IBD MeetUp

Santa Claus Rally or a

Lump of Coal?
December 13, 2022

Roy Mattox Wesley Mattox, CFA, CMT

Chief Market Strategist Chief Technical Strategist
Portfolio Manager Portfolio Manager
(704) 619-7445 (704) 877-1762
[email protected] [email protected]
Follow @RoyLMattox Follow @WesleyJMattox
 Investors Business Daily
Charlotte Meetup Group

What We’re About

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We aim to educate and connect investors in a vibrant and active community in Charlotte. We focus on the combination of technical and fundamental analysis
featured in the book, "How to Make Money in Stocks" by William O'Neil. With IBD's educational support, members hone their investor skills and work to master
the intricacies of the stock market. We cover CANSLIM concepts exclusively in the monthly meetings and utilize educational material designed both for novice
and experienced investors. Members are encouraged to participate and discuss the current State of the Market as well as provide input on Leading Stocks in
Leading Groups in the Market.

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Disclaimers
The content in this presentation or in Discussions on the Meetup website should not be considered as a recommendation to buy or sell a security. All information is intended for educational
purposes only and in no way should be considered investment advice. Integrated Financial Strategies, LLC does not endorse, recommend, advise, or in any way construe the discussions in the
Charlotte IBD Meetup group as investment advice to be relied on. Roy Mattox provides information solely for educational purposes based on his experiences, opinions, and actual trading history
over the past 30 years. As such, he is not compensated by anyone for hosting the discussion. These discussions are for educational purposes between members of the Meetup Group. Mr.
Mattox is strictly acting as a host and facilitator to provide meaningful discussions about individual stocks. Members of the group who provide input on individual equities is done, likewise, to
provide opinions of an educational nature and are not to be relied on as investment advice. All investments, especially stocks are speculative in nature and involves substantial risk of loss. I
encourage investors to invest carefully. I also encourage investors to get personal advice from their professional investment advisor and to make independent investigations before acting on
information that we may discuss. Much of our information is derived directly from information published by Investors Business Daily and which I believe is reliable, but is without independent
verification. Therefore, I cannot assure you that the information is accurate or complete. I do not in any way warrant or guarantee the success of any action you take from my comments. Past
performance is not necessarily indicative of future results. All investments carry risk and all investment decisions of an individual remain the responsibility of that individual. There is no
guarantee that systems, indicators, or signals will result in profits or that they will not result in losses. All investors are advised to fully understand all risks associated with any kind of investing
they choose to do. Hypothetical or simulated performance is not indicative of future results. Unless specifically noted otherwise, all return examples provided in the literature and publications are
based on hypothetical or simulated investing. I make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because hypothetical or
simulated performance is not necessarily indicative of future results.

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Current Quarterly Earnings growth of at least 25% for the past 2 quarters. Also watch for quarterly sales and profit margins that are
C growing.

A Annual Earnings growth of at least 25% for each of the past 3-5 years. Also watch for return on equity (ROE) of at least 17%.

N New — Look for companies with new products, new services, new conditions in the industry, new management, or new price highs.

S Supply and Demand — Look for big volume increases on days of upside trading.

L Leader or Laggard — Look for the top stocks, both fundamentally and technically, in the very best performing sectors and industry groups.

I Institutional Sponsorship — Watch what pension funds, mutual funds, banks and other institutions are buying.

M Market Direction — Three out of four stocks follow the market, therefore make sure the market is in a confirmed uptrend.

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Process Overview

Technical Fundamental Macroeconomic

Analysis Analysis Analysis

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Technical Analysis
Price Breadth Sentiment Ratio Analysis
• MACD • % of Stocks > 50-day MA • NAAIM Exposure Index • Growth vs. Value (IVW:IVE)

• Price Phase • % of Stocks > 200-day MA • VIX • Small Cap vs. Large Cap
(IWM:SPY)
• RSI • Advance-Decline Line • CBOE Put-Call Ratio
• Stocks vs. Treasuries
• Stochastics • New Highs / New Lows • ICE BofA U.S. High-Yield (SPY:TLT and RSP:TLT)
Index Option Adjusted Spread
• SK-SD • Bullish Percentage • Treasuries vs. Junk Bonds
• CFTC Non-Commercial Net- (TLT:JNK)
• Point & Figure Long Positioning
• ROC • Implied & Realized Volatility
• Trend

⮚ Short: 10-day EMA > 21-

day EM

⮚ Intermediate – 21-day EMA

> 50-day MA

⮚ Long – Above 30-week MA

Technical Analysis Fundamental Analysis Macroeconomic Analysis

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Fundamental Analysis
Investors Business Daily Current Quarterly Earnings growth of at least 25% for the past 2 quarters. Also watch for quarterly
• CANSLIM
C sales and profit margins that are growing.

• MarketSmith Annual Earnings growth of at least 25% for each of the past 3-5 years. Also watch for return on equity
• Composite Rating
A (ROE) of at least 17%.

