Yahoo Finance

Welcome to a new episode of Opening Bid. I'm Yahoo Finance executive editor Brian Sai. Like I always say this, the podcast will make you a better investor and a smarter leader. Have to do our stock of the day to kick off, uh, this particular episode. Stock of the day, maybe I've mentioned this 75 times in the course of 130 or so tapings. It's invidia. This is the stock of the day is invidia. You can see the countdown clock on the board here. 3.Things I want to hear from Jensen Wong as the company gets ready for its big GTC event in San Jose. Some would say this is the Woodstock of AI. I don't think you'll see anybody there smoking joints in terms of AI software programmers, but here's a couple of things I want to hear from Jnson Wong with the stock down 10% year to date. I need to hear more details from the company on its next generation of chips. That's not Blackwell.Ruben, you will hear a lot of the callouts on Ruben at this conference. I need to know how powerful it is and how much better it is relative to everyone else's. Number 2, needed an update on the total AI addressable market for Nvidia. And number 3, the offsets in the China business that is likely to be harmed by the trade war that could come in the form of how much Nvidia is playing in the AI robot scene, always a hot topic for Jensen.And I'm out of time here. OK, and a little out of breath, but, uh, I, I have enough breath to, uh, I think hang with my next, uh, featured guest here for this episode. That is Richard Ross, head of technical analysis at Evercore ISI. Richard, great to see you. It's been a while. I was joking to you off camera. It seems like the only time we talk is when the market's going to hell in a handbasket. I mean, good, good to see you. So um before we get a sense of where things are in markets here.You know, we've seen things pull back in March. We've seen tariffs drive headlines, uh, recession fears drive headlines. What have you been doing right now and what are the charts that you look at during, I guess this more tumultuous time?

Yeah, I think, well, one of the key thrusts, Brian, and thank you for having me of technical analysis is to try and remove the emotion from the equation in high volatility situations or phases like we're in right now. So I think all of us on Wall Street over time, we have a process that we've developed. We continue to refine that, and we have our go to. So what are my go-tos? I combine both the top down and the bottom up. So from the top down, we want to look at those pillars of the macro community, the dollar, crude oil, and those.Credit markets in terms of interest rates, whether it's your 10 year yield, your inflation expectations, what have you, your, your curves, your 2 10s, so top down, and then we look bottom up. Let's look at our big sectors, look at our big stocks that drive those sectors. And as we know, it's been a market that's been increasingly top heavy in recent years. So you don't have to go too far down that list of stocks in the S&P 500 to get just about half the index, as you know.

Isthere anything in this market action that would suggest the selling is over?

Yeah, I thought last Friday, last Friday's sort of furious finish, if you will, where we tacked on more than 200 basis points in the S&P as I look here, 240 and those triple Qs. I thought that was really resounding and again, not to sort of wash over the weakness. I think we're still down 2% for the week, obviously 10% correction, really just terrible action off the top. But I think when you look at that weekly candle I'm a bigUser of the candlestick charts for those technicians out there, had a really nice bullish weekly reversal, sort of the proverbial, uh, you know, whipped cream on top of the road apple as a golfer might say, but it put in that nice bullish weekly reversal right around that 5650 level on the S&P. So after 34 weeks of panic-driven selling extreme oversold conditions, but it lands you're right on top of that key.Support and that's where we've made the bottom in each of the two prior declines of notes since the bull market began late in

2022. So I'm a, I'm a closet technician, um, Richard. I mean, I just love this stuff. I mean, look, I have the experiences you would do, we do this for over 30 years. I think you were number one last year, so congrats, uh, to you and your team on that one. That's really cool stuff. Um, but I haven't seen that, that whoosh.You know that one big washout day that, you know, that typically gets a lot of headlines, hey guys, the selling is done. There's no more sellers, here comes the dip buyers. I mean, have you seen anything like that? And do, and I'll even ask this, do we need to see that?

Yeah, I think last Monday was probably the closest, uh, you know, down at 5%, I think at certain points in time in terms of those triple Qs, maybe 350, 400 basis points on the S&P. So that was pretty, uh, whoosh-like, if you will, for lack of a better term. We did see the big spike to 30 where we double top back at the December highs, which I think was a nice sign of relief. We've seen our credit spreads widen back above the 200 day moving average. But in terms of that big sort ofCathartic, climactic moment, as I said, I think Monday was the closest we got, and it was really sort of 3 weeks of kind of rolling whooshes, if you will. So maybe not that watershed kind of moment, knock on wood, be careful what you wish for, but almost a series of sort of fractal watershed moments that to me, I think really tells us that that 10% decline on an index level is just about all weneed.

