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Katherine Ross: The Dow had been up for eight straight days until we got this morning's reaction to the Saudi Arabian oil attacks. Art Hogan, Chief Market strategist for National joins me. All I want to ask you, do you expect that this move down to continue?

Art Hogan: It's interesting. So we've had a market that's gotten a bit stretched. I certainly think that when we look at what's happened for the entire month of September where we're reversing that choppy actually is on August. And I think all of that's around the better tone on trade with China. So I think that, you know, for a market that has gone up as much as it has in a short period of time, we've probably have to take a pause here. Whether the causes of spike in oil prices or anything. I think tactically we've just gotten a little overbought so I wouldn't be surprised to see a bit of a pullback this week.

Katherine Ross: So last week we got a lot of talk about free market pundants about the market rotation. Now in layman terms, can you describe what a market rotation is?

Art Hogan: Sure. So what had happened for most of this year is that there's a small group of very popular stocks, you know, whether they are the ... stocks are the high momentum security software names. A lot of the stocks that had done very, very well had gotten very overbought. There's a lot of sponsorship on one end of a barbell of just momentum stocks. So think about Apple and Facebook, think about Nike and Lululemon. All the very popular household names. At the other end of that barbell was the defensive groups. That's the group that pays good dividends. So you had utilities and real estate investment trust and consumer staples and those were the two bar bells that were holding up this market for almost all of this year. Last week because of the fact that the US 10 year yield bottomed down in August and started ticking higher yields were actually going up from about 1.47, about 1.7 which is a big move in yields. Folks started saying, perhaps we don't need to be in these two credit trades anymore. Let's think about this stuff that's in the middle, like all the things that haven't had sponsorship this year. Investors have been not looking at financials. They got a bit last week. Energy stocks got a bit, healthcare stocks did well. So I think it's a rotation out of what was very popular for most of this year into it was very unpopular and that lasted for most of the week.

Katherine Ross: So you think this market rotation was expected?

Art Hogan: Well I don't know if it was overdue for sure, but evaluation basis, if you look at the multiples that the momentum stocks were trading at versus the multiples that the unwashed masses, the things in between we are trading at, there was a huge discrepancy and that doesn't usually last for very long. So for example, at its peak in August, the S and P 500 was 7% points higher on a year to date basis than the Russell 2000 that's never that wide. And there's a lot of reasons for that. But the Russell 2000 has a lot of domestically focus, mid cap stocks that were just getting ignored and what was really a chase for defensive and a chase for momentum.

Katherine Ross: As an average investor, how do I find value in a market rotation?

Art Hogan: Well, what'd you want to do is see what hasn't performed and I think a lot of that was happening last week. People were really sharpening their pencils and saying, hey, what's been ignored for most of this year? Energy certainly fell into that category. Financials because of the low interest rates. We're in that category. Most of healthcare because it's an election cycle that we're in and we're concerned that there's going to be some pressure on drug pricing and reimbursement for health care in general. Industrials, a lot of the industrial complex hadn't really done well and the reason for that is when you think about a slowing economy, whether domestically or globally, you say to yourself, well, with low interest rates I should probably have some dividend protection and we should also own those stocks that will do well regardless of how fast the GDP growth is. And that tends to be those brand leaders and the very popular household name. When the yield on the 10 year started creeping up, people start thinking maybe the solidarity economies over down, maybe that trade is behind so people really started looking at what hadn't performed well this year. And it's interesting when you look at the S and P 500 last week before the rotation started, but 200 stocks are trading 10% below their all time highs when the S andP 500 itself as an index was less than a percentage point. So there's a lot of things to pick through and a lot for investors to find value in.

Katherine Ross: So before we go, I'd have to ask, what are you looking at this week in the markets?

Art Hogan: You know, essentially if you asked me that before last night, I would tell you it's going to be what the Fed does and what Jay Powell has to say and where we are with interest rates. And I think consensus is they'll probably cut rates again, although I don't think they should. That has shifted. Now we're gonna have to become oil experts this week. Apparently we need to know, for example, that the percentage of personal consumption that is energy related for you and I is only 4%. So we're going to hear a lot of alarming things about higher energy prices, slowing the economy down even more, which is true, but it's not as drastic as some of the headlines will be today. We're going to keep a close eye on what oil does. You're going to hear other countries that come out and say, Hey, we've got spare capacity. We're going to bring that online. You're gonna hear about how much storage Saudi Arabia has, how much oil and the storage China has, how long that will last. And you're probably gonna hear about the Strategic Petroleum Reserve, which is something we learned about in the fifth grade. The president's probably gonna use that. We store oil. We can release that onto the market if we think there's a need for it. And you have to understand the US is the swing producer and energy right now. We've had an amazing, scientific discovery and the way we find hydrocarbons in the ground and bring it to the consumer, and more of that will be happening. So the fourth quarter of this year, if there was gonna be a bad time for an oil stock, is the best time because a lot of the energy that was stuck in the Permian basin is actually coming out with get pipelines that are going in. So the logistics have gotten better. So I think we're gonna hear a lot about energy. It's probably going to be about that and for most of the week and tell it's not, then Jay Powell will cut rates or he won't. So it's going to be a busy week.

Katherine Ross: All right. Oil in the Fed. There we go. Thank you so much.

Art Hogan: Thank you so much.

Oil is dominating headlines.

Stocks were falling Monday, endangering the Dow Jones Industrial Average's eight-day winning streak, after oil prices surged the most in more than two decades following an attack on two key Saudi Arabian oil facilities.

TheStreet's Katherine Ross sits down with Art Hogan, National Securities' Chief Market Strategist, to break it all down and more.

Here's an excerpt fro the video:

"It's interesting. So we've had a market that's gotten a bit stretched. I certainly think that when we look at what's happened for the entire month of September where we're reversing that choppy actually is on August. And I think all of that's around the better tone on trade with China. So I think that, you know, for a market that has gone up as much as it has in a short period of time, we've probably have to take a pause here. Whether the causes of spike in oil prices or anything. I think tactically we've just gotten a little overbought so I wouldn't be surprised to see a bit of a pullback this week," Hogan said.

For more, watch the video above. 

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