On this week's Stansberry Investor Hour, Dan and Corey welcome J.C. Parets to the show. J.C. is a Chartered Market Technician, founder of TrendLabs, and editor of the Everybody's Wrong newsletter.

J.C. kicks things off by discussing the difference between market technicians and "chartists," the fact that valuations and fundamentals no longer drive stock prices, and the "big bullies" that trickle down to the individual stock level and move markets. He delves into the topic of positioning and finding parts of the market where folks are too bullish or too bearish. For example, J.C. points out that small caps are currently vulnerable for a squeeze. After that, he gives listeners the "cheat code" for analyzing the market, including what to look for, how to cut through the "noise machine" of financial media, how to spot changes in trends, and how to distinguish reality from narrative...

The market is what's real... Everything else is a guess, is an estimate. CEOs are wrong all the time, or they're lying to you. Both happen quite regularly. So the way I look at it, we want to trust the only thing that is actually real. And there's no argument that when shares exchange hands at a specific time on a specific date at a specific price, that will never be revised. That is there forever.

Next, J.C. walks through a hypothetical trade in the small-cap Russell 2000 Index to demonstrate his thought process and how exactly he finds opportunities. He highlights relative strength, waiting for a change in trend, weighing risk versus reward, not taking profits too early, and his unique position-sizing strategy. J.C. also emphasizes the importance of continually asking yourself how you could be wrong once you've formulated a thesis. As he says, if you can't answer the question and don't know how the market could prove your thesis wrong, "It's not an investment. It's a religion [based on belief alone]." This leads J.C. to talk about overcoming human emotion, having a plan before entering a trade, and taking advantage of all the emotional investors who don't have a plan...

Almost everybody in the world... is not going to have a trading plan. They're going to just act irrationally and emotionally. And their crazy lizard brains are going to be driving their decisions. So it's not just about overcoming our own lizard brains. It's about now taking advantage of [amateurs who] are not self-aware.

Finally, J.C. throws out a few areas of the market he likes today and is following closely for opportunities, explains how he decides the right time to enter and add to a trade, and gives listeners solid advice for risk management. "If you're in a trade that's losing, you're going to be distracted, and you're going to miss the giant elephant that's walking right past you," J.C. quips. And he closes the show out with a conversation about investing discipline, including not entering risky trades even if you know they'll go up...

We have a "naughty list." These are the types of stocks that we're not going to sell naked puts against, right? Like I could look at this thing. I'm like, "Dude, we could sell these puts right now. Make a fortune. There is no way this thing is going lower. It's going higher." And I could be dead on. But if it's on our naughty list – because it's too volatile to sell naked puts – I'm not going to sell the naked puts. And I'm going to leave all that money on the table.

Click here or on the image below to watch the video interview with J.C. right now. For the full audio, including Dan and Corey's post-interview thoughts, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

J.C. Parets is a Chartered Market Technician, the editor of the Everybody's Wrong newsletter, and one of the most widely followed technical analysts in the world. He's also the founder of TrendLabs and All Star Charts. With 20-plus years of experience navigating bull and bear markets alike, J.C. has built a reputation for helping investors stay on the right side of trend and risk.

J.C.'s work has been featured regularly on Bloomberg, CNBC, Fox Business, ABC, and CNN, as well as in the Wall Street Journal and many other financial publications around the world. He has spoken at some of the top investing conferences and been invited to speak at top educational institutions, including Harvard University, Duke University, New York University, the University of Chicago, and Hong Kong Baptist University.

Dan Ferris:                 Hello, and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.

Corey McLaughlin:    And I'm Corey McLaughlin, editor of the Stansberry Daily Digest. Today we talk with expert technical analyst J.C. Parets.

Dan Ferris:                 J.C.is a great guy, lots of fun to talk to. If you're into technical analysis, you will absolutely want to take some notes. So, get out your pens and pencils and let's do it. Let's talk to J.C. Parets. Let's do it right now.

                                    J.C., welcome to the show. Good to have you.

J.C. Parets:                 Good to be here.

Dan Ferris:                 Yeah, I'm glad that we have you on the show because you know stuff that I have never spent any time of my life looking deeply into. I'm not a chartist, simply put, and you are that and more. I guess the first thing I want to know is from the top down, just being a chartist describes you know a million different ways of looking at the market. From the top down, if you had to give me a few bullet points or if I just asked you casually what kind of an investor are you or what kind of a trader are you, how would you answer that?

J.C. Parets:                 Well, I think a lot of it, and I appreciate you being here. It's a great question. It's a great place to start because I think there's a lot of misconceptions as to what technical analysis even is. So, every chartist is a technician, but not every technician is a chartist. So, what we're doing as technicians is that we're analyzing the behavior of the market and therefore market participants. It just so happens that the best way to visualize the changes in equilibrium between supply and demand happens to be in chart form. So, technicians are often seen looking at charts and things of that nature, but the truth of the matter is, we're looking at a lot of data and this data can be visualized on spreadsheets. And there's all kinds of different charts like scatter plots and line charts and bar charts and all kinds of different ways to visualize data.

                                    And why is it that we're doing that? We're analyzing the behavior of markets because one thing that you'll learn over time, or if you're new to this, you can go and look and check the math, but valuations and fundamentals are not what are driving stock prices. We have the data. So, what's driving stock prices is positioning and how the market is positioned... Or in many cases, this position for a major move and those unwinds are what are driving asset prices, not just an individual stock, but stocks as a group, specific sectors as a group. Other assets like gold and bitcoin and crude oil and forex markets like what's happening in the dollar. So, there are major, major asset classes all over the world that are really the big bullies in the room. So, while the U.S. stock market might be worth $60 trillion, you're looking at a bond market that's worth $130 trillion and a forex market that's in the quadrillions. So, these major, major moves are trickling down to the individual stock level and that's really what's moving markets, not things like valuations or earnings growth or anything like that. So, that's what we focus on.

Dan Ferris:                 Over what time are you telling me that those things don't move markets, like ever or just in the past few years or just this year or when?

J.C. Parets:                 Yeah, I mean, the big drivers are really asset allocation and rotation amongst asset class that takes a long time, particularly at the large-cap level. I think the largest disparities that you're going to see on a regular basis between what the overall market is doing and what an individual stock is doing is going to be at the small-cap level where no matter how bad the market is, there's going to be small caps that are going to be doing well, and no matter how good the market is, there's going to be small caps that are doing poorly. I'm generalizing in terms of asset classes in general, and then we can work our way down from there.

                                    So, we want to look at positioning globally and understand the big tides and the direction that that's going and then work our way down. So, for example, if we're in an environment where the uptrends are intact in the stock market, for example, and the outperformance is in the United States stock market and the unwind is happening in that direction, what are some of the better ways to take advantage of that trend example that I just elaborated? Probably in areas where the U.S. shines that other countries might not have, things like large-cap technology, things like growth stocks and things of that nature. So, it starts there and then we trickle our way down to the individual stock level. But our big focus is in positioning and taking advantage of that through a variety of different breath measurements, sentiment analysis. And then just the overall data that we get from FINRA and the Commitment of Traders report, that tells us a lot about the market's positioning.

