Transcription
Today's number, guys, might be kind of shocking. What happens when we see a market rally almost 2% and then drop 2 1/2 by the end of the session? Well, one thing's for sure, volatility is back. And this means some of the biggest darkp trades ever recorded are starting to appear on some of the hottest markets, including the South Korean market and hardware stocks. And, of course, now Nvidia. This week's the big earnings, and this could be a huge catalyst. So, join us as we go through stocks, commodities, and cryptos. No matter whether you're an investor or trader, this one is not to be missed. See you soon, guys.
Well, welcome back, everybody, to one of the largest daily shows on the planet when it comes to everything to do with markets. It was down for big tech and up for certain defensives as we started to see a market present a very different story than what we've been seeing over the last couple of weeks. And to make matters even more interesting today, we need to talk about exactly what's going on underneath the hood. Because it might shock you how much margin is currently involved in these markets and the fact that momentum has now been running so quickly and so fast that even Goldman Sachs believes it's in the top percentile.
Let's kick things off here, though, with a couple of big posts around the American consumer because, as we know, we are in a K-shaped economy. Some people are doing really well; the rest are not doing so well. And this is leading to staple stocks breaking to all-time highs as we see Costco going through again.
Now, I actually wrote a bit of a note about this over on our X account. Links in the description down below. And one of the reasons why we're doing this is, of course, because when we see discretionary stocks dropping and we see staples stocks going crazy, it can mean that Wall Street is actually rotating underneath the hood.
Now, this is exactly what we're starting to see with one of our favorite indicators that we've got coming up later on today's show. But we're also starting to see volatility come back into the hottest markets. The socksel in particular has been fluctuating up and down upwards of 20%. And the reason why this is occurring is, of course, not only is it three times levered, but what goes up so quickly can also come down pretty fast. The question is, will it be the same as what history has shown us?
And you might be thinking, well, history is probably going to show us that markets are going to go down. Well, unfortunately, maybe for the bears, this is not exactly the way that semiconductors have played in the past. And most notably, periods around the recovery post the dot-com boom and also generally drop markets is what we usually see this type of market in.
I think this is important to note because, yes, the markets gapped up one and a half or 1.8% 8%, then went down 2 1/2. But in most of the previous periods where we've seen this, you'll note that markets were already selling off. This one is happening at the peak. So, could it be a complete reversal from the stats here?
This shared from Astra Insights, Astra Insights over on X, guys. Give them a follow. New account. Really awesome stuff they're bringing here. Seen a couple of replies to our post, so I thought I'd give them a bit of a shout out here. But socks performance after large gap ups, actually the positivity is there. The only difference is, I think, where it's happening, which at this stage is at the top, not actually at a pullback.
Now, let's talk about why this matters more than usual. We've been looking for cluster trades. We've been looking for large trades for quite some time now. Already, we've got some of the biggest trades ever recorded. In fact, the biggest trade ever recorded when it comes to EWY. Now, this is the South Korean market.
Now, we've been talking about this because hardware and semiconductors, basically all that really matters at the moment. Everything's driven by the AI trade and the GDP growth at the moment in the US economy anyway. The most important economy in the world is still being driven by AI data centers.
Now, we've just seen the largest, second largest, and third largest ever recorded for EWY. And that's according to volume leaders. And it does start to marry up with a couple of other clusters that we're starting to see, including some big ones here for one of the most important sectors, which is semiconductors, the seventh largest trade, and a whole bunch of clusters of other large dark pools in this case.
And for anyone that doesn't know, dark pools basically just means a transaction between two large entities that's done off market and then recorded by the end of the day. And you can see here a lot of transactions coming through as we hit this cluster up the top. Also, AMD is hitting a very similar cluster that we'll look at later.
Now, does this mark up with some of the things we've been talking about, a pullback in the market or maybe even a correction period? Well, it does also start to mark up here with macro charts. And I did repost this one at macro charts over on XYUS. Always does some great stuff.
