Transcription
S&P 500 came down about 1% today and then reversed. NASDAQ was not as fortunate to have this very specific pattern, and we're going to talk about it. This does make me think we're getting a little defensive. I'll explain why in detail. And we also need to talk about this massive reversal in tech in the middle of the day. Let's get to it.
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Okay. The thing about the notifications is at least you know when they come out, then you can watch the pieces you want and kind of go from there. But if you've been following through Saturday, we've been talking about this and how the breath has been bad and that we're setting up to have some kind of pullback. What that pullback's going to look like, you know, remains to be seen. But this is the beginning of it. And the one thing I would say is the S&P reversed and closed over the open and the NASDAQ. If we go take a look at the NDX and do it that way, not so much. We closed flat, but it gives us that sense of all right, we're just going to get flattish on the day and get out of the way. And that's kind of where my head was with it. If you look at the cues here, you did very obviously very similar. But a lot of people were like, "Wow, we're down 2%. This is my chance to buy." That kind of thought process does make me a little concerned that it was that easy. And I'll show you why.
I love days like today because they present great trading opportunities. It was really easy once you got the pattern to short off the open and then the rally at the end of the day was pretty simple. You could just see from 1:00 on, but we'll get to that right around when there was a bond auction, actually. But if we take a look at this and we can just see this the straight down. Okay, everyone's like, "Oh, it's a gap fill." But you're inside this other bar. So we really make this monumental move and you have a gap in the chart here and you have a gap in the chart here. So you do have this island that's somewhat by itself up here and you do have this reversal. The thing that bothers me about this more than anything when I look at it is we're still up way above and we didn't even crack into this. Meaning you're not really falling down. Now the hourly was setting up, cracked, and they're starting to lift and we went from overbought back to neutral there. Go and take a look at this on the 15 and you can see really right when we just started flipping and coming back to it. If you think that that's enough, you know, no one ever really knows, right? Like you don't know if you're just going to automatically just say, "Oh, that's enough and we're going to come back to it." There are some cracks here and I think the cracks are some of the DRAM stuff that we're going to discuss, but the Samsung thing has me a little concerned still, just the way that we acted on it. But oversold cuts right through 30, lifts, and then pushes. And that's really what we're looking for. That kind of behavior and that presents a great opportunity right around 1:00.
Now, if you don't know, at 8:30 today, you had CPI came out. And when CPI came out, what happened? Uh, market sold down. Okay. 1:00, what happened? You had the 10-year bond auction. And then as soon as you had that bond auction, everyone's like, "Oh, look, it's not a dumpster fire." And then they bought equities again. So, that was more of a macro trade. And when you see that happening over and over again, and you can just, you can literally see the bar in which it happens where the 10-year takes place. I mean, it's again, it's not really rocket science. You can see when they literally said, "Oh, we're going to buy equities here." You can go take a look at the 10-year as well, and you'll start to see these kinds of areas. And what happens if the bond auction's not as bad, even though we did kind of drift on that, it's worth paying attention to. And it's also worth paying attention to the dollar right around the same period of time, just to see if there's any action there. You could argue that since that 1:00, you did nothing but sell down on the dollar. But overall, the bigger move on that was of course going to be equities. And so watching those bond auctions, I think there is a 30-year coming tomorrow at 1:00. Yeah. So you're probably going to want to watch that as well and just see how it acts. This kind of volatility I do like a lot.