Dan Ferris:                 Yeah, tell me more about that. What does positioning mean? I promise you that right now, as we're talking, a significant number of our listeners are saying, "Wait a minute, what does positioning really mean?"

J.C. Parets:                 Yeah, no, it's a great question. I mean, I love this. It's near and dear to my heart. And I think it's important to understand that at the end of the day, if you're an investor, you're – these are humans that are making decisions. And these are machines that are built by humans that are making these decisions. And us as humans, we have flaws. We have many flaws. We're great, Homo sapiens. We made it. We won the whole thing. We're here. But at the end of the day, there's a lot of flaws that come with that throughout evolution. So, I think if you're trying to make money in the market and you want to understand the market, you really want to understand humans and our own flaws.

                                    And so, as humans, we make irrational decisions, we make poor choices when our stress levels are elevated. In this day and age it's not when we're being chased by a lion in the jungle but when there's money involved. That's when our stress levels get elevated. If you add a layer of politics on top of that, man, now the crazy pills really come out. So, humans make really poor choices in those environments. And the market is so massive that it exposes those human flaws.

                                    So, as investors, if we can understand that, there's a huge opportunity to make money from those poor choices that we know for a fact humans are going to continue to make over and over and over again. So, we analyze a ton of different data to identify where the positioning is most extreme. Where are people way too bullish? Where are people way too bearish that there's nobody left to sell,  it's already priced in, and the only way that we can go is higher? We are looking for those pain points all day every day because that's where the biggest moves come from, from the massive unwinds in positioning.

                                    So, we're looking at short interest. People forget that if you own a stock, you're just promising to be a seller one day. But if you are short the stock, you are a guaranteed future buyer because the only way to unwind a short position – these are people betting that the stock price is going to fall – the only way to unwind that is to buy it back. In their perfect world – or in our perfect world, if we're short, we want to buy it back at a lower price so that we can keep the difference. That's how we make money, when the price of stock goes down. But when the price of the stock goes up, that's a problem because now we're losing money. It's going in the opposite direction and we're paying margin interest to be short. So, we're getting taxed on the margin and we're losing money. And if we're a major hedge fund, we have to do the opposite. Hedge funds are there to make money, not to lose it. So, if they're losing it, that's a big problem. So, when the majority of shares are short, that creates a lot of vulnerability when they're all covering at the exact same time. So, that's just one example of a dataset that we take that's publicly available and we organize it, we look specifically for the most vulnerable areas, and then we look to buy some of those names.

Dan Ferris:                 So, you look for meme stocks before they take off like rockets, huh?

J.C. Parets:                 Could be. The beauty of it is there's a time and a place for everything.

Dan Ferris:                 Among other things.

J.C. Parets:                 Yeah, of course. I mean, there's a time when meme stocks are ripping. There's a time where meme stocks are collapsing. There are times when energy stocks are collapsing. There are times when energy stocks are doing well. Look at small caps. They have been underperforming forever. Everybody knows it. The IWM, which is the Russell 2000 ETF, the short interest is making new 52-week highs as we speak. When we look at the futures positioning,  speculators have the largest net short positions ever. So, you've got the "dumb money" that we want to take the other side of agreeing with all of these shorts. So, right now small caps in general are vulnerable for a squeeze.

                                    Now, will that happen or not? We have to see. We have certain thresholds that we wait for. So, just because everybody hates something, it doesn't mean we like it. Doesn't mean we want to buy it. That's not a good strategy. We want to wait for the markets to then agree that that unwind has begun. We have a variety of different ways that we quantify that and then we participate. We wait for that turn. But the first thing we want to do is identify where those turns can potentially come from. We saw it in the fall last year when China – everybody – just all the Trump things were working, for example, going into the election. All the Polymarket was saying "Trump victory." you saw Tesla and crypto stuff working, banks were working. Republican Trump stuff was doing well. It was like "OK, well, if Trump wins, what's the trade?" Everybody assumed that it was going to be sell China, sell emerging markets, tariffs, blah, blah, blah. So, we were buying those things. Those are the things that we're buying. We're specifically buying Chinese stocks. We're specifically buying stocks that would benefit from a weaker dollar. But that was based on positioning. It wasn't like this massive fundamental shift that emerging market economies were all of a sudden so profitable and so great. It was the fact that everybody hated them and sentiment was so poor, there was nobody left to sell. And so, there was only one direction it can go and we benefited from that. So, those are the types of opportunities that we're looking for on a regular basis.

Corey McLaughlin:    This reminds me of – Dan, I edited a newsletter from J.C. many, many years ago for a little bit. And this reminds me of one of the things that – and I learned a ton about technical analysis while doing it, which was one of the great benefits. And do you still do that thing where you at the end of every month, you look through – how many charts was it? It was like 1000 charts or something – and figure out what it was, figure out the big trends?

J.C. Parets:                 Give or take. Give or take a few thousand. But yeah, listen, there's a lot of charts – particularly on a monthly basis. I really like to rip through a lot of them because you're getting a lot of monthly closing data – so it's a great time to do that, take a step back. But yes, I absolutely do that. You want to know the hack? That's the hack. Everybody out there listening, if you're listening and being like "J.C., what's the cheat code to this market? What is the Holy Grail?" You want to know what the Holy Grail is? Once a month, go look at monthly candlestick charts. Once a month. Every single one of them. Look at the S&P 500 and the Dow and the Nasdaq, but then also look at financials, industrials, technology. Look at all the sectors. Look at all the countries around the world, German DAX, Japanese Nikkei. Look at Chinese equities. Latin America. Look around the world. Look at the commodities: crude oil, gold, silver, copper. Understand where the 10-year yield is heading, the U.S. dollar. Think about the most important assets and then make a list and at the end of every month look at those. Look at the bellwethers: JPMorgan, Apple, Microsoft, the companies, the big drivers – Amazon – that are driving these sectors. Include those on the list. Reach out to me, I'll give you my list. It's all good.

                                    But have a list and then go through that every month and it's going to remind you "Oh, this trend is up. It's making an all-time high. It can't be down." It's a reminder because throughout every day and every week it's like "Oh, what did the Dow do? The Fed said this. And the Trump tweet. And the this." It's a never-ending noise machine. So, taking a step back, pouring yourself a glass of wine or tea or whatever – I don't judge, whatever you're into. Me, I'm more of – I like a little Barolo to go with my monthly candles. But hey, that's just me. And I just sit there and take a deep breath at night when the kids are asleep, just me, some music, the charts, glass of wine. That's the cheat code. That's the cheat code. Barolo and monthly candles.

Corey McLaughlin:    That is what I remember. Yeah, just you doing the work and just looking through – it was probably 3000 charts. It's a lot.

J.C. Parets:                 It depends what kind of mood I'm in. It's usually about, I don't know, 3000 to 5000 charts a week normally. It's just that that week I'm more focused on the monthlies versus other weeks I'm more focused on weeklies probably.

