Transcription
There are quite a few juicy setups in the market right now, as August volatility continues to heat up. We also have a huge amount of news this week, including inflation-related news. This can obviously move the volatility index, known as the VIX, and in turn, move the markets as well.
The Fed is now projecting three rate cuts in September, October, and December. This is after Trump has nominated Steven Moran to fill an empty Fed board of governor seats. And if tariff-related news couldn't get any crazier, Nvidia and AMD are now required to pay the federal government 15% of all of its China chip sales revenues.
Now, Nvidia and AMD, they had restrictions on selling chips to China. The government lifted some of those restrictions. So, Nvidia gets to sell its lesser H20 chip, and AMD gets to sell its lesser MI308 chip, by far not their most powerful AI chips, but still very powerful chips. And the government wants 15% of those, kind of like the Sopranos.
And of course, I'm going to be giving you my technical analysis and my outlook on the markets, in addition to, as I said in the beginning, some of these setups that really look exciting here, in my opinion. So, let's make sure that I get you guys right for the trading week with everything that you need to know. Let's get right into it.
So, as I said, this week we have a ton of news. This is in contrast to last week, where we actually did not have a ton of news, and the trading day intraday was not, it wasn't the best price action intraday, in my opinion. But this week, we have CPI on Tuesday, and on Thursday, we have PPI. On Friday, we have retail sales, and we also have consumer sentiment.
Now, CPI is expected to come in at 2.8% versus 2.7%. It'll be interesting to see if that happens. We will also get another round of jobs data, as unemployment claims will come in on Thursday. Now, unemployment claims were terrible last week, showing that there may be some cracks in the employment numbers, as they came in way above expectations. 226,000 unemployment claims versus 221,000 expected.
Of course, I will be covering CPI for you live on this channel at 8:30 a.m. on Tuesday. You definitely want to stick around for that. And now, the Fed is expected to cut three times. In September, we are going to likely get a 25 basis point cut. In October, another 25 basis point cut, taking us down to the 3.75 to 4.00 points in terms of the Fed funds rate. And then in December, likely another cut, taking us down to the 3.50 to 3.75.
Now, the reasons for this are twofold. One, like I said, the jobs numbers are starting to show potential cracks, and the Fed might want to get ahead of that. They don't want unemployment to get out of control and then keep rates where they are and potentially exacerbate the issue. But secondly, Trump has nominated Steven Moran to the empty or the vacant board Fed board of governor seats.
Now, the reason that this is significant and does give JP Morgan more of a reason to boost its expected number of rate cuts this year is because Moran is very much loyal to Donald Trump. And there are seven Fed board, there are seven Fed governors that vote on whether the Fed should cut rates, keep rates where they are, or raise rates. And if you guys remember in the last FOMC, there was a historic event. For the first time since 1993, two Fed governors have dissented on a policy vote. So, these two Fed governors actually wanted the Fed to cut, while the rest of the Fed members, Fed governors, and Jerome Powell had voted to keep the policy rates where they are. And so now, if you have a third governor who, in this case, this person is sympathetic to Trump, so you can surmise that he would likely favor a cut, then that will create even more dissenting voices in the Fed and can influence the Fed to actually implement more cuts than the Fed initially wanted to, which is why we are now seeing calls for three rate cuts this year, as opposed to two or one.
Now, before I get into the stocks and the charts, we have to talk about this. Nvidia and AMD right now are required to pay the federal government 15% of China chip sales revenues, which is wild. I don't think I've ever seen a setup like this before where companies, private companies, have to pay the government money. But I guess, you know, this is part of the whole tariff plan here. And we still don't know what the tariffs are going to be on semiconductors, right? We heard rumors that there would be a 100% tariff that would be announced this coming week on semiconductors that are not made in the US. And since Nvidia and AMD both work with Taiwan Semiconductor, we were thinking that maybe that, you know, they would be part of that 100% tariff. However, in my opinion, reading this right now, I don't think that Nvidia and AMD are going to be subject to that larger tariff. And this seems like an agreement that Nvidia and AMD agreed upon with the president and the administration in order to avoid larger tariffs.
