Transcription
The S&P is not the problem. The S&P's already flipped through that island reversal gap. So, that's not our issue. Here becomes the issue, and you can see it really on the cues. So, if you look at the island reversal gap that we have right here, and we're going into something this evening that we have to go over in two seconds here, but you came right to the top of that island reversal gap and then you just couldn't get through and then you rejected.
And now, if we take a look at the NDX, let's look at it through the cues. And once we see this, you really can't unsee it. It's pretty glaring, as someone likes to say. Someone likes to say, "Absolutely glaring." So, let's get to it.
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This has been a pretty textbook setup. And what I'm going to do is just go to the top of that island reversal gap, and you're going to see that level and you're going to see the rejection of that island. So what happened here is you have the break on the NASDAQ. You have the break here, and then that forms this gap, and that gap is an island reversal gap. Anytime you have an island reversal gap in general, you have three to five days of any really pattern. It's a technical time frame. Of course, it goes over, but three to five days. If it doesn't happen, it usually stands. And that's what we're saying. So if we count one, two, three, four, five, six, you can see we hit it, complete rejection, and that by the fifth day, you could not get up there. Sixth was rejection. Then we obviously have what we saw at the end of the quarter, and we know what the culprit is, and we are seeing huge rotations that we have to pay attention to today. But that's actually a good thing. I'm happy that we're seeing that now.
The level that is absolutely glaring. If I just go here and show you the 12, 22, and 55. And you will notice the volume is beyond anemic on the Qs. And it, we'll go into the NDX too, because you really should look at that. But we have the 55 here. So we know that we have a put wall right here at 700. And we know that we're not breaking that or have not broken that yet. We've tested a couple times, and it never really broke that. And we've never really gotten to a level where it's been in jeopardy, right? Not really. Not since we've had this, these shenanigans. But what we do have in here is we have the 22 and the 12, and they are declining and they're pointing down, and it ties directly into 724 and why they love this 724 so much. There could be a whole myriad of reasons for it. But if we go and click on that 724 there, and then what we'll do now that you know the 22 is there, we're going to clean off all of that. We're going to go to a bar chart, and then what we're going to do is we're going to take the top, started from the bottom. Now we're here. Huh. And then we're going to drop that there. You're going to get the 71785 as well. So that is the 50% move. Promise never to do that again. And then if you look at that 72553. I'm going to leave those in for one second so you can see something. Then we're going to go to the five. And you're going to see, just let's get rid of the pre and the post. And you're going to see how you're riding that level 618. But you have another level in here. And that's from the top to the bottom of that level. And all I did was started from the bottom. Then we're here. Boom. Promise broken. And now what we want to do is just see what happens with it. So that 72553 has been a real pickle. But 724 has just been a beline of the 22, and that is becoming an issue. So you have this area that is just, I don't know what to call it, but a pickle. Every time we're getting over the 22, we're getting rejected by this retracement level and just tumbo matumbbo over and over again.
So, this is setting us up for shorts during the day, but the shorts are kind of iffy because you have Samsung's earnings, you have prelims tonight, and we'll get to this. So, we'll get to it in a second. So, what we're seeing here is we're seeing these failed rallies and then we're seeing them roll back over, but we're not really falling apart. What we're doing is rotating. And we'll get into how you can see that. I do have some concerns here, but I do want to address this. So what we're doing or what we've seen with semiconductors is even the open today, you couldn't hold the open. And if we do the simplest things here, and we just drop it again, drop it like it's hot. And then here's the 22, and we've closed below it. Hits the 22 and rejects. Remember, the 12 to me is, can I swing what's going on here or not? The 22 is, are the bulls in charge or the bears in charge? And the 55 to me is, do I have institutional support or not? So right now, I really can't swing anything in semis, and the bears are in charge, and they've been in charge for two days, and if you really look at the market, it feels that way.