Now to give an update on what's going on with what we covered on Saturday with EWI. It's kind of interesting that even that bounced on the 10-year bond auction. But I, if let's get rid of this for a sec and just get to this. So, the one thing about this is they have gone out and tried to mediate. The mediation didn't work. And so, now Samsung is set up to go on strike. So, they're going to go on strike. That's coming. Now, when they decided when they say, "Oh, we're going to go on strike," they still have to go in front of court, which starts tomorrow, and then the court has to the 20th to say yes or no if they can go on strike in South Korea. And then you're going to have an 18-day walkout. You have a gap down in the chart. You're unable to close over the open. What I thought was super interesting about this was not just the sell-off you had in semis, but when there was no mediation, and we looked at something like Micron, we did a a trade on just a lot of the semis right around that 1:00 level and specifically DRAM, which may or may not be the way to go here. And this is where it gets really interesting. But once again, here you are, 1:00, 10-year bond auction. Maybe watch the bond auctions right now, specifically around CPI, PPI, because it it's pretty clear what's going on, right? Anyway, if you look at this, I'm not surprised that we rallied because if Samsung stops and the price of DRAM goes higher, means Micron goes higher, and it means that also the ND and then you also have SanDisk. And that's why you're seeing some of these names lift the way that they are. You know, this MRM is another one that we're playing in the room and what this thing moved today, 10 bucks, like 33% or something absolutely insane. And you are getting differentiating movement, but at the same time, it seems like the levered ETFs are a lot cleaner right now. We'll get to that. I do think that you could see price points go higher and that could drive Micron higher. But you're getting this topping pattern right here. And I, I want to go through this before I move on to the next thing in the 80D kicks in.
So if we look at this, you have what's referred to as an abandoned baby pattern. Hold on. I actually created this thing. It's a really simple pattern and it does mark tops, but what it is is you have a doji. There's your doji. Then you have a bar up. Then you have a bar down. Now, they want them to be long bearish, long bullish, and perfect. Yeah, good luck with that. If you had to wait for something like this, maybe you'd see one every 50 years, but the pattern is the pattern, right? So, when you start to see this, you're like, "All right, green. All right, abandoned. Doji, red." If you have that, you have a form that you could look at. Whether you want to be exact or non-exact, that's entirely up to you. But it's that pattern recognition. And so, I thought this was super interesting. Now, Samsung and Hynix are about 25% a piece or 50% of it. That could be why, and then it could get lifted up with Micron and the other names. I think what really gets me about this is, are we putting in some kind of top on memory? And is SanDisk going to mark that? And if SanDisk is going to mark that, then how do we feel about this hanging doji here on EWI? And I want to be clear, you're not seeing anything that's like overly bad. You have broken down. You've broken through here, but you're just starting if you're going to really correct and really come in. This is day one. And so you want to make sure of that. So it's given us a huge opportunity to trade. We did an AMD trade today. We actually held AMD puts off the open. But these kinds of trades, this is exactly I want to show you something because this is exactly the type of setup that you could see tomorrow where they gap you down and then you get into these previous closes and then those people want to get out. And we could start seeing that kind of behavior here. And I'll show you what I mean by this. My target on this thing today was 418. Uh, but when you're in this area, you gap down, tries to get through, can't, tries to get through, can't, and all you're doing is just watching it, right? So, again, if you use something like the RSI, I'm just watching, pops over, tries again, and you do hit that higher high and it's not extreme, but I do watch this. And even this early, I'll pay attention to it and be like, "All right, well, we're not really going anywhere." And it didn't really have any kind of ump here. So, this was pretty clear to short and we already had puts from the open and then we held some, but it gave us that opportunity. And a lot of these names are going back to these levels of the ETH. They're all trying to head back to that eighth level. I'm not really sure what's so exciting about that level, but for today, I thought you had a shot at getting to 418. But what you're trying to do right in here for those that are doing more short-term trading is watch tomorrow. If we gap down, you're going to want to watch how you act at the previous close tomorrow. And I think that this is pretty textbook stuff, guys. Like, if you look at how this is trading, that's a 45-degree angle where they are selling equities into the 10-year bond auction. And then from the 10-year bond auction, after that, they are just buying equities. It is a very clear definitive line on what they're doing here. And I think you could have some kind of acceptance of this tomorrow with the 30-year after PPI as well. So, it might be a very similar setup. Let's watch this play out live, just the entry, and then we'll go from there. That's definitely a clear indication that you're probably going lower. See how you're rejecting here that area. Short AMD, AMD, I'm up a dollar on. I'm not doing anything with because I have too much long on. I'm going to trim some of the short cuz we came to the open and we're holding that. Trimmed up seven or eight. I don't think that AMD is going to fall all the way down, but I had like 418 where it could really get to. You're not falling apart anymore, guys. Up $10 on the AMD trimmed. Actually got nine, not 10. So these kinds of opportunities, I think you're going to see more of those. I don't know that you're just setting up again, and I just want to preface this. I don't know that we're really just setting up again to just rip faces off. They are starting to be a little bit more discriminate about what they're buying. You're starting to see like RBL, this RKLB, Rocket Labs. I need more caffeine. You can start seeing how that's setting up a flag. The AS, you know, when they're dumpster fires, they're staying dumpster fires. I think that's super interesting. You look at RGTI today and again, you know, like I think it's super interesting that, you know, "Oh, it's a $4 million stock, you know, in revenues. Oh, we better get involved." All of a sudden, people like, "Maybe not so much." If you take a look at him, you know, dumpster fire earnings, got a dumpster fire result. And you're seeing that, right? Psix was a dumpster fire floating down the river. Uh, and then they're not bouncing. So, they're being very discriminant about what they're buying. And we are seeing that defensive stance. And I just want to show you how you can do this for yourself and you can learn how to get uh a sense of what's going on in the market.
