Transcription
We talked about yesterday. We talked about this possibly being a liquidity grab, and that's exactly what it was. Now, we have a lot of uncertainty out there, but we needed two things to happen. Both those things did actually happen, and we are going to get that. I think we'd be remiss to just not look at the cues, same exact thing, and see exactly what's going on here. So, we're going to look at the breath and how that developed today, and we have to go over those two things that we said had to happen a month ago that are starting to develop and definitely happening. Let's do it.
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So, let's start with the basics. Number one, if we take a look at the cues and we watch how this is playing out, we can certainly see how the 55 is declining, the 22 is declining, and the 12. So, while we're in here, I constantly am saying I'm not so much worried about the moving averages. Why? Because you're in a trading range, and you don't use trend, which is what moving averages are for. Moving averages work in a trend environment. In a non-trend environment, they don't work as well. If I go here and do the simplest thing and just get rid of everything and just make it this for a second, do you have a trend or do you not have a trend? It's not rhetorical. You do not have a trend. You are just chopping around. It's getting harder and harder to say that you don't have a trend, though. And I want to just get be real clear with this. When we start declining on a 55-day moving average and the 12 is pointing down and the 55, it all of this pointing down, 55, 22, 12, you haven't had that since we had all that winning and liberation. And I just want to show you something here a little bit later in this video that we said we didn't want, and we're definitely getting. So, we're going to have to pay attention to that, and I'll show you what it is. But we really didn't want that, and it and it is happening.
But let's get to the two things that I stated that you needed because it's really important to get this. I hate doing going through a video and not coming out with it in the beginning. So, lower lower low. So, low lower low, and then you have exhaustive selling, and then you don't have enough buying. Exhaustive, and then you have way more buying. There's your bottom. Now, there's more signs that that was the bottom when you came in here, and then you had your RSI here, and then here. So, you have low, low, high, right? Low, and then higher than this. So, that's a divergence. It's an RSI divergence. If you don't believe in them, that's fine. You don't have to believe in gravity, but it still exists. So, when we look at stuff like this, I'm not saying they're 100%, but you really don't want to bet against them. And so, when you see these, it's probably a really good idea, especially if you're swing or a long-term kind of guy, to not fight this. And what we want to do is just understand it and say, "Okay, well, we see it. We want to pay attention to it. And now we're going to see if it actually holds or if it doesn't hold."
Now, the next thing really for us to do with that from that standpoint is just to move forward. Well, how do we move forward? What do what do you mean move forward? Well, what would be the next hurdle that we have to do? Well, we have to start getting over the moving averages. 22. All right. And we're moving. So, we're going to get a 1222 cross. And we've had nothing but buyers every single day since this has happened. So, does it look like we're getting buying or does it not? We're getting buyers. Now, it could be the short covering and the unwind, and that's a completely different conversation that we can have. But the one thing that we needed when I said that, "Are we bottoming?" and we've been talking about this for a period of time, was that that is a bottom. Now, if earnings get bad, if the market crashes, if you expand out, if another leg of the stool goes, remember you have the macro, you have the fundamental. I know this is your favorite part of these videos, and the technical, right? It's my drawing skills. And when you're coming across like that, you have the the what's going on, who's affected by it, when do we act with the what's going on right now with who's affected by what's going on and when do we act, that's all you have when you're looking at a chart and a particular time, that's the snapshot of the stool. If something else happens and all of a sudden we get to the point where Iran spills out and it gets worse and worse and worse, well, then all of a sudden then this whole thing changes, right? The market is dynamic. It's not static. You have to understand that. So, a lot of people say, "Well, you said, well, this is these are the facts that I had at that particular time." Now, what's going to change those facts? You always have to think like that.
Right now, you're holding. If we go and take a look at Bitcoin, why is Bitcoin doing so well? And I think this gets interesting because people are actually buying Bitcoin because of what's going on in the Middle East for stabilization. And when we start to think like that, that's one of the reasons why people are seeing Circle do what it's doing because they're getting involved in it. Why? Well, they're getting involved in it because of they want stable coins versus certain currencies that are in the Middle East right now. Makes perfect sense if you think about it, and that's one of the reasons why you're seeing it move. It's a proxy trade. It's no different than what you're seeing with PLTR and how PLTR is leading today. But that said, is this something that we really want to cater to? Is this something that we really want to pay attention to? And the answer is yes.