So this was pretty, as I like to say, absolutely glaringly obvious. And the first half hour to hour of trading is what? It's always retail, right? So we know this. And if you look at what we saw at the end for retail, what did retail do? Retail took it up to the highs of the day, and you never came near it. That was it. So they lured you in, and then from there, you could see coming straight across, and then the last hour to hour and a half. So, if you just mark it off, we'll mark it off from a dentist's favorite time of day. And then we'll just drop it like it's hot right here. And you can see what did they do. Well, they just sold. They sold all day. Institutions sold from 2:30. I like using 2:30. Some people use three, the last hour. You should use what you're comfortable with. But if you ever just take these rectangles and throw them up there and go, "What did retail do in the first hour? What did we do in the last hour? Institutions do in the last hour to 90 minutes?" Gives you a pretty clear picture of where they started at 2:30 to 3:00, how they finished, and they finished at the low of day. This actually presented a really interesting short for us today where we just let it start to rally up, and then when it started to rally again, and then when it finally broke, we actually shorted it. I'll just put in the time stamps here. So really, what we were doing was just shorting it, and then I also sold the the 210 calls just to open at 210 for 16 bucks, and then as it came down, we just trimmed and trimmed. You can see this, the trade started around 11:00 and then ended day. They kind of flim-flammed me at the end for the remaining. But we're trimming the whole way down, and you can say it here. I'll just get rid of this now. So when we rallied up, I'm watching, and then you can kind of see the retest in here. If I overlay the RSI with it, it'll make a lot more sense. My settings are different on the RSI. I don't mind sharing them. It's that I use 15 open, high, low, close. And then I will play with the moving average. Sometimes I use the moving average, sometimes I don't. In a fast market, I'll make it an EMA. Um, and then I'll actually change the dimensions of the SM. You know, if it's an SMA or an EMA, I actually change them dependent upon the kind of volatility and market that you have. It's not consistent. But, you know, roughly it's around 15. And right now, I have what I would call like a hot SMA because it's an EMA, so it'll load front-load the first three. It's just easier. But, you can see like right where that close is, like there's your bar. And if you know, you look about 10 minutes later, I'm watching the retest. Watched it try and failed Matumbbo, and then it was pretty obvious that we had a pretty easy short. So I'll trim out of it, and then I'll just leave the sold calls on too, 'cause they just bleed out, right? So it just makes sense, just might as well make more money. Why not? But you know, end of day, why are we doing this? I think a lot of the reason candidly is the rotation that you're seeing that we're going to get into. But you also have Samsung hanging over your head this evening, and I actually think that's the one thing that's holding you up.
Before I forget, enrollment to get into the community is open this week. If you're on the waitlist, you probably will get an invitation. They started going out tonight, and they'll go out for five days, and then I'll close enrollment probably till September because I do all the onboarding calls myself. You're not forced to talk to me, but but I do them. Left head, right shoulder, neckline. I think I'm funny. Anyway, this is super interesting to me because you're seeing rotation, and I'm going to just show you the easiest way for you to understand rotation, right? 'Cause like, no one really knows what's going to happen. Like, we can all sit there and go, "Oh, the blippity bloopity bloop did this." But like, at the end of the day, of 20-some years of doing this, I'm just telling you that it's all about probabilities. So when, now we already put CIBR in there. Let's take that off again. All right. So CIBR, I want the socks in there. CIBR. Um, I also want to put in IGV to show you the difference. We're going to put IBB in there as well. And we have the socks in there. And then we're going to put the Mags in there as well. So now that I have all those in there, and I have a daily watch, when I drop this to a one-minute chart, and what you'll see, and we'll go back to the beginning of the day. You can run these at the beginning of the day. So let's say there's like eight or nine names you're interested in. You throw them in a line chart like this, and then you just watch them all day, and then whatever ones are doing well, they're the ones you pay attention to. And if you're trying to short, guess what? They're the ones you short. Like, you don't convince yourself that, "Oh, I want to buy the one that's dipping like that." That's good luck with that. It's not going to work. You want to play the ones that are telling you what they're going to do, right? So, if they're not keeping up as the day goes on, and you can like watch this real-time and just go back and hit the bar replay, and you can see it. It gets super interesting and super easy to see like what's happening. So, all period of time, and you can see like, "Hey, do you really want to be buying semis? You, you sure about that? Versus everything else." And then I tend to put in the NASDAQ, especially if I'm trading tech, because that gives me a demarcation line. Like, "Do I really want to be buying cybersecurity?" Even though I do like the cybersecurity, but do I really want to be chasing that today? We're not going to be chasing the Mag names. Like, it just doesn't make any sense. It's very clear they're buying MAG and they're buying biotech. Even software is outperforming that subsector. So, that's telling me that they're going after the larger caps more than the mid-tier subsector, right? So, you start learning these nuances, and it's not like it's not rocket science. It's just that I've been doing it so long. But it tells you a story. So like if you had 10 names and you're trading those 10 names that you're interested that day, or five names, and you threw them all in here, you could watch them during the day and say, "Hey, this one's acting relatively better than this one. Why don't I look at that?" And oh, that's a good idea. It helps you greatly.
