Where are the Leaders?

July 17, 2022

Roy Mattox Wesley Mattox, CFA, CMT

Chief Market Strategist Chief Technical Strategist
Portfolio Manager Portfolio Manager
(704) 619-7445 (704) 877-1762
Roy.Mattox@IFSInvest.com Wesley.Mattox@IFSInvest.com
Follow @RoyLMattox Follow @WesleyJMattox
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.

2
 Process Overview

Technical Fundamental Macroeconomic

Analysis Analysis Analysis

3
 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

4
 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

5
 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/ 6

 Quad 1: Goldilocks
Best Asset Classes:
Equities, Credit, Commodities, FX
Worst Asset Classes:
Fixed Income, USD
Best Equity Sectors:
Tech, Consumer Discretionary, Materials,
Industrials, Telecom
Worst Equity Sectors:
Utilities, REITs, Consumer Staples,
Financials, Energy
Best Equity Style Factors:
High Beta, Momentum, Leverage, Secular
Growth, Mid Caps
Worst Equity Style Factors:
Low Beta, Defensives, Value, Dividend
Yield, Small Caps
Best Fixed Income Sectors:
BDCs, Convertibles, HY Credit, EM $
Debt, Leveraged Loans
Worst Fixed Income Sectors:
TIPS, Short Duration Treasuries, MBS,
Treasury Belly, Long Bond
Technical Analysis
Quad 2: Reflation
Best Asset Classes:
Commodities, Equities, Credit, FX
Worst Asset Classes:
Fixed Income, USD
Best Equity Sectors:
Tech, Consumer Discretionary,
Industrials, Energy, Financials
Worst Equity Sectors:
Telecom, Utilities, REITs, Consumer
Staples, Healthcare
Best Equity Style Factors:
Secular Growth, High Beta, Momentum,
Cyclical Growth, Small Caps
Worst Equity Style Factors:
Low Beta, Value, Dividend Yield,
Defensives, Size
Best Fixed Income Sectors:
Convertibles, BDCs, Preferreds,
Leveraged Loans, HY Credit
Worst Fixed Income Sectors:
Long Bond, Treasury Belly, Munis, IG
Credit
Fundamental Analysis
Quad 3: Stagflation
Best Asset Classes:
Gold, Commodities, Fixed Income
Worst Asset Classes:
Credit
Best Equity Sectors:
Utilities, Tech, Energy, Industrials,
Consumer Discretionary
Worst Equity Sectors:
Financials, REITs, Materials, Telecom
Consumer Staples
Best Equity Style Factors:
Secular Growth, Momentum, Mid Caps,
Low Beta, Quality
Worst Equity Style Factors:
Small Caps, Dividend Yield, Value,
Defensives, Size
Best Fixed Income Sectors:
Munis, EM $ Debt, Long Duration
Treasuries, TIPS, Treasury Belly
Worst Fixed Income Sectors:
BDCs, Preferreds, Convertibles,
Leveraged Loans, HY Credit
Macroeconomic Analysis
Source: Hedgeye Research; https://app.hedgeye.com/
Quad 4: Deflation
Best Asset Classes:
Fixed Income, Gold, USD
Worst Asset Classes:
Commodities, Equities, Credit, FX
Best Equity Sectors:
Consumer Staples, Utilities, REITs, Health
Care, Telecom
Worst Equity Sectors:
Energy, Tech, Industrials, Financials,
Materials
Best Equity Style Factors:
Low Beta, Dividend Yield, Quality,
Defensives, Value
Worst Equity Style Factors:
High Beta, Momentum, Cyclicals, Secular
Growth, Leverage
Best Fixed Income Sectors:
Long Duration Treasuries, Medium
Duration Treasuries, IG Credit, Munis
Worst Fixed Income Sectors:
Preferreds, EM Local Currency, BDCs,
Leveraged Loans, TIPS
7
Roadmap: Finding the Next Great Growth Stocks

1 What is the relative strength line and RS ranking in MarketSmith?

2 Is it a big stock? How large is the total addressable market?

3 What is the company doing to disrupt the industry and the world?

Is this a new, innovative industry? Who are the top 2 leaders in the
4 group?

