Transcription
What caused the NASDAQ and the S&P to actually crater this morning and then bounce back this evening? Really hard on earnings. There's a lot going on here, guys. We're going to jump right into it. Parts of this you might want to watch again. Let's go.
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Now, in regards to this, look, I was going to put it right there. Subscribe. Let's get to this. Now, we can see this huge drop and we all know that OpenAI has been struggling with paying these debts, right? They have all these debts outstanding, and we know that they have a huge issue with that. So, we watched the market absolutely get smoked this morning and everybody was in panic mode, right? You came in and this is what we were dealing with and nobody really knew what they were going to do about it. And we all knew it was coming. We all knew it was out there that you're going to have this kind of drop. We just didn't know when it was going to happen and for how long. But you can see it starts at 8:00 last night and then by the end of the day you're down 2% and everybody's rushing back in.
There's some good here that happened structurally on the breath side, which was actually surprising. It's why this one's going out a little late. I wanted to wait to see it. Really surprised by some of this stuff. We're going to get to and we have to go through all these earnings, but we need to go through the article very quickly. So, let's just get to it.
Let's talk about the article that changed everything today. This is OpenAI and this was in the Wall Street Journal. "OpenAI Misses Key Revenue Targets, High Stakes Sprint Towards IPO." And this is the CFO. And to me, this was really a CYA by her. But let's just go through some of the key parts of this that really set off this trickle down. As always with the stool, we want to look at the macro fundamentals and technicals. OpenAI recently missed its targets for new users and revenue stumbles that have raised concerns about company leaders whether it would be able to support massive spending on data centers. So, the spending is what's scaring everybody. CFO Sarah told other leaders that she's worried a company might not be able to pay future computing contracts. So I think this is really interesting. CFO has told other company leaders if the revenue doesn't grow fast enough, according to people familiar with the matter. So to me this is them putting her out there or her putting himself out there and saying, "Hey, you guys, we have these contracts, we might not be able to pay." I look at this as what we refer to as like floating a balloon out there and seeing what happens.
Board directors have more closely examined the company's data center deals in recent months and questioned CEO's efforts to secure even more computing despite business slowdown. So the business is slowing down and he's out there trying to get even more computing power. The spending scrutiny is constraining Altman's once boundless ambitions. Initial public offering could take place the end of the year. Frier, CFO, and other execs are seeking to control costs and instill more discipline in the business at a time putting them at odds with their CEO. And this is Sam on a couch being cool. "We are totally aligned on buying as much computers as we can, working together every day," they said in a joint statement, which means I guess they're trying to put a united front on. Again, I believe the CFO is just floating this out there because they have concerns. So he was always trying to lock up as much as he possibly can. Put on the hook for $600 billion in future spending commitments. You will remember it was 1.2 trillion by everything by ChatGPT. Invincible success, support of Frier and the board, growth has slowed. So they're changing their tune. There's an internal goal of reaching 1 billion weekly active users for ChatGPT end of the year. And then you can kind of see where they're going with this article.
Last piece of this, multiple monthly target new revenues have been missed. Losing ground to Anthropic. This is really important because it's not like AI is going away. You're just using a better mousetrap, right? It's like going from AltaVista to Yahoo to Google. For you guys that remember that from back in the day. $122 billion, largest funding round in history, putting more solid financial footing. The company signed up for much more computing, burned through that amount. I think with Sora too, they don't really talk about that in the article, but when you went through that kind of money and you got nothing for it, it definitely puts people on their heels and I think that there's definitely something out there. So, the difference is they're saying that they don't have to worry like Anthropic about a capacity crunch. Well, yeah, I get that. But if nobody's using the product, why do you need the extra stuff? And we're just going to call it stuff because it's memory, it's storage, it's compute, hence stuff.
Okay, what does this mean? Well, to me it meant a couple things. And the first thing was, and I was really surprised by this, but Microsoft cut its ties yesterday and cut its revenue rec share yesterday. And I thought this was super weird that the stock went down. And we're going to take a moment to dig into this because when you can see here, they announced this and this is what happens. "We're done with our revenue share with them," and the stock goes to 404, right? Who says algorithms don't help? So when you see that, I looked at it and was like, this doesn't really make a whole heck of a lot of sense that the stock's going down on this because they no longer have to share their revenue. And what Microsoft's doing is really, frankly, is trying to cut their ties and just keep their equity position. And they've been trying to do more with Anthropic, if you noticed. Okay, but this marks our top. Look, what a coincidence where it stopped. This marks your bottom and you never got there. But this is what happened. So you came in today and they smoked it again. But then what did it do? It undercut and it hit a higher high. So, this is getting really interesting from a trading standpoint, how you're actually coming under, backfilling, and then holding those levels. So, as long as you're really staying above that 410, you really seem like you're putting in some kind of flag pattern under a 12, a 22, and a 55. That's what I use. You should use what you're comfortable with.
