Um but you're you're making that be a good thing to do. >> Well, maybe for Halloween. Yeah, but that sounds kind of disgusting actually. >> I know. A little too creepy. But but the point being is, you know, I'm I'm sort of beginning to feel the same way about oil uh and the oil producers, the way in which I was feeling about silver when silver was, you know, below 30 um and seeing all these potential tailwinds coming up. >> Well, you you the worry then is are other people people going to start feeling that way? because uh I don't know too many people who are starting to think bullishly about oil like I am. But if I start hearing that everybody is and I'm going to get worried about my own opinion about it and I have to reevaluate that. >> Yeah. I I I I think general public wise I I and clearly Wall Street wise they're still not really that that interested. I will say several of the analysts that I've been talking with on this program recently are starting to have the similar like Yeah, I'm looking at oil more and more and I'm thinking that that's probably a good place to start putting capital. >> Yeah. >> I don't know if that makes you nervous or not. >> So I hopefully I'll be able to get out before everybody starts piling into oil just like they've been piling into gold. >> Yeah. Well, we'll see. >> Well, we should have a few months of that. And I'm sure there's some interesting oil gold ratios that that you could pull up for us at some some future time to come on the program, Tom. >> Well, the oil gold ratio in real time is not as important as the lagging relationship where oil movements tend to match gold movements with a lag time of about 19 and a half months, much like they do with yields. It's just it's just that oil follows in gold's footsteps. So calculating a ratio of their prices in real time misses the point that it's a lagged relationship. >> Okay. But interesting. So, I know you're talking with a broad brush here, but this would suggest that in a year and a half from now, so what we're talking mid 2027, there could really be a big oil price spike. >> Um, an oil price uptrend. I don't know about spike. Uh, and we're getting into the, you know, definitions of words, uh, but words are important in my business. And so yeah, I'm I'm looking for oil prices to go higher to match the movement upward in gold prices over the last 20 months. >> Okay, >> I don't have an end date. I don't have a price target and date in mind. Uh uh I just think it's going to go higher and so you what however long that trend goes. So you want to ride that trend. >> Okay. Well, next time you come on, let's let's go through some oil charts. Also, too, because I'm remembering you have some super spooky correlations with the oil price and and delayed lags on where the economy goes, where the markets go and and I mean, these are these are crazy. What is it like a 10-year delay or something like that? >> Yeah. And that has not been working. um oil prices started crashing 10 year 11 years ago from a peak in in mid 2014 uh down to a January 2016 low. So that should have meant that this whole year for the stock market should have been a down year until January 2026 and it hasn't been working that way. Maybe uh Trump supporters say it's it's the Trump economy, baby, and that that it changes everything. Maybe. Or maybe it's a uh making a zigzag that's uh gonna postpone getting the work done and we're going to get it we're going to cram it all into the last few months between now and January. That's still a possibility and that that actually fits with the hypothesis of what we're seeing from the breath divergences that fits saying another leg down. The argument against that is it goes against bullish seasonality. So we get to see which of those two forces is the is the stronger one. Well, it'd be fascinating to follow. Okay, so let's start landing the plane here. I know you got Well, there you go. Bottom line, and let's let's let's learn where Tom's uh you know, mind is right now in terms of where the odds lie from an investing standpoint. >> Well, seasonality was due to make a bottom in mid-occtober. It was supposed to have been going down all during August and September to get to that October low. It didn't go down like it was supposed to until the very last minute. So like a college student who tries to cram for the final exam on the night before, the market waited until the last minute to get all the work done. Uh but but even with apart from the big one down day on October 10th where we saw the two and a half% decline in the in the S&P 500, we were already seeing bearish divergences starting up. And that's a that's a bigger term problem. It's not an unresolvable problem, but it's a concern for now. The Fed is creating that problem by keeping rates too high. Uh the market has told the Fed, you need to be a half a point lower than you are already, even with the last quarter point cut. And the market is the Fed is not listening. The longer that they wait, the more damage that they cause each and every day. Um long-term rates are about to start a big rise. So, uh, if you are going to get your home re mortgage refinanced, you have about another three weeks to get it done or you're going to be regretting, uh, not getting that done. Uh, gold is really stretched. Uh, doesn't mean it cannot get even more ridiculously stretched, but understand that that if you want to bet on that happening, you're playing at the end of a long uptrend and it's a dangerous game. >> All right, I got to ask you about the long-term rates. So, if if mortgage rates really start climbing higher from here, I know you're not a housing market analyst, Tom, but you probably know enough about the housing market to know that, you know, it's it's it's been in a compromised state with, you know, lowest transactions ever pretty much and and inventory starting to really spread across more and more states and prices starting to come down. I gota imagine you would you would think that that would only bode um orally for the