Hey there everyone. Welcome to our latest episode of the Market Misbehavior Podcast. My name is Dave Keller and here on the Market Misbehavior podcast, our goal is to have great conversations with great market practitioners, authors, educators, money managers, traders, strategists, anyone else that we think has a great perspective, great stories to tell, good lessons learned that they're willing to share with all of us as we have a brief conversation about the market environment, how it's evolving.
Today, a really fantastic conversation with Chris Verrone. Chris is the chief market strategist at Strategas Research Partners, joining us from his office in New York. I've known Chris for a number of years and back in my institutional investor days, I used to enjoy frequent visits up in the Boston area from Chris and his team. Chris is a fantastic technical analyst, arguably one of the best on the street, and has great experiences.
What's so striking about my conversation with Chris is very early on, see if you can catch it, he talks about how he had goals for this year. This is a guy that has had a successful career in the investment industry, he's arguably probably the most well-known technical analyst on the street, quoted all the time in financial media. And the fact that at this point in his career, he's still actively thinking about what could I do better in 2025 that I did not do as well as I could have in 2024. And I think that speaks volumes about who Chris is and really represents, I think, the best of the technical analysis community.
Chris and I talked about a number of different things. Talked about process. We talked about his technical approach. How he has gone on a journey from a very simple approach through his career, going to a much more complicated, much more indicator-heavy approach and now at this phase sort of coming back to and recognizing the benefits of keeping it simple and just having very straightforward ways with which you analyze market conditions and just watch for signs that that change.
We talked about the strength in gold, silver, precious metals. He suggested he saw some potential downside after the incredible runs that we've had. Did not see incredible downside in Bitcoin and cryptocurrencies as Bitcoin pushing above 110,000 as we recorded our interview. We talked about what he was seeing and hearing going into that April 7th major low, how the conditions really suggested a tactical bounce and then more broadly how you balance and how you relate short-term strength and weakness or the tactical call with the long-term call. And he would argue that the long-term trends, the long long-term perspective, that's where he feels he can add the most value.
And I think that's well said. One of my favorite quotes, very quotable interview. One of my favorites was whatever your target is, it should be higher. I'll let you listen to the interview to see where he said that, what he was suggesting. But great conversation with one of the best technical analysts I know. Chris Verrone, chief market strategist at Strategas Research Partners.
Super excited to be catching up again with Chris Verrone. Chris is the chief market strategist at Strategas Research Partners in New York. Chris, it's been a little while since we've spoken. I feel like there's plenty of market action to talk about, but it's great to see you again.
Welcome back, Dave. It's great to see you. It's great to be here. Thank you.
I feel like there's so much we could cover in a short period of time. Before we get to the current markets, before we get to a number of different charts, which I love to throw at you and just see where your head is at, tell me this. I mean, just quickly summarize what, how would you describe your technical approach? I've followed your work for many years. Most people listening probably have not had the pleasure of that. How would you describe how you approach the market every trading day?
So I would say constantly evolving. I think you have to constantly evolve to what the market gives you, to new regimes, to new indicators, to new approaches, but really for me always based on the tenets of what I like to call, and I know it sounds contradictory, but what I like to call bottom-up macro, meaning looking at all the stocks everywhere in the world and arriving at some macro conclusion about the signals from the individual equities. I've always felt that the best way to do macro is actually through the lens of stocks. So bottom-up macro is how I would describe my process.
As I say to clients, particularly when I'm meeting new clients or prospects, I say, 'Okay, listen, I try to accomplish three things every day. The first is easy.' You know, when you look at thousands of charts every day and every week, I think in 20 or 30 or 40 minutes, I can show you something thought-provoking, something provocative, maybe something that changes the way you think about the world. That's always my first goal.