What we've just seen is a historic speculative option volume push. And this is coming off the March lows all the way to the rally that we've got right now. Now, of course, we do know that it's heavily in semiconductors. We do know that it's heavily in RAM stocks in particular, which is why we're paying most attention to them. But the last time we got an overby this big, market still managed to go up for a little while, but became quite volatile in the preceding period. And I think that's the key here. Risk protection, volatility, not much FOMO. It doesn't mean the market has to go and turn around. What it does mean, though, is that, at least based on history, we often get to these peaking points and what we see is a slowdown in the market as things reset. And this is, I think, very important. It's not often the end of the trend itself. It's generally just a pausing period, which means that we get rotation into other sectors and other, you know, possibilities.
Now, Bespoke Invest also put out, I think, a pretty interesting report here, which is something that we love on this channel, which is, of course, the advanced decline. And they actually did a study between 2026 and 1998 to 2000. And what they found was that the advanced decline, although I think it's an excellent indicator, and we'll talk about later, actually disconnected itself from the market. While we saw more stocks declining, we actually still got a market going bullish. Why was that? Well, it all became about the tech boom. And even though the economy itself was already saring signs of significant slowdown, as in more stocks were actually declining than advancing, it actually took almost 2 years for the market to top out at that case. And I think it's very important to note that we have recently seen the advanced decline line going down, but, at the same time, the markets have been pushing up. So, it's kind of similar in those ways to the analog.
Now, here's where things get very interesting. It's all about, in my opinion, the fact that we've got yields up and the market up. And while that can go for a little while and sometimes it's good, it usually is better when it's coming off a significant pullback. And what I mean by this is usually almost a bare market and then a recovery from that bare market. Remember 2022? Well, 2023 we had a market up and inflation up, or at least yields up, and that led into 2024. That's perfectly healthy. Where the problem lies is now we're a few years later, 2026, and what we're seeing is bonds break out to multi-deade highs and close at new weekly levels. And we're also seeing, of course, markets themselves showing signs of some weakness in credit default swaps. So that means that some of the biggest tech companies in the world are also coming under scrutiny when it comes to their debt and their bonds. This AI trade has to eventually work, and I think the market might be looking for that each and every earnings period. So, of course, we go back to what we've been saying all year, which is earnings, earnings, earnings. So far, this earning season has been phenomenal, and it's been living up to expectations. But obviously, if the next one doesn't, we could get a growth concern, and that can reprice stocks very, very quickly indeed.
Speaking of repricing stocks, we've got the big one coming up this week, guys. Nvidia earnings whispers here. Always give them a follow. Some excellent, great reports. And we can see here that earnings watcher has also put out their expected options move based on, of course, the options market itself, and Nvidia is expected to move between 8% plus or minus on the session. So, if you think about this and you think about the market capitalization of a $5 trillion business, you start to get the idea that this is going to move an entire world, entire country's economy potentially in a session. So, just remember, plus minus 7 to 8% is going to be huge, and Nvidia's earnings are already expected to be a beat.
Okay. Yes, it does tend to beat, which we'll talk about in a minute. But the thing with Nvidia is, how does it react afterwards? Well, Blue Kurdic actually put together some good charts here about what Nvidia's done. Now, Nvidia does tend to beat. It beats a lot of the time. I think it's only had really one miss for a very, very long time, but still the market can sometimes be in a buy the rumor, sell the fact. Now, most recently, that's exactly what's happened. It's been Nvidia down actually on the session after the report earnings week. So, this is what's happened the last three times, fourth time, fifth time, sixth time, seventh time. So, you can kind of get an idea, out of seven, five have actually been down. Now, that's not exactly a great stat for the semiconductor trade right now. Either way, you know, it's still a coin flip. As you can see here, 50% over time, but it is important to note that Nvidia is going to be one of those big moves.
Now, from a Ford PE perspective, Nvidia looks cheap, but do remember to also look at price to sales ratio, which will show you that it's kind of trading around in line. And that's why sometimes it's important when you're doing fundamental analysis to look at a couple of different reads, not just PE, or not just EPS, or not just any of those other ones. You've got to bring it all together.
So, what we've been discussing on the market right now is not so much that everything looks horrible because it doesn't really look horrible. It's that everything looks so extended. So, last week we reported on both the S&P and the Q's closing outside their weekly Ballingers. Obviously, we then mentioned this to about Polycarp, which Polycarp obviously went and did a report on this, and they found that every time it had happened in the past, we generally seen a slowdown as long as both had occurred.
