Transcription
S&P futures had a massive bounce off a critical level. We're going to discuss exactly what happened. The same could be said for NASDAQ futures, but this definitely was a little bit different today. We could not clear the 200-day moving average on the NASDAQ, or we could not clear what happened here on the S&P as well. And then something else happened that we have to go over technically.
But first, we actually have to get to the big news that made the market go up by $2 trillion within five minutes. This was the tweet that made the market rally. "I am pleased to report the United States, America, country of Iran over the last two days very good, productive conversations of hostilities in the Middle East. Based upon the tenor and turn of these ineptitude, continue throughout the week, I've instructed the Department of War postpone any military strikes against Iran." The only problem is, Iran has no idea what he's talking about. Let's get to it.
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Now, why does it matter that the other side is saying that they're not meeting? Well, it matters for a couple of reasons. Because they're going as far to say, "We don't even know who you're talking to." And at the same time, the war is still going on. Meaning, they are still bombing local areas. They are still bombing Israel. Now, whether you're going to say that's two fronts or one front, that's fine. It is what it is. But what we have to do is look at what exactly happened and then how we can profit from it. That's what we do here.
If we look at the S&P, the S&P rallied up and rolled all the way back. Now, let's drill into this for a second. And what we'll do is we're going to go to this bare chart. And we really have to look at when or plain chart. And what we really have to do is the big focal point is I was telling everyone in the community, and if you're trying to get in, just look for a a letter. There should be invitations going out pretty soon to another batch. If you were trying to get in, get on the waitlist, links in description or sometimes I pin the comment.
If you look at this range in here, that's where the algorithm ran you in five minutes. So the algo just runs everybody up, and that did a good job. I mean, five minutes and you got 3%. You know, it's hard to beat that, right? So you have to look at that for what it is and say, "There's no way that I'm going to be able to compete with that." So you just want to look at where the algorithms always run out of money or their ability to go and push it any higher. Let's look at it that way. And what's that tell you? Well, that gives you a real clean range. And you can see we could never really get over that range today.
Now, let's go take a look at the Q's, and the Q's, you'll see the same exact thing. So, if we look at this range on the cues, what did this do? Well, what this really had the effect of doing when we go and look at this range here in 5 minutes, that you went up 3 and a half percent. This is what people mean when they say this is not a tradable market. Imagine coming in short and just a tweet, and you're three and a half percent against you just on the index, and then you find out that the other side has no idea what they're talking about.
Now, whether or not they do or they don't, okay, let's not go even go down that road. Let's just assume that they do know what you're talking about, and you still didn't move. I think it's a good sign, candidly, that if we go to this and we just drop the fibs on there, I think it's a really good sign that you didn't stay below the 50% line on the cues. So that means for the day, we really didn't have net sellers. And I think if you just go to on the first five-minute bar and do the same thing, and you come to that 50%, you'll note that you kept hitting there as well and not breaking. I think that's great.
What I think is more problematic is that what we saw after it happened. So we saw two two things that were very different here. And the first thing that we saw was we saw energy. Now, we saw energy drop and then rally. But what we saw mostly is this is a retail product. So if we say that this is a retail product, which it is, USO is a retail product. And we mark off that five-minute bar. So this is your news. Yay, world peace, right? They do the undercut, the rally, they do the little dip, 2:30, that's his favorite time of day, and then they rip us.
All right, let's go take a look at crude. Did crude have that dip? No, crude didn't have that dip. All right, so what had that dip? USO had that dip, the retail product. What did crude oil do? Came right back to this level on that five-minute bar where the algos were. Held that level, flipped, and then lifted and pushed higher, and then we were unable to get back to that level again.
So, what do you really have here? You have a low from here. Then you have a higher low, and then you have a higher low, and then you have a high, and then you have a lower high, and we don't know how this plays out yet. You could make the argument that you have a bear pennant, but I think if we just do the simplest thing yet again, all we're going to do is just drop it here. There's your 50% line, and we couldn't get over that. So, you may make the argument here that you still have net sellers in crude at this particular time, which theoretically should be really bullish, right?
Okay. So, this is what our chart looks like on crude. If this was over and we had world peace, or we had this rhetoric stopping, let's leave it at that and stop being so facetious for a second. What would have happened today? Do you think you would have stopped here? You wouldn't have stopped here. You would have been in the 70s pretty easily if anybody believed this.