Is a recession priced into the market?

It's a good question. I feel like we did skip a phase here, you know,

we

went

we went we went from slowdown. I mean, before recession, we should be thinking about slowdown, but we haven't. It's just like, OK, the economy is growing at 2% plus clip. We have the investment banks looking for 3 or 4% growth this year, and then now recession. I mean, there's no to your point, there's like been no middle ground.

Yeah, I've been, I've been somewhat surprised, flat-footed, wrong in terms of the speed at which the pendulum has swung back from, from the so-called euphoria, if you will, after President Trump was elected for the second time to almost despair when he somewhat took somewhat of a different tack that many anticipated in the in the 1st 100 days, if you will. But you know, again, I think we've seen these deeply oversold conditions in terms of momentum. We know that prices have pulled back.Underneath the surface, actually more than that 10% correction. So this almost gets back to your your prior question about that whoosh moment. You know, I think when you look at an individual stock basis, you'll see declines that in many cases approximate the declines of the entirety of the 22 bear market. And think about what went on in 202 that drove that 20% plus decline in the S&P 500 basis points of Fed tightening. Crude oil surges to 120, 130%. The dollar goes straight up. Inflation surges to 9%. So all the forces.drove this bear market, these meaningful declines on a sector level and an index level, those factors are not here, but yet the stocks in many cases take a Tesla down 55% off the top. It went down 75% of the bear market. So maybe to your point, to marry sort of the economic lens, if you will, and, and the market lens. Yes, we've gone right to a recession playbook. In, in my humble estimation, and you, you know, I'm not an economist, I think it's premature uh through, through the lens of the markets themselves, it's premature.To take out that recession playbook just 3 months into the year. It feels likewe've,

it feels like the year's almost over, Richard. It's like we've seen so many different news cycles drive this market and also corporate fundamentals too, corporate, uh, fundamental stories. But you know, as you, as you zoom out a bit, could this year just be the year of the trading range market where some days we'll we'll rally back, we're going to get hit on various policy headlines, but when we zoom out and take a picture of 2025, it just might look like this.

Yeah, I think that's, I think that's fair. Now, keep in mind, we are coming off of a period, you know, maybe 6 months or so of sideways. And when you think about some of those bigger stocks, you know, I know you mentioned Nvidia in, in the lead and then obviously for great reason, especially with, with the big event this week. This is a stock that is basically at the same level that it was at 67, almost 8 months ago. So, maybe to answer your question a little more succinctly, even though the horse sort of left the barn on succinct, I, I actually think it's unlikely that weStay in this trading range because we've been in one for some time from a market standpoint. And then when you do get this sort of, you know, volatility thrust and you get a whoosh down in the market, a nice 10% correction, it cleanses sentiment and positioning. I'm not saying no one owns any stocks, but I'm saying people own a lot less stocks than they did a month ago. So when you wash out sentiment and position, and keep in mind real fear, almost palpable fear has worked its way into the market. I think you're setting the stage for a real trending type move. Now.perhaps to your point, maybe valuations, maybe fears of a recession, tariffs, what have you might limit that upside, but I don't think we stay sideways or stagnant for much longer here. You know

what bothers me in our my Sunday morning brief newsletter on Ya finds anybody can go check it out. It's for free. I made a list of 13 things that are bothering me about the market. It went up on Sunday. It's still on there on the top of our homepage, but one of them was the market is still responding negatively to tariff fears. Does that bother you?

Yeah, there's a few things, you know, it's funny. I was going to write a report today, uh, it said 10 things that make me bullish. But, but again,guys, we're,

we're not, we're like of the same mind. We're just, I mean, I'm just a little, I don't know, I'm just a little bearish, I think, even though I'm not