So, in terms of whether this is bullish or bearish, I really don't know how to quantify this. Now, the reason I'm saying that is because Nvidia and AMD were restricted from selling to China. Now that the federal government has lifted those restrictions on certain chips, lesser powered chips than their most powerful ones, right? That means that opens up a new revenue stream. However, that revenue stream is going to be penalized or is going to be taxed 15%. So, they are going to increase their revenues, but those revenues are going to be taxed or capped by this 15% that would otherwise be attributed positively to Nvidia and AMD's margin. So, I don't know. I actually don't know how much revenue we are talking here. I guess we will see in their next earnings report. So, I'm not going to call this bearish, even though a lot of people online are trying to say that this is overly bearish.
All right, so before I get into the stock setups and trades that I'm looking at this week, let's just talk about the overall market real quick. So, we are just hovering. On the left, I have the SPY. On the right, this is the Dow Jones, but we are hovering. The SPY is hovering around that 20-day moving average. Now, we did pop below it, and it looked like we're going to bounce off of it and continue lower. And as you guys know, we do have quite a few imbalances down here to address. Plus, the SPY was coming from major overbought territory. It hit the overbought level on the RSI a couple of times. But if you zoom out a bit, we have been consolidating at this level since July 16th, so almost a month in this range here.
And with earnings season almost over and major news here coming up, and remember, we do not have an FOMC in August. So, the only real news on the inflation Fed front that we have in August is CPI, and we don't have a Fed meeting until September 17th. So, it really depends on how these numbers come out, on how the unemployment claims come out, obviously, on how the CPI comes out, and then as well as to a lesser extent, consumer sentiment.
Now, I talked about this before, but I have done some research on how the Dow Jones does often preempt the drop in the other indices, QQQ and SPY. And until the Dow Jones does the same thing as SPY and QQQ, where it, you know, bounces below the 20-day moving average and then healthfully gets above it. If the Dow Jones keeps getting rejected at the 20-day moving average, then I think that that could set up the start of a pullback on the S&P 500. If the Dow Jones does get above this and close above it, then I think that the volatility, or at least the downside potential for a pullback, gets delayed until we get closer to September.
Remember, August and September are the two worst months in the stock market. However, as I've shown before, there have been times, if we take a look at the last five years, there have been times where August actually ended green, and then we got a more severe correction in September. Now, I don't think we're out of the woods here yet, and I still think there could be a chance for a drop in August. Especially if you look at the divergence here, where the S&P 500 on the left made a lower high, and the NASDAQ on the right made a slightly higher high, as we wicked above the July 31st high.
Now, I do still have a hedge with debit put spreads on the indices, and those spreads are slightly down at the moment, but I will likely continue to hold it until I see some movement in the Dow Jones. And if the Dow Jones gets back above that 20-day moving average, then I think that the market can continue to rally for a few more weeks until we get to that September time frame.
All right, now onto the stock opportunities. I just want to give a moment and congratulate a few more members. Blinky, who took our SOXL trade, we bought SOXL at $7, is up $175K this year from SOXL. I do think that there is a massive opportunity if we can get a retracement back down to the teens. And shout out to Kush, who finally learned how to manage risk properly within the confines of these swing trades and crawled out of a hole. His account now, from negative to positive 7.85% year-to-date. A lot of you might think that this is not impressive, but for someone who was negative to still stay focused and use risk management to crawl out of a hole, super proud of this guy, man. And Jay, finally putting in his biggest trading month ever at $21,000. This is what I love. Everyone has a different budget. They're coming from a different place. They're coming from a different experience level as well. Everyone is unique. And I just love seeing people put in the work. I'm very closely tied to the community. I notice it all. I see people's improvements from what they post, the questions they ask, the risk management that they institute when they didn't have that much risk management before. So, super proud of the community, man. And if you want to sign up and trade live with me every single day, wop.com/thetravelingtrader. I go live every single day at market open.
All right, let's get into the plays here. So, the first chart that really stands out to me, and I was looking at this, was Coreweave, because I noticed that it was in a downtrend. Obviously, this is one of the AI hype stocks. It doesn't mean that it's a BS company, but it's a growth stock, and we were in this major downtrend. I did set an alert for if we broke out of this trend, and on Friday, we broke out of this trend with a 7% gain. Now, I admittedly wrote this stock off, but I started doing some research this weekend on whether there's an opportunity here, not only for a trade, because obviously this right here to me screams like a very low-risk trade setup. We do have earnings coming up, though. More on that in a second.
