Transcription
If you look at the market, you wouldn't think that you have all this carnage out there, but that's exactly what you have. You are seeing us get a little more defensive in here, but you look at something with the cues and this does not look like it would be the worst day in the world.
But what we saw here was very technical and there was a big move in breath in semiconductors that I'm going to show you. And you're going to want to pay attention to this because it's definitely something that's on my radar when we keep testing these levels over and over again like we're doing with the 55. Something's got to give. We're getting tighter and tighter in here. The deterioration's become a concern.
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In front of you is NDFI. And why this is so important is this is the NASDAQ 50-day uh move stocks above the NASDAQ 50-day average. So if I go here and turn this into a line and let's get rid of this for a sec. And what I want to just point out is that you can see from this area about 64 over, we just never were able to get above that since that April level. And we've never really been able to get below this. The problem that I'm running into is that if we really look at what's been happening, we're starting to get these lower peaks and now we're starting to get from the low, we're getting lower highs and now we're getting lower lows. It's a little bit of a concern. It's not like the be all end all. It it's if we start breaking 46, it's a concern of mine.
So, one thing that you want to take from this video and everyone has access to it, just NDFI. just go out there and drop an alert and if you start breaking that 4690 woot woot just put a little alert there and then it'll go off and then you'll be all happy because you'll be like okay the breath is awful let me stay away from it.
If we take a look at S5 FI for a second here that's actually been trending higher but now it's starting to get a little toppy as well. See my concern is with what's been lifting the the S&P if that stops are the MAG 7 going to lead us again? And I I don't know the answer to that. Watch this. You see, we've been riding the wave of energy and everyone's all excited because the energy names have been moving and that's keeping the breath of the market up. And then if we take a look at the XLP side of the trade, that's not really participating, right? So, what's really doing it? It's energy and it's also been the service space which also started to roll over. And if we take a look at the the refiners, they're peaking. So, as far as the breath getting out, what's really doing it? Well, it's been financials. Financials have just been on fire. You've had names like Black Rockck that have absolutely killed it. JP Morgan killed it. Goldman Sachs killed it. The larger problem with this is not that these names are killing it. The larger problem with these names is the is a much different fact. It's the fact that can financials run the whole world if semiconductors come in.
Now, when it comes to semiconductors and looking at what's going on to me, there's a lot here. And I want to go through something proprietary that I've been using for a while, and it's extremely helpful. And it triggered on Friday. It actually triggered a little bit before Friday, but then it got better. And I'm like, "All right, well, maybe it'll just fix itself." Well, it didn't fix itself. It actually got worse. The only takeaway you have is the fact that you did not close below the 55. But this is like one of those like warm like halftlike disgusting sweaty handshakes. Like nobody wants this, right? like you actually wanted to like rip your face off when it hits that level like no bounce and then rally. That's not what you did. Far from it. And this in in my opinion is a little bit of a concern and I'm going to get into why and the deterioration I see and what we need to have happen in order for us to start looking at this.
If you are trying to get into the community, please look for a invite. Uh, I believe there's like 48 hours left and then based upon the volatility that I think is going to happen in the market. I'm probably closing the enrollment till September. So, just links in description if you want to get on the wait list. All right, let's get to it.
All right, so let's get to the meat and then I want to show you this because I think it's really important. So, we've been talking about this for some time, left head, right shoulder, but we had this period of consolidation and we don't have really bad earnings. Matter of fact, you have the exact opposite of really bad earnings. We have a bunch of people that think that they can tell you exactly when earnings are going to come out and when they're going to peak, but I I'm not that good. I can't do all that. What I can tell you is what I have. And I'm going to just go back really quickly and just walk everybody through this. So, you have the what and then you have the who's affected by it. And then you have when's it time to buy them. That's what you have. That's all we have. There's nothing more to what we do besides what, who, and when. And they are linked by macro, fundamentals, and technicals. You can have the perfect macro situation. You can have the perfect fundamental situation, but if you don't know when you're supposed to buy and when you're supposed to sell, you're going to have a problem.