future of housing prices in 2026. Correct. >> Yeah. Uh there's two ways that homes become more affordable. One is that the mortgage rate gets lower or the two more is the the purchase price gets lower. Those are the only two ways to have it happen. Uh we've seen an outflow of population out of our country. So there is housing supply in terms of bed space uh that has now suddenly been freed up. But that's at the lower end of the market. It doesn't change the prices of m mansions in Miami. But uh you send two two million people either on on US planes or on their own deporting back to wherever they came from, that's going to change uh some of the demand for housing stock in this country. And at the same time, if we're heading into a recession like some of the divergences are saying, that's an an additional problem. and then to have if gold is right about a big rise in in long-term interest rates coming. Yeah, that's going to affect mortgages. So, um not necessarily a great time to be a home buyer right now. Um these things are cyclical and they are there are swings. So, if you miss it now, you may get a better time later, but if you're if you're waiting to pull the trigger to refinance your your mortgage, I' I'd go ahead and get that done now. >> Yeah. No, I think that makes sense. Um, from a a a home buyer standpoint, um, yes, bad if if mortgages go up, but might be good if mortgages go up in a way that's bringing purchasing prices down, um, into a place where you can get them. Um, and and I I I just, folks, I'm I'm digging into this because I just released, um, a video the other day with housing analyst Nick Jurley, uh, who gave a phenomenal and very datarich, uh, outlook on where what's happening in the housing market and, what he thinks is going to happen next year. and he actually thinks that that it's really going to start to accelerate to the downside uh in terms of prices and his outlook is not predicated on mortgage rates moving much from where they are. So if they start going up materially well that's just going to pour fuel on that fire that he's he's talking about. And if if going back to the chart of the two-year and the Federal Reserve being, you know, behind uh the curve, if history repeats itself and we go to a point where there actually is a pretty decent market correction at some point, well, obviously that creates a negative wealth effect uh that's going to spill over into the housing market as well. So, you know, all these things are interrelated. So anyways, very much appreciate you you sharing your opinions on that and you know, who knows what'll happen, but Tom, I look forward to having you back on here in a couple months to give us an update. >> That sounds great. And if anybody wants to see charts like these or learn more, you can go to our website. We have a big learning center that's all for free. Lots of material in there. You can sign up for the free weekly chart and focus email. Uh we don't sell our lists. You won't get spammed by signing up. It's just a way to get an article on whatever I feel like talking about that that week. And if you want the good stuff, get our newsletter daily edition. >> So, you beat me to the punch. This was the most important question I was going to ask, which is where can folks follow you and your work. The answer is right here. For those listening on on audio, uh, it's mcosscillator.com, all one word. Um, I get Tom's newsletter. I get it daily. Uh, it's a fantastic resource. If you've been intrigued at all by his charts here, um you're going to absolutely love what you get on a daily basis with this report. And then his monthly report uh is just uh I mean you really got to sit down with a a large drink uh to to make it through that uh because it's just so dense with all the data that Tom packs in there. And in wrapping up here, folks, please join me in thanking Tom for again giving so much of his analysis here to us by hitting the like button and then clicking on the subscribe button. below as well as that little bell icon right next to it. Quick reminder, too, as I said earlier, that the Fal Money Fall Online Conference is coming up this weekend, Saturday, October 18th. Don't worry if you can't watch live during the day. Replay videos of the entire event will be sent to everybody who buys a ticket. So, if you haven't bought your ticket yet, you got to do it now. Go to thoughtfulmoney.com/conference. Uh, and if you are a premium subscriber to the Thoughtful Money Substack, look for the code that I've been emailing you that you can use to get an additional $50 off of that ticket price. Uh lastly, if you would like to get some help from a professional financial adviser on how to position your financial portfolio for, you know, the whatever lies ahead for us, but especially if it follows the the trajectories that that Tom thinks it may, highly recommend you get that uh advice and guidance from a good professional financial adviser. importantly, one that takes into account the macro issues that both Tom and I talked about and that the other experts on this channel who come on here talk about with me. If you've got a good one who's doing that for you and managing your your portfolio for you, fantastic. Don't mess with success. But if you don't have one, you'd like a second opinion of one who meets those criteria, then consider scheduling a discussion with one of the financial adviserss that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out. To do that, just fill out the very short form at thoughtfulmoney.com. only takes you a couple seconds. These discussions are totally free. There's no commitments involved. Uh it's just a service these firms offer to be as helpful as they can to as many people as possible. And with that being said, Tom, it's always such a joy, such a privilege to have you on here. Really look forward to having you back on early in 20126 to provide an update for us. >> My pleasure, Adam. Have a great day. >> All right. Thanks so much, Tom. Everybody else, thanks so much for watching.