Now, Coreweave hasn't been public that long, but if you look at its revenues, $15.88 million in 2022, $229 million in 2023, $1.9 billion in December, and $2.7 billion trailing 12 months. So, their growth metrics are as impressive as any growth company. Then when I started digging into what the company does and who their customer base is, Microsoft is a major Coreweave customer. In 2024, Microsoft accounted for 62% of Coreweave's revenue. And this is their first, basically their first Mag 7 customer. Nvidia owns 7% of Coreweave and it has a close partnership. OpenAI uses Coreweave as well. They signed a $12 billion, five-year contract with Coreweave.
But if you're wondering what Coreweave does, obviously you could search on your own, but in a nutshell, what they provide is AI infrastructure. However, the way that they differ from AWS and Azure and Google Cloud is they provide what is called bare metal GPU access. So, Google, Amazon, Microsoft, what they provide are cloud-based, cloud-based AI infrastructures, and you do have a what you call a virtualization layer on top of that. Now, that works for most companies. However, that doesn't provide the maximum compute because there's latency when you apply a virtualization layer on top of that cloud-based AI infrastructure. But Coreweave offers bare metal GPU access. You could think of this as direct access to the compute that your company is, that your company requires in order to run complex operations. So, they sort of fill this void where Microsoft, Google, and Amazon, they're not incentivized to run bare metal GPU access because you can't really scale. They can scale their cloud-based AI infrastructure a lot faster and a lot more than a company can scale a bare metal type of infrastructure. So, you can see here, bare metal infrastructure delivers up to 20% better performance for large-scale AI training, and this is why OpenAI went with Coreweave. There's also a cost efficiency component, high-speed networking, rapid deployment, and scalability.
So, I've talked about my investing style before, and I really like to invest in leaders in the space or monopolies in the space. So, I asked Grok who are its competitors, obviously the major hyperscalers, Amazon, Microsoft, Google, but it is a different type of AI infrastructure. So, if a company's not looking to go the hyperscaler route and they need more optimal compute or more dedicated compute, then they're going to go with a bare metal solution. And in the bare metal solution space, Coreweave is head and shoulders above the rest. Like Lambda, like Paperspace, by Digital Ocean, like Vast.ai, Coreweave is here, and the rest of them are here. So, it is kind of a monopoly in their own little niche.
So, not only do I like it as a small investment, Whoa, there's something really weird going on with the lights here. Not only do I like it as a small investment, I'm not going to throw all my money into Coreweave, but I might throw a small percentage into it because I do think it's a hyper-growth company, and we're still in the very early stages of AI, in my opinion. But I think that there is a trade setup here. The only problem is that it reports earnings on August 12th, which is a Tuesday. So, I'm personally, I don't know. I'm undecided on whether I want to trade calls for its earnings or whether I want to sell cash-secured puts potentially for stock ownership in case the stock drops. So, if I sell the 100 cash-secured puts on Coreweave and Coreweave falls, then I will get assigned Coreweave shares at a discount. If after earnings Coreweave rallies, then I will get paid 100% on those cash-secured puts that I sold. What I'm hoping happens is that the stock actually doesn't move for earnings, and that way I can trade a break and retest setup on Coreweave because technically it looks really good, and I just told you what I liked about the company fundamentally. So, that one's definitely on my radar.
Uber is on my radar as well. Now, I've been in Uber since the low 60s, but Uber just got a couple of major price hikes or price target hikes, and it did a massive buyback, and it has generated more cash than it has ever generated before. It's growing at a pace that it's never grown at before. I mean, by all metrics, Uber just looks like a powerhouse of a company. Here, you could see its revenue growth: 3.8, 7.9, 10.4, 13, 17.4, for 32, 44. I mean, it's just growing astronomically. And if we look at its cash from operations, it is generating, it's a cash-generating machine. Went from having consistently negative cash positions to now generating almost $9 billion in cash just from operations. I think Uber is easily a $100 stock, if not more. So, I am definitely looking for an area to dollar-cost average, and I think pretty much it is in that area currently. You could see the previous high here at $87, which is where we bounced off of. I don't mind dollar-cost averaging into Uber here. It did experience a little bit of profit-taking on Friday. Last Friday, as of the time of this recording, was down about three and a half percent. There might be a low-risk, high-reward trade on Uber, but I do want to see how the indices fare first and how CPI fares first, because if we do get an overall market pullback in August, then I think that that might affect most of the mega-cap or mid-cap stocks. So, depending on how Monday, Tuesday look, I might send out a trade on Uber. But in terms of an investment, I like the dollar-cost averaging level here.