So, the tail doesn't wag the dog when it comes to technicals. In other words, if you have a stop, you don't not honor your stop on a technical chart because the fundamentals are good. It's the kiss of death because it's becomes a function of what the market's willing to pay for the fundamentals at that time. So, I'm just going to say that again because it's really important to get. It's a function of what the market's willing to pay for the fundamentals of something. So, when we see this, we have to honor it and we have to acknowledge what it is. And let's say that the socks does break this head and shoulders. And I'm going to tell you give you something to to look at. I'm going to show it again on Saturday because it's not something you're going to be able to see. Uh, but it's really important to get the concept. And I'll just I'm trying to figure out the right way to explain it to you because what will happen here is people say, "Well, no, they're going to do $20 a a year and blah blah blah." So, I'm just going to ride it out. You don't know when it's going to end. You don't know why it's going to roll over there. There could be something out there that we're not aware of. All right? There could be another margin call, which I think that you have an issue, but we'll get to that. Um, and I just want to be really clear about this.
So, then when we're going through some of this stuff, and I'm just going to start with the basics here. So, when we're going through something like this, this is just the 55. And all they did today was take you right back over. Today actually in the community I did a a midday uh private video. And I I very rarely do them, but when you're playing these kinds of games where we're like, "Come on guys, let's get it back over the 55 so everybody, you know, feels that it's safe and everybody uses what the 50." So it is what it is. But the point that I'm getting at is this is like hi jinks. The fact that you're going to get it back over and this is what it's going to look like, that's just complete hy jinks.
So what I've done over time is I have created breath indicators for certain sectors, pretty much all the major sectors. And I'm just going to show you this one and then I'll tell you what my concern is with it. So this is something that I created. It's private. I'm not putting it out there for people to pick up. I'm sorry, but I am going to share it and I'm just going to explain how it works. When you are above 50, you're flipping the bearish. So when you're above 50, you're flipping the bearish. When you get up to 80, you are at extreme levels of bearish. The way I created the breath indicator is it actually will fall off a cliff as soon as breath gets better. So, it's more for me to find areas of entry. You'll see when it completely fell off a cliff right here, right? And that was pretty darn clean. And what I need I'll just tell you how it works. Um, if I'm extreme and I'm over the red line, I need it to break below the green line. And when it does that, you pretty much have an all clear. And it's pretty good from a from a sector standpoint. But the point that I'm getting at here is this is showing you complete breath deterioration in the socks. And we're going to go through some of these names. But when I broke above five, it puts the brakes on. So I break above the 50. And then after that, I actually come back down on it and I'm like, "All right, we're going to be all right." You know, we should, you know, start working it back over. Because it will do that. It'll like pop over and then I'm like, "All right, I might be okay. I might be able to walk this back down." It's done that in the past. But when it did this, it gave us no indication of that. A matter of fact, it actually reversed and went higher. So, I need the breath of the entire socks to get better than it is right now. And this has been fairly accurate, not only at telling me when to get involved, but when to just like when we're going to bottom. So, you'll have this extreme reading on it. And we might be close to one. You might get that cascade, but I think you're near more of, and I'll show this. I mean, it's not really rocket science how it works, but you can just see like when that falls off, like it's pretty much a go. And when it's extreme, it's extreme, but it can stay extreme for a very long period of time. That's when we had all that winning and liberation and then it gave you an all clear and then you could just start seeing how it acted and then all of a sudden it got right to that 50 and then it never really did anything and then it just went right back down. Right? But you need these to flush out. It is very rare for me to get to a 60 on this. If you go back and look at this historically to ever really see it when it got to a 60 to not get up into the 80s. It's not common for it to do that. And what you're looking for when it does that is you pretty much need an all clear from those to get all the way back down. And I have it as set as a fast trigger. So it does happen pretty darn fast. It's not going to be exact, but it's definitely there. So where we're at right now, no, I'm not really crazy about what I'm seeing. So I'm going to go through some other stuff now, but I thought that this was really important for me to share with you because when I see this, yeah, the brakes go on. They they kind of have to go on here now. and it's not really what what I want with the earnings that I have, but I have to play the hand that I'm dealt.