Here's the problem. And this is where people are losing it. And I'm going to walk through some of this. When you're dropping like this, that's great. But for the period of 30 days, actually 23 days at this point, you've been higher. So when we look at inflation, we have to go to February 2nd. And we're just going to do this back envelope. And then what we're going to do is we're just going to mark that February 2nd to where it lands on the 27th right here, because the 28th we're off. And then we go there. That gets you $64 on that anchored VWAP. So that means the average price for February was $64.
When you go here, and this is why they say higher for longer is bad, and you drop an anchored VWAP for the average profile there. And then we just go here. Let's get rid of this magnet before I have a falling down episode. And so then what we're going to do is put that right there. And then we're going to look at the difference. So what I'm doing is taking the average from March and the average from February. And this is the problem that people aren't getting that oil on average month over month, you're up 34%. That's the problem here. Even if it gets better, it's got to drop drastically below your average to even matter. And we're just not doing that. So, that's the first problem that you're running into here.
We're going to get to that and tie it into the bond market in a second here. But, I think that we have to do the other part first. The energy names. What happened to the energy names? Well, the energy names were supposed to sell off today because you are going to obviously not need them as much anymore because of all the yada yada. Okay. So, here comes XLE. What does XLE do? Opens and rips into the end of the day. Let's go take a look at the five-minute chart. And we can take a look at what happened here. Here's your 9:30 buy. Here's where we were achieving world peace in a tweet. Here's where we rallied back. And then this is where we hit highs back and then we closed near the highs of the day.
If you look at this and we look at the volume on this, it was just outright buying. People could not get in the energy names fast enough. They felt that they were getting a deal. Take a look at Exxon. All they did was buy Exxon all day long. You had one five-minute bar, and that was it. If you take a look at Chevron, you're at all-time highs after hours. And this is what's even crazier about Chevron. If we go back and take a look at the 9:30 level, all the way back up. Nobody believed any of this. And it ran all the way back up. And then you have the CEO of Chevron after hours saying, "People are grossly mistaken on where they think energy prices are actually going. And and already oil should be a lot higher."
Now, you people might say he's talking up his own book. Candidly, if you know a lot about oil and you follow the market, they want stability more than they want a higher price. They just want the stability. So when he says things like that, he's just telling you that the world's out of whack. I'm not saying he's not trying to talk up his product, but you have to realize that the stability of having it in a range is better for these guys because then they can plan and hedge. It's just going up and and them not being able to know what they're going to get next month or next quarter. It's harder for them. They'd rather have that consistency of earnings. So something like that, these are classic reversals of, hey, we think you're done. No, we're not done.
Now, this is where it got super interesting. When we started looking at the producers like the VLO or the refiners, I should say MPC, they didn't have the same move. They didn't bounce the same way. And so what this means for me when I look at, you can see this through the crack spread. They're the refiners. They didn't move the same way as XLE did. So what is that telling you? That's telling you that this could be coming to some kind of end or some kind of like conjecture on price. Let me leave it at that. But that that price is going to be higher than we think it is. And that's why when you look at crude higher for longer on crude is good for Exxon and good for Chevron. But if the crack spread, if it starts tightening, it's not as good for the refiners. So there's an issue there because they make their they make more money off the spread, right? That's why it's called the crack spread versus when you start looking at CVX, you start looking at Exxon. I think there's an important distinction there, and I really would pay attention to that.
What I saw today was a bunch of people that are assuming the war the world's going to end or the war is going to end. And so the VIX opens down on the news at $20, rightfully here. And then what's it do for the rest of the day after that news? Just goes higher all day long. All right. So, let's go take a look at MOVE. So, MOVE is we're going to go here. We're going to make this a well, we don't have to make it a line. We'll leave it there. So, MOVE backed off a little bit in here. And we saw this breakout the other day, and this is bond volatility. And that's telling you that they think that they still need insurance, but maybe not as much. And then we watch the 20-year, and the 20-year can't rally. So, they're not convinced.
How about the dollar? What's the dollar doing? Well, the dollar is coming in, so that's good. So, you have some moving parts here that are telling you a couple things. The very first thing that you should be picking up from this is there is massive uncertainty and massive real uncertainty that anything is really going to get accomplished.
