Peter Brandt’s Bullish Call

Featuring Peter Brandt

Peter Brandt of Factor LLC dives into the charts and makes an optimistic case for U.S. equities. Filmed on May 15, 2018.

Published on
17 May, 2018
Topic
Technical Analysis, Trading, US Economy
Duration
17 minutes
Asset class
Equities
Rating
33

Comments

  • VP

    Vincent P.

    20 5 2018 18:55

    5       0

    Perhaps biased as a trader myself in the trenches every day, Brandt's piece was most enjoyable. Whether he's right or wrong doesn't matter, I like his incomparable delivery. I think many would agree. Comments contained many "qualifying" rejections and endorsements seemed only based on reputation, which I think is evidence the odds are against his call. Bring him back as much as possible though, because notwithstanding the wide variety of topics presented on Real Vision, the constituency seems to raise the energy level a notch when it comes to a "good" trading presentation. A monthly overview of major market asset classes from PB would be wonderful regardless of whether he makes a specific call. RV could skim around the content edges and dump some dead wood making room for Peter. Sorry no offense to anyone on that. Commentary was just awesome stuff!

  • WP

    William P.

    19 5 2018 15:35

    1       0

    Peter's insight is always interesting and concise. A RVTV bonus.

  • BT

    Brian T.

    19 5 2018 14:46

    1       0

    There are some really excellent comments here and dialogue and Peter even weighed in here and there. What a fantastic communities of original well informed thinkers. Thanks to RVTV for letting me be a part of this!

  • DH

    Damian H.

    18 5 2018 10:24

    2       0

    It is SO special to have Peter directly engaging with viewers and their comments. Quite extraordinary and much appreciated. Thank you Peter.

  • JL

    Johnny L.

    18 5 2018 09:36

    2       0

    I'm not as convinced as Peter is. Many headwinds exist now that didn't before and rates are rising. Global data is slowing ytd in convincing ways. Passive investing/algo buying is dominant. Before 2008 crisis active managers ruled.

    Inv today are like trained monkey's on buying every dip since 2009 as a guaranteed inv strategy that hasn't failed.

    Volumes ytd on the buy side are 40% of avg daily volumes of late.

    Dalio and Loeb and others are setting up big US short positions.

    Numerous major CB are adding gold big time.

    Credit card and loan data is looking like a train wreck in coming.

    Cash is now an alternative with higher yields.

    I just wonder if this buying that Peter sees as a positive is by habit rather than analysis.

    • SG

      Sumit G.

      19 5 2018 02:12

      0       0

      Hi Johnny. Appreciate the comment. I wanted to ask how are you able to see what positions Dalio or Loeb are taking. It would be very interesting to see if they are net short.

  • TD

    Tejas D.

    18 5 2018 05:59

    0       0

    Great video. Always great to hear Mr Brandt's views about the market. Will be really useful to have his views on market on a monthly basis or so.

  • DC

    Darrell C.

    17 5 2018 23:51

    0       0

    I guess the next six months will tell ..... Mr Brandt’s skillset and wisdom sends convincing arguments.
    In many ways we stand in unchartered waters, so a downside could be, in following, a chart based on past patterns..?

    • MC

      Minum C.

      18 5 2018 18:33

      3       0

      One has to think Mr. Brandt's skillset has as much to do with his ability to manage trades as it does to put them on. This likely comes from the decades of experience and battle scars he's had to endure over many different market cycles. I think this is Steve H's point below and it is a very good one.

  • SH

    Steve H.

    17 5 2018 21:15

    12       1

    Peter Brandt is always worth listening to, and this piece is no exception. His multi-decade record is superb. That said, there are a couple of caveats that might be worth bearing in mind here:

    1. Technical traders are very rarely right more than half the time, relying on effective money management (i.e., carefully managing each trade's risk and reward) to net out positive on an aggregate basis. Brandt is no exception, and freely admits his less than 50% win-rate. His bullish stance on 'US equities' is in essence a single trade, and therefore based on Brandt's own trading history has little better than a 40% chance of being right.

    2. I wonder just how much credibility can be placed in the AD line these days. First, the prominence of passive flows quite possibly distorts its information value relative to past periods. Second, idiosyncratic and price-insensitive decisions made in the context of buyback programmes can also influence the trajectory of AD lines without providing very much insight into broader market psychology. Third, and more generally, can anybody point me at authoritative research that actually establishes a reliable correlation between price on the one hand and divergences in the AD line (or any other indicator) on the other? I know the technicians' folklore, but I've never found any rigorous statistical analysis to support it.

    A final thought: it's a shame to hear somebody of Brandt's calibre following the bubble-vision tendency to attach the 'perma-' label to folks with a view opposite to his. It isn't necessary to be a perma-bear to have misgivings about the current market, whether on technical or fundamental grounds.

