J.D. DURKIN: Good morning, Action Alerts Plus subscribers. I am TheStreet's JD Durkin talking with Bob Lang from the floor of the New York Stock Exchange. Bob, it's great to have you here.

So this is officially our first time chatting, so I do want to begin first by kicking it off by picking your brain a bit. What is the key, from your understanding, of this market at this time from your perspective? What's most important?

BOB LANG: Well, it's also very important, JD, to understand that we're still in a bear market. And these bear market rallies can tend to be real spectacular, big, huge events that tend to push people's minds into thinking that the bear market is over. But we don't tell the markets what to do.

So by that token, we have to look back, historically, at least this year in 2022, and see all the many times that the markets have given up big, huge rallies that we've had within days, if not weeks, of those big, giant rallies. And in fact, if you look back since April, JD, probably about 12 different occasions a big, huge rally has been given back either the next day or within two days after that. So people get excited about these rallies, and listen, I know people want to make money on the upside. I get it, but you have to keep it in context here, the fact that we are still in a bear market and we are going to be in one for quite some time.

J.D. DURKIN: So from where you sit, it sounds as if you're pretty confident to say it might be a bear market rally we've had the last couple of days and it likely won't be the last one that we have?

BOB LANG: That's right. And I remember back in the 2000, 2001, 2002 time frame, JD, that was a huge bear market, only because of its duration and the damage that was inflicted on the NASDAQ. Which the NASDAQ at that point was down from March 2000-2002 72%, from 5,000 all the way down to about 1,000. So I remember back at that time, JD, that there were lots of fits and starts with the markets.

We were going up and then all of a sudden it just became an opportunity for long holders of stocks to sell. Every single rally was a sell the rips type of environment. And people get exhausted and tired of all that stuff. They want it to end. And it won't be until everybody completely gets exhausted and stops hoping.

I mean, all these words and terms that have been coming around. We heard in the summertime, JD, about peak inflation. We heard, and more recently, the other P word, a pivot by the Fed. Once we get people stopping to think about these things and how they're going to approach the markets, that's when we're going to get closer to a bottom than we are now.

J.D. DURKIN: Yeah, absolutely. I do want to move over to the technical side of things here, Bob, while I have you. Obviously, we follow the S&P very closely in recent weeks, hitting the 3,600 level. It currently sits a hair above 37, but what S&P resistance level should members be eyeing now, you think?

BOB LANG: So above here, JD, we're looking at about 3,800, which is a pretty sharp, stark resistance level. That was a level that was penetrated more recently to the downside with some heavy volume. So there's going to be some selling up there.

3,850 and then all the way up to 3,900, we think that if the market does rally even further, that's probably about as far as it's going to go. Now to the downside, one level I've been thinking about is this 3,700 level. And certainly, if we break that on the lows today, it's going to be very bad for the bulls and we're going to be looking probably quite a bit more downside to come before the end of October.

J.D. DURKIN: All right, so you said 38 and I just wanted to clarify there. So 38 and what's another number you want people to stay focused on?

BOB LANG: 3,800, then 3,850 JD, and then 3,900 probably would be the end of it on the S&P.

J.D. DURKIN: OK. We'll continue to follow that, of course, in today's trading session, for the rest of the week as well. Bob, you've also been keeping an eye on volatility.

The VIX, the so-called fear index, if you will, closing above 30% for 15 of the last 17 trading days. My goodness. Why is this so important to watch?

BOB LANG: Well, it's important to watch because it's remained elevated because a lot of players have been needing to hold protection, right? And they hold protection by adding puts. And the fear gauge, which is the volatility index, which is what I follow, it kind of measures how people are positioning themselves with options on the S&P 500 puts and calls. So the higher the volatility level is or goes, the more protection people are buying, the more chances that they're buying puts.

And why would they be buying puts? Because they're expecting that implied volatility, when it's high, they're expecting wide ranges to happen in the market. So it's not just down, JD, it's also up as well. So we had some large ranges, especially last Thursday, it was amazing.

We were up 40, then we were down 80, then we're at 109 on the S&P 500. Just one of those garden variety routine days that you have, right? But frankly, with the elevated volatility here, it really makes me a little bit cautious, a little bit worried, that something out there is hasn't sprung upon us in terms of some surprise here, because there are some people are still holding a lot of protection right now with the volatility level being above 30%.

J.D. DURKIN: I wonder for people that may closely follow the VIX, is there an oh no level that you would want them to keep an eye for?