taking stocks. I think, no, no, I think that's, that's very fair. And obviously, the list of concerns is, is not short either, as it is want to do after a 10% pullback.Um, but, but I think getting back to the, to the spirit of the, of the question, you know, I still see a lot to like out there in terms of this market. Um, I get it, we have a, a, a somewhat unconventional approach to President Trump's second term here. We have an expensive market. You have a market that went up 70% off the bottom. So you, you took some legitimate concerns into uh maybe.a tough time in the presidential cycle in terms of coming back in here and really wanting to make an imprint, if you will. I don't know how that plays out from, from a market standpoint per se, but again, I think that the positives and the negatives, I still think lean more towards the positive side as we speak today. What concerns me more is less of the reaction to the tariffs, but, but more so the reaction to interest rates. You know, we've seen interest rates fall, and I think maybe this is the more selling point, Brian. I apologize for being so long.But you've come off from 480 and changed down to 420 on the 10 year. I put forth that that would be a bullish tailwind typically markets like lower interest rates, but this time around, people said, no, it's for the wrong reasons. Interest rates have come down because of your tariffs. So I sort of took the long way home in getting back around to the tariffs. But my point is we need to get back to an environment, Brian, where lower interest rates are viewed through their traditional lens, which is, hey, that's a tailwind for the consumer, not, oh, interest rates are coming down becauseFears of tariffs are driving people into these safe haven assets like gold at 3000, like your tenure bringing those interest rates down to 4.25%. So that's the part to me, Brian, that's more concerning. I get it. People see tariffs, they want to sell stocks. That's fine. What's not fine is selling stocks when you see lower interest rates, lower crude oil, and a weaker dollar, all three traditional tailwinds for riskassets.

Before we get to a break, Rich, you made a lot of important points there. One of them being you still view the market as expensive.

I think traditionally people say people, history tells us that above 20 times, again, it doesn't mean the market has to go straight down. It just means historically you're at that higher end of that valuation framework. Now again, we've been at that higher end of the valuation framework for 70% on the S&P. So that's why I focus on price rather than price to earnings ratios, not.To say they're not important. Obviously the two work together. Technical things happen for fundamental reasons, but I think for most market watchers that use spreadsheets and more traditional valuation metrics, I would say people still think the market's expensive. Now again, when you talk about declines off the top, even big name high quality stocks like your JPMorgans of the world, your banking sector, talk about 20%.25% decline. So you know, PEs are price and earnings for now prices have come down and we haven't seen the impact of tariffs on earnings just yet. So it's a case where price has gotten perhaps ahead of the E, and I think that's creating the opportunity here. All

right, hang with us, Rich. We're going to go off for a quick break. We'll be right back on opening bid.All right, welcome back, uh, to Opening bid. Hanging here with our Rich Ross, head of technical analysis at Evercore ISI, one of my favorite technicians, uh, on the street. So I just wanted to save some individual stocks to the second half of this because, um, you know, you gotta get some buildup to it, Rich, you know, you know, people love their individual stock analysis. Um, Mach 7. Now we've seen a rotation out of Mach 7.Into health care and other safe havens. I was looking at, uh, even this morning, uh, Coca-Cola, PepsiCo, um, those names doing well. When does that strength come back to the mag 7? Does, does, does Nvidia need to come out here this week and say the AI AI market opportunity is strong and that reignites the space or we need to see something else.

Yeah, no, I think you're right in going down that road. Look, semiconductors are the underlying commodity of the tech sector. The tech sector is the underlying commodity of the S&P, given it's hat, and clearly those Mag 7 have been used as that source of funds to fuel not just defensive bets within the US market, but really more bullish bets on a global scale as we've seen markets in China and Europe really kind of take the baton for the time being in terms of their relative outperformance. Two moves that I think are bullish, but to bring it.to the Mach 7, keep it here in the US. We do need to get those, those lead dogs sort of back in, in the fight here. Now, as much as we have all, I shouldn't say we've all wanted it, but a lot of people have wanted breadth to expand. You feel like the market's healthier when there are more participants. But the issue is when you're selling the big stocks that have all the market cap to expand that breadth, that digestion phase on an index level doesn't go down so easy as we see. So I think it is a very key week here. You've had some pretty sharp.Drawdowns, but take a stock like Nvidia, for example, and I'll just focus here. I'm not going to go through all of the seven as we speak, but this is a stock that went up 1,300% at 2 years old.

Totally normal, right?Totally normal.

So stocks that go up 1,300% are allowed to move sideways for eight months. They'reallowed,

are

they,

are they, are they?

Ithink so. I think so. I mean, to me that's, I guess you call it healthy consolidation. It's not healthy if you own it and it goes down 25%. But the point is this is what stocks tend to do broadly speaking, not not to preach and tell you.This is what stocks too. They go up 1,300%. They move sideways for eight months, and then they decide, all right, I've eased that overall condition. Is the next move up or is it down? I think the next move is up in Nvidia, and if the next move is up in Nvidia, the next move is up in the market, not to oversimplify a highly complex business likeours. No, but

you make, you make a key important point for and look, it

used to be

Apple. We used to be the most important stock in the market. It is Nvidia. It is the bottom line of this, Rich, where this market sell-off can't.We can't get back to going up to the right consistently if Nvidia is not going to go work, uh, work higher, right?