• EPS Rank New — Look for companies with new products, new services, new conditions in the industry, new
N management, or new price highs.
• RS Rank

• Sales, Margins, ROE

S Supply and Demand — Look for big volume increases on days of upside trading.
• Investors.com
Leader or Laggard — Look for the top stocks, both fundamentally and technically, in the very best
• 3rd Party Research L performing sectors and industry groups.

Institutional Sponsorship — Watch what pension funds, mutual funds, banks and other institutions are
I buying.

Market Direction — Three out of four stocks follow the market, therefore make sure the market is in a
M confirmed uptrend.

Technical Analysis Fundamental Analysis Macroeconomic Analysis

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Macroeconomic Analysis
Hedgeye Research – Growth, Inflation, Policy Model

Quad 1 Quad 2
Growth Accelerating as Inflation Decelerates Growth Accelerating as Inflation Accelerates
Monetary Policy Bias: Neutral Monetary Policy Bias: Hawkish
Market Narrative: Goldilocks Market Narrative: Reflation

Quad 4 Quad 3
Growth Slowing as Inflation Decelerates Growth Slowing as Inflation Accelerates
Monetary Policy Bias: Dovish Monetary Policy Bias: Neutral
Market Narrative: Deflation Market Narrative: Stagnation/Stagflation

Technical Analysis Fundamental Analysis Macroeconomic Analysis

Source: Hedgeye Research; https://app.hedgeye.com/ 8

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Quad 1: Goldilocks Quad 2: Reflation Quad 3: Stagflation Quad 4: Deflation
Best Asset Classes: Best Asset Classes: Best Asset Classes: Best Asset Classes:
Equities, Credit, Commodities, FX Commodities, Equities, Credit, FX Gold, Commodities, Fixed Income Fixed Income, Gold, USD
Worst Asset Classes: Worst Asset Classes: Worst Asset Classes: Worst Asset Classes:
Fixed Income, USD Fixed Income, USD Credit Commodities, Equities, Credit, FX
Best Equity Sectors: Best Equity Sectors: Best Equity Sectors: Best Equity Sectors:
Tech, Consumer Discretionary, Materials, Tech, Consumer Discretionary, Utilities, Tech, Energy, Industrials, Consumer Staples, Utilities, REITs, Health
Industrials, Telecom Industrials, Energy, Financials Consumer Discretionary Care, Telecom
Worst Equity Sectors: Worst Equity Sectors: Worst Equity Sectors: Worst Equity Sectors:
Utilities, REITs, Consumer Staples, Telecom, Utilities, REITs, Consumer Financials, REITs, Materials, Telecom Energy, Tech, Industrials, Financials,
Financials, Energy Staples, Healthcare Materials
Consumer Staples
Best Equity Style Factors: Best Equity Style Factors: Best Equity Style Factors:
Best Equity Style Factors:
High Beta, Momentum, Leverage, Secular Secular Growth, High Beta, Momentum, Low Beta, Dividend Yield, Quality,
Growth, Mid Caps Secular Growth, Momentum, Mid Caps,
Cyclical Growth, Small Caps Defensives, Value
Low Beta, Quality
Worst Equity Style Factors: Worst Equity Style Factors: Worst Equity Style Factors:
Worst Equity Style Factors:
Low Beta, Defensives, Value, Dividend Low Beta, Value, Dividend Yield, High Beta, Momentum, Cyclicals, Secular
Yield, Small Caps Small Caps, Dividend Yield, Value,
Defensives, Size Growth, Leverage
Defensives, Size
Best Fixed Income Sectors: Best Fixed Income Sectors: Best Fixed Income Sectors:
Best Fixed Income Sectors:
BDCs, Convertibles, HY Credit, EM $ Convertibles, BDCs, Preferreds, Long Duration Treasuries, Medium
Debt, Leveraged Loans Munis, EM $ Debt, Long Duration
Leveraged Loans, HY Credit Duration Treasuries, IG Credit, Munis
Treasuries, TIPS, Treasury Belly
Worst Fixed Income Sectors: Worst Fixed Income Sectors: Worst Fixed Income Sectors:
Worst Fixed Income Sectors:
TIPS, Short Duration Treasuries, MBS, Long Bond, Treasury Belly, Munis, IG Preferreds, EM Local Currency, BDCs,
Treasury Belly, Long Bond BDCs, Preferreds, Convertibles,
Credit Leveraged Loans, TIPS
Leveraged Loans, HY Credit

Technical Analysis Fundamental Analysis Macroeconomic Analysis

Source: Hedgeye Research; https://app.hedgeye.com/ 9

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Typical Bear Market Levels

Source: Ciovacco Capital Management 10

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Past Earnings Recessions

Peak Month Trough Month Months of Contraction Quarters of EPS Decline EPS % Change
Aug-57 Apr-58 8 4 (17.0%)
Apr-60 Feb-61 10 7 (11.7%)
Dec-69 Nov-70 11 5 (12.9%)
Nov-73 Mar-75 16 4 (14.8%)
Jan-80 Jul-80 6 4 (4.6%)
Jul-81 Nov-82 16 4 (19.1%)
Jul-90 Mar-91 8 10 (36.7%)
Mar-01 Nov-01 8 5 (54.0%)
Dec-07 Jun-09 18 7 (91.9%)
Feb-20 Apr-20 2 4 (32.5%)