Now, I told you guys Dell was my sleeper AI pick. And I gave you guys this in a previous video, I don't know, a month ago. We have now broken out of here, up 10% since I told you guys about Dell. And I actually think that Dell is going to continue growing and has a chance to get back to its all-time highs near $176.
XLV, which is the healthcare sector of the S&P 500. I waited patiently for this, and it finally got to my long-term trend line. If you look at this trend line here, this trend line has been active since 2009. Now, we are back in this consolidation level that we saw all throughout 2021. And I don't mind dollar-cost averaging in XLV here.
Now, I do not expect healthcare to act like a growth stock. Meaning, I don't expect healthcare. A lot of people are pouring money into United Healthcare or Novo as if it's the next Nvidia or something. There is a ton of value in those stocks, and there is a ton of value in healthcare, but it's just the momentum is not with you at the moment. I think that if you are looking for value stocks and you're looking for long-term value, for sure there are some names here in healthcare or the healthcare sector itself. But I think people are expecting that somehow United Healthcare is going to run in the same way that Meta has or Nvidia has. I don't know where they get that notion. In the long run, I think if you bought United Healthcare now, or XLV now, or Novo now, I think you will make money in the long run. But you have to be prepared to hold these things for value for a very long time. There's a very big difference between a value stock and a growth stock. Growth stocks are generally the ones that people like because the parabolic moves can happen quickly in the right market environment. A value stock might be something that you have to hold for a very long time, but eventually, you squeeze out the value that was in there when you bought them at a discounted price.
And Tesla, this setup here, everyone and their mom is looking at this setup. Still have my Tesla shares from $220. But what I'm looking to see is, do we get rejected from this very clear trend line here and come back down, or what I want to see is a breakout from here and a retest? Because at that point, I think we finally start tackling some of these equal highs, like the equal highs at $367. However, I don't like to prematurely trade. There's a lot of people that bought Tesla calls here. I don't like to prematurely trade Tesla like that. I have the shares, but I would much rather wait for a break and a retest.
Now, SMCI suffered because it obviously missed revenue expectations and it missed Q1 2026 guidance. But if you look closely at its guidance, you could see that forward year 2026, its guidance is significantly higher than expected. So, it is $33 billion for the entire year. It just gave a less than desirable outlook for Q1 of 2026. But forward year 2026, its forecast came in at $33 billion. And this was against analyst expectations of $29 to $30 billion for forward year 2026. So, I do think that there is a right price to pick up SMCI. Once again, you guys know that we traded this pre-earnings. And if you look at the bottom of November 2024 and the high here that we achieved in February, we are inching towards that 0.5 level. That 0.5 level is where I will be happy to dollar-cost average. But if we take, if I'm being more specific, I do think that we can fall below these equal highs here on SMCI into this weekly fair value gap. So, somewhere between $33 and $39, I will be interested in picking up SMCI shares for the long term. I'm not going to preemptively on SMCI try to produce a trade here for SMCI right now. I'm just talking about dollar-cost averaging. You're not going to be able to place a trade on a falling knife, or at least an optimal trade, at that.
Anyway, traders, everything you need to know in the markets this week, including the stocks and trade setups that I'm looking at. Obviously, this is just a handful of what I'm looking at. I can't make a video on every single thing that I'm looking at. That is why I go live every single morning at market open to tell you what it is that I'm looking at. If you want to join me live every single day at market open, and you want to trade with me, and you want access to the swing trades, the day trades, the stock alerts, the long-term buys, the long-term macro analysis, link is in the description. Click, come and join. I have no idea what's going on with this line here on my face. The window is hitting just like at the right slit that I can't close it unless I have, unless I, you know, buy some additional curtains. Either way, subscribe to the channel, hit that notification bell, stay safe out there, traders. Peace.