I think that's very fair to say, and I, and you know, in my career, I'm always reticent to, to suggest that it's one indicator or one stock that, that the entire sort of future of the market hinges on. But, but the near-term future of this market, uh, you know, for lack of a better term, is, is dictated by what's going on at Nvidia and really in semiconductors and technology writ large just by virtue.Of their size by virtue of their import because as we know, what's been driving that key AI theme that's been driving Nvidia and Broadcom, it's really had its tentacles in so many different sectors across power generation, what have you. So there are a lot of stocks that have been touched with the brush of AI and Nvidia. So, as we know, very important for that stock to work and, and again, it's been through kind of a tough patch here in, in the recent quarter, but you've thrown everything you can at it and the stocks still standing.You're back at 120, you know, as itshould.

This is a company that might, it may grow its data center revenue over 20% the next two years. I mean, it has the fundamentals, but I know we're not going to get into all the Mach 7, but I, I think what we're talking about here invidia, we can apply, I think, similar thinking to Tesla. Now you mentioned earlier on, I mean Tesla's just fallen off the map, but its fundamentals suggest that the stock should fall off its map. So my question to you is, is it, is Tesla really oversold here as we approach a 50% decline?

Yeah, look, I think I'll focus just on the, on the price action, on the chart itself. You know, we have a fantastic auto analyst, and Chris McNally, he's really top of the tables there. Um, so I'll leave the Tesla talk to him. But in terms of the price action, as I mentioned earlier, 55% decline off the top. You lost 75% in the entirety of the bear market. I'm looking at my screen today with the 34 RSI. I think that RSI dipped down into the low 20s. Keep in mind for those keeping score.30 traditionally viewed as oversold doesn't mean we buy everything the minute it dips below 30. But when you take a big marquee stock like Tesla, I was going to say a trillion dollars dollar company, but $800 million at this point after the correction. You know, you take a $1 trillion dollar company and you give it a 22, 23 RSI, you take 55% out of the market cap. That's extreme oversold conditions. So you're factoring in, uh, uh, a lot of, you know, I don't know what.The right word is in terms of fundamentals, but I think I would just say the risk reward is compelling when you have that technical backdrop in terms of price and momentum at extreme levels. And, and keep in mind, you know, Elon Musk has become a lightning rod for, I don't want to say controversy, but people have different opinions obviously to leave the politics at home, but it's sort of been a way for people to express kind of bets against what the president and Elon Musk might be doing inDC again, I'm not suggesting I'm doing that. I'm just suggesting people have done that. They're they're marking up the cars and they're protesting, etc. It's weighing on the stock, but thus far the punishment doesn't fit the crime in my humble opinion, down 55% in a marquee name with a with a 22, 23 RSI. That's a buy for me. I did like it higher admittedly, as we know, but, but look, every day is a new day and I like it right here. All right,

let's let's getThe Mach 7, you know what has surprised me, maybe it should not surprise me it does nonetheless. Oh, outperformance in European assets. How long, Rich, you and I have been doing this a while. I mean Europe is just a slow growth region and suddenly, you know, concerns about US growth now is everyone excited about European growth, which is still not going to exactly be great and those stocks will come off the table? I mean, how many, how much, I guess more room to the upside for European stocks here?

It's interesting. Look, I think it's in a very powerful trending phase right now. I like what you see in Europe in particular. You see with the European banks, a 12-year base breakout. You have the DAX up 15, 16% year to date outperforming the US over the trailing 12 month period here pretty dramatically. So I think there's a lot of momentum and that momentum is driven by a fundamental story in terms of what's going on on the fiscal side in Germany. So I'm with you.A little bit skeptical in terms of the relative outperformance going forward from here. I think we've already come through a 12 month period of fairly dramatic or outsized outperformance in Europe, which we haven't seen over the past 18 to 20 years. So I think that run of relative outperformance might be waning in terms of Europe versus the US, but, but be very clear here. Strength in Europe, strength in China to me is just bullish more broadly. A lot of people are saying, you know, let's sell the US and go buy your.Up in China, you know, it's an indictment of the US, and I look at it the other way. I think Europe and China working as a recognition that the dollar has come off the boil. Interest rates have eased, inflation has eased, and the rest of the world is far more sensitive to those forces as we've seen in recent years. So again, strengthen those markets makes me feel more bullish about the US, but in terms of Europe itself, maybe I'll tie it all together and say this, Brian, I would much rather buy oversold, unloved, under-owned US equities at the tail.of a 10% correction, then chase overbought, over-owned European equities at the tail end of a 12 month run of relative outperformance.