I want to go through some key names here because I think that this will maybe highlight it a little bit cuz you'll be sitting there going, "Well, what what do I do with your special indicator now?" But I I just think it's important to note this. So, we marked this off at the end of the day and what I was telling people to do was just watch that level because that's really your 55. You hit your 55, you reject. You come all the way back down here and this was your put wall. I actually sold puts earlier in the day down here and then it undercut uh and then candidly I hedged it because I have so much like of uh SanDisk I had to hedge um and I did it with Micron too. It's not a function of me worrying about catching this kind of move, right? Like the way that I set my hedges up is that I'll get more net long as they go up and then more net short as they drop. But the problem is that the net long up because of the hedge, I'm just not going to make as much as if I didn't have the hedge on. So, it is what it is. And I'm okay with that when I get into these kinds of environments because I don't really want to unwind until I see what can happen. And what we're seeing is we're hitting that level, we're rejecting. We're hitting that level, we're rejecting. You do have a put wall here. We have to look at that put wall tomorrow, 1500. You might want to mark that down and we can see how that plays out. But you want to watch that. Also, take a look at Micron. Micron came right to what the 55 and then bounced off and also right here is your call wall or I'm sorry your put wall. So you came right back down to it today and you know we had a lot of patience today to wait for these areas for these areas to finally hit and when they did great they gave us opportunity there but this is what we got. you you have a you have a put wall that you're going through like Swiss cheese you have to be super careful of and then through that you're hitting VWAP rejection hitting that hitting it rejection. So you're you're kind of in a pickle here now from my perspective these have been the big runners and if you take a look if you really take a look at it you have to overlay what's been working and why it's been working. So like this has all been one big trade.
So here I'm going to clean off EWI and I just want to show this because this is exactly what you didn't want to see today and it's exactly what happened. So we can say that it didn't happen or we undercut and we bounced whatever but this is the problem that you're running into. So you had major margin calls here meaning we gap down and after we gap down that day we they're forced margin calls the next day they lift the market up. So, what do you think the people that had margin calls did and all those people that they came right back in the market and what are they going to get tonight? They're going to get a down market. So, the question is what do they do with it? Do they rush back into the market? Probably not because they just got washed out and they just bought again. So, we have to see what happens tonight in Asia. But you're setting up here and what we have is this little area right here which this is the 55 and we've cracked it and you keep waiting for it to reclaim it through like a a major move after it got washed out. And instead of that what they did is they undercut the key level and now we closed above that key level which is good but it it should have bounced a lot hotter today. Like it really should have bounced hot and and by bounce hot I'm not referring to like a two like a two-hour move and I'll show you what I mean by that.
So this is EWI and this is the bottom at like 12:30 of the market today. And this is just a private cloud that I use. But if if I go here and I look at that bounce from here, what 167 to 172 closing at the 172, it's three or four points. It's like, okay, it's like a bounce for ants. Like when you're when you're here and you're excited because this thing is bouncing like $3 after just getting absolute shellac, that's not what you need to form a bottom. What we're looking for to form a bottom is something like here where you hit that level, it's emphatic and then you bounce off of it. We're not getting that. And so this is a concern and it's just the slow grind down here with the RSI. Now, if I go take a look at the 4hour RSI, we're going to get rid of the pre and the post for a second. I'm not getting extremes. I'm not getting that, oh, we sold down. We're just getting that straight 45°ree selling. So this is becoming a concern and I'm tying it directly to semis because the whole reason that if you go back to when the semis started to lift again it all started back in here when they started to lift through EWY and everything started settling with oil and now they started to rally again and then they you know they run up another 100% from here. I mean this was an enormous move for people that caught it right it was like 92%. So the question becomes what happens now? You are trying very hard to form this bottom. I actually tried the swing trade in here and you know right now it's not looking absolutely fantastic to be candid. If this starts to crack you you have to really be thinking that that 30% note that came out the other day. We kind we went over that I believe what's today Wednesday. So we went over that yesterday. Um 30% note which is the average correction. I measured this correction yesterday and said maybe that's enough because this correction right here is 24%. And so if we measure from here down on where we were at, we got to 24%. So I'm like, okay, well maybe that's enough. The average correction in AWI is 30% which takes you to this level. So the question is what happens when we get down to there, if we get down to there, and I don't have an answer to that.
You're definitely getting signs of which way this market's leading through breath and through new IPOs that came out. And I could show you what I mean by that. So, for example, SpaceX is a name that we're short and did quite well with today. Um, obviously, this thing took out the IPO low and it should not be doing that. And so, what you would take from this today, what I think the biggest takeaway was for me with this today over everything is that they are not going to defend it. And if they're not going to defend it, meaning the investment banks, if they're not going to defend it, no one's going to defend it. And that's going to be a real issue, especially when he comes to the market and he wants to raise capital. So, if they're not going to defend the IPO price, which it does not look like they're going to defend the IPO price and you came all the way back to it and undercut it like that, you're probably going lower. You have a lot of market makers in the option market at that 125 level. Your put wall is still that 135. Um, I think the call wall is like 165. Uh, but obviously that IPO VWAP trade, you can, you know, when these break, that's usually it.