So if you go to the top 40 sectors on the day and all you do is click the button and then sort them and then by sorting them you can see what's up on the day and what's not. Well, the first thing is the demarcation line. Just look and say, are the majority green or the majority red? The majority are red. And then if you start looking and say, okay, the majority are, you know, the minority are green. And then what is up? And then you're like, med devices, defensive healthcare, defensive energy. Not really def. I guess you could say it's defensive, but biotech, XLP, staples, financials, energy. So it's not like, you know, it's not like tech's lighting the world on fire. Utilities. And then you start seeing some of these kinds of breakouts with names like BTI that are breaking out right now. When you start seeing these defensive names that pay yield, they're starting to break out. Philip Morris, they're breaking out. That's telling you a story. It's telling you that they're like, "All right, let's go out and buy yield right now." And whether that is going to be a continuation or not, we don't know. But that's what they're doing right now. So, when we see stuff like this with XLP shaping up, you know, it does make me want to go and take a look at Proctor and Gamble or Colgate and just see what they're doing or even go take a look at Clorox and just see like, hey, what's really going on here? You know, more of the aggressive ones are going to be your Costco or your Walmart, obviously. But if we go and take a look at those, I always go to like the real needs and see how they're going. The Proctors and Gamble because that tells me more than Costco. To me, it does. Maybe it doesn't any longer, but to to me it does. So, when I look at something like a Costco, like you're not really breaking out, but they are putting money in those defensive names. And I get it. People are going to be like, "Oh, it's one day." It it all starts with one day, man. It all that's how this starts. And it starts with like a hanging chad. And and I'm not saying, believe me, I'm more long than short, but you can't be out here flapping in the wind and thinking that you don't have a shot at getting to like 462 like that. That's where you were in the beginning of May. To think that you can't come down to this, retest some of this. You most certainly can. The easiest way to do this is take the high and then just take the most recent swing low, drop it, and then there's a 50% line. This is going to take you to that 618. And I'm just going to leave the 618 there. But I bet you the 786 is obviously it's going to be higher, but I bet you you're going to find, yeah, there it is as support. So you start looking at this and saying you have that kind of opportunity. I don't think you have to think about coming back down to something like this 427, which is the VWAP of that whole area. But to think that you're not going to be able to drop another, you know, five or or 10% I think is kind of silly. If you came to the 618 retracement, it gets you down 9%. If it if I came back down to here, which is that 786, that's going to take us roughly to what? A 2% move down. I don't view that. I feel like that should be a little higher from where we are. Yeah, there it is. 6% from where we closed. I don't really view that as the end of the world. Now, what's going to negate that is coming out and taking out a new high. Until then, I think you have to look at this and I think you have to prepare yourself in your trading and saying, I need to be a little more nimble. It's not a function of, oh, we're going to moon again or we're not going to go higher. It's a function of where are you in the food chain. You just ripped everybody's face off and to think that you're not going to retrace and backfill. You will. It's actually a healthy thing and we want to see that.