The second goal, Dave, as you know, you've done this for a long time, is admittedly more challenging. It's to attempt to be correct as often as possible. I will humbly concede I am no more right or wrong than anyone else out there. But you do know when you're seeing the ball well, when you're not seeing the ball well. And I think it's my job as an analyst to, you know, frankly tell clients, listen, I'm seeing the ball well here, or listen, I don't understand the puzzle pieces here. Here's what's maybe most important, but I'm not sure which way this is going to break. I think honesty when you're communicating with clients or colleagues or peers in a game that's very difficult is important. I'll never be dogmatic in my work and I think that is such a sin, particularly on the sales side, when you come across just the dogmatic approach to markets. It's too hard to be dogmatic as the facts change.
And then third, as you know, Dave, I used to come up and always see you up in Boston. I spent 100 days a year on the road, not because I enjoy airplanes, but because my best ideas are all stolen from other people. When you're an analyst, I think you got to strike the relationship between how much time you spend staring at the screens and how much time you spend talking to people. And I know I need to break that up 50-50 because I get just as much value and insight talking to other people, particularly people who don't do technicals.
And that's what's key. 99% of people I talk to on a daily basis do not do charts, do not do technicals, certainly like we do. It's so important for me to hear that perspective. It's important for me to read newspapers. It's important for me to really increase the number of inputs into my process.
You hit on so many great things there, Chris, and I love, I mean, that description of what I would say sort of what you should be doing as a kind of traditional sell-side technical analyst or in your case at a successful independent research shop, I think that's spot on. And I don't miss everything from my Fidelity days, but I do miss having people like you come in and being able to, you know, have just conversations about what we were seeing and what we were hearing. And I think you're right, I think we all gained a ton from just having those conversations.
So set the table for where we're at here. We'll talk about some of the market conditions and what we've seen. We've obviously had a significant reversal from the April lows to where we're at. I want to start if we could at those April lows. This was actually a tweet you put out on April 4th: 'Missing for weeks was stress and put-call ratios and any evidence of capitulative or indiscriminate selling. Those boxes now checked. Gold being sold sharply reflects too in the final phase of a decline. No place to hide. Probably close here.' Not bad, Chris, in terms of timing going into a significant low in April.
But can you talk to us a little bit about, you know, that idea of capitulation? I feel like, you know, when the market's going down, people get really nervous and the pessimism usually peaks at the low. Can you talk a little bit about the conditions that you saw sort of going into that period? What gives you the confidence to think, okay, we're near the end of this and we want to start, you know, thinking more upside potential?
Yeah, I mean, confidence is a dirty word in this business because you got to be careful. But listen, I would say the real tactical calls have never been our strong suit. I think I'm just better at kind of longer-term trend following, identification, and kind of using the charts to do that. One of my New Year's resolutions this year was actually to try to be more tactical, not because I think there's great value from a trading perspective in the tactical, but because it allows you to play the longer-term call from a more strategic vantage point. And that was kind of our, you know, every year you want to be getting better and improving your process. And that was one of my goals for this year.
And frankly, we got lucky in, you know, early to mid-February with a cautious call. I don't short uptrends, but I didn't like what was happening under the surface. I didn't like the internals were weakening. I didn't like the asset managers had all corrected. Some of the leaders were giving way. I didn't think we would trade to 4,800 S&P. I thought we'd get a correction to 5,500-5,600 and it would be kind of viable in the context of an uptrend, certainly accelerated through March into April.
And kind of by the time we got to, you know, April 4th, 5th, 6th, 7th, I think that tweet was timestamped the 4th. Put your thumb on that weekend and you had all the conditions that generally present themselves near some type of a tradeable low. And listen, our view or our call to clients, and we hosted a call that Sunday night and we basically said, listen, I don't care if you're the most bullish person over the long term or the most bearish person over the long term. What you have to recognize that has happened over the last several days is we checked the sentiment extremes. We checked all this evidence of indiscriminate selling, right? That's the sell whatever you can, no place to hide.