At the same time we're saying all this and all this rhetoric and we're watching the market do this, we'll just use the S&P for a second. There's one part of this that everybody missed, and I and you're not going to have missed it because you're watching this, but I want to get this out where we're going to have troops there on Friday, and no one's even thinking about the thing of him just saying, "Oh, we're going to slow down until Friday." And then he has troops there, and then he says, "Okay, well, we have troops here. We didn't make any progress, so we're going to take this island." And I'm not a master strategist, and I have no idea. Let me be really clear when I say something like that. I have no idea what I'm talking about, and neither does anybody else that's playing, you know, war strategist online right now. But if you don't even put that in your percentage of a possible probability, and you're just going to take the tweet as the war's over because I say so, then how'd that work for you back here on oil at 93 for tweet number one? That's the thing that I don't think people are truly getting about this. We had the same thing here, and it was over. Same thing here.
And then when we listen to these CEOs, and they're telling us like, "Guys, this is going a lot higher. Oil's going a lot higher. CVX, oil's going a lot higher." You may think he's talking up his book. That's cool. I don't look at it that way. I think he's telling you that he sees an imperfection in the market, and he's trying to tell people there's an imperfection in the market. And if I'm to look at this, that imperfection to me is the spread in crude that fast over that period of time. And what I mean by that is if you looked at the probability of you having a 34% move in crude month over month, I can tell you that you haven't had that on average since you had something back here where we went to zero on crude. It actually went negative at one point because they were afraid that they were actually going to have to take physical delivery.
So what does this mean to you and what do you do with it? Head on a swivel. And here's the part that people aren't getting. This is the thing that people aren't getting. When in doubt, zoom out and keep it simple. Real simple. S&P rejected its 200-day moving average. It's irrefutable. It's objective. I'm not going crazy until we start closing above the 200-day moving average. Well, that seems reasonable.
How's that going with the Q's? I'm glad you asked. So, when we look at the Q's, we can see the same exact thing. So, do I have to go out there and be first? Well, what's my leader? Okay. Is my leading the socks? Is that what is that's what's leading right now? Right. No. You tried to get over the 55 and the 22, and you got completely utterly mamboed today and you didn't go higher. Well, financials, they're leading. No, they tried to get over the 12 and they couldn't get over. Okay. So, what's leading right now? Energy. Energy hit a new all-time high. Energy hit the 12, bounced off the 12, and closed at an all-time high. That's what's leading. Everything else is conversation right now. That's not to say don't trade the tech, but just understand it is what it is.
If you look at these five-minute bars after the day, you had five minutes, and then that was it. And then you start rolling right over. So please understand that you couldn't get over, that was the end of it. And I don't know how to be any clearer about that rejection, and then there you are. And then you start to see like the death spiral. Now, what's important about this and the way that you're rolling over is these levels are pretty clear. You have a 420 level in here from the option market makers. The 400, you have a huge level on the option market makers. So, when you look at where this stuff is, it's not rocket science. It's telling you where you're going to go to.
We had a really great trade plan today on SanDisk. I'm able to short this thing at like four, what was it? Not 42. I think it was 38. Right around that 38 level. And you can see it ties directly in. Again, it's not rocket science. You can see where you're lifting over on this key area. You have a divergence as well. I mean, it's not rocket science where you try these things, right? You're just trying to stack everything in your favor. It doesn't mean it's going to work, but you're just trying to get more and more probabilities in your favor. That's all you're doing with trading. You know, you're just try you're fighting for inches. You're not fighting for yards. So, once you see something like that, it makes a lot more sense. And then you can just see from there, we rolled over, tested our first area, and came all the way back down to that breakout level, which also got you back to what the call wall, which is 700. Really easy trade today, and it was pretty simple trading this stuff in and out in markets like this. It makes a lot of sense to just be nimble in an environment like this.
To go out there now after what happened on Friday and to say to us, we have to look at this market. We have to get long because this is going to yada yada. Yeah, I I'm over that after what we just saw with the with what we just saw with the 10-year and the way the 10-year is acting. And I do agree that you want to look at the bond market. You want to look at the dollar. We want to look at MOVE and see what's going on there. We want to look at the VIX and see what's going on there. We want to pay attention to all of it, and we want to ascertain this. But at the end of the day, price is price, right? And we have to trade what the price is. Like that's really it.