If we go and take a real quick moment and let's do the breath before I go into the next thing cuz I think that this is really important for people to get because when we do this and we review it over and over again, it starts to sink in, right? You'll start being, "Oh, hey, where's this level? Hey, where's that at?" And I'll show you some of the other things that we went over. But what really telegraphed this for us yesterday was I said the S&P stocks above the 50-day broke 50 and they watched that. Now the 200, 50, 20, and five. These are percentages above those specific corresponding moving averages. So we're going to get rid of these for a moment and we're just going to look at what's going on with the 50 and you can see it for yourself that we have cracked that level. And once you broke 50%, that means more names in the S&P are below than above. That's not really where you want to be. So, as we're going higher, you're seeing the breath of the market is getting worse. It doesn't mean you fall off a cliff that day, but if you start looking at how this transpired, you'll note this. The more you look at this stuff, the more you'll see it, and you'll be like, "Oh, that's why he's always yammering on about this." But when you start to see that behavior, you want to pay attention to it because it just tells you like, "Hey, is the market getting stronger or is the market getting weaker?" And when you start to see that kind of, you know, the angle, and you can see the difference in the angle here, you really want to pay attention to that. And if you go through history and look at it, you will find areas like this. It doesn't mean that you're just going to fall out of bed. I'm going to be really clear about that. But you'll note that when you start having issues, you'll start having those jagged moves down over and over again. And you just want to watch it. And then you can then you just go to the secondary names like the 20 and say, "Well, maybe the 20 is getting better. Does that look like it's getting better?" You've seen better before, right? It doesn't look like that. So, it's falling down and now I think we're at a 42%. But, you know, when we got washed out and we hit the double bottom, it was right here. And that was pretty easy to note. And the divergence, we actually talked about it. That's why I go through the same indicator so that you guys can just start getting it. Uh, and then you're hitting a what? Lower high in here, even though we're making a higher high here. So, the breath on the five is getting worse. So, again, it's not really where you want to be, and that's really important for us to get.
And then if we just go here and take a look at new highs on the day, we did this Monday. We started looking at this just taking a shot and seeing that, oh, the highs are here and we're not hitting new highs. And then when we start looking at the New York Stock Exchange, new lows, they're ripping everybody's face off. And that's just Monday. What do you think Tuesday is going to look like? It's going to look like a it's going to look like a face ripper. There's how can it not, right? It was a blood bath out there at one point today. Of course, everyone will tell you that they got out of the way and then they put everything back on at the lows, but some of us are actually trading for real, not in Candyland. So when we start to look at this stuff, I think if you got back up to this 114, maybe that's an area. The other thing that we want to look at is S5FI and then just look at NDFI real quick and take a look at this and say, do we have any kind of movement here where we're seeing these higher highs, which denotes what? That they're favoring the S&P. They are favoring the S&P by the way because the S&P closed higher. What didn't close higher? So if you take a look here, high pulls back, low, high. So, we're starting to turn a little bit here. Not a lot, but my antenna's up and I think we have to, you know, really pay attention to that. It doesn't mean that you don't have opportunity. Far from it. I actually think you get more opportunity this way when you have these kinds of names and you have this kind of movement. You know, today with that news, we were able to get into EWY, do a trade there, DRAM, bought it, did a trade there. I just didn't feel the need that I had to marry everything and take that much undue risk overnight. Specifically with the DRAM stuff flapping in the wind and we don't know what's going to happen with Samsung. It doesn't mean again, and I will stress this, that these moves are over. Far from it. You know, far from it in my opinion based upon earnings and the way things they're taking things up. But I do think it means that you want to be more cautious and that you have opportunity.
The other thing that I think it really means is if you're an options trader, please listen to this. You just got you just spiked on the VIX, right? You just spiked on the VIX, which you haven't done for a very long period of time. And we're gonna say, "Well, it's no spike." It's the biggest spike that you've had in May, so it's got everything's relative with options. You should know this already, right? Sounds so grumpy. So, that's the first thing. The second thing is if you look at the cues, you're no longer hitting a higher high. You pulled back. So, all the times that you're out there buying calls now, all that are buying puts, you're going to wonder why they're not working the same way. And I just explained why. You're now going sideways. And the the implied vault is going to crush and it's going to crush your options like a grape. So, you know, maybe look at the other side of that. You know, maybe look at being a seller of options, but you know, you should do what you're comfortable with. That's it. Oh, if you're trying to get into the community, just please look for a newsletter. Should go out either tonight or tomorrow for a group. You'll have five days. All right, that's it.