Is demand exploding for the new product? Peloton, Tesla, Teladoc,

5 Docusign, Zoom in 2021.

8
Roadmap: Finding the Next Great Growth Stocks

Ideal to have triple digit revenue growth and triple digit earnings
6 growth. These are jewels.

Leading stocks in new bull markets will be the first ones making new
7 52-week highs.

8 Leaders run up for an average of 8 earnings reports or 104 weeks.

Best screens for leaders: MarketSmith Growth 250, IBD 50, Your
9 Weekly Review, Minervini Trend Templates

Is the current market environment favorable? Is the market in an

10 uptrend?

9
Roadmap: Finding the Next Great Growth Stocks

What is the macroenvironment telling you that is not in the charts? Is

11 your view being confirmed by the action in the stocks?

Perception becomes reality. Stocks that go up 10% in price with

12 volume up 300% that day are launching pads for major runs and are
not sell signals.

13 Study past leaders from IBD model stocks.

Pocket pivots and up on volume screen provide accumulation clues

14 while stocks are in their base. Accumulation of A or B and up/down
volume over 2.0 are signs of institutional demand.

Is the stock in a stage 2 technical uptrend? See Stan Weinstein’s

15 Secrets for Profiting in Bull and Bear Markets.

10
Roadmap: Finding the Next Great Growth Stocks

Study the classic books from William O’Neil, Mark Minervini, John
16 Boik, Jesse Livermore, Nicolas Darvas, Gerald Loeb, etc.

Observe market sentiment and market breadth indicators to gauge

17 the health of the market.

Run your screens every day in MarketSmith, FINVIZ or a similar

18 service.

Pay attention to the IPOs. Particularly watch IPOs in the last 3 years
19 for fresh new leadership. See The Lifecycle Trade by Kathy, Eve,
Eric and Kurt.

Watch the IBD Innovation Fund (FFTY) and the Renaissance IPO
20 ETF (IPO) for growth leadership.

11
Intuitive Surgical
(ISRG)

12
American Power
Conversion
(APCC)

13
Home Depot
(HD)

14
 Netflix
(NFLX)

15
Qualcomm
(QCOM)

16
America Online
(AOL)

17
 Apple
(AAPL)

18
 Apple
(AAPL)

19
Priceline.com
(PCLN)

20
Cisco Systems
(CSCO)

21
Wal-Mart
(WMT)

22
 Google
(GOOG)

23
Hansen’s
(MNST)

24
History of Bear Markets – Dow Jones Industrial Average
-0.1
1953
1971 2016 1949
1980
1969
2011 1984
1923 1957
-0.2 1998 2022

1990 1934
1939 1947 1914
1982 1978 1911
1966
1962 2001
-0.3
2002
1970
1987 1933
2020
-0.4 1917 1942
% Decline

1974 1903
1929 1921
1938 1907
-0.5
2009

-0.6

Bear (No Recession)

-0.7 Avg. Bear (No Recession)

Bear (Recession)

-0.8 Avg. Bear (Recession)

Avg. All Bears

1932

-0.9
0 100 200 300 400 500 600 700 800

Days
Source: Ned Davis Research 25
What Happens After Large 2 Quarter Declines?
20%+ 2-Quarter Drops for the S&P 500

S&P 500 Performance After Decline

Date Decline 1 Month 3 Months 6 Months 9 Months 12 Months
6/30/1962 (23.5%) 6.4% 2.8% 15.3% 21.6% 26.7%
6/30/1970 (21.0%) 7.3% 15.8% 26.7% 37.9% 37.1%
9/30/1974 (32.4%) 16.3% 7.9% 31.2% 49.8% 32.0%
12/31/1974 (20.3%) 12.3% 21.6% 38.8% 22.3% 31.5%
9/30/2002 (28.9%) 8.6% 7.9% 4.0% 19.5% 22.2%
12/31/2008 (29.4%) (8.6%) (11.7%) 1.8% 17.0% 23.5%
3/31/2009 (31.6%) 9.4% 15.2% 32.5% 39.8% 46.6%
6/30/2022 (20.6%) ? ? ? ? ?