But what this is telling us very clear today is they are rotating. And if you look at how you are here, and I'll just make this super clear off the open, watch that first like hour and a half, really the first hour, but like after that first hour and a half, it got really clear that they were buying biotech, they were buying the Mag 7, you know, even software to an extent versus the NASDAQ. And they, what were they selling? Semis. So the question that we have to ask ourselves is, are we setting up for some kind of crash or correction? And there's something out there. I hate to say this, but yeah, I'm a little worried about something that I saw, and I'm never worried about something I've seen in the past. Like, never, because whatever we've seen in the past, we're always prepared for. I'm not so sure. So, I will show you. But this does paint a pretty clear picture. So, this did allow people to, you know, rotate into those names and by understanding that and breaking it down, they'll just go back to a bear.
Then, when you're looking at like Meta, like it's not rocket science, like, "Oh geez, Meta is like running today. Why is Meta running?" And then you're like, "Well, it's the Mag 7s are outperforming." I think it's personally a defensive strategy, and they went too far left, but you're seeing it with Google, Meta, Amazon, you're seeing all these names come back into play. Apple to me, what we've done and and we're doing quite well with it was this. The Mag 7 was like a no-brainer because it, they were so depressed. The PE of some of the Mag 7 names is actually cheaper than what you're seeing in the S&P. What I don't like, and what somebody showed me today, and I'll go off on one of my ADD tier rates, that you're going to start getting negative free cash flow on Microsoft if they continue spending. Like, that seems like an issue. So, I don't know. I don't know that I want to pick the individual name or say, "Hey, Meta is really going to work out with those great goggles because their ideas are always so awesome." So, like, I don't know that I want to do that, or, "Hey, do I want to buy Google?" But if, you know, one person quits, they might lose a hundred billion dollars. Like, we just saw that the other day. Like, two people quit, and then the stock went from like 360 to 340. It was ridiculous. I think looking at it from an aggregate standpoint makes a lot of sense because the volatility that we're experiencing right now is pretty insane. And so when I look at that volatility versus the market, and I've been showing this in a different way, like the way that I've been showing you guys is to take things like SanDisk, and we'll get into some of these names in a second, but I really want to, instead of just doing evergreen content, putting it out there, and I do want to do that kind of stuff. I like showing what I'm using when I'm using it so that you can see like, "Oh, this is actually what he's using right now." So, like the one thing that I've been really trying to hammer home is ATR. And this is what I've been trying to get people to understand. Come on, there it goes. That what you're starting to see here with the ATR is like, for example, SanDisk's ATR is 222. Well, that means on any given day, this is telling you that we can move well over 10% like for no reason, just because somebody sneezed. So when we understand that, and you're like, "Well, that's because it's a $1,700 stock." No, because when you look at the ATR, an ATR tells you roughly where you could be 67% of the time. If I look at the same price point, June 3rd versus July 2nd, we'll say, right? So now you're here, and you're at 226, we'll call it, and then from here we were at 110. So we are basically up 100% on the ATR in a month at the same price point. So, the level of volatility that the underlying assets that we're trading are going up is absolutely insane, which makes it a great environment for people that know how to sell calls and sell puts or credit strategies. It's like, it's a great time to do that because when you look at the VIX is at 15, and people are like, "This doesn't make any sense. The volatility is insane." Blah, blah. Well, I don't really use this a lot, but you're going to hear a lot about this, and I'm going to explain why you're going to hear a lot about this, but this is called CO1. And someone brought it up to me the other day. That's why I like the community because I, I have a lot of people and a lot of eyes in there and people that actually know what they're