So, the two things that we really needed to have happen was IGV stabilizing. Bitcoin, is it stabilizing? It's trying. This is not a great-look chart. This is a day and a squeeze, but it is a stabilization versus where we were before. And as long as we're not undercutting here, I think we're fine. As long as we're not closing below 628, I think we're fine. It's a 50% retracement that you've done at this point. I think I think you have the ability to go lower. I've been saying you're going to get into the high fours, low fives. You know, 52 is really where I'm thinking, but you have retraced all the way back on these moves, you know, 80%. So, that's always out there, and I don't think that's unrealistic to see something like that, but you should do what you're comfortable with.
So, what does this mean for us and where do I think that we're going with this? If we have stabilization, we can start looking at the other areas. The one thing I did yesterday was the breath of the market, and I just want to walk you through this. So, what we do is we take S5FI and we divide that by NDFI. And what this is going to do, it's something that you can do for yourself. And then what we're going to do is click right here. We're going to turn it to a line, and we're going to go to a bare chart, meaning there's nothing else on it. And what you're going to see is that every single one of these peaks, and they are relative, not absolute, meaning it's not when went over to if, then it's just relative. When you see these peaks, you do not really want to play against it on both sides. And I'll show you what I mean by this, and then I'll show you why it's so effect.
So, what we're going to do is we'll take the S&P 500 and we'll drop that on there. Then what we're going to do, well, we might as well do the NDX as well. We'll drop that on there, too. And then we will go to this. And all I'm going to do is click on the button. And then we're going to move that to new pane above. And then we'll go to this one as well. Move to new pane above. And the reason I show how to do that is because I get a lot of questions, candidly. So, here's your equation right here. Anybody can make this for themselves. See your spikes? See your bottom? Spikes. Bottom. Spike bottom. Again, you do not have to be at a high. You do not have to be that way. You can see the trough valuation in here, the trough valuation in here. Those trough valuations, you see how they're acting. See how they're predicting, right? And then they're telling you where your issue is going to be. And then they're telling you where your issue is going to stop. Over and over again, they are marking bottoms. And then down here, they are marking highs. It is over and over again. It insists upon itself, actually. And what you're seeing here is you're actually seeing the trend get stronger. A matter of fact, if you had to look for an environment that was similar to this and you looked over here in September of 24, you would see the exact environment that we're talking about where you're making a high, then a lower high, a high, then a lower high, and then what does the market do? Market rips. A high, then a lower high. As long as it drops, market rips. That's what you're setting up for according to this with the information that we have right now for this market to turn around and grind. We are getting enough information from earnings that they look fairly decent, and we'll get to that.
But I think it's very important for us to take a second here and say that the S&P 500, 50, this this is the 50-day, and this is the 50-day. So, stocks above on their percentages of the 50-day are being outperformed. So, when this drops, the NASDAQ breath of the 50-day on a percentage basis is getting better than the than the S&P breath of the 50-day. So, as long as the NASDAQ breath is getting better than the S&P breath, you're golden. That's what you want to see. If it's the other way around, ah, not so much, right? That's when you start running into a problem because of the defensive plays, etc., etc. So, when we look at this, we really want to be cognizant of that. We really want to pay attention to it. I cannot stress that enough. Let's get to it.
Now, I would like to take a moment to just look at the New York Stock Exchange Composite and look at the MLEN index. You can see that you've been above that zero line since the 14th, and ever since then, we've just been making higher highs. I don't put much into the moving average. We cross under, we cross over. It's exhausting. If we were up near 500 and then we started to roll over, maybe I'd be concerned by that. But when you're here, it's not really a concern. The larger concern is if we would break that zero line. And this is just the New York composite. We are not doing that. What we are doing is we are rotating, and that for me right now is absolutely fine. What we do want to focus on is what the market's telling us. For example, if we look at the tankers, which should be going up in value, we talked about this yesterday. What are the tankers actually doing? They've actually dropped since this began. So, some of the big tankers are TNK, STNG, FRO. What are they doing? They're dropping. All right. Does that look like a prolonged kind of situation? Not particularly, even after some of the comments that Merse came out today that they're going to slow down on what's going on in the Middle East. All right.