So if I look at the S&P right now, and I'll clean off my million levels and we do the simplest things and say, "All right, well, here's the anchored VWAP back here. Okay, we're holding on the SPY. Awesome. That's cool. We're holding that level. Where are we on the 200?" Okay, on the 200. We'll make that bright so that we can see it. And there it is. Now, what's that telling you? We got to it and we rejected. Great.
If we go and do this on the Q's, there's the 200. And let's just drop the anchored VWAP there as well. Cool. And then we stopped. We can actually take an entire volume profile and put it on that level. And we can see that you have another level there that you would hold in the Q's. And then we can do the same exact thing on the SPY. All I'm doing is grabbing an anchored VWAP or an anchored volume profile, apologies, and dropping it there. And it's giving us other levels. So that we failed the 200, which means you lost all your bulls. The bulls are gone till you're over that, right? So trying to swing trade as an index sector stock trader, trying to trade that as a top-down index sector stock when I only have one sector that's rocking, which is energy, is absolutely freaking pointless. Which takes you to 640 and then it takes you down to that 630 level. And that's how you're setting up.
Here's the thing that most people are missing, and what I want to leave you with. I want to just say something. We'll get to the breadth in a second, but I just want to show you this, and then you should be able to use this for tomorrow. I'm oversold. The market's so oversold. Is it? So, I'm going to just show you this. If we go here on the hourly, you're completely back to neutral, as you were neutral here and then rolled over. As you were neutral here and rolled over, as you were neutral here and rolled over. You want me to say it again? This is I mean, it's the same soup reheated, and you're trying to make it a different soup every time you heat it up. Just watch the darn thing. It's the same exact thing. So just allow it to be what it is and stop telling it that it's something else because you're not going to time the bottom. None of us are.
If we look at this on the four-hour, which is really what you want. Yes, I've got a four-hour. Yes, I'm undercut and I've already bounced, and I have a 40 reading. I still have a what low. Every high from February 25th on the RSI is a new low, right? Every peak is a new low. Okay. How about the Q's? Same exact thing. So, let me clean this off. So, when we look at this and we're saying, "Oh, well, we're oversold." Well, where where's that oversold? You're still in this quadrant, but you're not at some level. You're not at like, let me rephrase this. You're not at winning liberation level of oversold, right? You're not at an 18 and saying, "Oh, we definitely have to bounce with an 18." We're at like a 40, and the VIX is nowhere near and any kind of extreme. So, we're really going through this frog and boiling water. But the point that I want you to take from this is that on an hourly chart, you're back to neutral.
Now, when we look at this and say, "Okay, well, where does this get us going into tomorrow?" I have no idea what headline I'm going to get tonight. As I'm recording this, I'm reading a headline coming across right now about how Israel is being is attacking Hezbollah. That doesn't really sound like the end of something to me. But again, what do I know?
So, if I look at something here where we're looking at the 200, the 50, the 20, and the five, these are percentages above. These are getting to those trough valuations where you do bounce. There are extreme situations when you break the 50 here, which we have done, where it gets a lot worse before it gets better. So when we had all the winning and liberation on the 200, we got to 17% of names were at that level. When we got here on the winning and liberation, it got to five. We're at 19. The point with this is, do I Let me say it this way because I think it's more important. The point that I'm getting at is do I think there's a bounce out there? Yes. I think it's faster than we think it is. The B bounce will come faster than we think it will. The problem is the last couple innings of this can be absolutely brutal because they come for everything at once. So, you have to think about it this way. If 81% of all names are below their 50-day moving average, the only things for them to sell left if this gets worse and it's setting up to get worse, the only thing out there are the big winners, which means that they're going to clobber those like they always do. They clobber everything towards the end. And so that what you're saying is like, okay, well, this gave us a reading of like one stock was above its 20-day moving average, and right now you have a reading of about 80. Like it's these numbers are really bad. Usually when you get in the single digits on the five that you bounce. So again, head on a swivel, but if the energy names are going to react the way that they did today, and they're going to bounce and have huge buying like they did, it's really telling you everything that you need to know. And those that are nimble are going to be able to take advantage of what's coming. That's it.