Transcription
Hey everybody, it's Brian Shannon from alphatrends.net. Today is Friday, the 14th of March, and uh, we had a little bit of a relief rally here today. We'll talk about uh, what could happen here with uh, sustainability of this trend, but for the week we still lost ground. The semiconductors had led the way a little bit on Thursday and followed through today, so that's good to see. They were the leaders up, and uh, they were the leaders down here recently, but now they're maybe taking a leadership role once again. Bitcoin had a nice uh, pull uh, rally here today, but still down 4% on the week. So let's take a look at these charts and make some sense of it. Uh, let's—I don't know why I'm on that—here's the S&P 500. Let's actually use the uh, TradingView charts, because the TradingView charts, we have this uh, just a great way of visualizing where we are in relation to that 5-day moving average.
The 5-day moving average is the orange line. Ever since this selloff began, I've been saying day after day, we are guilty till proven innocent, because we're below a declining 5-day moving average, and when we're guilty till proven innocent, that means we don't want to be a buyer. Don't buy the dip; wait for strength after the dip. Where is that strength? It's starting to emerge right now. When we're below it and it's declining, we have a red tint to it. When it's above the 5-day moving average, but the 5-day moving average is declining, it's yellow. When we make a higher high above the flat to rising 5-day moving average, as we did in the semiconductors, then it's green. It's just a quick visual representation. This is the SPY; this is the NASDAQ, starting to turn more neutral here, and you know, today was a good start. So let's see if we can follow through on that. That's always what's most important: is can we follow through?
While I have this up, let's talk quickly about Bitcoin, because Bitcoin, as we know, made a lower low over here, and it's gotten a bounce today. That bounce carried through up to the anchor uh, from the prior low, so that's this low right uh, here um, back uh, earlier in the month. So that is where we are now. We still have a pattern of lower highs and lower lows in Bitcoin. If you look at Ethereum, Ethereum is severely broken; Solana also severely broken. They're due for a bounce, but structurally, I don't think you're going to see them uh, showing a leadership position for a while. So let's get to the important things: that is the equities and the S&P 500. As we know, you know, we came down, blasted through that 200-day moving average. I did a real good um, video for uh, on Wednesday for uh, live on Twitter, and that was—I was—I spoke about the 200-day moving average and the fallacy of support at the 200-day moving average, and the people who buy just because it's at a 200-day moving average really got hammered pretty hard in here.
Uh, this was 571. If you look at 571, when the market was there, there was no evidence that the buyers were gaining control. We were still well below this orange 5-day moving average. So daily chart on the left, as always, and we're below declining 20 and 50-day moving averages, which tells me any rally that comes out of here is likely going to be a bounce within a downtrend. I—it doesn't mean I don't think it's possible that we could see this market uh, make a V-bottom, but I think there's just too much political uncertainty that it—that is going to happen. Maybe it will, but it doesn't seem likely. Let's take it one step at a time, just as we have all the way down. So we've had that pattern of lower highs and lower lows, and now we're getting a bounce. Now again, the—when we get back above that 5-day moving average after such a prolonged decline, it means dip a toe in the water. What I really want to see is maybe we rally up a little bit and then pull back; that 5-day moving average flattens out, and then I think you could get a whole lot more aggressive. The first level of uh, interest would be the month-to-date anchored VWAP; that's this blue line. Next up would be the 38.2% retracement of this high to that low, and then we've got the anchor off the all-time high. So we're setting up for continued bounce in here, seems so.
Here's our 15-minute chart with that 5-day moving average. Let's just, you know, imagine where we are on Monday. So Monday, we get rid of this data in the 5-day moving average calculation, which means early in the day, if we rally up, it will start to flatten out. So now, if you have a small long position, what we'd really like to see is it pulls back down towards here, and then we'll start to see that 5-day moving average catch up to it, and then that's where a higher conviction long could be taken. Right now, a—a—a small position today would have made sense, and as you know, I took the day off today, but before I left, I reminded subscribers: chase the gap or wait for VWAP. Do you want to chase this gap here, or do you want it to break below VWAP and then reobtain VWAP and then set your stop below the higher low? If you did, you would have bought here or here; either one of those was a valid purchase with a stop below the prior low, and you would have participated not in the whole rally, of course, because you know, a lot of it occurred from a gain, but to be a buyer in this general area, which uh, we're looking at a one-minute chart um, 550—let's just call it 558—if you bought at 558, you'd be up four and a half points, and you know, you don't have to use one-minute charts uh, all the time, but on days like this, I think even a swing trader or even an investor is best off using a one-minute chart early in the day, just—just for that precision entry, so you're not—so you're sure you're not buying as the market pulls back, but as it has already pulled back, regathered its momentum, and surmounted the daily volume-weighted average price.
