Interview With Stephen Kalayjian

Mar. 13, 2020 6:13 PM ET
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Gold & Precious Metals, Commodities, ETF investing

Contributor Since 2017

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  • Kalayjian thought the market was set for a significant pullback before the coronavirus crisis.
  • MontesDeOca felt the crisis has revealed serious weaknesses in the global economy.
  • Kalayjian feels we will get through this and that the government will act as a backstop for the market.

Our CEO, Patrick MontesDeOca, recently interviewed Ticker Tocker co-founder and veteran trader Stephen Kalayjian.

Kalayjian discussed his start on a trading floor in New York. His father introduced him to trading and got him his first job. Kalayjian tried college, baseball and football, but ended up working on the trading floor in New York at the COMEX. He learned patience and consistency. One trader said he would make or lose $100 per day, and then stop. He later became a multi-millionaire following that philosophy. He started Tiger Securities with the same philosophy of being flat at the end of every day. He never had a losing month or year. He traded just under 2 billion shares with a high winning percentage in the upper 90s.

For eight years Kalayjian analyzed the markets visually and saw patterns repeat themselves constantly. All the markets have patterns that repeat. He started his own charting application with his own indicators. He was able to identify trends and reversals.

Most such systems use back testing, by looking to see if the system worked looking back. Kalayjian’s system and the Equity Management Academy’s Variable Changing Price Momentum Indicator (VC PMI) are based on forward testing: how well the system predicts the market. Kalayjian said his system was working well in multiple markets. His system gave him the market direction.

Turning to the market, gold is up $24, trading last at $1696.80. Silver is at $17.51, up 24 cents, and the Dow Jones is down about 1,000 points. A report in the Daily Mail said that US hospitals are preparing for 96 million coronavirus infections and nearly half a million deaths, leaked documents revealed. A University of Nebraska medical professor wrote the report. He expects more than a million Americans to be hospitalized. The crisis could be ten times worse than the flu season. This leaked report flies in the face of President Trump’s assertions that the coronavirus will not be very bad at all and that it is under control.

“Health is your wealth,” Kalayjian said. “When the S&P hit the 2853, I thought the Fed was going to cut interest rates, but that really doesn’t do anything.”

Kalayjian thought the market was due for a significant pullback anyway. From the 28,000 level to 28,400, he thought we were due for a correction.

Some 61,000 people die from the flu in a year, but, Kalayjian said, that as the warmer weather comes in the spring, the coronavirus may go away. Most of those who died were elderly or had significant health issues. It is still horrible, but the whole coronavirus seems to be blown out of proportion.

MontesDeOca said that the VC PMI takes into account the fundamentals, so he pays little to no attention to such fundamental events. He believes the numbers may be exaggerated in relation to the virus. But as a trader, the key to focus on is “the psychology of the people who can drive the situation to an extreme,” he said. He argued that the coronavirus was the trigger that revealed serious weakness in the equity markets in relation to debt.

Kalyajian said, “Whenever you have a health crisis of this are going to have a major effect on the economy.”

Kalayjian has never seen paper towels, toilet paper and bottled water out of stock at Costco, when there is tap water. Not even tuna fish was available. “I am really miffed at the mindset of what is going on here.” He related it to warnings in the Northeast that 3-feet of snow is coming and you can’t even get near a supermarket. Then they get two inches of snow. “I am not really one to panic,” Kalayjian said. “I believe that the just clueless. A private company is more apt to handle the situation than the government can. I mean, look at Katrina….As long as you take precautions,” such as wash your hands and don’t touch your face, you should be alright. “I love the volatility, though, in the markets.”

Kalayjian said that “people just don’t know how to take profits. We had a 36% run, from 17,000 under almost 30,000 yet it’s still not enough for people.” He stressed, take your profits. He knew a pullback was coming. He thought we are going to continue making new lows. He thinks the market could go down 4,000 points.

MontesDeOca asked if this is a correction in a bigger bull market or we headed for a bear market? Kalayjian said, “If you can survive what happened in 2008, the government is always a backstop to this market.”

MontesDeOca said Dodd-Frank and other rules added more safety nets under the market since 2008.

Kalayjian said, he believes that 20,000 could be a scenario. Many years ago the Dow hit 16,500, and many talked about the end of the world, yet the market bounced 2,000 points. He wonders where some of the low numbers mentioned come from.

Kalayjian does not think the Fed knows what they are doing. “I think cutting 50 basis points was the worst thing in the world...It caused more fear in the market than good.” And now, where can they go? Negative rates?

MontesDeOca said there is no more room in terms of interest rates, if the crisis worsens or if there is a deflationary cycle. Kalayjian thinks the US will recover, especially since the US is the leader economically.

MontesDeOca believes we are seeing the deflationary consequence of the virus, but in the longer term the result is going to be inflationary. Kalayjian believes gold is rising because of a flight to quality, but also because the Federal Reserve is in reduction mode versus increase mode.

Kalayjian does not think this crisis will scare people out of the market. “A lot of people just decide to buy” when it is like this.

“Most people can’t trade this because they don’t have the skill set, the technology or understand how fast these markets are,” Kalayjian said. All the forward earnings that these companies gave, are all going to be downgraded. All the analysts are going to have to reduce their own expectations for this quarter.

MontesDeOca asked how this crisis might affect the election in November. Kalayjian thinks if he handles it well, it could help Trump. But he has to be proactive and get the right people in. He stressed that a president has to react very fast to a crisis like the coronavirus.

Kalayjian said he built Ticker Tocker so everyone could get the content they needed, whether novice or professional, short, medium or long term, to help make the right decisions.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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