doing. And I can't watch everything. You just can't. But when it breaks eight, that's when I'm supposed to be concerned. I always look for what happened in history, and that just makes my life easier, right? And because I think, "Oh, if this happened, then that could happen." But when this drops, so what you're looking at here is you're really looking at the VIX and the S&P. So think about the S&P's volatility in relation to the top 50 stocks in the S&P. And when it starts to get, the more it drops, the less correlated you are. So you have a really bifurcated, less correlated market than you've had in a very long period of time. And that's why it's doing what it's doing. But it's getting to the point where this is extreme. So whenever I see extremes, I need to pay attention. And so when I went back through this, and this is what I was saying earlier, like the thing that concerned me was the last time that we did this and had this kind of level where these lead to seems to be these huge spikes. Well, these spikes are when we had all that winning and liberation in 2025. When we went to, you know, war, nobody thought that we were going to go to war, whatever. We're calling it a quagmire. But back here in July, like this is July 10th, 2024. And then you look at how we lifted into August 5th, 2024. Well, this ties in perfectly at that level, which is this is one of the most insane levels that this thing has. Like, it's not common. It doesn't go all the way back, but it's not common for this to be here. Like, not even a little bit. So that's how bifurcated we are. So whenever we get this bifurcated or have that lack of correlation to the underlying index, it means two things. One, it means underneath the breath is deteriorating, and we don't even know it. Like we're standing on quicksand and we're not aware of it. Doesn't mean it can't fix itself, but we need to be aware of it. So watch this.
But wait, there's more. If you act now. So, if we look at this in 2024, and I've pointed this out like a month ago, but you had this big move down in April, and then you rallied back up, and then the US dollar versus the yen then collapsed. If you look at the date and when this happened, this happened right at July 10th. And that correlation to what I just showed you was reading the same exact damn reading you have right now. Excuse the language. So, then I come to here and I'm like, "All right, well, I've got this little move down that looks familiar." And then we have this little, you know, juke, which is right here. Bonk. And then we try to lift up, and then we have a red bar down followed by a rally, and then we have a long red bar down. I mean, it's like looking in the mirror when you really look at it. Now, I'm a big believer, and once we've gone through something once, we tend to not go through it again because those people are hedged. But if I don't show this, I feel like I'd be remiss. So, the one thing that I don't think that we're paying attention to as much might be, is there going to be an issue here with the US dollar and this Japanese yen trade? And then I start thinking about like, okay, well, what are the issues this week? Well, you have the Fed minutes on Wednesday. Could they cause a curl fluff? Could that be an issue? You have the bond auctions this week. You have a 10-year and you have a 30-year bond auction. Could that be it? I don't have a clue. And I'm not going to pretend that I do. And I'm not going to pretend because it did it here that it automatically means it's going to happen here. But I think I'd be remiss if I don't point this out. And I want to show you some other things.
So we can all see the semiconductors and how they're acting. So if we go and take a look at the socks, this is not getting better. It's actually getting worse. And you have left head, right shoulder, and the right shoulder is more developed. What got me today about the socks? I'm going to drop it like it's hot to a four-hour. I'm not getting oversold. Like, I'm not getting to these levels where we might have a technical oversold bounce. What I'm getting to is I'm getting back to neutral. So all they did on the hourlys was take you back to neutral, make everyone feel warm and fuzzy, and then just sweep the leg. That's all they did. Now, if you would think about this, would you think that you're neutral on the hourly chart on the socks? Probably not, considering the, you know, the amount of carnage that's gone on. So that's the first thing that I think is super important.