So the NASDAQ, this is an interesting one, because uh, I mentioned to subscribers on um, Thursday that the anchored volume-weighted average price from January 3rd, the first day of 2024, we had uh, undercut that on Tuesday and then again on Thursday, and that often what we see is a slight undercut of a low at an important level, and last year's anchor was the important level here for that NASDAQ, and then we get to see a bounce. Now, of course, it closed really terribly on Thursday, so you can't look at and say, "Hey, that was easy." In fact, as it broke back below the volume-weighted average price from that low on Thursday, I got out. So again, same story: chase the gap and—and buy up here and experience this pullback, or wait for the volume-weighted average price here at 476. I took the day off, but before I did, I told people it looks like the markets entered a correction yesterday, which is hilarious that—and I kind of ranted about that yesterday—is the market was supposedly in a correction as of yesterday because it was down 10%, and wouldn't it just be like the market to be down in correction mode and uh, then have a big rally? But here was the most important thing: be careful about not chasing; chase the gap or wait for VWAP, and that is, you know, why I teach these strategies. I'm not always going to be there pointing out what to do at an exact time, but to tell you the strategies and when to use them is very valuable.
So here on the NASDAQ, what do we have? We still have, you know, what—what—what could this be? This could be a shoulder; this could be a head, and if we have a pullback, everyone's going to call that a shoulder. What I always like to point out is what is an inverted head and shoulders pattern? It's simply a change of a pattern of lower highs and lower lows close to a pattern of a—a higher high and a higher low. So we want to see a higher low first. Maybe we, you know, rally up to here Monday morning, the month-to-date anchor; that would be great, and then start to pull back, and then I think you can buy with greater conviction over here. Either way, it looks like it's bouncing. So again, we have to look at the certain things that say, "Where does it have the potential to go?" Let's look at key levels where it might encounter supply, such as that blue month-to-date anchored volume-weighted average price at 485, or the red anchor from the all-time high, which also comes in to the 61.8—I'm sorry, the 38.2% retracement of this move. So this is the full move down; that's 38% of it; that's 50% of it; that's 61.8. So those are key levels to be aware of on the upside uh, in the week ahead.
The Russell 2000 just continues to be the worst market out there. Now, maybe this is getting ready for a turn as well. You know, same story: lower highs and lower lows, higher high and higher low. This has the potential for a bounce, but you know, the other markets—the NASDAQ—it's below the declining 20 and 50-day moving average; it's below the 200-day moving average. But if we bounce up into that level, that seems reasonable for the Russell 2000. However, you know, maybe we're going to run to the two-year volume-weighted average price in here, but I just don't think this market is the one that you want to be focused on. If you want to focus on it, then look for the same type of, you know, pullback and then get going. Semiconductors, as mentioned, you know, they kind of led the way on Thursday with their uh, just getting above the 5-day moving average for two days in a row and today making the higher high above it. So in the semiconductors, let's take a look at the anchor uh, from the beginning of the month, which is right here uh, and then from the all-time high, which is right there. So maybe we rally up into this zone and then start to pull back a little bit and start to build a little bit more for a sustainable rally. That's the way I'm looking at the semiconductors. Um, I don't want to chase things because we're still again below 20 and 50-day moving averages; rallies typically don't hold. Biotechs just continue to be a waste of time here; they're just chopping sideways.