We saw, I think at one point on that Monday, you only had about seven or eight percent of the S&P above the 200-day moving average. Even in the most apocalyptic bear markets, you have rallied from that condition. And my gut was that we probably rallied to, you know, 5,600, maybe 5,700 over the next, you know, eight to twelve weeks as is typically the playbook. And then we'd have to make a call. We'd have to evaluate the character of the rally, make a call. My gut was it would probably fail. But as the rally matured, I was like, listen, this looks better than I would have expected four or five weeks ago. We've seen the internals improve.
Listen, I'm not sure I would call this rally A++, but you know, it's been a minus. We've had the one-month highs expand, particularly the cyclical sectors. I mean, at one point last week, you had 97% of tech above the 50-day moving average. You had 95% of industrials above the 50-day moving average. It reflects the return to momentum. So if you think about where we were on April 4th to where we are today, I think the trick right now is again differentiating between your tactical view and your strategic view because tactically we're up 20-plus percent in 30 trading days and we can certainly pause or consolidate.
And rates, we wrote this morning, rates are as good a reason as any for this market to consolidate or pause. It could be any reason. It happens to be rates. My gut says if you thought a month ago we'd rally and we'd fail and that could be exploited, I think your thinking today has to be, okay, if we come in here, it can't be exploited. It's going to stay contained and I think it stays contained into the 5,500-5,600-5,650 zone.
I'm not a big level person. I kind of subscribe to the view that this is not a precision business. This is a put your thumb on the chart and if you can get it within the eyesight of your thumb, you've done a pretty good job. And that would be my gut. Put your thumb on the 50-day moving average. You probably get pretty good support on any near-term consolidation. But a lot of the things we see are telling us think more optimistically relative to the consensus.
So talk to me about how you triangulate. I mean, obviously the S&P's had an incredible rally, right, from the April low up to where we're at now, sort of, you know, stalling out around that 5,900-ish level. We also have a situation with the dollar, you know, probably breaking down or in the process maybe breaking down, rates pushing higher. How do you triangulate the technical view of strength off of the lows versus some macro conditions? And I feel like it's not hard to list off a bunch of macro reasons why the market arguably should go lower, right? We can come up with reasons pretty easily. How do you balance those two between higher rates, weaker dollar, which, you know, implies maybe some caution versus price action that's been fairly constructive?
I think the macro on balance is probably why I would be reluctant to say the rally has been an A+ off the lows. I mean, what I'm trying to figure out, and this is why this business is so great, where you think you have these puzzle pieces and you're like, well, if I'm right on this, then I can't be right on that logically.
Well, there's some humor in that because it's assuming that those two puzzle pieces that you think are opposing are actually opposing. And I'll give you an example of that right now. I am, for lack of a better phrase, for the past year since last summer, I've been a raging yen bull. I am a dollar-yen bear. I'm a raging yen bull. I think yen's going to 120 and all the like. But man, if yen's going to 120, am I dead wrong on stocks? So that's the conflict that you see in your work sometimes.
And when I say there's almost a hubris in thinking that you're seeing the ball so well that you're going to get it right twice, oh, that you get dollar-yen right and you get the stock call right as well. That's where I kind of go back to my knitting and I say, okay, I have a view on dollar-yen. I have a view on equities. I have a view on oil. I have a view on gold. Let's keep them in their own domains best we can. Because the moment you start thinking, well, if this happens then that happens and this happens and that happens, next thing you know you're four or five steps down the sequence and you kind of forgot what the main point was.
So I actually, you know, I do macro, I do macro through the lens of the equity. But I feel like I make mistakes when I try to get too linear or extrapolate too much in my thinking.
There's so many great points that you made in there, Chris, and I love, I feel like so often investors try desperately to simplify and maybe oversimplify and just come up with these very simple factual relationships between different charts, right? Different things. And if this happens, then that has to happen. And I always try to remind people those are often tendencies. They're not guarantees, right? I mean, that tells you what could happen or maybe what has often happened, but, you know, something different can has always happened.