So, if we take a look at that, you remember if you're in the community that we own DHT and then we closed it, and since they did quite well with the trade, but I think it's important to note that if this was going to get worse, that would be running. So, then what we would do is go and look at other things. Well, what other things would we really go and take a look at? Well, we'd want to go see what's going on with gold. Are they out there buying gold? And the answer is no. They're not really rushing into the gold trade, are they? So, then that puts us in another precarious position where we'd have to look at that and say, well, they're not really out here running into gold. So, is there something there that we need to do? And the answer again is not particularly no. There's not really anything there that we have to pay attention to. So, as we continue to do this and to look at this, we have to ask ourselves, is there something out there that's telling us exactly what's going to happen? And gold and silver are not giving us any indication. The tankers are not giving us any indication. If we said, "Oh, well, they're buying the defensive names." I would argue that defensive names are rolling over, which is telling you we're going to go back into tech.
So, I'm going to say it again, and then you can cut it out, and then when it doesn't happen because something else happens in the market, you can go, "But you said this was," and then I'll say, "That's what you sound like." But you always want to look at this because this is telling you a story, right? So, then we would look at the RSI and go, "Well, what is the RSI telling us?" Right? The RSI is telling us to start looking at shorting XLP names. That is what that's telling me. I'm putting a little note there. Note to self. So, I love doing this. I like doing them raw, too, because then I for I forget things that I wanted to short or wanted to look at. So, you see how that's rolling over right here? Look at it. See it? See how it's rolling over? So, you'd want to start looking at some of the XLP names because to you buy defensive names when you think you're going to have an issue, and you're not doing that right now. The one thing that's always constant is you go into those defense that defensive move. Now, perhaps you're rolling into the XLV names. Not particularly are you? All right. Well, how about XLI? Let's look at the industrials. Well, if they were going to shut down the straight and everything was going to slow down, why are the industrials moving?
So, the question you have to ask yourself is, is this market giving you any indication whatsoever that you're in a position here where this is going to be prolonged or affect the world? No. What it is going to do and what it is going to affect in my opinion are this, and you guys are welcome to comment on it. I think it affects the home builders because I think it's going to affect the rockets of the world. I think it's going to affect the names, and I think the chances of us getting a rate cut are pretty slim because it's going to be impossible to get a rate cut when gas prices and you go and take a look at RB OB. Here's gasoline. Let's go to that gasoline futures. So, you can always go and look at gasoline futures from here. And if you ever want a guide so you can see how CPI is going to come in going forward, whenever you want a guide and you want to see how this is going to go, all you have to do is take a look at this and say to yourself, well, let's see what's going to really happen here. So, when we look at RB here, that's going to be more expensive. So, here's a real quick tip. Go and take a look at February 1st and then go and drop a line there. If you're above the average, you usually come in hot. And I know it's like, well, that's just ridiculous. Is it really that simple? It's sometimes it's really that simple. Everything costs gas and oil. The housing and people like, well, it doesn't. Well, getting to your house costs money. Then building your house, they have to go there unless they're living in a TP in the backyard, right? So, then they have to put that cost into their construction budget. So, when they figure all that stuff out, you have to kind of work with everything is tied to oil and gas. So, when you put that there, then for this month, for the month of February, when CPI comes out, watch CPI come out again. You can time stamp it and just remember, I don't know where we're at on the time stamp. Here's the thing, 504. Just remember this. I bet you have a pretty hot CPI coming out with what just happened in February and where you're at. And I think it's going to be an issue unless housing comes in. 33% of CPI is housing. But even then, the gas is in that number one way or another. We always want to pay attention to that.