The Dow is the one that also I pointed out was right on the two-year anchor yesterday um, and that is getting a nice bounce, but again, do you want to buy it after it's just rallied from 408 to 415, or do you want to see it pull back, make a higher low, and then buy here with a stop there? If you're buying it right here at the weak today anchor and the 5-day moving average, then your stop—this is the most recent relevant uh, low. So instead, we want to see a pullback, buy strength, and then set our stop under here. That's the ideal way to get involved if you're trading the Dow. Financials bounced here a little bit. I was thinking that they had the potential to make it down to the 200-day moving average; buyers stepped back in, and that broke the pattern of lower highs and lower lows. Breaking that pattern doesn't always mean just automatically buy, because is it—is it extended there? Instead, you want to see it pull back, and if you're looking to buy the financials, do this. What it does mean though is if you were short in here that you should cover, because the definition of the downtrend—lower highs and lower lows—no longer exist, so you should cover, and that's, you know, that's what we have in here.
Bonds are starting to try to stabilize. We spoke about this last week that they ran into supply right at the 2-year anchor—that black line—the anchor off of the 2024 low and the 200-day moving average; that's what these three things are in here. Last week, I sketched out it was highly likely we're going to see a pullback; we did get that pullback; we're holding right on the anchor from the election. Now, this is the one that our elected leader is kind of hanging his hat on now and saying, you know, he's proud of the bond market, but whatever the reasons don't really matter; the fact is what we want to see is we're holding the 20—the 20 is above the 50; the 50 is rising, and we're creating maybe a higher low here on the shorter-term time frame. We still have a declining 5-day moving average; that 5-day moving average will continue to decline on Monday and maybe even halfway into the day on Tuesday. So if you're looking to buy bonds, maybe a little bit of this and then be a buyer over here with a stop under one of these higher lows; that's the way you want to look at it.
By the way, I wanted to uh, ask you a favor. I've been elected—nominated, I guess—as a candidate for the best educational uh, content provider on StockTwits. I'll provide a link on the YouTube video here to vote for that. Um, it would mean a lot to me if you did vote for that. There's other—there's other people there that maybe they're your favorites as well. Um, you know, something I'm proud of is that I teach things that other people's don't—other people don't. They've, you know, copied a lot of my things, and I'm—I'm happy for that. This is why I've—I've, you know, spoken for decades about the 5-day moving average, and other people are using it, about the anchored volume-weighted average price. The educational content is really what I'm proud of here. I'm not here to tell you what to do; I'm here to give you the education so that you can provide uh—you—you can provide a solid understanding of technical analysis and have the confidence to get involved in the market when the market tells you to. So I'm going to provide that link, and if you'd vote for me, I'd appreciate it.
The energy names, they got a nice bounce in here today, and they're right up against uh, you know, some key levels: the two-year anchor, the year-to-date anchor, the anchor from the election. I thought maybe we're getting ready for to roll over; it didn't do that. So realistically, you look at the weekly chart on the uh, energy names, and there's still just stuck in this big range, so I kind of look at them as a waste of time. Tesla, it's getting a little bit of a bouncing here; this is what I sketched in yesterday. So maybe we can get a little bit of a pullback; it—it's, you know, it's definitely way overdue for a bounce after the magnitude of this decline, but it wasn't until today that we have, you know, gotten to the 5-day moving average, and that 5-day moving average Monday morning, first thing, it will start to rise uh, actually after the last—after the first hour or so, it will start to rise, and then it will start to rise quickly even if the stock pulls back, which I would love to see. I would love to see it do that, because the 5-day moving average will be rising, and I think Tesla's probably good for a pretty good bounce. It's finally in a position where it looks ready to be bought. I've been avoiding it the whole way down here um, except for a couple little day trades. Palantir here looks like it's turned the corner; I've got a small position in that one, and um, you know, if—if Palantir can pull back, make a higher low, buy in here, stop under there; that's the way you want to look at these things. This weekend, I'm going to go through a lot of stocks for subscribers on uh, Twitter and AlphaTrends. So uh, it's 10 bucks a month to join on Twitter; it's a great way to see what uh, else I'm doing at AlphaTrends. Have a good weekend, and uh, I hope your week wasn't too bad with this uh, selloff—that you've been uh, listening to the message of the market, which is stay on the sidelines while we're below declining 5-day moving averages. Now things are changing; it's time to get interested again.