Average 7.4% 8.5% 21.5% 29.7% 31.4%

Median 8.6% 7.9% 26.7% 22.3% 31.5%
Positive 85.7% 85.7% 100.0% 100.0% 100.0%

Source: Ciovacco Capital 26

 Annual Returns and Intra-Year Declines (S&P 500)
34%
31% 30% 29%
26% 26% 27% 26% 27% 26% 27%
23%
20% 20% 19%
17% 16%
15% 15% 14% 13%
12% 13% 11%
9% 10%
7%
4% 3% 4%
1% 2%

(0%) (1%)
(2%)
(3%) (3%)
(7%) (7%) (6%) (6%) (5%) (6%) (6%) (7%) (5%)
(10%) (8%)
(9%)
(8%) (8%) (9%) (8%)
(10%) (8%) (7%) (8%) (7%)
(11%) (10%) (10%) (11%)
(13%) (12%) (13%) (12%)
(14%) (20%)
(17%)(18%)(17%) (17%) (16%)
(20%) (19%) (19%) (20%)
(23%) (24%)
(28%)
(30%)
(34%) (34%) (34%)
(38%)

(49%)

1980 1985 1990 1995 2000 2005 2010 2015 2020

Annual Returns Maxium Intra-Year Drawdown Average Drawdown

27
Dow Industrials Four-Year Presidential Cycle

28
2022 1962

29
2022 1990

Iraq invades
Kuwait

30
 1962

Bear Market

5 Month Base 31
 1970

Bear Market

4 Month Base
32
 1974

Bear Market

5 Month Base 33
 2002

2nd Bear Market

9 Month Base 34
 2008 – 2009

Bear Market

6 Month Base 35
2022

Bear Market

36
 10%
20%
30%
40%

0%

(40%)
(30%)
(20%)
(10%)
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Q1 2022:
Q4 2021:

Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Q2 2022 Atlanta Fed Nowcast

Jan-18
Apr-18
Jul-18
Oct-18
-1.6%
-1.5%
+6.9%

Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Are We Already in a Recession?

Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Source: FRED & BEA
37
Atlanta Fed Q2 GDP Forecast

Source: FRED & BEA 38

 Company Warnings and Downward Earnings Revisions
• Microsoft (MSFT) SEC Filing (6/2/2022) – “On June 2, 2022, Microsoft Corporation updated our guidance for the quarter ending June 30, 2022 due to
unfavorable foreign exchange rate movement in the quarter through May.”

• Target (TGT) Press Release (6/7/2022) – “The Company is planning … more conservatively in discretionary categories like Home, where trends have
changed rapidly since the beginning of the year”

• Bed Bath & Beyond (BBBY) Press Release (6/29/2022) – “In the quarter there was an acute shift in customer sentiment and, since then, pressures have
materially escalated. This includes steep inflation and fluctuations in purchasing patterns, leading to significant dislocation in our sales and inventory that we
will be working to actively resolve.”

• Restoration Hardware (RH) – Press Release (6/29/2022) – “The deteriorating macro-economic environment has resulted in lower- than-expected demand
since our prior forecast, and we are updating our outlook, particularly or the second half of the year.” 2022 revenue growth lowered from 0% to +2% to -2%
to -5%.

• Micron (MU) – Press Release (6/30/2022) – “Recently, the industry demand environment has weakened, and we are taking action to moderate our supply
growth in fiscal 2023.”

• Helen of Troy (HELE) Press Release (7/7/2022) – Since our April earnings release, the macroeconomic outlook has changed significantly as consumers
shift their buying patterns and adapt to a number of factors including the impact of inflation and interest rates rising more rapidly than expected.

• Amazon (AMZN) – Article (7/3/2022) – Amazon cancels or delays plans for at least 16 warehouses this year.

• ServiceNow (NOW) Interview (7/12/2022) – “You’re going to see the headwind of the dollar right now against well-known technology brands. No one’s
going to outrun the currency right now.”