Corey McLaughlin:    Got you.

Dan Ferris:                 So, when you look at all those, what do you come up with at the end of it? What do you – you're obviously not looking at them very long because there's only so many hours in a week. When you quickly are ripping through those and you're looking at a monthly candle, you're just seeing what's up and what's down and then, what, building some kind of a picture of the overall market out of it?

J.C. Parets:                 Yeah, I think you nailed it. It's really a way to the evidence thing. There's no one magic bullet. There's no one magic indicator that's going to tell you "buy, sell," and what to buy or sell. It doesn't work that way. It's really a way to the evidence. So, if you're seeing certain indications – like, for example, in the first quarter this year, the dollar was getting slammed, money was rotating hard internationally into Europe and Asia. I mean, these markets were ripping while the United States wasn't going anywhere. But while everybody was like "Oh my God, the tariffs and the market's going to crash and Trump's ruining everything," and look at the Economist magazine... Like holy cow, it was like the bald eagle walking out of a hospital with bandages. It was bad sentiment. Individual investors, historical pessimism. Barrons' big money poll was the most bearish ever. This goes back to the '90s. So, many indications.

                                    Everybody thinks the market's going to fall apart. But the rest of the world is ripping. So, if the world is really coming to an end, are you going to get outperformance from Latin America? No, they're going to be leading the march down to zero. Deutsche Bank making new highs, Germany making new highs. These are not the types of things that would happen if the – European banks breaking out to new highs. These are not the things that happen if the world is falling apart. So, the rest of the world was supporting the case that yes, we should buy stocks. All these people are crazy. These historic pessimistic readings. We're not just buying it because everybody hates it. There are a lot of indications that we need to be buying very aggressively here in early April. So, fortunately, we're data-driven. We're not here for the narrative. We're specifically looking for where what's actually happening is different than what people think is happening. Those disparities – I write – we have a product called The Divergence because that's what we're looking for. We're looking for divergences between reality and the narrative.

Dan Ferris:                 And you assess reality mostly by charts. So, when you look at all those, I mean, are you taking notes on 3000 charts or are you – I'm very curious to know what you do with that volume. I mean, the sheer volume of information on a weekly or monthly basis.

J.C. Parets:                 Yeah, we're just looking for trends. Just looking for trends. That's all it is. It's either an uptrend, a sideways trend, or a downtrend. And then we're looking at everything on multiple time horizons. So, while we'll start with a 30-year chart, the next chart will be that same asset in an eight-to-10-year chart, and the next chart will be that same asset on a three-to-nine-month time horizon. So, it's a multiple-time-frame analysis, understanding the longer-term trends, and then the short-term secondary waves within those big trends. So, what is it that we're doing? We're looking for trends very specifically. Why do we do that? Because we know asset prices trend. We know. We know that returns are not random. We have the data. We know.

                                    So, there's a lot about the market that we don't know, particularly about the future. So, for me, I find it easier to just start with the things that we do know exist. Asset prices trend. Momentum exists. Relative strength is real. Money goes to where it's being treated best. Relative strength is a real thing. We know those are three pillars of the market. Asset prices trend, momentum exists, and relative strength is real. We know those three things, and that's really what we start with.

                                    And then, to answer your question, Dan, we look at a lot of charts. Why do we look at all the charts? Because that is the only fact. Everything else is a guess. Everything else is an opinion. An earnings estimate is exactly that. It's an estimate. Guidance from the company is exactly that. And by the way, they often change their guidance. It's kind of a ritual around here. The government data that comes out, those are estimates. Those get revised. We know going into the number that they're going to be revised. The bond market doesn't do what the Fed says. The Federal Reserve does what the bond market tells it to do. And they could do their best to kind of maneuver that – so, if you want to know what the Fed's going to do, just follow the fed-funds futures.

                                    So, the market is what's real. Everything else is a fugazi. Everything else is a guess, is an estimate. CEOs are wrong all the time or they're lying to you. Both happen quite regularly. So, the way I look at it, we want to trust the only thing that is actually real, and there's no argument that when shares exchange hands at a specific time on a specific date at a specific price, that will never be revised. That is there forever. So those exchanges in those assets, the prices trend over time. They go up for a while, they go down for a while. So, participating in those trends is how we want to be able to make money consistently, because we start with what we know. And we know that that's how asset prices behave.

Dan Ferris:                 So, you started out telling me that positioning was the most important thing, but now it sounds like trends are super important. So, we're building how J.C. does things here. And it sounds like those are two – correct me if I'm wrong – equally important pieces of the pie for you to make a trade.

J.C. Parets:                 Yeah, I mean, and it's one before the other. So, first you get the sentiment extreme and then those trends last for a long time. Those trends tend to persist. And that's the real meat of it. And then, you get that last move at the end where now everybody's an optimist and everybody thinks it's going to go on forever. And that's when you start looking for deteriorations in momentum, in relative strength, and look for those trend changes. Because while we know that asset prices trend, we're not blind. We know that trends change, too. There's a much lower likelihood that the trend is going to change but of course trends change all the time. They go up, they go down. So, there are indications of those changes in trends, sentiment being one of them.

                                    But yeah, so how do we start? We're looking for positioning. We're looking for major trends across asset classes and rotation amongst them. So, it's not just the S&P 500 on an absolute basis. It's the S&P 500 versus foreign equities. It's the S&P 500 versus gold. It's the S&P 500 versus energy. So, when the S&P 500 falls, you're going to see that relative strength. You're going to see that deterioration in the S&P compared to other alternatives, like bonds perhaps. So, in the strongest trends, these assets are not just doing well on an absolute basis. The strongest trends outperform their alternatives as well.

Dan Ferris:                 So, a typical trade for you might – just to pick on the Russell 2000, which you mentioned, right now you might be saying something like, "Well, the positioning is extreme. Everybody wants to be short. Everybody knows that it peaked, whatever, five years ago or something and still hasn't made a new high and it's performed like garbage. So, therefore, now that I've established the positioning is extreme, then step two is the moment when the trend goes in my favor. I don't want to be short, as an extreme of shorting, so I'm really looking for an opportunity to go long. But I'm not doing it just based on the positioning. I've got to wait until –" this is sort of like our friend Steve Sjuggerud who says he wants it cheap, hated, and in an uptrend. So, you've got hated and probably cheap, maybe, let's say, by the positioning and then you're just waiting for that uptrend piece to kick in. Am I right?

J.C. Parets:                 Yeah, that's exactly right. And depending on the positioning, there's different ways to take advantage of it. But you're spot on, Dan. And so, for example, in the China, we're not going to go buy the Shanghai Composite Index. Or, you could buy an ETF, like the FXI that trades that. We want to look for [the] best vehicle to express that thesis in the open market. So, we've been buying Chinese stocks, like Tencent Music, which is the Spotify of China. It was an outperformer within the Chinese space. So, we want to be in the space because of the unwind, but there's already something in there that's working better than anybody else, so let's just buy that one because that's ahead of the pack.