And the other thing that I thought was super interesting today was this SKHY. Um, if we go and take a look at this from this perspective and we'll go to here and we're just going to drop it like it's hot right there for a second. So, here's the IPO VWAP and you hold it and you bounce. You break it, you come to the lows of the other day and you flip the IPO and then you hold and you bounce. It's super interesting to watch this hold while you're watching EWY struggle. So, something something's going to give there. And the question is what?
If we take a look at DRAM, which has been a leader here, the one problem that we have with DRAM that it did for the first time is that we broke the 55day moving average. And so people say, "Well, you think DRAM's over?" It goes back to, that's what you sound like. It goes back to this. It goes back to you have macro, you have fundamentals, right? And you have technicals. And sometimes the technicals are going to tell you something before the fundamentals do the macro picture. Now, what I thought was super interesting about this today, but you see how you're Well, that's just god awful. This is telling you that we're losing institutional support. Now, you have three to five days to reclaim it and go from there. But the opening price and the fact that we can't get over these opening prices, it's a problem. Like, it's not a blessing. It's a problem. So, again, we want we want to watch that.
And so, you start going through those names and you're looking at Micron that's sitting right on it. And then you're looking at SanDisk that broke it and like did like the, you know, the fake juke like it was going to go back over it. And we know how that went. Not very well. So, when we start to see this, we need to make sure those put walls hold, but we pointed this out this morning. Um, I know we did it in the community. I think we did it publicly, too. But, you know, these CPU names, you can see the writing on the wall here, like ARM broke the 55. And then if you could look at Marble, you broke the 55. Intel broke the 55. So when today like with Dell, everyone loves Dell and and I think it looks fantastic, but it acted god awful the other day on the breakout and you look at the selling. So what are we seeing? Well, for some reason they don't want to own CPUs and the only one they seem to really are trying their their darnest to stay in is going to be AMD.
Now this is where it gets again important because they come for the generals last. So if the breath of the like the that proprietary breath indicator that I showed you, that usually means that they all get worse before they get better, right? So instead of looking at getting in the ones that are cracking or the ones that haven't cracked, you're looking to watch the the later ones and see if they crack and then either shorting those or when we roll back up, they're the ones that you would look at. So like for example, you look at something like Nvidia, you would think that it was blue skies for semiconductors today. There wasn't a care in the world. You know, you look at something like AVGO, it's like, well, we opened and we closed and everything's great. You don't really have a lot of issues there. I also would say that I think it's a rotational issue to some extent because financials are closing at all-time highs. You know, the MAG 7 rotation is clearly working. This is we bought this as a swing recently. It's doing great. Like there's not really much to do with it. I don't know which day what's going to work. You know, right now it's Google because the Warren Buffett comments today, him saying that he wishes he bought the stock before and they Warren Buffett and Birkshshire own this now. Um or it's like, you know, is Meta going to have a good day or is he going to do something else and try to make us a giraffe again? So, you just don't you don't know what you're getting there. So, it's not one that I really want to play with. But then you go through them and it's like, all right, well, Microsoft's holding your flagging. And then when we start looking at names like crowd and we're waiting for that sector to move, that's not what's doing it. They're getting defensive. They're putting money into the defensive name.
So, if you look at the trade this way, if you went mag seven and you divided it by the socks and then you go and just get rid of this, we can make this a bare chart. We'll turn it to a line and then we'll just drop it with an RSI and you can see it like it's pretty darn clear that they are buying the MAG 7 and they're getting at a semiconductor. So, the capex trade is actually inversed, right? And so, if you see that then you're like, okay, well, this makes a lot of sense. This is what they're doing now. are buying the the Mag Seven names. Now, for how long that goes on, you know, I don't have a clue, but it's really clear here that you can see that divergence right down here, how that started to turn. And that's really starting in July. And since July, if you really go back to this and just start from this spot and you just go, well, where's July 1? You can see that right in here. And that from then on, it's just been straight down. where if you look at the mags and you see how that's been since July and you going it's pretty darn clear what's been going on. So I don't know what's going to make that change.
I know people are looking at IBB. I've been hearing a lot about it. Um it was great on the way up. I was shorting LAPD and doing really well with that short. Uh I'm a little concerned about do they start selling everything and preserve capital if we break and I don't have an answer to this guys. I don't you know you're in a really precarious position and the breath is deteriorating on semiconductors which was the leader. So until we get some stabilization here and you get some real real emphatic close, I think you just want to, you know, less is more until we see that. That's that's it.