The other one that I thought was super interesting today as well was looking at Oracle because Oracle's really on the hook, meaning if something truly goes wrong, Oracle is going to run into trouble because they have an outstanding bill with them. So they, and they spent all this money. So if they don't need it, the question is, well, where does that compute go? Well, maybe somebody else needs it, right? Okay, great. Whatever. But I expected this thing to at least test and go through the 55 and test that 55 because it really puts their footing at risk when the CFO of one of your biggest clients comes out and says, "Hey, by the way, yeah, if we can't get it together, we're not going to be able to pay our bills." Like, nobody really wants to hear that. But you're stacked and you're holding this level and it's building in here. So, I think that this is super interesting as well. That helps. Than the other one that you take a look at. And again, I thought for sure that these would come in, but the opens were the low and they held. Now, do they continue to hold or not remains the question. And there's a couple things here because we had some really, there are some companies that just absolutely crushed tonight and we're going to talk about that. But there's some stuff here technically that I think that we should go through on the market. Let's start there.
So, we're going to start with the SPY and we're just going to do the basics. And when we look at the SPY, what we really want to do is just understand what happened today. So we gap down and we finished flat. It's not great. So if I just clean this all off and go to a bare chart and then from that bare chart, I go to an open high low close and we can just see the gap down and our inability to get above any of that. It's kind of an issue, right? It's not the biggest issue, but it's kind of an issue. And to me, it could have been a heck of a lot worse today. And frankly, I'm surprised that it wasn't. But I would have rather have just ripped the band-aid off. So this is kind of the suck salad that they gave us at the end of the day. Here you are in the daily and the daily is already crossing to the low end side of this. Now what I don't like about this and you were going to blow this up sooner on a four-hour is that if you mark this off right here and when you don't want the magnet, it's on. You're going to see there's a lower low. So if I go to the four-hour in here and let's clean this off and let's change it to this level. And I don't need to get that. That's super aggressive. I don't need to be that in your face with it. Good lord. So then you can see the peak from here and then down. So what you have is you have a divergence. And now people will say to me, "Well, these don't work." And then I could go pull out a thousand examples of when they do work. But you know, just because they want it to work in five minutes doesn't mean that that's how the market's going to work. So I have this. I have to either start going back through this, but I think you're at risk here. So, where do I think that you're at risk to? And then we're going to go through some of the other breath indicators here in a second. I think you're at risk to 700. I don't think that you're at this enormous risk, but I think you have risk to 700, which really puts you from here down, which was really going to put you at what and say I think you could correct 2% and retest that level. And I don't really think that's the end of the world.
If I do the same thing with the Qs, this gets a little more interesting because if we go and take a look at the daily and we go to a bare chart and we're going to clean all this off, you have that pattern. You basically have an island reversal. Now, it's not a perfect technical island reversal because these two are still connected. So, you for a true one, you don't want to be have any connection whatsoever, but you do have that "I'm not in the mood, Larry." So, if you can see this, right? You pop over, here we are, and then we gap down and then we have this gap to fill, but you also have this gap in here that you did fill. So, you can make the argument that, well, it's there, but not really. I see it. I would pay attention to it, but this to me is also more of an issue when we do it this way and I go to the RSI and I look at the RSI coming over and breaking through the 70. I need a return through that and get back on track. And I had great earnings tonight, but the breath of the market's a little bit of a concern. So, when I look at this on the daily, yes, it's there. When I look at that on the four-hour, I'm rolling over. So, all this means to me from a technical standpoint, remember everything that I do is top down. That doesn't mean that that's how you do it. It doesn't mean that that's the way that works for you, but I look at everything and I say index and then I say sector and then I say stock. And that's worked for me for 20-some years. You should do what works for you. So when I see this, I don't know that, you know, the sky is falling and all this and the Armageddon and whatever, man. But when I look at this, all right, that takes me to 3%. Okay, so I think you could correct 3%. I don't really think that's the end of the world. And then from there, we have to see what happens. My concern with this is that people don't think that, you know, and this always is the case, people don't think that the market can drop on their names. Well, it can. And we always have to be very cognizant of that, right? We always have to be aware that it can happen and it can get worse even when you have good earnings, which we're going to have to address tonight because some of these earnings were just fantastic and presented huge opportunities, and then others were just dumpster fires, which gave you really good shorts. But when I look at this, I have to look at this and say to myself, like, okay, well, what's going to be the driving force that's going to get that down? Well, it could be a myriad of things, but let's go take a look at the SOX. And what did the SOX do today? Well, the SOX absolutely unequivocally panicked right on the pre and the post.