    • PB

      Peter B.

      17 5 2018 22:53

      9       2

      All good comments. Thanks. My definition of a perma-bear is not someone with misgivings about the current market -- but analysts that have been outspokenly bearish for several years, each week focusing on a different narrative to explain why they are right and the market is wrong. Hope this clarification helps.

    • DC

      D C.

      17 5 2018 22:54

      3       0

      Extremely well put with every point, Steve. Certainly makes me uncomfortable basing the all or nothing call on the AD Line, which as you put is a 50/50 indicator at best. McClellan has some interesting counter points such as Eurodollar COT leading indicator, presidential cycle, 3m t bill rate lead, which all point to more volatility / negative direction for SPY. He also admitted AD Line was the only fly in the ointment.

  • AH

    Andreas H.

    17 5 2018 18:32

    3       0

    unbelivable, RV puts bullish cases on TV and I am turning neutral to bearish (was bullish since 2011!), hmmmm. still long, but very very carefull.

    • PB

      Peter B.

      17 5 2018 22:54

      6       0

      Good reason for being careful. My rule is ALWAYS be careful. I would not put on a trade without a protective stop.

  • DR

    David R.

    17 5 2018 18:02

    0       0

    Just noting that 6-month May-Oct seasonality is historically the worst time of year, although that's mostly applicable in a flat or down market, with counter examples some years.

    The six-month forward seasonality significantly improves over the next 6-8 weeks or so.

  • DR

    David R.

    17 5 2018 18:00

    2       0

    I'd love to see his dollar outlook. As for 17 months, US equities have mostly risen only on a collapsing dollar, losing 20-25% to European currencies and 30-60% against some Asian currencies from Jan to Jan. Is the dollar about to crash again?

    Our expectations is that once this long-overdue corrective bounce higher in the dollar ends, then the dollar will crash down in a 3rd wave by the most since its crash in the latter 1980's, falling approx in half from its prior level. US stocks will rise in nominal dollar terms, but will continue to be bad investments on a currency-adjusted basis like they've been since the start of last year (even worse after tax & inflation). Actually US stocks have been *negative* in such terms and have hugely lagged select opportunities especially in Asia, which is growing 3-5X faster and doesn't suffer the same debilitating debt & tax headwinds of the US and western Europe. Much better to invest internationally, tax-free if you're properly structured.

  • BT

    Bryan T.

    17 5 2018 17:32

    2       0

    Raoul has been telling us since last year that the coming wave of selling from aging baby boomers who are overweighted equities is a massive issue that will drive equities much lower.

    What are Peter's thoughts on that "thesis"? Demographics are highly predictable so is Peter just whistling past the coming graveyard or has Raoul overstated the concern?

    • DR

      David R.

      17 5 2018 18:09

      2       0

      Jake, thing is that technicians don't care about fundamental issues like demographics. Or some would argue it's all already baked into the price. As Peter says, price is king. Actually, some of the really great technicians would say time is king, trumping pricing, but price matters. In this case, considering time as king, the bearish phase has already run about 3 months, so if it's a new bear market, then the bear must growl very loudly very soon, or the bear phase is over.

    • BT

      Bryan T.

      17 5 2018 19:10

      1       0

      Thanks David...food for thought. It would seem to be a bit foolhardy not to care about something so knowable and predictable as demographic hard data and its effects on markets... but having that already baked in is an interesting possibility. Although outside of Raoul I don't read about the issue (aging boomers as net sellers en masse overwhelming buyers) with anything near regularity so maybe the issue is baked in or perhaps its being ignored...the timeline is shortened with technicians momentum or kinetic energy trading (rules based for example). An orderly market requiring a buyer on the other side of a trade seems exposed to downdrafts if the sellers swamp the boat and the price must seek equilibrium. How would a technician consider that basic equation?

    • DR

      David R.

      17 5 2018 20:08

      1       0

      Technicians don't. They essentially look at charts for patterns, in the belief that history repeats in the form of patterns they attempt to discern. I actually find it very accurate when done well, but it's not easy. In contrast, when you analyze the fundamentals there are a myriad of factors to consider and how do you know whether you're missing some or which are most important. For example, you might assign the most weight to the demographic fundamental and another might assign more weigh to the sovereign bond crisis believed to be coming head on like a runaway freight train (which some believe will make capital flee from bonds into equities as bond markets crash, more than offsetting the effect of that demographic issue). Technicians don't care about any of that, rather care about price time and patterns.

    • PB

      Peter B.

      17 5 2018 22:55

      4       0

      If I am wrong there is nobody else I would rather have right than Raoul.