If we take a look at what happened with the ones that broke out today, this becomes a concern of mine. So, if I go and take a look at something like IGV, which is obviously seeing some inflows, and Mags are seeing inflows too. I think they're playing Mags to be defensive. And I think they're playing Mags to be defensive, and I think they're doing that, but they actually came in at the end of the day on the XLV, and they actually put a bid in there. So, if you watch the beginning of the day, what happens? And again, what we want to know always is who's doing what when. So, I'll say that again. Who's doing what when. So, here's the first hour of the day, right? Yay. What happens? Retail's like, "I got to get out of these losers, right? I got to get out of healthcare." And then you go to like 2:30, which is right around here. And so, yeah, institutions really aren't doing a lot with it either. But are they panic selling? Not really. No, they're not really panic selling, right? All right. So, when we start to understand this, like they're crazy, right? Look at these crazy kids. The first hour they got to get in, the second hour, the first hour, the next day, they got to get out. It's nuts. So, what is this telling us? It's telling us that yeah, they didn't really feel the need to get out of XLV at the end of the day. If you go and take a look at XLP, you'll notice that they got a little more defensive there, right? Retail's ready to get out and ready to rock and roll and buy semis. And what is institutions doing there? And I'm not going to draw my crazy little lines again, but what are you seeing in here? You're saying that they got defensive. So, I do think there's something to that, but also I think they are rotating into different spaces. So, you know, you are rotating into the XLF. I bought DPST recently. A bunch of people in the room bought FAS. They want, I want some kind of small cap exposure. Come on, you can load. I believe in you. You can do it. And so like FAS is obviously doing really well. The DPST is obviously not going to be doing as well. I wanted some small cap exposure. Ask me how that's going. It's actually okay. But I really think that smaller cap regional banks are like they're so cheap in regards to the rest of the market. And I don't think he's going to raise rates. That's just me talking out loud. So I don't, it's not like they're getting out of everything, right? Right? If you go take a look at XLI today, far from it. Like they rallied and bid it up, but at the end of the day, what do we see? Well, you have all the hoopal heads that followed, you know, like Barry into I'm going to short Caterpillar 2 trade and we'll see how that goes in a couple weeks. But I don't think that you have a problem here with these names. I really don't.
But here's what gets me. Like we bought GEV at a,000 and hit all-time highs today. And I really like this trade. I'll tell you what I don't like. I don't like how I hit the high and I reject it. I don't like how I hit a high here and the RSI doesn't align. But wait, there's more. I don't like how Crowd is one that we own. And I don't like how we came out, hit all-time highs. They really trapped retail here, and we hit all-time highs, and then we backed off of it. And then PINW hit 360. And you might think that I'm like splitting hairs on these closes, but I didn't have the follow-through. Now, if I look at CIBR, it's there. But what I'm getting at here is where's that follow-through? And I just don't see it.
So, when I go and take a look at like the NDX, and we look at something like this, watch when we look at the bull side. I don't have a lot of buying as we come off the holiday weekend. But what does get me about this, and what I need to be concerned about, is tonight at 8:00, we have Samsung that will preliminary earnings. Their earnings are going to be stellar. They're going to be fantastic. How can they not be, right? But how much of that is baked in? And did they bid up Asia last night? So, you have to remember, Asia is obviously ahead of us on the time. So, we're getting that, you know, Thursday close at 80, and now we're at 90. So, did they bid it up last night ahead of this because they know that Samsung's coming out with earnings the next day, and now they're like, "Oh, great. We get to buy it cheaper." So, we have to really watch what happens tonight with Samsung's earnings. And my concern is just when I look at some of these larger cap names, they're hanging on by their fingernails. And so, where I think the issue could be is if we start seeing selling and we start making lower lows from Thursday. And I think that could feed upon itself and people say, "Just get me out. I want to get out of the market. I want to regroup." So that's the thing that we have to watch tonight. And then we have to watch for that follow-through of that move tomorrow. For example, let's say that Samsung overnight, they sell it all down. That might just be the wash, and that might be the end of it, right? Or if they bid us up pretty high based upon it, then they might do the same thing that they did today, which was just sell to retail. That's it.