All right, let's get rid of the pre and the post. And let's go to this. And we can see that we are below that 70 for the first time. We have a doji here. And then we would have to go, all right, well, where's real support? Okay, well, that's 369. Okay, so we could really theoretically get smoked here. So the very first thing that we'd want to do is look at this and say, well, that's a true island, isn't it? And by true island meaning that we are not touching any part of any of that there. Right? So that's an island reversal. Period. End of story. Whether it holds, whether you go sideways and then go back through it, whatever. That's what a top looks like. I am not going to call it a top on semiconductors. I am just telling you that that's what it looks like. That is one leg of the stool and this is what we're dealing with. So, we have an island reversal here and at the top of this here is the RSI at 86 and it looks like we're going to break 70. Breaking into 70 is a problem for me. When I break into 70, it's something I want to pay attention to. What I will say is they bought the heck out of the dip. Even if they were just shorting it, whatever, they bought the heck out of it. And we haven't even tested the 12 yet. So, you don't have a tremendous amount of long-term technical break today because you had a down day. Let's just call it what it is. But when you look at like, hey, well, where's real support? Yeah, it's down here, guys. So, I'm curious about the mark if that gave us anything. Not really. No. So, then what we want to do is just look at this on a four-hour, flip it to here, take off the pre and post, and it's sitting right there. This is what we have, and this is what we have to deal with. And I think that this is super important because this has been our driving force. And it's putting in an island reversal pattern at the top of a chart.
Now, if we take a second and we look at the breath of the market, and this is really what I wanted to do today, and I was really shocked when I saw this, shocked, I tell you. So, this is the five, this is the 20, this is the 50 and the 200. These are stocks above or below that percentage. So, when I look at this is above the 200-day, what percentage? What percentage is above the 50? What percentage 20, five, etc. All right. So, the 30, the five's been washed out and coming and it is where it is. Look at what you're seeing on the 20. We flattened today. I was really shocked. Shocked, I tell you. When I saw this because not only did you go up on the 200, you actually turned up on the 50 and I thought for sure you would have broken it today on the S&P and you didn't. But what this does is this gives us a really great level to mark off. And we also had some really good earnings tonight. But there's that 4953 level. So if I just put a little alert there, you can put alerts on indicators. I think this is really helpful that we held that level. We do not want to break it. And they rotated into names.
So then the next thing that we'd want to do before we really get into the details is start looking at NDFI. Now, why do we want to look at NDFI? We want to look at NDFI because NDFI is going to be the NASDAQ. And we can see that the NASDAQ did not fare as well as others. Well, what do you mean? I'm glad you asked. That is actually down. So, we lost about from 59 to 54 on the day and we closed at 57 to 53. So, we lost three percentage points there. So, if we go S5FI and then we divide that by MDFI, we get this fancy indicator. And then what we're doing is what's rising, S&P or the NASDAQ? NASDAQ's starting to lose to the S&P. That means that if this starts rising, that we could be going through a period like we did in middle March, like we did end of October, right? This is when we start rolling over. That's how it begins. I'm not saying we are. I've been very clear that you have about a 2 or 3% correction before you even get to a support level. So, I'm not seeing that. The earnings that we're about to go over certainly aren't going to show that, the majority of them. And I think that's very important. But we have to be cognizant that this is out there.
Now if I go and take a look at the VIX and again to me this is just, man, no one has a care in the world. Like when you go and take a look at the VIX, like literally no one cares about what's going on out there. They're like, "Whatever, we're going higher," and so this is how they're acting. Now after hours we had some really big movers and we should cover those. For me, the biggest one out there is obviously going to be Seagate. And I'll cover these extensively tomorrow in the pre-market. And also, I'm going to go live tomorrow night. So, make sure and hopefully I brought that up at the beginning of the video. I'm recording this part before the beginning, but make sure that you subscribe because I'm going to put a link out that should only go to people that are subscribed. I don't want people coming in the room that haven't seen this before and aren't familiar because it's going to be pretty wild with all four of those hyperscalers. We're going to have to go through conference calls. I'm going to have to go through all the earnings and everything. So, I'm trying to figure out a way to not make it unlisted to make it public but to subscribers. Also, I'm probably going to put that link out only through the Substack too. So, make sure that you're just, if you're not subscribed to the channel, just make sure that you get the Substack links in description.
