KATHERINE ROSS: Good morning, members. I'm so excited to be joined by AAP team member Helene Meisler to take a deep dive into the market from the technical perspective. Probably already know Helene from her daily technical analysis on real money. She was at Goldman Sachs first ever Market Technician and is famous for analyzing hundreds of charts by hand. Helene, thank you so much for joining me.
HELENE MEISLER: Thanks for having me, Katherine.
KATHERINE ROSS: And I want to give members a quick reminder that before we get started, that Helene's perspective may not always be the same as Chris's. Now, this is all about giving you additional insight as you follow along with Chris's daily management of the portfolio. You can check your Alerts for Chris's full take on today's headlines. With that being said, Helene, I want to kick off by picking your brain. From Fed Chair Jerome Powell speech, the ongoing debt ceiling debate, it was a busy week for markets and the economy.
When you're looking back at that, however, what was the most consequential to you?
HELENE MEISLER: Well, for me, it was the fact that the breadth of the market had been spectacular starting in late December, early January, right up probably through the end of January. And then right around midweek last week, just around the Fed meeting, REITs started to falter a bit. It started lagging instead of leading, and to me, that was a big change in the market to the negative side.
KATHERINE ROSS: Is there anything that the average investor might be missing, or something that they should be paying a little bit more attention to, in your opinion?
HELENE MEISLER: Well, a few things. One is when the market starts to get more narrow, you should be thinking about doing a lot less buying and maybe even raising some cash. Because when the market gets narrow, it's usually a precursor to a market pullback. And as you can see, I mean, the Russell 2000, the Transports, NASDAQ, they're already down like 4% or 5% in a well. And that's, for a lot of big stocks, it's not so much, but in a lot of the smaller names, that can almost mean a 7% to 10% correction in many of it.
KATHERINE ROSS: Helene, what's the chart behind you? I'm sorry, I'm just so curious.
HELENE MEISLER: That is-- it's Peloton.
KATHERINE ROSS: Oh. We haven't talked about that name in a while.
HELENE MEISLER: I threw it. Well, I didn't throw it away, obviously. I stopped putting the pencil to the paper when the stock fell below $5. And that's actually-- if I stop putting the pencil to the paper because the stock has gone under $5, it's usually a buy signal. And I think Peloton may be about $15 now, so it really was a good time to buy.
KATHERINE ROSS: Look at you go. OK, so over on real money. You did recently write that a choppy market is the best thing that investors can expect. What's making you think that, and shouldn't we be getting like-- I apologize. What's making you think that, and should we be getting ready for something worse?
HELENE MEISLER: Well, it'll be something worse if technology rolls over, because technology controls the indexes. Really, all those big cap names are what moves the indexes. So if technology can stay where it is, then the indexes can remain choppy. But right now, my focus is on the stocks that were really hot in January, not technology so much, and it's the industrials, the materials, energy. Energy has just gone sideways for months.
But the industrials led us in the fourth quarter, and they've stalled out. Materials have stalled out. So those charts and stocks start rolling over. I think that it starts to weigh quite heavily on the market as a whole.
KATHERINE ROSS: When you're trying to get a read on the broader markets, many of our members at least like to look at the S&P resistance levels. Is there a level that you're watching specifically?
HELENE MEISLER: I don't necessarily-- I mean everybody has 4,200. 4,300 was the high in August. Right now, there is some short term support down here. I'm going to call it 4,050, 4,100. If you want really specific, it's right around 4,065 4,070 I think we're probably, just in the next day or two, going to rally off of that, and then I think we'll come down again. And the key will be, do we come down and we retest that level, or do we come down and break it? And my sense is we're probably going to break it.
KATHERINE ROSS: What happens if we break it?
HELENE MEISLER: Then we go down to the next support level. I like to look at the market in terms of swings. And we had a nice swing up from what 3,600 to 4,100. And now, we're having a swing down. And if you sit back and you take a look at the markets starting last May, we came down from 4,100, and we spent a lot of time going up, going down, going up, going down, and that really, honestly, is more of a bottoming process. At this point, I do not expect us to break the October low. I think that would be really a bridge too far.
KATHERINE ROSS: I'm going to give it one second because we've got the bell going on behind me. But Helene, what other indicators do you look at when you're trying to gauge where stocks could be headed?
HELENE MEISLER: So I don't think the breadth of the market, and one of the indicators that I look at in terms of the breadth is, how many stocks are making new highs and lows? So one of the problems last week was that we had a nice run up in the number of stocks making new highs. But last week, that started to come down even though the indexes kept rallying. And to me, that's usually a red flag because it tells me the buying is drying up.
So right now that we're pulling back, I'm watching the number of stocks making new lows and they have not expanded greatly. If they start to expand greatly, I think it portends a lot more downside for the market. And then, we'll wait and see what happens when we get oversold. At this point, we just have to wait to see what happens because what happens is when you're rallying, you're looking for, is buying continuing? And like I said, when the new highs start to falter the buying is drying up.
But on the downside, you're looking, is the selling is accelerating? And so far, it really hasn't accelerated very much. But if it starts to accelerate, then you're going to look for the indexes to follow suit.
KATHERINE ROSS: Helene, when you're looking at stocks to chart by hand, what stands out to you? Why do you pick certain stocks?
HELENE MEISLER: Oh, well, my pile of stocks is so old. I've been doing probably most of them for years. But over the course of a year, you get-- stocks get bought out or you've got a stock like Peloton that pulls off the bottom. And so, about once a year, I look for replacement charts. And so I look for a new group that's become hot, that maybe I'm not charting. So like a few years ago, I was only doing Tesla in terms of EV.
So I started doing ChargePoint, I started doing Rivian, just to get a feel. Or like when the ridesharing companies came public, I started doing those. So it just-- in that respect, it just depends, what hot what's not.
KATHERINE ROSS: And for members who want to see your charts, they can go to your Twitter page, correct?
HELENE MEISLER: Yes. I often take pictures with an iPhone of a paper chart and post them.
KATHERINE ROSS: So there you go. I think your Twitter ad is your name, so @HeleneMeisler, if members are curious to check that out.
HELENE MEISLER: It's not my first name. It's HMeisler. Yeah.
[BACKGROUND CONVERSATION]
KATHERINE ROSS: All right, Helene, thank you so much for joining us today. And if you were looking for Helene's thoughts on any specific charts, we'll be having some good news for you. She's actually going to be joining Chris and the Street's editor-in-chief Sarah Silverstein live on Wednesday, February 15 at 12:00 PM Eastern for a monthly live show. Now, in the meantime, please continue to send your questions into AAPclub@thestreet.com and have a fantastic weekend.