                                    Same thing in the small-cap space, looking for what's in small caps. We could buy the IWM, I suppose, and there's nothing wrong with that. But for our strategy, we'd rather buy a stock or an option on a stock. So, what's in the Russell 2000? A ton of biotech stocks, a ton of regional banks. So, that's probably a pretty good place to start. As it turns out, regional banks and biotechs, also very highly shorted. New multiyear highs and short interest for the XBI, which is the biotech ETF, new 52-week highs in the KRE, which is the regional-bank ETF. So, from a top down, we're seeing that small caps are hated on the futures market, at the ETF level, then what's in the small caps is also hated. So, this is a really good pond to go fishing in to look for stocks that are showing relative strength that check off those boxes. So, those are the types of names that we'd be buying.

Dan Ferris:                 And let's just stick with this just to – purely hypothetically here – I'm not asking for a real trade, but just hypothetically here, then, let's say that you look at the Russell and then you say, "Well, of course, given how much regional bank and biotech, those have to be heavily shorted too." So, before you decide to get into the trade, are you saying, "We like these five or 10 – or however many biotechs – and we like these five or 10 or however many regional banks?" And based on what is what I'm thinking. When it's about picking those names, do you wait for the trend to change and let the trend change tell you which of those you want, or do you look at any sort of fundamental or any kind of other data to tell you "Oh, this is probably the bank or the biotech that we want?" How do you know which specific names?

J.C. Parets:                 Yep. No, it's a great question. And Dan, you're doing a great job of kind of showing that funnel, like starting with all of this and then working your way to this. You're really pinpointing the process really well, so that's a great question.

Dan Ferris:                 That's what our listeners want, I promise. That's what they want. They're taking notes.

J.C. Parets:                 Oh, I love this. This is fantastic. No, which is just great because some people are like "Just give me the stock, J.C. I don't care about…" But I love –

Dan Ferris:                 No, but that's just giving them a fish. We want to teach them to fish.

Corey McLaughlin:    Yeah. We like a process.

J.C. Parets:                 No, this is great. No, I really appreciate this. I hope you know that. So, that's exactly – great question. So, then what's next? Well, then what we'll do is we'll run a scan showing the relative strength in those industry groups. So, you have the sector level, which would be – so, you've got the asset-size level, which is small caps. But then within small caps, you've got a lot of financials and a lot of health care. But more specifically within financials and health care, the sectors, they are biotechnology and regional banks within the financials. Now we're breaking it down one level. We don't know that there's going to be a ton of short interest there. We don't know at all. We look and it's like "Oh, there's a ton of short interest." Now, that makes sense because there's a ton of short interest in the Russell 2000. So, it's not a surprise. But we don't know that going in. And we're then seeing that and being like "Oh, wow, look at this. So, that makes sense. OK, great."

                                    So, all the pieces of the puzzle are put together. These names are hated. So, then we're looking for the relative strength. We're looking for the strongest ones within those groups. And then, we'll, like you said, wait for the change in trend. How do we identify a change in trend that is a momentum shift, an explosion in high momentum? Also, we take an anchored volume-weighted average price. So, in other words, we're pivoting to former highs because one thing that we know is that when a stock is going up, the investors are making money. The people who own the stock are making money; the people that are short the stock are losing money. We know. So, if we know that investors that own the stock are making money in uptrends, we can reverse engineer that and say, "Well, how do we know if investors are making money?" And the answer is you anchor a volume-weighted average price to the prior peak and you could quantify whether or not the owners are making money or not. And you don't want to own things where the owners aren't making money. You want to own things where we are.

                                    So, there's a variety of different ways that we quantify a change in trend, but it starts with that top-down approach and that's when we execute. Now, of those, how do we pick? We look for the best risk-versus-reward profile. How – I don't care how high you think the stock goes – 10 times, 100 times, make it a million times. What's the difference? I'm more interested in what the market would have to do to prove that thesis invalid. Where is your guess that Apple's going to go to double or that Nvidia is going to go to this or that bitcoin is going to go to that? What would the market have to do to invalidate that thesis? If you can't answer that, you're in a lot of trouble.

                                    So, I always answer that, obviously, because I've been doing this a long time and I know if you can't answer that, you're in a lot of trouble. And I'm still here, so I've figured that one out. So, what would the market have to do to invalidate the thesis? If that invalidation is very far, like the market would have to break below a certain price, if that's very far and the risk-versus-reward profile is not very skewed in my favor, then I'm not really interested in it. I want very well-defined risk parameters where I say, "I'm buying the stock at 72. If the stock breaks 70 for a variety of different reasons – I'm either wrong or early," and either way, that's the same thing. So, I just don't want to be long the stock if it's below 70. Not because it's two points below my entry or a certain percentage below my entry, but very specifically because if the market were to do that, my thesis is probably very wrong and I don't want to be in this trade. So, I have to be able to define that before putting on the trade.

                                    And then how high can it go? Well, it better be a lot higher than what I'm willing to risk. So, if I'm willing to risk two points, man, I've got to be able to make at least eight to 10 points to the upside at least for me to be interested in putting that trade.

Dan Ferris:                 At least four or five to one.

J.C. Parets:                 So, then it just comes down to best risk-versus-reward profile.

Dan Ferris:                 OK. So, at least four or five to one.

J.C. Parets:                 Yeah, I mean, generally. I mean, at least, yeah.

Dan Ferris:                 And just to be clear, all of this, when you say, "What would the market have to do?" it's all about price levels and predetermining, "The market would have to violate such and such a price level to the downside to tell me I'm wrong. And it would have to confirm such and such a price level to the upside to tell me I'm right," et cetera, et cetera.

J.C. Parets:                 That's right. Yeah. And you said it right there, which I didn't mention –

Corey McLaughlin:    Does that sound familiar, Dan, with all the different other traders that we've had on here, just managing the risk part of it –

Dan Ferris:                 Oh, yeah.

Corey McLaughlin:    – that we always end up at?

Dan Ferris:                 Right, so the next question becomes – and if – I don't know if you want to hypothetically stick with this Russell 2000 example, but whatever makes sense to you to explain it. But in that trade, just say, how many names would you be looking for? What determines how many names you're talking about, or how large of a position you might take in biotech, and how many of those names you might buy, let's say?

J.C. Parets:                 Yeah, well, we want to be adding to the things that are working. And we want to be doing less of the things that aren't working. So, if you're eating cupcakes and donuts every night and you're putting on weight, maybe you shouldn't do that. But then you go for a 10-mile run and you feel fantastic afterwards, hey, maybe do a little more of that running thing. You want to do more of the stuff that  is working, do less of the stuff that's not working.