Now, we have seen both, and I think it's important to note that it's SPY and Q's because, of course, we pay more attention to what the S&P is doing than the Q's are doing because the S&P does tend to be the better read. In most cases in the past, it has caused a slowdown in the stocks. Not necessarily the topping of the market, but a slowdown. And one of the reasons why Wall Street could be looking at doing this is because margin balances at several retail brokers have surged. And, of course, they're getting crazy. According to the latest source, Goldman Sachs data here, shared by @WallStreetJesus over on X, basically shows that everybody is buying pretty heavily into particular stocks.
Now, we do know that momentum is also hitting the top percentile according to Goldman, and this usually creates not a topping effect. It usually does something like this, guys, and it kind of goes like this and then it actually goes like that later on. Now, interestingly, could that be a mid-cycle year? We have a rally, we have a drop down, and then we have a rally coming into the end of the year. That is, of course, the million-dollar question and something that we'll be tracking as we go through the next earnings report. And, of course, we look at the current price action.
So, so far we have Ballingers overpriced and totally outside of their usual levels. We've got a semiconductor market where volatility is back. Although in the past, volatility has usually led to bullishness. But I will state that if you look at where those bull levels have happened, that is gap up, gap downs, gap up, move downs, and then rallies after that, generally they've already been in a pullback. They're not usually at a top, if you get what I'm saying. We've got semi-euphoria, obviously historic stuff, one of only a handful of times this has ever happened. And we currently have a market that's already been repricing itself this entire earning season leading into Nvidia. So, will Nvidia be a catalyst? Usually, it's one of those big kind of key zones. It's the biggest stock in the world. It matters, and, of course, everyone needs to be paying attention.
Some other things that have been happening. I thought this one here from Duality Research is always very interesting chart. Duality puts out some great data here. And you can see that actually hiring is going up, uh, in some cases. So, interesting to see that. That could be also an early warning sign or an early sign of maybe even recovery in the markets. But from my perspective, at least how I'm looking at this, I think we've got a lot of other problems, and that one is only one read. So, of course, we'll be looking at the good and the bad. But right now, markets still remain resilient, which we'll look at in a moment, but there's a lot of overbought signals coming through.
AMD clusters, meanwhile, we're seeing a lot of trades going up there at AMD. And, of course, software continues to be a cluster of potential accumulation and actually had another great sector, so, session. So, we're seeing kind of software go up, AI or semiconductors go down, which makes some sense because, of course, they're kind of like the counter trade to each other at this stage. Something we've been looking at for a while, and it's interesting to see that WOFF continuing to actually see flows come into it.
All right, let's jump into the charts now, and then, of course, we'll look at the options flow. Then we'll go to the key levels, and first up, we'll start here with the US dollar. Now, the US dollar has been pretty stuck for quite some time, and nothing much has changed in that one. It's still stuck within the zone, and it looks like at the moment it's trying to break up towards the 120, and, of course, that's going to be really reliant on what's going on geopolitically and, maybe more importantly than any of this, what's happening with yields. So, are we going to continue to see 30-year yields break up, etc.?
S&P 500 time, meanwhile, advanced decline line has dropped, but it hasn't gone underneath that last lower low. So, have we got a change of trend on the S&P? Not yet. And this, of course, also means that we need to look at things like percentage of stocks above the 50, which at the moment actually accelerated the last 24 hours as we saw a breadth widening. Yes, a widening, guys, for at least one session.
And then we look at the futures market, which did it make a lower low? The answer is no, not yet. It actually found bounces in our green box. And this means we're still in a series of higher highs and higher lows. However, we have given up the key moving average, which was, of course, the 2-hour 50 exponential. That's the blue line here. And what's happened? The market's gone underneath. And as it often does, it's found it as dynamic resistance. So, we're actually trading around that resistance level that you would expect the bears to try to push down on the S&P at around this zone if they're going to try to do it. It's a very tough trade, though, because, of course, you're going against what has been a historic trend.