39
Source: Federal Reserve Bank of St. Louis 40
 Implied Fed Funds Rate by December
4.0%
3.77%

3.5%

3.0% 2.93%

2.5%
2.43%
2.0%
Current Target
Range
1.5% (1.50%-1.75%)

1.30%
1.0%

0.5%

0.0%
Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22

Source: CME Group

Note: Updated 7/13/2022 41
 Fed Funds Futures Next Year
7/8/2022 Higher 7/13/2022
3.74% Lower
3.67% 3.73%
3.64%
3.62%
3.63%
Expected Fed Funds Rate

3.56% 3.53%

3.54%

3.41%

3.30%
3.42%

December-22 February-23 March-23 May-23 June-23 July-23 December-22 February-23 March-23 May-23 June-23 July-23

Federal Reserve Policy Dates

Source: CME Group

Note: Updated 7/13/2022 42
 How Serious is the Fed About Fighting Inflation?

• Fed Governor Christopher Waller – pledged that

the central bank won’t make the same mistakes on Average Annual Average Annual Fed
inflation as it did in the 1970s – “We know what Year Inflation Rate Funds Rate
happened for the Fed not taking the job seriously on 1969 5.5% 8.2%
inflation in the 1970s, and we ain’t gonna let that 1970 5.8% 7.2%
1971 4.3% 4.7%
happen.”
1972 3.3% 4.4%
1973 6.2% 8.7%
• Chair Powell – June FOMC Press Conference –
1974 11.0% 10.5%
We are strongly committed to bringing inflation back
1975 9.2% 5.8%
down, and we’re moving expeditiously to do so. We 1976 5.8% 5.0%
have both the tools we need and the resolve that it 1977 6.5% 5.5%
will take to restore price stability on behalf of 1978 7.6% 7.9%
American families and businesses. 1979 11.2% 11.2%
1980 13.6% 13.4%
• For now, the Federal Reserve is seeing broad support 1981 10.4% 16.4%
from the White House and Congress to do what is 1982 6.2% 12.3%
necessary to slow inflation.

Source: BLS, The Board of Governors of the Federal Reserve 43

Equal Chance for 75bp/100bp Rate Hike in 2 Weeks

93%

50% 50%

7%

+75bp Increase +100bp Increase

Prior Current

Source: CME Group 44

Yield Curve (10yr – 2yr)

45
 Mastering Techniques & Tactics to Earn Triple Digit Returns in the Market!
1. Concentrate don’t diversify. Five or six names are all you need in your portfolio to generate huge returns. ( Occasionally up to 10, but more than that will generally lead to lower
returns and dilution). You can’t have life changing returns owning a hundred stocks. A good strategy is to start with 10 names and narrow them down to 5-6 of the best candidates.
With a small group of stocks in your portfolio, you can focus and be very disciplined in your methodology.

2. Turn over your portfolio. You need to be able to take profits. Forgot about ego and do not worry about taxes. Do not employ a buy and hold mentality using a trading methodology.

3. Time your trades. Use Charts. Time is money and timing your stock positions is everything.

4. Manage the risk reward relationship. Don’t risk more than you expect to gain. Cut your losses promptly i.e. ( 5-8% generally). You can make big money being right only 60-70% of
the time if you manage your losses accordingly. Approach every trade with a risk first mentality. Know where you are getting in and know where you are getting out. Write it down.
The failure to adhere to stops and cutting your losses quickly is the single most destructive mistake made by all investors.

5. Trade directionally. Never average down in a losing position. On a pullback wait for stabilization and a turn before investing. The optimal trade is to immediately be profitable. The
best stocks are the hardest to buy. They don’t seem to let you get in. It is important for the stock to go up for multiple up days on increased volume.

6. Build in Success. Trade your largest when you are trading your best. Only get aggressive when everything is working. Let small wins finance larger risks. Build in a cushion. Don’t
revenge trade.

7. When you get a profit, move the stop to breakeven. Never let a decent gain turn into a loss. Backstop profit. Raise your stop loss as the stock continues to go up. Generally, take
20-25% profits.