BOB LANG: Yeah. So I think there's also been a lot of talk about wanting to end the bear market, and how often that ends is when you get to some sort of capitulation moment. And a lot of people attach a large move in the VIX, maybe up to 40 or 50 in the volatility index, as being some sort of capitulation saying that, just get me out. I just want to sell everything. I don't care anymore. I'm tired of it.

That's sort of the capitulation that a lot of people are looking for or expecting. I don't think that can really bet on expecting that sort of thing happening without some sort of event causing that rise in volatility. But if the VIX breaks, JD, 30 and comes down to 29, 28, and starts rolling down, you'll see a lot of people starting to sell that volatility. And on a flip side, that is a bullish sign for markets and we could see markets turn and move right back up, maybe towards 4,000 or a little bit higher.

J.D. DURKIN: Yeah, let's talk the bond side of things here. Amid the rush of the earnings season, we do have the 10-year Treasury yield, that continues to tick higher, Bob, as you certainly know. Should we expect to hear more about companies hunkering down in the weeks ahead?

BOB LANG: Yeah, that's kind of the message that we've had these last four or five days, excluding the banks and the defense companies. Lockheed Martin, of course, we talked about a little bit yesterday as being one of the strong names and with good earnings and good guidance. But I think this is something that really we have to be paying attention to, listening to some of these companies and saying, they may be talking about a good quarter that they had in the third quarter, but they're worried about 2023. Especially with higher inflation and a slowing economy, we're possibly going to see some slowdowns in the next few months with jobs and job creation.

And again, this is something that companies are going to need to do. They're going to hold onto their cash. They're going to do fewer transactions, fewer mergers and so forth, and just try and get what they can out of the economy while it's still working.

J.D. DURKIN: For sure. OK, let's stick with earnings. We saw results from Elevance Health that reported strong sales, also a boosted outlook. Yes or no, are you feeling bullish on the stock here?

BOB LANG: I really like this one, JD. This is a newer name that we put in the portfolio last month. Elevance is the former Anthem insurance HMO company, like UnitedHealth, Humana, Cigna, those names. But we like the numbers and they actually guided higher for 2023.

So the revenues were very, very strong. The chart is actually looking a lot better now. I had a really good day on Monday and we're looking for it to follow through and we can get up to new, old highs probably in the next couple of months.

And again, the thing that I described about the market, JD, is this, is that the market can continue to flop around, possibly even go lower. We've picked some stocks that can go against the grain, go against the market. So we think that this stock can do well regardless of what the rest of the stock market is doing.

J.D. DURKIN: You also have a price target on Lockheed Martin specifically. Do you see Lockheed becoming a bit of a safe haven in the portfolio overall?

BOB LANG: Great name, JD. I'll tell you what, this stock is following through today. The markets were a little bit volatile, now we're up a little bit today, currently right now.

But the markets were pretty volatile this morning, but after a strong day yesterday, you would have expected a little bit of selling off of Lockheed Martin. It's up another 2, 2 and 1/2 today. So following through on a strong day like yesterday, that's a bullish quality of a name that we really like.

J.D. DURKIN: Finally, I do want to end today's session with something a little bit different. Bob, as you know, today is unthinkably 35 years since Black Monday, the crash here in 1987. You've been in this business for a minute and I do want to tap into that knowledge that you've had over all these years. What has changed, do you think, since that day and what have you learned?

BOB LANG: Well I'll go back to where I was back in 1987 when the crash occurred. I was just getting ready to go to getting my life started in San Diego. I went to San Diego State. I was starting school over there and the crash hit the first semester I was there in 1987.

So I learned a lot back then. I did have some stocks that got crushed on that day, but they ended up coming back. JD, to answer your question about some of the things that have changed, it's the amount of participation that's come into the markets these days versus back when 35 years ago. And the amount of information and the speed of which the information gets into people's hands and their heads, it's amazing.

Because back then, you had to really rely on a broker, you had to call him up and you couldn't do anything electronically. And it could be days or weeks before you got a hold of information that was really important for you to make decisions or choices. But today, you can get all this information that you want instantaneously.

And I think people use protection. I think one of the reasons why we had that big breakdown in 1987 was a misunderstanding of how portfolio insurance works. I think these days, people really understand and know the importance of that and how it works. And I think it's the knowledge level is certainly increased and people getting a lot smarter about obtaining information.

J.D. DURKIN: Absolutely. The Dow shedding nearly 23% on that historic Monday. And I'm very grateful to you for the perspective on this and all of the stories that we covered here during our interview today, Bob. Thanks a lot.

And as a reminder, please keep sending your questions. Yes, you watching this at home, to AAPclub@thestreet.com. Thanks a lot for taking the time to join us. We'll do this again soon, Bob. Thanks.

BOB LANG: Thanks, JD.