Now, let's take a look here at what's going on from the options levels. We mentioned in the last one, psychology numbers matter. 7500, every 500,000 increment, guys. It matters quite a lot. And we hit a thousand, or we hit a 500-point increment. And it just so happened that there was a ton of calls sitting on it as well. So, that's acted as Wall Street saying, you know what, rather not push that level. That's going to cost us something. Now, puts have started to appear. As you can see here, 7,400 is the current strike that we're looking at at the time of this recording. But you notice that if we get underneath 7,400, we're probably going negative gamma. So, things could get kind of wild quickly, as in we could see a bit of a repricing there of the stocks should we actually move down.
Similar thing on the Q's. If we get through something like 705, which is where we are right now, quite a few puts in the next 24 hours. And 700 as well, quite a few puts into the next expiration strikes.
Tesla, meanwhile, as we already detailed, 450. Amazing how that core wall plus great supply plus great technical analysis acts as a resistance. And now, of course, we're falling back down to that 410-400 phase. And I think that stock is going to just like chill for a little bit after what was quite a nice gamma squeeze.
I bit what's going on in the crypto world? Well, we can see here that we have a pressuring point of 45, but really it's all over the place. There's a little bit of weakness in the crypto field. Obviously, Ethereum coming down to a key support zone, but, more importantly, we've also got some really kind of big pullbacks on Bitcoin coming back to the 50 daily moving average, which is a little disappointing to see because it was starting to heat up. And if it it had broken through that daily 200, wow, it it could have been pretty nice.
Nvidia, well, there's calls everywhere. Everyone seems to be going on the call strike for Nvidia earnings. You can see here not too many puts, a lot of people on calls, and it is hotly anticipated. So, remember that's going to be on Wednesday, and it could be a huge session.
Let's now jump into the charts that matter in terms of the lead indicators. And we'll start off here with high yield junk because, of course, high yield junk has been seeing a little bit of a decrease in recent weeks. And that is leading to a market that's more bullish and bonds that are a little bit more bearish. And we always need to pay attention to the bonds because, of course, what the bonds market is saying is, it's saying it's a little weaker, guys, than we'd like in the debt world.
Now, if we have a look at the 30Y, that's still holding and maintaining above. So, of course, this is going to be an important one to look at as well, and bonds themselves will be tracking them very closely.
When it comes to the K-shaped economy, the American consumer is continuing to weaken. The market is quite bullish, but guess what? Consumer discretionary stocks continue to get destroyed as we see Costco and Staples break up to new multi-year, if not all-time highs across the board. And this is really showing that the consumer is saying, you know what, I need that dopamine hit. I need to buy, I need to buy, bye, by, buy, guys, but I'm going to buy a carrot or I'm going to buy something from Costco that cost $5, and that gives me my dopamine hit. No longer are they going out and buying $700 shoes. So, there you go. That is starting to occur here in the markets. And you can see with Costco's latest consolidation into breakout that happened about 2 weeks ago. Again, this is the, the well, actually, it's only a week ago. This is the signs of a market that is starting to show rotation. And we're seeing that, of course, through Staples as well, where Staples are starting to, you know, show some significant signs of improvement in recent weeks, especially when we then compare it to the SPY, which has been, you know, starting to turn near these lows. So, this is all very important analysis because it shows that Wall Street's moving a little bit of money, and they seem to be going a little bit defensive into what is traditionally more of a late cycle or defensive pose for flows after what was a historic semiconductor rally. Pay attention when it happens, of course, after the rally, which had only just started a few days ago as we saw.
US oil hit resistance, fell off that level as, of course, we continue to see news each way on what's going on with oil, and this, of course, pushed down as well some positions, though XLE managed to close higher. So, you can see here that stocks in energy actually managed to do pretty well throughout the session.
Now, if we go over to what's going on when it comes to everything to do with software, it's a totally different market. Basically, we have a market that is making a series of higher highs and higher lows, and it is closing above and continuing to go from strength to strength. So, it's like software or cyber security or anything that was really hated. Again, the press was super, super, super negative on it just a few weeks ago. And it's why we often say, if it's in the press, it's in the price, guys. It's one of our favorite sayings here at FX Evolution.