8. Sell into strength. Selling half is a win/win. Get out before the stock reverses down hard. Protect 75% of the gain when you are up 20%-25% using an automatic stop loss trigger.

9. Conduct post analysis regularly. Results don’t lie. Improve your weaknesses. Trading successfully is all about confidence and psychology.

10. Avoid style drift. Define your trading style. Become a specialist. There is no holy grail except managing your losses. Take responsibility. Rules are of no use unless you follow
them.

Studying price and volume is the key in generating enormous success!

46
Helpful Investor Resources

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

Investors.com
MarketSmith

Roy Mattox Wesley Mattox, CFA, CMT

Chief Market Strategist, Portfolio Manager Chief Technical Strategist, Portfolio Manager
Email: Roy.Mattox@IFSInvest.com Email: Wesley.Mattox@IFSInvest.com
Office: (704) 643-5000 Office: (704) 643-5000
Mobile: (704) 619-7445 Mobile: (704) 877-1762
Twitter: @RoyLMattox Twitter: @WesleyJMattox

47
Appendix

48
S&P 500

49
QQQ

50
FFTY

51
IBD Mutual Fund Index

52
 IBD Mutual Fund Index

Components
I B D Mutual Fund Index
Symbol Fund Name % Chg YTD
JAENX Janus Henderson Enterprise T (20.6%)
SEEGX JPMORGAN LARGE CAP GROWTH I (26.2%)
FKGRX Franklin Growth A (26.4%)
FCNTX FIDELITY CONTRAFUND (27.7%)
MFEGX MFS GROWTH A (29.2%)
FKASX Federated Hermes Kaufmann Small Cap A (31.6%)
BARAX BARON ASSET RETAIL (32.5%)
ACFSX American Century Focused Dynamic Gr I (33.4%)
JARTX JANUS HENDERSON FORTY S (33.5%)
SGRAX WELLS FARGO GROWTH A (33.7%)
ARTMX Artisan Mid Cap Investor (34.3%)
OPOCX Invesco Discovery A (34.7%)
PHSKX Virtus KAR Mid-Cap Growth A (34.8%)
ACRNX Columbia Acorn Inst (35.0%)
LAGWX Lord Abbett Developing Growth A (35.4%)
ALSCX Alger Small Cap Growth B (35.6%)
WMICX Wasatch Micro Cap (35.9%)
PRNHX T. Rowe Price New Horizons (36.5%)
CMSCX COLUMBIA SMALL CAP GROWTH I INST (37.5%)
HAMGX Harbor Mid Cap Growth Instl (39.9%)

53
Nasdaq & MACD

54
Nasdaq & RSI

55
Nasdaq & MA Crossovers

56
S&P 500 and % Above 50-Day

57
S&P 500 and % Above 200-Day

58
Nasdaq and % Above 50-Day

59
Nasdaq and % Above 200-Day

60
S&P 500 & Advance/Decline Line

61
Nasdaq & Advance/Decline Line

62
Nasdaq & Net New Highs

63
Nasdaq & Net New Highs (5 Years)

64
Nasdaq & Net New Highs (20 Years)

65
VIX & S&P 500

66
VIX & S&P 500 (5 Years)

67
Nasdaq & Active Manager Exposure

68
Nasdaq & Bulls vs. Bears

69
Nasdaq & Net AAII Bull/Bear Sentiment

70
5-Day MA Put/Call Ratio

71
5-Day MA Equity Put/Call Ratio

72
High Yield Spreads vs. S&P 500 (Daily)

73
High Yield Spreads vs. S&P 500 (Weekly)

74
FFTY

75
ARKK (Daily)

76
ARKK (Weekly)

77
Bitcoin

78
Ethereum

79
Gold (Daily)

80
Gold (Monthly)

81
U.S. Dollar (Weekly)

82
WTI Crude

83
Natural Gas

84
U.S. 2-Year Yields

85
U.S. 10-Year Yields

86
U.S. 30-Year Yields

87
U.S. Yield Spread (10yr – 2yr)

88
TLT

89
High-Yield Corporate Bond ETF

90
Barclays High Yield Bond ETF

91