With that, I do think the issue is going to be there. But I also think that's one of the things that we're seeing where you're seeing names like MO that rallied up, PM that rallied up, and now they're rolling over. All of a sudden, you're seeing these divergences, and they're nasty. Why? Because that trade's over because they're not going to be in the position where they're going to have to go out there and be rate sensitive anymore because you're going to have access to rates, right? And if you can have access to rates, that's exactly what you want. If we were looking at something like this, if we were looking at XLP and it looked like it was going to break out and not like it was going to fall down to the depths, right, then we would have something that we would be concerned about. I don't see that. Now, that doesn't mean that we're going to lose the Walmarts of the world, but you start looking at the Cloroxes of the world, and we see what they do. Well, that looks like a dumpster fire floating down the river with a bunch of raccoons. Somebody was looking for something to short. Wink wink, nudge nudge. Right. Look at that. PG. Oh, I mean, these look awful. How about toothpaste? Yeah, that doesn't look great. I've seen great before. That's not a photo of it.
So, if we tie that together, if you're going to get out of those names and you start going, "Well, these names have been running since when? About January 8th earnings, they did well in the tariff news." But if you took XLP like this, and then we just divided XLP by the spy, I mean, nothing crazy. Go XLP. Let's do it again. Work with me. Work with me. Here we go. So, if we looked at XLP, well, you've been outperforming, outperforming. Are you outperforming now? Well, it's not rhetorical. No, you're not outperforming. Okay, cool. So, we know that XLP is getting weaker. It's very clear that XLP is getting weaker. At the same time, if we looked at XLP getting weaker, and then we looked at XLK, for example, versus the SPY, you might get a different looking chart, and you do get a different looking chart. How about if you took the MAG 7 and you compared that to the SPY? What do you get? Well, isn't that precious? Right? So, you can start seeing the lower low here, and then you have a low here, and then what do you have here? A high. So, you're getting the exact inverse of what the XLP spy is. So, if one got worse and was inverse like this, looking at this like look at this for a second, look at it, and then go here, just remember that you can actually go back if you want and then look at the mags. It's like looking at an anantimer. I mean, you can look up what that is, but you guys already know what that is. You're smart. So, my point being is they're rotating into this. So, if they weren't rotating into this, it wouldn't look like this. That is a snapshot on time of where you are right now. That does not mean that things can't change if things escalate.
I don't know how much more winning and liberation he's got around the corner waiting for us, but it is what it is. In regards to AVGO, it is rocking after hours. Let's see exactly what happens with it. I do have a position in it. I thought it was really very, very cheap historically. I'll show you how I figured that out. But the important thing is after hours, this is when the conference calls going on. Earnings were really good, gross margins were good, and they raised their guidance by 10%. Because I mean, they do a lot with Google clearly on the TPU side. How this acts tomorrow remains to be seen. What's important is we gave you a guide yesterday, and I I want to walk you through this. I am purposely giving you guides that I use every single day of trading that I developed over 27 years of doing this. When I give guides, you might just want to see if they work and just write them down. But when we're starting to look for these names that are getting above the 22, as IGV is above the 22, and we talked about index sector stock, you might start finding names that are breaking out, and it's pretty clear what those names are. So, you might want to run that scan tomorrow and see what you get.
Now, one of the reasons that I was interested in owning um AGVO is I run this comparative analysis, and I'll show you it. So, here's AVGO to the socks, and I'm always looking for anomalies. Well, what's an anomaly? All right? Or an oddity, or whatever you want to call it. It's called an outlier because that's really what it's called, right? Maybe I could use my the right words. So, if you're looking at this right here, what happened here? What happened? As my niece says, "What happened?" So, if you look at March 31st, 2025, this is when we got all that winning and liberation, right? And then we had to pause it because we were consumed by winning and liberation. And where are we right now? So, AVGO is at the same level in regards to the socks as when we had winning and liberation. It's pretty insane when you think about it, considering the growth of this company. And so, historically, when you start to see these kinds of things, if you get any kind of good news, which is what you got tonight, got good news, then that puts us in a position where we have to understand, well, that might be something that we want to pay attention to, right? And so, that gave me more to look at. Again, we can run scans like this, and I can show you more of these things. If you want to see it, just drop comments below, and we'll go from there. But I would go through parts of this and start implementing it to your own strategy. If you're trying to get in the community, please be patient. Please have your name on the wait list. As you guys know, I talk to everybody if they want to that joins the community.