Now, I also want to remind you guys, if you haven't subscribed to the channel, make sure to do so and hit that bell icon, as, of course, this is type of stuff that we do that's a little bit different. We look at, of course, WOFF-style setups. We look at the volume, we look at the flows, and we think about markets very, very differently. So, if you haven't done it before, make sure to sub, and, um, yeah, also share it with your friends and family. We hope to get more and more people into the channel over the next coming years as we do think this is going to be a pivotal time. So, you can see here that software has been improving, as we mentioned.
Now, NASDAQ, what's going on here? Little bit of weakness coming into the NASDAQ. We lost the 2-hour 50. Funny how that acts as dynamic resistance, guys. You can see here, even just while we've been recording, it's trying to fall off here a little bit, but has it taken out the key supports? Not quite yet. You know, we're looking for 28,500 to really close below that to be significant.
What about the Cosby? Well, the Cosby has fallen off a cliff, and it is starting to sell off here at 5%. And this is the thing. Volatility hit. We talked about it last week. The first signs of cracking. When V enters the room, guys, what do we do? We pay attention because that means that someone with probably Buffin-style information in the Bloomberg terminals. They're looking. They're putting it in the AI. They've got the Einstein brains. They're actually making better decisions than us. And we look at the flow. We don't really necessarily need to have that info. We just need to see when they're paying attention to it in the market. So, that's what happened. And we're seeing the same thing with DRAM, just as they announced as well a two times levered version of DRM. So, funny how that happens as well. So, some volatility there coming in on those markets, and I think we need to pay attention to that.
Silver, meanwhile, dropped off after hitting the first resistances. I guess we didn't hit the second one. Silver h it's kind of sitting around the zone. Gold managed to hold up around 4500, which I think is really key. And if it does break through that 4850 zone or 4,800 zone in the future, that's going to be super significant. For now, though, holding on to dear life for gold, um, making sure that it's holding this level, and I think some day traders might like the zone, but it is just forming a little bit of structure. It's still very, very, uh, pivotal. It does hold there.
Why'd this all happen? Well, a lot of metals actually flew up, and then, of course, they've sold off those areas.
Now, Chinese stocks, they're sitting right on supports. They're holding their own at this stage. The CSI 300. So, no, that's not CSI Miami or anything like that, guys. That actually has fallen off quite substantially. You can see here losing 200 points after what was a pretty nice rally after a nice island reversal. I don't think that's unexpected. I'm actually going to be watching around 4750 for this stock market index.
And for the Australians out there, the XJO, not a great close on it yesterday. A very choppy market, actually quite hard technically here because, you know, this is a little bit of support. Found it, dropped it. That's not really very positive for the Australian market. Kind of makes you think it's going to try to retest those lows. So, we'll be watching it closely there.
On to crypto. Speaking of retesting lows, Ethereum's coming down to its first level of support, and Bitcoin can't catch much of a break. It managed to bounce the 20, which I still think was excellent. It bounced up. It hit the 200, which we knew was a problem, and then made a lower high, dropped back down, and now it's sitting at the 50. Now, sometimes it finds the 50 as resistance or support. So, we'll be watching closely. The problem with this one is, even though it's in that demand zone, we need a bid, and there's no bid here. It's not like the daily where you expecting a bid because it was more of a systematic kind of process. Here it is scary because, of course, it's dropped straight down. It's becoming a little bit too strong to the downside. So, we have to really be watching Bitcoin very, very closely over the next 24 to 48 hours to see whether this one can buck the trend. Remember, it has kind of linked up with software in the past. So, software is up, Bitcoin down. It's very strange. Usually, they should be kind of linked like they have been for quite some time.
Guys, if you enjoyed today's video, then remember to subscribe and smash that like button. If you want to find out more about what some members of the community do in terms of learning more about our education, our process, and how we kind of go through and look at the flows and look at the supply demand and look at all of the structure in these markets way more detail than even we go into here on the channel, then you can check it out over on our website fxevolution.com. Also, sub to the newsletter. We've got a good one coming this week. One free institutional insight each and every week. Free link in the description down below and pin comment. And, of course, follow us over on X where we post many of the charts that we shared today. Thanks so much, guys. I hope you have a great one. We'll see you in the next.