                                    If we're long a biotech and it's working and more setups are setting up, we're going to bet that those names are going to do the same things that these other names are doing. And if those start working, we're adding to positions in that space if it's working, because, as I started the conversation, from extremes in positioning tend to come massive unwinds and huge trends. So, just because you're in maybe a little bit early doesn't mean that there aren't going to be more opportunities moving forward. In fact, I have learned the hard way that you really want to let the profits run. I get asked, "J.C., what is the risk with this strategy?" The risk with the strategy is that you're not greedy enough. You want to be really greedy because these trends persist. So, if you are bashful and you're taking profits early, you're defeating the entire purpose of what we're trying to do here with this very specific strategy that we're incorporating, which is, we're looking for huge winners because they're coming. They're stemming from extremes in sentiment. And we know that those are big moves.

                                    So, I personally don't like to risk any more than 1% to 3% of my portfolio on any given position on a trade. Now, it doesn't mean that I'm only going to put 2% of the entire portfolio in the stock. What I'll do is I'll calculate, "Well, if I'm going to put a stop loss at 70 and I'm buying it at 72, that's two points of risk," so I'll calculate how much money am I willing to risk on this trade? Let's call it $1000 and I'm willing to lose $2. Well, then I'll buy 500 shares, because if it breaks $2 – if it breaks $0, I lose those $2 at 500 shares. That's $1000. I said I didn't want to lose more than $1000. That's how I'll position size accordingly. If I want to buy an option, I'll say, "OK, I don't want to lose more than $1000. I've got $100,000 in this strategy. I don't want to lose more than 1%. That's $1000. So, I'll buy $1000 worth of call options." I'll by 25 delta calls – so, going out 60 to 180 days or so. And we'll give ourselves enough time depending on where volatility is, and then we can express it that way. But the risk is the same. I'll either position size the shares according to my reverse-engineered math on how much money I'm willing to lose on this trade, and then I'll position size the call options accordingly in the exact same way.

Dan Ferris:                 OK. So, position sizing is important to you. I knew we'd get here eventually, as we always do with all the traders that we interview. And even a fair amount of folks who call themselves long-term fundamental investors will say, "Well, our position size is this or this or this." So, that's extremely important. That sounds like a very important risk-management tool for you. A lot of the traders we talk to, they'd say, "Well, how we enter a trade is important." And you've told us a lot about that, about the positioning and the momentum and the trend. Would you say that the risk management is more important than the entry?

J.C. Parets:                 Yeah, 100%, for sure. Not even close. In fact, you said before that a lot of the traders you interview and things like that, it always comes down to risk management.

Dan Ferris:                 Always.

J.C. Parets:                 That's not surprising at all. Go read Market Wizards by Jack Schwager, [where] he interviewed all the greatest traders of all time. You know what you're going to find? All of them have different strategies. All of them did something different. But the one thing in every chapter is that it all comes down to risk management. Every single one of them. It doesn't matter what their strategy is. It doesn't matter the trader. It doesn't matter which book, because he's written a few books. They're all the same. It all comes down to risk management.

Dan Ferris:                 I was going to say every single trader in every single book. We've had him on the show. Yep. Every single one of them. Even the ones like Chris – what's his name? I forget. The guy who's doing something that no one else is doing. He's using social media and all this stuff to pick stocks. Nothing to do with charts going up or whatever or fundamentals. Neither fundamental nor chartist. It's all social media stuff. And he's exactly the same way. So, that's the one thing that has been impressed upon you and me and hopefully our listeners. You can't not do that. If you're going to be a trader, that means that you are in the business, does it not, of position sizing and stop losses and other risk controls. That's your business really.

J.C. Parets:                 Yep. Yep.

Dan Ferris:                 And yet –

J.C. Parets:                 That's why I always have people, like "Oh, J.C., I think that Apple goes to a million" or whatever. Where are you wrong? I don't care how high you think it goes. Where are you wrong? What would the market have to do to prove your thesis invalid? And in a lot of cases, because humans are crazy, as we discussed before, they just believe that a stock – this is hope and dreams and "Oh my God" and "They're going to revolutionize the world" and da, da, da. We know. We've heard all these stories before. And maybe they do. Maybe they do. I don't know anything about that stuff. Where are you wrong? Where are you wrong? If you can't answer that, then it's not a trade. It's not an investment. It's a religion. It's a cult.

Dan Ferris:                 Yeah. A belief. That's right.

J.C. Parets:                 It's a belief. Exactly. If you don't have –

Dan Ferris:                 And it's an emotional – yeah.

J.C. Parets:                 Yeah, if you don't have an exit strategy of what the market's going to have to do to prove that thesis invalid, it's no longer an investment. I don't know what it is. It's evil, is what it is.

Dan Ferris:                 And again, all of the traders I've ever interviewed or heard of, with one exception, will say, "We're trying to mitigate the role of emotions here. We're not we're trying to not let our emotions screw up the trade." And only one guy, John Netto, has said, "Well, no, I like my emotions and I use them and I pay a lot of attention to them and so forth."

J.C. Parets:                 I know John. I know John well.

Dan Ferris:                 Yeah, I found him fascinating, as I've found all of you traders fascinating.

J.C. Parets:                 He is. He is.

Dan Ferris:                 Yeah, it was great stuff. Anyway, so here we are. It's just so – it's profound. I don't know why. I have to say this every time we interview a trader, but it's true, man. We get to the same place every single time.

J.C. Parets:                 But here's the thing, Dan. We take all of this and we take it another step further. So, we understand because we've been doing this a while and I have a lot of friends that you've mentioned and everything like that and I've read all the books and I've made all the mistakes. We know that humans are flawed, ourselves included. So, we're trying to overcome that. How do we overcome that? How do we take the emotions out of that to have a trade plan, to have a plan before you enter the trade when your emotions are not high, when your stress levels are not elevated, you're not in the trade? Once you're in the trade, now the crazy pills. Now you can't think straight anymore. Now you're thinking emotionally.

                                    So, you want to make a plan, a trade plan before you're thinking emotionally, when you're thinking rationally. But the beauty of all of this is that we know for a fact that almost everybody in the world, they're not going to do that. They are not going to have a trading plan. They are going to just act irrationally and emotionally and their crazy lizard brains are going to be driving their decisions. We know. So, it's not just about overcoming our own lizard brains. It's about now taking advantage of the others that have not come to the conclusion, that are not self-aware enough to understand that, yet alone take advantage of others' flaws. We are very specifically trying to extract profits from the market from those poor decision-making individuals. And you can see that in sentiment data. And that's exactly what we're doing. We have to take everything that we've discussed here today as far as risk management and then use that sort of against them for our own endeavors.

Corey McLaughlin:    This might be a good time to get into an example or two. Is there anything you could share? Is there a combo regional-bank-biotech stock that exists or what?

J.C. Parets:                 You've got to go –

Corey McLaughlin:    What are you looking at right now?

J.C. Parets:                 Listen, you need the AI gen – genomics. You've got to get all the buzzwords and whatnot –

Corey McLaughlin:    AI biotech bank. Yeah.