Average EPS Recession Lasts 10.3 Months

Average EPS Decline of 29.5%
Averages EPS Declines Excluding 2000/2008 of 18.7%

Source: Factset, NBER, D.A. Davidson 11

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2008 VIX 2022 VIX

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Volatility Needs to Come Down for Sustainable Uptrend

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 500

50
5,000

10
15
20

0
5
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
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1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
S&P 500

1996
1997
Fed Funds Rate

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
S&P 500 and Fed “Pivots”

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
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S&P 500 (1999-2002)

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S&P 500 (2006-2009)

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S&P 500 (Today)

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 0%
2%
8%

(4%)
(2%)
4%
6%
10%
12%
14%

1981
1982
1983
1984
1985
1986
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1987
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1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
CPI y/y % Change

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Source: BLS
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Inflation Forecasts
10.0%

9.0% Headline CPI YoY 8.6%

8.3%
Hedgeye Estimates - Nowcast Model 8.0%
8.0% 7.5%
Hedgeye Estimates - Comparative Base Effects Model
7.0% 6.7%
Bloomberg Consensus Estimates 6.5%
6.1%
6.0%
5.3%
4.9%
5.0% 4.6% 4.6%
4.3%
4.0% 3.7%

3.0%
2.0% 2.1%
1.9%
2.0%
1.2% 1.2%
1.0%
0.4%

0.0%
4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22E 1Q23E 2Q23E 3Q23E

Source: Hedgeye Research 19

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Markets Pricing in 50bp Rate Hike in December

80%

20%

Source: CME Group 20

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Fed Funds Futures Next Year

5.50%

5.07% 5.07%
5.01% 5.02%
5.00% 4.95%
4.82% 4.81%
4.65%
Expected Fed Funds Rate

4.50% 4.44%

4.00%

3.50%

3.00%
December-22 February-23 March-23 May-23 June-23 July-23 September-23 November-23 December-23

Federal Reserve Policy Dates

Source: CME Group 21

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3m and 10yr Treasury Yields

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Yield Curve (10yr – 2yr)

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Long-Term Yield Curve (10yr – 2yr)

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Charlotte Meetup Group QQQ

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Charlotte Meetup Group FFTY

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Charlotte Meetup Group Nasdaq & MACD

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Charlotte Meetup Group Nasdaq & RSI

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Charlotte Meetup Group Nasdaq & MA Crossovers

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Charlotte Meetup Group Nasdaq & 30-Week Moving Average

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Charlotte Meetup Group S&P 500 and % Above 50-Day

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Charlotte Meetup Group S&P 500 and % Above 200-Day

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Charlotte Meetup Group Nasdaq and % Above 50-Day

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Charlotte Meetup Group Nasdaq and % Above 200-Day

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Charlotte Meetup Group S&P 500 & Advance/Decline Line

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Charlotte Meetup Group Nasdaq & Advance/Decline Line

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Charlotte Meetup Group Nasdaq & Net New Highs

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Charlotte Meetup Group Nasdaq & Net New Highs (5 Years)

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Charlotte Meetup Group Nasdaq & Net New Highs (20 Years)

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Charlotte Meetup Group McClellan Oscillator & S&P 500

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Charlotte Meetup Group VIX & S&P 500

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Charlotte Meetup Group VIX & S&P 500 (5 Years)

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Charlotte Meetup Group Nasdaq & Active Manager Exposure

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Charlotte Meetup Group Nasdaq & Bulls vs. Bears

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Charlotte Meetup Group Nasdaq & Net AAII Bull/Bear Sentiment

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Charlotte Meetup Group 5-Day MA Put/Call Ratio

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Charlotte Meetup Group 5-Day MA Equity Put/Call Ratio

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Charlotte Meetup Group High Yield Spreads vs. S&P 500 (Daily)

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Charlotte Meetup Group High Yield Spreads vs. S&P 500 (Weekly)

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Charlotte Meetup Group All-World Index (ex-US)

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Investors Business Daily
Charlotte Meetup Group Bitcoin

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Charlotte Meetup Group Ethereum

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Charlotte Meetup Group Gold (Daily)

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Charlotte Meetup Group U.S. Dollar (Weekly)

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Charlotte Meetup Group WTI Crude

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Charlotte Meetup Group TLT

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Charlotte Meetup Group Barclays High Yield Bond ETF

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Helpful Investor Resources

Buy How to Make Money in Stocks by William J. O’Neil

Investors.com
MarketSmith
For more information or a complimentary consultation, please feel free to contact us directly at (704) 643-5000 or email us at [email protected] or
[email protected]
For more details on how we manage money on a discretionary basis for our clients at Integrated Financial Strategies click here.

Roy Mattox Wesley Mattox, CFA, CMT

Chief Market Strategist, Portfolio Manager Chief Technical Strategist, Portfolio Manager
Email: [email protected] Email: [email protected]
Office: (704) 643-5000 Office: (704) 643-5000
Mobile: (704) 619-7445 Mobile: (704) 877-1762
Twitter: @RoyLMattox Twitter: @WesleyJMattox

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