Anyway, so 671, absolutely rocket ship, man. And you know, I always wonder about this stuff, the timing of these articles. Yeah, I mean, you just ripped off that 555 close here. I did own this. I did not own it into this. I traded it after hours. It was a blowout. Like, there's no holes here at all. It was an unequivocal blowout. There's no way to say it. They raised guidance substantially. The earnings got raised substantially. Revenues got raised substantially. Gross margins are up, their backlog's up, like everything is firing. Like there's no holes in this and you're going to walk into tomorrow and you know, storage names are going to be through the roof. And I think that that's really important to understand. And it's not just there. It's Western Digital. A matter of fact, I traded this thing like, you know, and this is what I was saying yesterday about the market. I traded this thing I think three times this evening. It just kept it. There was just the gift that kept on giving. And then you had the terodine news, which we'll get to this one. No, this one I traded twice. Hold on one sec. Let me find it. Yeah, as soon as the conference call started, I'll show you the trade. I don't usually put alerts out after hours. Like, I'll tell people what I'm doing, but if you can't trade after hours, like you don't want to learn trading after hours. Like, it's a disaster. So, on this one, I'll mark this off real quick so that you guys can see this. But this was pretty 422. So the chunk down to nothing. Just trading around. Yep. Let's do this one so you can see what we were doing. And that should give you the timestamp there as well. So you can see it. Cool. And let me just drop that in there as well. Great.
So what I'm doing here is I'm watching STX start to break out into its conference call. And then as soon as I see that, what we're doing, come on, little guy. And then what I start to do is then I just start watching Western Digital form that cup. Let's get rid of this for a sec. And then I'm buying into that and I just post out there. I'm back into it. And then when I trim, I'm putting it out there. And then I'm watching the STX at the same time to see how that's acting because STX is obviously going to move the WDC. We can get rid of that real quick. And then come back to this one. And then what you have to do into these and you can see where it's up here. And I timestamp all this stuff. So you can see here at 429 trimmed and you can see the chart. And then what we're doing again, you see this push into it. I move the stop to 422. And then I just tell them to tag me if they need me. And then I sell into that strength and I'm down to a runner. And the reason there's a timestamp. And the reason I do that is because I don't want to be sitting here now going, well, what do I do with it? Right? So if you're day trading, you have to get out into positive slippage. Like you have to sell into this stuff. Do I want to sell when it's here? No, because I'm like, you know, I've been doing this again like 20-some years, but I'm just like everybody else going, "Oh my god, it's going to go to 450 and I'm going to sell it." I mean, that's what your chart looks like and you're selling it. You just have to get in the habit of like, "Oh my gosh, this chart looks amazing. Time to get out." That's day trading. It's very different than swing trading. Very different. So, getting out of that obviously, you know, I'll see where it gets into the close. I still have some time here. Maybe I'll get back in and hold them overnight. I don't know. I think I want to come in. I think I want to come in as flat as a pancake. You know, I really don't like the overhang and the way that the market looks.
The other thing I just want to point out are a couple things that I thought were super interesting. Pterodion was a dumpster fire floating down the river with a bunch of raccoons. I was in a real large SOX position. And you know, one of the key things I want to point out here is guys, if you're swing trading and you came in today, everybody takes a drawdown on days like today. Like you just are. Like if someone's going to tell you, "Oh my gosh, I did so well on my swing trades today." No, you didn't. Nobody did. The market. If you're in tech names and you're swing trading, you got destroyed today. Everybody did it. Just deal with that because I know people are going to see a lot of people talking about how great it was. How could it have been great if you were long tech stocks and you came in to that suck salad this morning? I've seen great before. It doesn't feel like that. So, when you see after hours, that's one minute, 60 points. It absolutely smoked the SX and that's what this was. That was that drop. So, I would watch that tomorrow. They are punishing anything that shows any sign of weakness. They are just like terminators out there. This, you know, dumpster fire of the week is going to go to hood and not just because of the double miss. You know, the double miss is bad, but okay, like people aren't trading as much. Fine, whatever. But the larger problem that I had with this move was that they just suspended guidance. Like, "We're not going to issue guidance anymore." Like, that is the call wall was 75. I'm short this at the time of recording this and you know, I shorted it here when I saw the news and you're not giving guidance. Like, what is that? What does that mean? I don't even understand those words. So when I see stuff like that, it's just like it's just an automatic out for me. You guys can comment. You guys love that this one. It's like a fan favorite. But how do you justify not giving guidance? That's it.