FSC Masters Working Group: Special Guest Bill Sarubbi (FSC Board Member)

Foundation for the Study of Cycles

Masters Working Group Special Guest Bill Sarubbi (FSC Board Member)

FSC Board Member Bill Sarubbi was the special guest presenter at the July 16, 2024, Masters Working Group (MWG) interactive session. This summary of his presentation is a sample of the content and high level of discussions happening at the interactive sessions twice a month. MWG is FSC's most exclusive Membership tier and is made up of a small group (less than 50) elite investors, traders, and cycles practitioners. We are currently accepting applications for ten new members of the MWG. If you’re interested in finding out more, book a call with D.R. Barton, FSC's Market Strategy Director [LINK].

Introduction

• Bill Sarubbi has extensive experience in the markets since 1966. A trained therapist, he worked as a buy- and sell-side analyst and has been a Member of the FSC for 42 years.
• Current Market View: Sarubbi believes there is too much money in the world, evidenced by high-value sales in collectibles (i.e., Sex Pistols single selling for £24,000). This is causing a bull market for almost all assets

Market Overview

• General Outlook: Correction expected in tech and communication services sectors
  • Broader Market: Overall bull into 2025
• Trends: Positive outlook for next year due to historical patterns in years ending in five and post-election years
• Short-Term Sentiment: Current optimism is too high, indicating a potential short-term correction

Indicators and Sentiment

• Put/Call Ratio: High open interest put/call ratio suggests excessive bullishness
• Investors Intelligence Weekly Sentiment Survey: Bullish sentiment above 63%, historically leading to below-average returns.

Market Rotation

• Sector Rotation: Money flowing out of tech and communication services into lagging sectors (good thing that supports the bull market)
• Breadth Indicators: Broad market indices like the NYSE composite and Russell 2000 showing strength despite declines in tech-heavy indices

Technical Analysis

• Key Indices: S&P 500 and Nasdaq expected to head higher after recent pullback has cleared
• Cycle Patterns:
  • Emphasis on long-term cycles, such as the decennial pattern, supporting continued market strength
  • 1-4-10 cycle shows bottoming of this pullback (chart)

• • Better seen in the bottom of graph 1-4-10 Year Cycle 2024 (blue line), which is a composite of the 1-4-10 year cycles (arrow shows the current decline, which typically lasts into the end of July):

Suggested Trades and Positions

• Current Holdings:
  • Long Positions: Apple, Qualcomm, Tesla, Netflix
  • New Additions: Ryder, Google, Goldman Sachs, Oracle, HPQ
  • Short Positions: Autodesk, Walgreens Boots, Ford, Uber
• Trade Ideas:
  • J.B. Hunt Transportation Services: Positive earnings surprise expected (short-term only)
  • Grindr: Strong performance and favorable cycle indicators
  • Costco: Reducing position due to expected lag in performance
  • Corning (GLW): Anticipated underperformance

Bonds and Notes

• Ten-Year Notes: Favorable seasonal period from June to August, holding a double long position
• Gold: Expected to stay in a range, with a positive bias until mid-August
• Oil: Buying double long oil ETFs based on projected turning points

Gold Analysis

• Technical Formation: Gold broke out of a rectangle formation, projected to rise
• Seasonality: Positive outlook from July to October
• Cycles: Weekly cycle suggesting a buy signal soon

Additional Insights

• Market Resilience: Belief in the market's ability to stay resilient due to high liquidity
• Historical Comparisons: Past market cycles and how they inform current strategies
• Sentiment: Watching sentiment indicators closely for market timing

Q&A

• Dollar and Gold Relationship: Generally inverse, but both can rise together in certain periods
• Earnings Surprise Method: Leveraging earnings season volatility for trades, with a success rate of 65-70%
• Long-Term Cycles: Importance and influence of long-term cycles on market trends