Chris Vermeulen, Founder and Chief Market Strategist of "The Technical Traders.com”, joins Yahoo Finance’s Seana Smith to discuss his thoughts on the markets and what he thinks will continue to impact them going into the new year.
SEANA SMITH: We want to bring in Chris Vermeulen. He's a Founder and Chief Market Strategist of TheTechnicalTraders.com. And Chris, I know you take a technical view when it comes to the market. The volume has been extremely light this week. What do you make of the action that we've seen over the past several trading days? And what's on your radar here as we enter into the new year?
CHRIS VERMEULEN: Yeah, well 2020 has been a pretty wild year. Obviously we've seen the NASDAQ really lead the way in terms of the indexes. And that's because it's tech-heavy, it's biotech-heavy. And those are two sectors that have done very well on the year.
We have been seeing a little bit of weakness really since the September top, where investors and traders aren't that interested in getting into the technology. We've seen the NASDAQ kind of lag and in the tech sector in general. But I think going forward, we're still in a very tech-forward looking economy. And I think it's going to do really well come 2021. Because really the lockdowns, businesses are more strapped to the internet now than they ever have been.
And it's really becoming a new way for a lot of businesses. So I like the technology looking forward. And obviously biotech is here, is going to be doing pretty well here too.
SEANA SMITH: Chris, within those tech names, are you betting on the leaders that we've seen so far over the last 10 months? Or is it some of the undervalue names that you're finding reason to buy at this point?
CHRIS VERMEULEN: All right, so I use a strategy called the BAN trading strategy, which stands for Best Asset Now. And it's a relative strength strategy. The key is to always be playing the leading sectors. You want to be in the market leaders, because they're more likely to outperform the market in almost all situations.
So you've got to be long the leaders. When you look at the market, technology was good last year, or this year. But PBW is a clean energy ETF up over 200% on the year. If you look at the opposite end of the spectrum, one of the worst sectors, which is the dirty energy oil holders, it's down minus 42%. So huge spectrum between the worst and the best sectors going forward.
So I definitely played the leaders. I'm always looking to be in the top three sectors. And I think in 2021, we're going to see some really good moves continue in those sectors alone, the clean energy. There's a few other sectors that are looking primed and ready to go.
So when we look into 2021, you know, we're looking at GDX or SLIJ, which are the silver miners. They've been building a very strong pattern. Silver miners look very strong, and of course, we've been having some cybersecurity issues. And so there's an ETF called HACK, H-A-C-K, that sector ETF, or that sector, is going to do I think very well in 2021 going forward.
And so the key is to try to own these leading sectors and to identify them so that you can ride these waves. Because 2021 is going to be a very volatile year. We are far from over. Volatility is good as long as you're in the right sectors and you know how to manage positions in case things turn south. But it's going to be a pretty exciting year for traders.
SEANA SMITH: Chris, it certainly sounds like it's a stock pickers market, at least from your view. But I'm curious with-- we are seeing a bit of pressure today, but we're clearly not far from those all time highs. We had the Dow closing at a record yesterday. Are you cautious or a little bit nervous at all that there's too much exuberance in the market at this point?
CHRIS VERMEULEN: I am, actually. I just talked about it the other day with subscribers about how we're actually in a very similar situation. When you look at the technicals and the underlying-- all the underlying equities, we're very similar to what we saw in February this year. Early June or July was there-- a June-- and also in September or August. Each time it led to a market pullback.
So I do think we're about to see a bit of a pullback. Everyone's kind of been piling in. I think we're running out of steam to the upside. So I'm anticipating a little bit of weakness come January. And we really need to see how January closes, because it's really like kind of like an opening year range. Where January closes, positive or negative, typically sets the tone for the rest of the year. So January going to be a very big month for both traders and investors to get a feel of how the year is going to turn out.
SEANA SMITH: Chris, how much of that has to do with the vaccine rollout? Because we've been covering the fact that we are well below what the initial expectations were just in terms of the number of people vaccinated by the end of the year. This could potentially be a huge headwind for the market going forward. So I'm curious how you're pricing that into your expectations?
CHRIS VERMEULEN: Yeah, so I don't price in fundamentals or news like that. But I would-- because we follow price as a technical trader. That's really the key for what I do. But when you look forward with the vaccine and the virus, I think it's going to be a huge headwind. I think people don't realize how hard it's going to be to vaccinate everyone. It's going to be a lengthy process.
Strain two is coming around. We're in prime time for it to spread. I think this lockdown-- which lockdowns keep getting stronger, more restricted, businesses and people-- I think it's going to drag out. And we're going to see it effect the first and second quarter of the year. Which people are already looking beyond that, but I think this is going to drag out a lot longer than people think.
So I think it's going to put some pressure. Come January, February, it might be a little bit of a repeat in terms of some selling if things continue to ramp up here with lockdowns and virus spreading.
SEANA SMITH: And Chris, speaking of lockdowns, I think the big question here is the impact that that's going to have on the labor market? Because we certainly have seen a recovery there. So pretty significantly over the last several weeks and the last couple of months. Do you foresee that I guess continuing, that trend here, at least over the winter as we see the number of cases surge?
CHRIS VERMEULEN: I do. I mean, when you look at the jobless claims like the four week average, it's climbing. It's continuing to go up. We've got more strict lockdowns now than we've kind of had before. At least in a lot of different countries, including Canada. People just can't work as much as they want to. I mean, they want to but they're not.
So we're going to see this continue to rise. And this is what I mean. It's going to drag out a lot longer. People are going to be suffering without income. Small business owners are just getting absolutely annihilated-- restaurants and like you know, mom and pop shops. I mean, this is the worst thing that could ever happen.
And it's going to be here I think for another three or four months longer than people anticipate. And it's going to hit the market eventually.
SEANA SMITH: All right, Chris Vermeulen, Founder and Chief Market Strategist of TheTechnicalTraders.com. Great to have you, and I wish you a very happy new year.
CHRIS VERMEULEN: Yes, same to you. Take care.