Now, fair point, point well taken. I want to get back to the US here while we have a couple of extra minutes with you here. One of the other things I didn't like about the market and I wrote about, Rich, was that how can you get excited about the market into a Fed meeting where theoretically, I can't see Fed Chief Jerome Powell not.In his own way, whether it's a blink, a nod, a word suggesting that he's concerned about inflation because of these tariffs, and that might dial back, you know, the expectations for a rate cut, which I think the street is looking for still two rate cuts this year. I mean, if he comes out and says he is concerned about tariffs in any way, in his own special pal way, I mean, is the market going to get hit?

Yeah, I think this meeting, you know, the Fed meetings always take on a heightened level of import and in particular with what's going on with the markets today and all of the cross currents, this, this one in particular, and really the next series of meetings as we work into the, I think the market has the first cut in May. So you know, as we work into that meeting as well, this whole series is going to be important. But Brian, I'm sure you feel the same way. It seems like every week these days we wake up and it's the next big thing, whether it's a CPI.Printer or a jobs report or an Nvidia meeting. So again, I know the Fed would sort of trump all of those individual data points, but I think in terms of the sort of vulnerability of the market itself to any one Fed meeting, you know, we're pricing that in on an almost daily basis. So I don't think we're building up to this Super Bowl here of something that Jay Powell could say that's really going to tip the scales. We're still in it. We're kind of in crisis mode as it were. I don't expect.Jay Powell and again, I'm not our Fed watcher either. I leave that to the expert Christian Guha, best in the business, but I would just say I don't think he's going to fan the flames of this sell-off, nor do I think he's going to throw us a life ring to help support risk assets, you know, they've been very measured in their tone, sort of telegraphing where, where the puck is going, so I would expect more of the same. Um, and right now in this market episode, I don't think Jay Powell is, is the straw that stirs the drink.He is more broadly as it pertains to markets, let's be fair, but right now it seems like we've got bigger things going on and, and we'll wait to see what goes on in May in terms of the real FedSuper Bowl.

No, that's a good point. Well, look, Rich, we have to do this, you know, I'm in business, news media. We got to play up these events. That's what we do. We got to keep these lights on. Um, in the last minute and a half or so, we always like to get hot takes from our guests. So my simple hot take, or my question to you is this, um, why is technical analysis?So amazing and why are you so passionate about it?

Yeah, look, I, I think at the end of the day, this entire exercise that we do here trying to predict the future for a living is an exercise in it's kind of behavioral psychology. And then I'm a big believer that technical things happen for fundamental reasons. I work at a fundamental research firm, the finest on Wall Street. But we also know that, that human emotion plays a big part in what goes on here, greed, fear, the need to pay the bill.You know, every decision is just not based on a spreadsheet, and that's why markets are neither perfectly random nor perfectly predictable. And all the technicals do is, is give you, um, any graphical or, or, you know, a visual representation of that human psychology. And, you know, markets change over time, but, but the human condition doesn't. At the end of the day, markets are driven by greed, fear, supply.Demand support and resistance, and, and obviously the fundamentals are behind the scenes driving all of that action. So, you know, in moments like this, use your levels, use your technical analysis, not just as a crystal ball, but as a framework for trying to manage your risk and think about where things can go when we're wrong, because we always think we're right, but we also know we're often wrong

when.And you're always right. Come on. Everybody else is everybody else is wrong, Rich, come on,

man. Exactly. Well,

this, uh, this episode reminds me that I need to have you on more than just uh reaching out to you when the market is going to hell in a handbasket or or getting blown up. Rich Ross, head of technical analysis at Evercore ISI, uh, good to see you, uh, and we'll talk to you soon. Appreciate the, uh, analysis.

Thank you forhaving me. All right.

All right, do stick around. Uh, we're gonna have many more opening bid episodes in the weeks and months to come, but in the meantime, continue to keep those, uh, likes coming on all the podcast platforms and the thumbs up on YouTube. Hit me with those reviews, comments, questions. I will answer all of them. I appreciate the perspective, love and help. We'll talk to you soon.