J.C. Parets:                 Yeah, there you go. Our clients spend a lot of money getting our trades, so I don't want to give away the portfolio in general. I did want to stick with the top-down perspective, just kind of how we think, and those are names that we're looking at. But I'll throw out some names like Bank OZK, Bank of the Ozarks, or the artist formerly known as Bank of the Ozarks, showing relative strength. These are the types of names that we would be looking at. Also oil and gas. A lot of short interest in oil-services companies, in the explorers and producers, and we're seeing a lot of relative strength coming out of the refiners. So, as hated as energy currently is, the energy stocks themselves, there is relative strength in the refiners. So, those would be the types of names that we're looking at in the energy space.

                                    So, I mean, that's really, really how I think about it from the top-down perspective. And I can give you other examples of really in the past, coming into 2023 for example, the short interest was off the charts. The majority of stocks had already bottomed out in the summer of '22. So, while the majority of the indexes were still falling into the fourth quarter of '22, most stocks had already bottomed. We know because I sit there looking at every single chart and I was telling everybody most of these things already bottomed. And so, short interest, not only did these short sellers not cover, they were adding to their positions, creating huge vulnerabilities in areas like speculative growth and technology. So, those were the types of stocks that we were buying. Those were super high short interest, where there was a ton of vulnerabilities there from those markets. Things like Carvana, for example, which was super highly shorted at the time, just one of the biggest winners ever, not because a car vending machine was such a great idea. In fact, everybody knows what a terrible idea it is to have a massive vending machine of cars. It's not a secret what a bad idea that is, to the point where the short sellers shorted it at such an aggressive rate that there was nobody left to sell. There was nobody left to sell, and so the stock went up 10,000%, not because vending machines for cars is a good idea but it's because the positioning was so extreme to one side. And we saw it in a bunch of other stocks as well.

Corey McLaughlin:    Right. No, that's a great example. And I totally understand and not giving away the farm here for free. What would you need to see from, say, going back, we were talking about small caps a little bit, if we're just looking, say, at IWM in general or the Russell 2000, what would you need to see to confirm that you want to get into a trade with that?

J.C. Parets:                 Yeah, I mean, it's consolidations within uptrends. It's how the market's behaving. I wouldn't necessarily buy the IWM specifically. It's looking for vulnerabilities in the Russell 2000 types of stocks and then owning those regional banks and biotechs or some of those. You can look at some of these transportation stocks as well. Transportation stocks also have been very heavily shorted. Speculative growth in general also. A lot of these names fall within the small-cap spectrum. ARKK, Cathie Wood's fund has the highest short interest ever. Highest short interest ever currently. So, these are people that are betting against those types of stocks. What are those types of stocks? These are speculative growth stocks, space stocks and robots and crypto stuff and AI stuff. And those are the types of names that people hate, so those are the types of names that we want to look very closely at. And we have and they've been working. And biotech is part of that, by the way. Biotech is part of that ARKK sort of theme. Biotech is part of this small-cap theme.

                                    So, in a lot of instances, you're getting similar messages from different parts of the market. In this case, you're getting data from the futures market, you're getting data from the ETFs. You're getting top-down data in terms of what they're doing within those sub-industry groups. You're seeing similar activity in the ARKK names, which biotech also falls within. So, you're checking off a lot of boxes. And that doesn't necessarily mean that we want to change our position sizing or anything like that, just to be clear. When a lot of different data suggests that we should be doing something, it doesn't mean we should do it more aggressively. I like to think about it like looking at the rain coming in. You've got different senses that are telling you that it's going to start raining. You start to smell the moisture in the air perhaps. You start to see the clouds coming in. You hear the thunder. There are different signs that "Hey, maybe I should go inside." It's not giving us any information about how long the storm is going to be or if it's going to be a bad storm or not-so-bad storm. We just know that it's going to start raining so we should go inside. It doesn't give us any indication of the duration or the amplitude. Same as this. Just because we're getting the same data, same points from different areas suggesting that we should be putting on one of these trades, it doesn't mean we want to change what we're doing. It's just more evidence of the same thing.

Dan Ferris:                 So, there has to be a threshold, then, for what you said before: Do more of what's working, do less of what's not. Technically speaking, in terms of metrics or however you make the decision, what does that look like? What does it look like when you say, "Hey, that's working." What does that mean, "It's working"?

J.C. Parets:                 It means the stocks we're in are making money. We buy a biotech, now we're up 20%, 25% in this biotech. We buy this Chinese stock, we're up 15%, 20%. Our options double in a week. Like "OK, yeah, all right, we should do more of this. Yes, I think we should." And then, so we'll go and look and we'll look for opportunities that have favorable risk-versus-reward profiles in that space. And there comes a time where there just aren't any more risk-versus-reward profiles in that space, in which case we won't be adding to those positions.

Dan Ferris:                 So, I'm just thinking through this in real time. I realize my question, there was a presumption under it, which is that you might not add to every position that's doing well, but your answers seem to indicate that you might.

J.C. Parets:                 Yeah, I mean, ideally we will, but the market doesn't care what is ideal for J.C. The market's going to do what it wants to do. And in some cases, I wish that there were more favorable risk-versus-reward opportunities, but the market just ain't giving them to me. That's life. So, that's kind of how I think about it.

Dan Ferris:                 OK, I think I sort of get that. But again, I'd like to just, purely for our listeners' sake, make it more concrete and just say that – well, as you said you, it sounds like you seize all the opportunities you can find but you can't always find them. And that goes for adding to positions as well as initiating them, it sounds like.

J.C. Parets:                 Yeah, I mean, listen, you can't own everything. So, there's areas where it's like "Man, I wish I had more exposure in that because it's working, but I made a decision two weeks ago to have more exposure in something else. And that's working too." So, you can't own everything. So, there's an element of that. There's going to be things that you're going to see that you didn't take advantage of. I mean, that's just what it is. Missing trades is part of the game.

                                    But getting back to how we started, which is the pillars of the market and really sticking to what we know for a fact to be true, and that's that asset prices trend, momentum begets momentum, and that relative strength is real, we also know that if the market is open, there's going to be more opportunities in the future. So, we don't have to swing at every pitch. We'll wait. There'll be more pitches. You just need to survive long enough to see them. And if you're in a trade that's losing and you're in a trade that's causing you aggravation, you're going to be distracted and you're going to miss that giant elephant that's walking right past you. So, part of the risk management is not just protecting your money, but it's the energy that you're spending. And if you're spending all this time on things that are losing you money, you're missing out on future opportunities. Like I said, that giant elephant walking right in front of you, you miss it because you're complaining about some stock that you should have gotten stopped out of weeks ago.

Dan Ferris:                 Right. And you – correct me if I'm wrong again – but I know for me, I think I know what the elephant's going to be between two opportunities, but then the other one winds up far outperforming and the one I thought was the elephant just kind of fizzles out or is mediocre or whatever and doesn't do as well. Is it the same for you? You don't really know the elephant before you get the huge elephant-size return. You're just saying that you can miss trades, basically, it sounds like.

J.C. Parets:                 Yeah, and I do all the time. And it's not so much that I miss them. I'll look at a stock that I can tell you "This thing is going a lot higher," but the risk-versus-reward is not where it needs to be for me to participate. It doesn't mean that I don't think it goes up. It's that I can't manage risk responsibly if I were to enter this position right here, right now. It doesn't mean I don't think it goes up.