  • SB

    S. B.

    17 5 2018 11:54

    2       2

    Most Technical analysists I follow think the market can probably go higher from here s&p 3000+. But there will probably also be a sizeable correction of 20-30 percent after that (in the fall/by the end of the year). Then the markets can go even higher in a true blowoff top in the early 2020's (probably due to new QE style monetary debasement/debt reduction).

    • SB

      S. B.

      17 5 2018 12:02

      1       2

      Also, I thought demand was mainly coming from stock buybacks of companies due to the repatriation tax plan.

  • Nv

    Nick v.

    17 5 2018 11:29

    5       0

    Always great. Thanks, Peter

    A few thoughts:

    1. In a world of growing PASSIVE investing, the advance/ decline would look better than in a market driven by active managers. Why? Passive buys EVERY share in the index, at the same time. I would suggest the A/D line is non-static and views have to be adapted.

    2. Long positioning remains high which means investors are factually bullishly positioned. This may be different from what you see on Twitter. Be that as it may, according to Merrill Lynch positioning is high. So is margin debt. Views on Twitter is a dime a dozen.

    3. I have the left shoulder in QQQ at 170.93 so not a H&S failure as yet (I am watching it like a hawk;). Why do you use the 166-7 level?

    Thank you and all the best
    Nick

    • AA

      Aymman A.

      17 5 2018 16:54

      2       0

      Nick, I agree with you and do not agree with a Peters reasoning. Look at price based internals - % of stocks above the 50, 150 & 200 day moving averages. They look worse than the price charts! Look at New Highs. They are not increasing. It IS very dangerous to say that this time it is different but the A-D line seems to have changed character. This is probably due to passive investing. Even a 1 cent increase in the price will be recorded as a positive. With ETF buy programs dominating AD line may have become less relevant.

    • DR

      David R.

      17 5 2018 20:18

      0       0

      Excellent points by all. While the SmallCap 2000 is making new highs, that's a bastion of small retail investors or "dumb money" which is typically late to the party before a major reversal. Exactly like the COTs etc show: commercials ("smart money") are short and specs ("dumb money") is long. In combination, usually that's bad juju. But both this positioning (commercial v. specs) and divergence (SmallCap v Dow) could change of course.

    • PB

      Peter B.

      17 5 2018 22:57

      3       0

      That was the level of the previous right shoulder high.

    • DR

      David R.

      18 5 2018 11:43

      0       0

      IG Traders' client sentiment flipped today from long to short, which being a contrarian indicator means US stocks are bullish as retail/specs increased their short positions.

  • PD

    Paul D.

    17 5 2018 10:50

    9       0

    To describe those that think the market will decline from here as 'permabears' seems a little disingenuous.

    US 5yr yields first closed above 2.5% on Jan 30th....from that session, SPX traded from 2830 to 2532 and Vix went from 13.4 to 50 by Feb 9th.

    US 5yr yields are not far from closing above 3%. One doesn't need to be a permabear to anticipate we may see something similar (or at least to protect oneself against such an outcome).

    • SB

      S. B.

      17 5 2018 11:48

      4       0

      I agree, almost as tiresome as classifying every gold investor as a gold bug.

    • PJ

      Peter J.

      17 5 2018 13:32

      4       0

      In Peter's case I believe its (permabears) just a figure of speech. He is a pure technical analyst, I don't believe he holds bullish views as a bias, it is purely what he sees in the charts and the numbers. I always like to listen to his views and insights even although I don't trade.

    • PB

      Peter B.

      17 5 2018 23:01

      6       0

      Anything is possible. Not sure the argument of higher yields = lower equity prices stands up to historical scrutiny though. Look at the period Dec '92 through Dec '94 and Jun '03 through Sep '06. Both periods with trend to higher yields and surging stock prices. But, every era is different. Which is why I am a chartist who uses stops.

    • PD

      Paul D.

      18 5 2018 14:18

      1       0

      I wasn't talking about 92-94 and 03-06 Peter (they are obviously vastly different in many ways) and historically correlations between bond yields and stocks swing from positive to negative correlations as you well know.

      I was talking about January 30th this year.

      It's much easier for rubber ducks to float when the bath is being filled then when the plug has been pulled.

  • SD

    Sebastien D.

    17 5 2018 10:32

    4       0

    Thanks Peter, that's very intersting. Would be interesting to have regular ones on key markets incl. Crypto ;)

  • MT

    Michael T.

    17 5 2018 09:50

    4       0

    This was a good technical overview of the current market situation. Thanks for that.

    A bit of critique for the production side: I like the theme of the video but having to look at charts through a grunge lens effect makes me think I need glasses :) It's a bit hard on my eyes when I try to look at the charts.

  • FG

    Fred G.

    17 5 2018 09:43

    4       0

    Peter Brandt is great! Thanks RV.