Think really hard about who you want on your team | Exchange places with Tom Bowley

I’ll start this article a little differently than all the other articles I’ve written here on StockCharts.com and talk about the topic for a paragraph or two.

I grew up in Maryland, very close to Washington, DC, and was an avid Washington Redskins and Baltimore Orioles fan. Looking back, I feel very fortunate to have been able to follow two successful sports teams for decades. Although both organizations followed for many years under undesirable ownership. However, during the 1960s, 1970s, and 1980s, these two sports organizations won multiple championships and were constantly competing for more championships. It started with the owners and the culture they created. They hired the right people to build it from the ground up and eventually hired two “field generals” who the entire community could embrace. I know I’m a “homer,” but Earl Weaver (Baltimore Orioles manager from 1968-1982, another year in 1985) and Joe Gibbs (Washington Redskins head coach from 1981-1992 and 2004-2007) were two leaders. . I admired it immediately. I admired Earl Weaver as one of the pioneers of using analytics in decision making, and he influenced my career as I became a stock market historian over the years. Weaver platooned outfielders based on pitching matchups, and was one of the first managers to use late-inning relievers to seal wins. I am a “number cruncher” and always have been, and I use similar “historical matchups” in the stock market as well. The use of analytics makes perfect sense to me.

Joe Gibbs is, to this day, one of my favorite human beings. He is a man of high character, integrity, faith and family. He is unquestionably a leader, as evidenced by his NFL coaching career and later NASCAR career. He is simply a winner. His players will run through a brick wall for him. He had conviction and was innovative. Do you know who started the ‘One Hundred’ set? Counter tray? In his first year as head coach of the Redskins, he finished the season 8-3 after starting 0-5. The following season, he won his first Super Bowl. He became the only NFL coach in history to win three Super Bowls with three starting quarterbacks. Conviction and innovation are important.

These two sports teams in particular, and these two coaches, have been a great inspiration to me. It was a perfect example of how to gain a competitive advantage and how to do things the right way.

When I had the opportunity to join the StockCharts.com “team” about 20 years ago, after leaving my public accounting career and founding EarningsBeats.com (formerly Invested Central), I jumped at it. Partnering with StockCharts felt right and we never looked back. StockCharts.com offers a great platform of trading and tools at a variety of price points, while also focusing on two of EarningsBeats.com’s three pillars: research and education. I am a mostly self-taught technician because I love independent research. But I’ve always been a fan of John Murphy’s work and books. John was part of the StockCharts team, so this was a perfect combination for me and EarningsBeats. From the beginning, StockCharts has boasted a top-notch ChartSchool that offers free training, which I use occasionally. If you haven’t used it yet, please try it. There is a wealth of information and education for both traders and investors. To some extent, EarningsBeats.com takes a similar approach. We charge the majority of our market guidance, research and education, while also providing plenty of free information to investors and traders seeking a better and safer financial future. My Trading Places blog here on StockCharts and my YouTube show are perfect examples. EarningsBeats also has a free EB Digest that creates training charts (and a couple of paragraphs) three times a week. If you haven’t already subscribed, please subscribe with your name and email address.

If you want to bring together the team you trust, start with StockCharts.com. I’ve worked with many of the contributors here at StockCharts and know many of them personally. Overall, this is a group that puts education first and has high character and integrity. They offer tons of free content, so you should take advantage of it. Find people you trust who use similar strategies to yours and build the rest of your team from there. In my opinion, this is where a team providing training and conducting independent research should begin. It also means ignoring people with agendas. My guess is that that’s about 90% of the people you’ll see on CNBC. We have had three market crashes in my lifetime (THREE!!!!!!!!), which have now lasted over 60 years. How do you explain CNBC, which has the same group of people parading across the channel giving dire predictions over and over again, year after year? There are people who keep spouting “CRASH”. The odds of something like this happening in my lifetime are about once every 20 years. CNBC certainly has its core “influencers” and who knows what their agenda is. I just turned it off. It’s easy to get swayed when you hear over and over again how terrible the economy is. How debt levels are getting out of control. How high interest rates will collapse the economy? (By the way, I’m hearing from some people now that the Fed becoming more dovish is also bearish on stocks!) You can’t make this up. I have “learned” that when markets are rising and breadth is poor, it is a sign of little participation and we should not trust progress. However, when the width is strong, it becomes an extreme that represents a peak. In other words, if you see breadth, sell whatever it shows. Also, if you haven’t heard already, a huge recession is coming. This helps explain why money has been pivoting heavily toward Consumer Discretionary (XLY) and Consumer Staples (XLP) and is currently at 2023 highs. But I’m good at sarcasm.

After years of learning and research, my favorite chart is the XLY:XLP ratio. It makes perfect common sense. Yes? If our GDP was two-thirds of consumer spending and the stock market was the best leading economic indicator, we would not follow the ratio between the aggressive consumer discretionary sector (which would probably perform much better in a strong or strengthening economy) and the defensive consumer sector. no see. The consumer staples sector is absolutely perfect. Take a look at the correlation coefficient between the S&P 500 and the XLY:XLP ratio in the bottom panel of the chart above. A strong positive correlation is indicated by a reading > +0.50 and a strong decorrelation is indicated by a reading < -0.50. This is not my opinion. This is absolutely true and can be clearly seen in the chart. The XLY:XLP ratio can help you determine whether you should expect the current trend in the S&P 500 to continue. This is my favorite “sustainability” ratio. So when I hear analysts, or anyone for that matter, talking about a recession coming in 2024, I can't help but agree. Sorry, I'm not sorry. This helps me ignore all of CNBC's worries and have confidence in my own beliefs.

Conviction is important.

On Monday, December 18th at 4:30 PM ET, we will be hosting an event called “Stock Markets and Interest Rates: What History Tells Us.” This is an opportunity to end 2023 with more knowledge about the relationship between the direction of interest rates and the direction of U.S. stock prices. This is a topic that everyone needs to understand now, as it will be one of several key factors that will determine stock market performance in 2024. This is a members-only event, but a 30-day free trial gives you a chance to participate in the event and kick the tires on EarningsBeats.com.

Click here to learn more and start your 30-day free trial. (Be sure to scroll to the bottom of the form to sign up)

Happy trading!

tom