Dan Ferris:                 That's interesting.

J.C. Parets:                 I almost guarantee you it goes up. I'm just not going to do anything about it because it's not for me right now.

Dan Ferris:                 That is very interesting to me because a technician telling me that he could look at a stock and say, "That thing is going higher," and yet your process won't let you enter – and you've been defining things like what's making money and what's working and all this stuff. But – so, understand that the context you've built to this moment makes that statement sort of a bit surprising to me, I have to say.

J.C. Parets:                 Yeah, because it all gets back to your earlier statement that it all comes down to risk management. It doesn't matter how much I like a trade. If I can't manage the risk, then I'm not going to put it on. Another great example – we have a naughty list. And this naughty list, these are the types of stocks that we're not going to sell naked puts against. I can look at this thing. I'm like "Dude, we could sell these puts right now, make a fortune. There is no way this thing is going lower. It's going higher." And I could be dead on, but if it's on our naughty list because it's too volatile to sell naked puts in, I'm not going to sell the naked puts and I'm going to leave all that money on the table. And that stock's going to rip and those puts are going to go to zero and I would have made a fortune. And we just don't put it on and we never will. And I see those all the time. It's like "Oh, man, sell those puts all day, baby." But there's no way we would.

Dan Ferris:                 I see. I see. So, in that earlier hypothetical with the stock ripping higher, you're sure it's going to rip higher, but you can't do it. It specifically might boil down to, well, the chartist such that the only way I'd know it wasn't broken is if it falls so far that the amount I think it's going to go up is not so much more than that. Therefore, that's why I can't buy a stock that I think is going to rip higher. Something like that.

J.C. Parets:                 Yeah. It's about the religion. If I can't tell you where I'm wrong, or if I can and it's just so far from current levels that it's too much risk, then there's nothing I'm going to do about it.

Dan Ferris:                 That's it.

J.C. Parets:                 I'll watch it. I'll be like "All right, nice for the people who own it. I don't." But guess what? All the time I own things that other people don't own and I'm making money. And it's my turn. It's OK.

Dan Ferris:                 Right. So, I guess my ultimate point here for our listeners is that the discipline required to do this – and this always comes up too with all the market wizards that we've interviewed and Schwager and everybody, every trader, the discipline to not – in this example that we're talking about, the thing you know is going to go higher that you can't buy, the discipline required to say no to that is substantial. As you've said, human nature is like "I want that. And I want a lot of it." And yet, if you have a real process, as you do, you say, "I don't want any of it." And that is – as far as managing human emotions go, that's a pretty tough thing for a lot of people. Everybody wants the FOMO trade.

Corey McLaughlin:    It's a big one. Yeah.

J.C. Parets:                 Well, you can't take advantage of other people's flaws if you can't control your own.

Dan Ferris:                 There you go. That sounds good to me.

J.C. Parets:                 It starts with being self-aware for your own flaws because we all have them, myself included. They're all there. And I've talked to a lot of psychologists about this for many, many years, because you know how these behavioral people make their way into finance. So, I talk to them. And a big thing that they say that I see in common is "Don't suppress those emotions. Be aware of them. When those feelings come about, expect them because it's perfectly natural for a human to have fear and greed at those times. Expect that. Be aware of them. And then don't act on them. But don't suppress them. Be aware of them." And then, we just take it another step further and take advantage of other people's lack of self-awareness.

Dan Ferris:                 Right. It's a tough game you play, J.C., all you traders, in my opinion, play. It's not for the faint of heart. It seems to many people, intuitively, lots of folks want to do what you're doing, they think. And they read Market Wizards and lots of folks say, "Hey, I want to do that." But day to day, it's a real slog, isn't it?

J.C. Parets:                 Well, if you go in with a plan, then it's not that hard because you just follow the plan. So, you're taking the ideas –

Dan Ferris:                 It's that easy.

J.C. Parets:                 – to take the human element – well, you want to take the human element completely out of the equation. So, if we know – again, getting back to the things we know, we know humans are crazy. And us lizard brains, we act irrationally when our stress levels are elevated. Well, how do we overcome that? Just take our crazy lizard brains out of the equation and say, "OK, we're going to do this. And if it does that, we're going to do this. And if it does that, then we're going to do this." So, we just follow the plan. So, if those things happen, we just do – if we're going to take half off the table when it doubles, then we take half off the table when it doubles. If we're going to get stopped out if it breaks two points below 70, then, whatever, the machine stops us out. Just follow the plan. Have a plan and then make the plan before you enter the trade and write it down. Literally write it with a pen and a paper or type it, whatever it is that you want to do. Have a plan. And then, so when the market's moving and the alerts are going off it's like, "Oh, what was I supposed to do when this stock did this? Oh, let's go to the plan. Doo, doo, doo. Oh, I'm supposed to take half off the table. OK, take half off the table."

                                    And then, in a lot of cases already front run that. So, for example, when we buy call options, I'm always going to take half off the table when that premium doubles. So, if I pay $5 for a call option and I buy 10 contracts, then as soon as I get filled on $10 contracts for $5, I'm going to go out and I'm going to put a good 'til canceled order to sell five of those 10 contracts at $10. So, when it doubles – so that's going to be a resting order, good 'til canceled. So, now even my crazy lizard brain can't screw it up because not only have I written the plan that that's what I'm going to do at that price, now the machine is already set to do it for me. So, now I don't even have to do it.

                                    And then – so, I'll be on the phone with my grandmother or ordering food for the kids or putting on a new trade or looking at some charts and then all of a sudden I'll hear [chime noise]. And I'll look and I'll be like "Oh, we just got filled on half our Tesla calls. Nice." And then I'll just get back to what I'm doing. Nice little dopamine hit, no big deal. And then I just get back to what I'm doing. Or sometimes when the market opens we get stopped out and it's like "Oh, that's a bummer. Anyway, back to…" You use the machines to help you execute the plan. It doesn't always work that way, depending on what your strategy is. You can't always have the machines do it for you. And I certainly can't have the machines always do it for me. But those are a couple of examples as to how the machines do help me.

Dan Ferris:                 All right. So –

Corey McLaughlin:    Yeah, and for the rest of us mere mortal humans who have flaws, you could have J.C. do it for you as well and then just let him do it.

J.C. Parets:                 For sure. Guys, I'm glad that you brought that up. You guys can go to jcsnewsletter.com and get my daily note called "Everybody's Wrong," where we are specifically looking for areas of the market where everybody's wrong. And one of the great things is that the market is always wrong in some place or some places. There's always extremes somewhere. And we're looking for those areas of sentiment extreme so that we can ride those trends the other way.

Dan Ferris:                 All right. This is an excellent moment –

Corey McLaughlin:    "Everybody's Wrong." All right. I like that.