I mean, Dave, just look right now with rates and dollar, right? For much of the last two years, until the last two months, rates and dollar moved in step with each other and then stuff changed, right? So you can have the nostalgia for the prior correlation or you can just play the ball as it lies. And I think the thing about this business is you have to play the ball as it lies. That relationship has been severed. I don't know why, but it is. It's unusual in the context of historically that you get rates up and dollar down in developed markets. That's generally something that's been historically reserved for emerging markets, but it is what it is.
And then conversely, when I look at some of the stuff going on globally, you know, I have bond yields up in Germany, German 30s look like they want to break out and we know what Japanese 30s have done. And, you know, I was looking to the financial media the last 24-48 hours and everything I read is like, oh, the move in US bond yields is because of the tax bill or the deficit. Well, there's no tax bill in Germany right now. There's no tax bill in Japan right now. So there's some global nature to this move in yields. The difference in those corners of the world right now is those currencies are actually going up.
So I've thought about this and I think if there's a criticism certainly of my own thinking or my own work sometimes, but most people in general, we tend to use indicators that helped in the last war, but you don't know if they're going to be relevant in the new war or the new regime. And I think credit is a great example of that where, you know, '07-'08 credit was a lifeline. It kept us out of trouble. It told us something was wrong.
And I wonder if it was so helpful then because that was really kind of a crisis of corporates. And you look at today and I don't think what's going on is about corporate stress. What's going on is the reordering of how capital moves around the world. So FX is probably a much better barometer of macro stress than credit might be because this is not about corporates. Corporates seem fine. This is about how is money moving around the world? Are we deliberately changing that? And therefore, is the currency not the best barometer of it?
If so, I think the shift with like, hey, rates up and yen up is a really important shift because it's not what I would have expected. And that's the other thing that we really try to emphasize in our work. I can tell you what I'm seeing and all that. You're probably seeing it, too. I think it's more valuable if I tell you what's surprising me, right? Because sometimes there's like this, especially when you're on the sell side, you want to ignore what doesn't really fit in the story you're trying to tell. That is so unhelpful. I want to emphasize what doesn't fit my story because it means that the market's telling me something I don't quite understand. So that's where the message might be, right? That's kind of where I spend exactly. So I try to spend more time in like the what is surprising me right now.
Everyone I talk to for two or three weeks, right? Why are rates up? Taxes going to add to the deficit. Fiscal condition of the country, stagflation, any number of reasons. Well, is it possible rates could be going up because growth expectations might actually get better from here? I mean, I have industrials making new relative performance highs. I at least want to be open to that.
And that's the thing you just see that we desperately try to avoid is this idea of being so dogmatic where you're not open to something looking really different. And this is certainly not original thinking. I mean, these are all ideas that I've picked up and stolen along the way and I've incorporated into my own.
I had the very good fortune last year, we do a big macro conference every year, I'm sure Dave you've attended in the past, and I had the pleasure of doing a fireside chat with the now Secretary of the Treasury. And what Scott and I talked about was this idea of imagination and as an investor or practitioner, spending part of your day thinking about what could look wildly different six or twelve months from now is a very useful exercise.
And like an example, you know, at the time, so this was, so Secretary Bessent and I, this was in April of 2024, so six months before Trump would win, six months before the nomination. So we were talking as two market people, two investors. And dollar-yen at the time was 160. And, you know, he said, imagine a world where it's 135. What does that world look like? And I mean, it turned out to be spot-on.
And what would you have thought would look different in that environment? Or I think today you could say, I don't know, it's my base case, but what does the world look like in six months or a year if gold's 2,500, not 4,000? It doesn't have to be your base case. It can be a very helpful thought exercise in preparing you for if something changes.
That's a big difference in your goal as an analyst, as a strategist, instead of trying to be right, which obviously it's better and it's more fun when, I don't mind being right, but just thinking in terms of probabilities and thinking in terms of potential outcomes. I think that's a really intelligent way of approaching what we're all trying to do.