Dan Ferris:                 This is an excellent moment to get into our final question, which is the same for every guest, no matter what the topic, even if it's a nonfinancial topic, same identical question. And if you've already said the answer, feel free to repeat it. The question is simple. And it's for our listeners' benefit, of course, just like everything else we do. And the question is simply, if you could leave our listener with one idea, with one takeaway today, what would you like that to be?

J.C. Parets:                 Go jump in the ocean. Just go jump in the ocean. Underrated. Especially if you're a trader, an investor of any kind, an entrepreneur, if you are in the business of thinking about things, then think about things. Take time out of your day to think. People are like "Oh, I have to be busy all day." If you are a line worker somewhere, like in a factory, and you're busy all day, that's one thing. But if your job is to think and think through things, then you should set time in your day to think about those things, whatever it might be. In our case we're talking about trading and investing, so those are the things that I think about. But nevertheless, go jump in the ocean because it's a great way to think. You're there doing the backstroke in the ocean. You're watching the land or the houses, the hotels, the mountains, wherever you are, and you're just in the ocean. And there's so many minerals in there for your body. It's so mentally therapeutic. You get some sun. You walk on the sand. It's good for your entire body to walk on the sand. What do they call it? Grounding or whatever? I'm not an expert, but take my word for it. Go to the ocean and jump in it, swim, splash in the water. Go. It's not just for 4-year-olds or little kids. Adults need it way more than the kids. Go find an ocean and jump in it.

Dan Ferris:                 I believe in this advice deeply. I don't live close enough to the ocean and go jump in it every day, but we have a pool and we do jump in it every day. And it's a great place to just leave everything else behind. You're not on your phone in the pool and you're not on your computer and you're not reading and you're not doing anything else. You're just sort of letting the sun hit you and the water wash over you. It's great. I totally agree. And I would add to this, J.C., spend time – my thing is spend time under the water. There is something about being underwater that I love. I absolutely love it. And I've got these two little 4-year-old twin grandsons who love it too. Every time they come over they spend half their time saying, "Go under water with me, Papa Dan. Go under water with me." Because they just – we all want to spend lots of time under the water. There's something therapeutic and special and serene about it. But that's a great answer, J.C. Thanks. This has been a lot of fun. I've really enjoyed this.

J.C. Parets:                 No, me too. I've got twin 2-year-olds, by the way. Any advice?

Dan Ferris:                 No, I'm the grandparent, dude. I don't have any of the real responsibilities.

Corey McLaughlin:    Dan's got the easier job. Yeah.

J.C. Parets:                 He gives them back. He gives them back when he's done. Yeah,  twin boys, 2-year-olds.

Corey McLaughlin:    He hands them back when he's done.

Dan Ferris:                 That's right. Give them back. There you go. That's the advice. Don't spend too much time around them. Yeah. All right, J.C. Thanks a lot, man. We will definitely be giving you a call.

J.C. Parets:                 No, thanks for having me. This was great.

Dan Ferris:                 You bet.

Corey McLaughlin:    All right. Thanks.

J.C. Parets:                 All right, guys.

Dan Ferris:                 We should probably start with you. You know J.C. better than me, don't you? You've known him for quite a while.

Corey McLaughlin:    When I first kind of got into the financial research world and newsletter world, I was editing other people's stuff and he was one of the guys that I managed to get paired with early on. And it was kind of as I was getting interested in technical analysis already, but then I came across what he was doing and it was just like "boom." I couldn't imagine – obviously, he has his own way of doing things, but you're able to learn so much from him. And I think he does the same for a lot of subscribers too and his readers. He's got a big following online and has for years and I think that's why, is because he's a teacher of it too, as you heard. And so, that risk-management point that we kind of drove home was something I remember too from working with him, was very specific levels of "Hey, if I'm wrong with this trade, it's done. It's over. We'll move on to something else." And there's plenty of more things you can do. He's not worried about missing out on things, really. I mean, it's really that process-driven.

                                    And like I said, I remember the thing about him every month going through thousands of charts and being like "OK, great. I'm glad he's doing it so I don't have to." So, if you're into technical analysis, he's a guy you kind of should follow.

Dan Ferris:                 Yeah. And the perusal or whatever he does of thousands of charts over a pretty short period of time shows you that trading is not about – it's about making money, of course. But to do it, you can't just be – you can't just get into it to make money. You have to – to do it right, you're going to have to fall in love with what is for me and for other people an incredibly tedious process that I will just never do. And I'm sure what people think I do – looking at 10Ks and studying fundamentals and trying to find great businesses –  is also a tedious process. Whatever you're doing. I remember thinking when I saw the film Amadeus and they were showing Mozart just sitting there and he said, "Well, the ideas just come to me and the rest is scribbling and bibbling and bibbling and scribbling," and I thought "Yeah, if you're a fly on the wall of a great composer or a great businessman or a great computer programmer or a great musician or whatever it is, you'd be bored out of your mind 99% of the time watching them work, right?"

Corey McLaughlin:    Yeah.

Dan Ferris:                 So, you've got to be in love with the process. If you can't fall in love with the process, you will never get the result of the increase in wealth. So, that's – I think that's an important point. And J.C. embodies that. He projects that because he very obviously loves what he's doing.

Corey McLaughlin:    Yeah, and he'd tell you about the mistakes and things he's learned along the way too. And he writes about those things too and shares those lessons. And so, yeah, I mean, and we should point out we're talking about, it's a very kind of specific technical-analysis trading strategy that he's doing. This isn't like – you're not doing this with your whole portfolio, hopefully. You're trading what you're comfortable with trading. And it's a process to do that. And at the same time, I think, he kind of touched on this briefly, of comparing the different sectors and asset classes or whatever it may be, you can really kind of pick up on those trends and pivot points, I think, as well as it's also valuable from like a macro perspective just seeing – really just looking at those numbers. He just cares about that and that's kind of the religion right there. And whether you believe that or not or want to believe that or not – if you do, it can reveal certain trends and pivot points. And that was really an eye-opener to me when I first started working with him too.

Dan Ferris:                 Yeah I'm glad you mentioned macro because from whoever, like Soros and Druckenmiller all the way to people that we've interviewed, like Hugh Hendry and Raoul Pal and others, all these macro guys are also paying a lot of attention to what's happening on the chart because they have the macro thesis and they're waiting for the market to confirm it. Or they're looking at the market price action to tell them something about it at least. So, also a good point. Anyway, it's just fun talking with the guy and it was fun having him on the show. He's a real fun guest, and I hope everybody enjoyed him because we're probably going to invite him back because it's better to have a guest that you have a lot of fun talking to than somebody else.

                                    So, that's another interview, and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we really, truly did. We do provide a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy. If you liked this episode and know anybody else who might like it, tell them to check it out on their podcast app or at investorhour.com, please. And also do me a favor, subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram; our handle is @InvestorHour. On Twitter, our handle is @Investor_Hour. Have a guest you want us to interview? Drop us a note at feedback@investorhour.com or call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my co-host, Corey McLaughlin, until next week, I'm Dan Ferris. Thanks for listening.

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