Transcription
There's a great old Wall Street saying, "They come for the generals last." And we're going to touch base on that today. But there are some basics that we have to go over here. We are below on the S&P futures, the 200-day moving average, and the anchored VWAP from here. The breadth of the market is trash right now. As we can see, and if we take a look real quick at the NASDAQ, we can see very similar that you've broken your anchored VWAP from April and you are at a key level. We're going to talk about how bad is bad and how much worse it could possibly get. I think the most important thing about this is, are you on the beginning of this or the end of it? And it does matter, and I'll explain why very quickly. 27.5% of you that watch these videos do not subscribe. They are all linked together. I purposely do not run ads in the middle of them, which throws off the algo. So, to compensate for that, if you can like, subscribe, click all notifications, it helps me get the message out and help people, which is the whole purpose of me doing it.
All right, let's go. So, the adage is, "They come for the generals last." But the very first thing that we have to say is, how bad is bad? Like, how bad can this get? So, what we want to do is understand where we had our winning and liberation. I hear that there are people out there that actually have, like, bingo cards or drinking games at this point when I say "winning and liberation" and mark it down, which is kind of funny. But nevertheless, I do think it's kind of interesting that this level has been broken by here. If we go back through time and we look at this, I'm going to leave the 20 or the 200 in for a second. And we go back to the global pandemic, and we can see that we came to that area and held, which is almost perfect. And then you can see that the bottom was actually flipped when we got above that. So, when we break these key levels, we have to understand, like, how bad is bad.
So, I'm going to clean these off for a second. And then what I want to do is I want to turn this into a weekly chart. And I just want to show you something. So, how bad is bad? Well, the 200-weekly moving average stopped in December '18. It stopped in March '20. It kind of stopped in here. We played with it, and then we stopped here. So, if you're saying, "Well, how bad could this get?" That technically is where every major area has stopped. So, I think if you go on the premise and say to yourself, "All right, if that's as bad as we could possibly get," that's another 12%. Now, to put that into perspective, that would be like five more Fridays that we just had. And if you really look at it, it's nowhere near as bad as you think it is, considering from where the peak is, and this part's really important, and then you come to where you are, and you're already down 14% from there. If we go and take a look at the ES, and do I think we're getting there? I think you have a shot at it, but I have to be candid. No, I don't think you're getting there. But I think you have to take a sense of this and say, "How bad is bad?" And if we came here, you'd say, "That's another 10%." Okay. So, if we mark the high of that again, and we just drop it like it's hot. I know the kids still say that. And that's 10%. All right. Cool. So, it can be as bad as it's just been. All right. Fine. So, we know what we're dealing with. And I think that that's what I'm trying to get people to understand. You want to quantify your risk. So, I'll say that again. You want to quantify your risk. No matter what you're doing, you want to know, like, "Hey, how bad is bad?" And then, "What do I do if this happens?" So, this is the level to me where I get really aggressive and I really start buying because everyone keeps talking about, "Oh, we're going to go back to, you know, wood-burning stoves and yada, right?" Okay.
So, what we want to do is understand how bad is bad. Now, once we have that part of it down, we can go to the next part and say, "All right, if we overlay some indicators with it, what indicated that we were done?" Well, we were at a 17 on the RSI in here, and then we bounced, and then he brought out another piece of cardboard, as we all know, and then we went down another level. All right, cool. So, after that bounce, how far did we go down? We went down another 16%. All right. So, if we rally back up, we have to understand that we could still roll over again. Double tap, which happened here as well. We have the single tap and the double tap. So, you have to understand that even when you bottom, you have to ask yourself this question: Did we are we bouncing or did we bottom? That's a really important question. So, I'm just going to say it again. Did you bounce or did you bottom? And that's something that you're going to have to give it some time to figure out. It really depends on what the news is. But we have to look at this area and say to ourselves, "Well, how many times have we been down here on the ES?" And if we just go over and look at the past five years, you'd say 10 times. And then if you looked out and said, "All right, if I bought in here over three months, was that a good idea?" Well, not when you're getting through $1.7 trillion. And say, "All right, well, we're not doing that in here." Was that a good idea? Yeah. Yep. Yes. And yes. So, you would understand that this is different because this is when you know JPEGs were called NFTs, and you know everyone was going to make it rain, and everybody had a new cryptocurrency. I think there was one actually called Pancake that people were crazy about back then. Anyway, if we take a look at this market and we look at how this is playing out, you are more oversold than you are overbought. But what people don't get about levels like this when we look at this or the NQ is that this is the most dangerous part of the trade. If you ever look at the moves under the line, they are vicious. They are not easy. They are not something that there's no rhyme or reason to whatsoever. And I'll get to that in a second. But when you see these moves, when you're under here, it's the strongest part of the down move when you break. So, when people say, "Oh, well, we're oversold and yada." But the worst part of it, I always think about it like whipping like a dragon's tail because I don't know what else to use. But if you think of it that way, like you don't want to be on the tail end of that thing because it's going to hurt. And if we think about it that way, that makes a lot of sense. Like, "Okay, well, if you knew that you had a week left here, for example, on the NQ when we were back here, and you're like, 'Well, we only have a week left.' And then after that week, you know, that's going to be the end of it, you know, according to this because we have this divergence. So, surely that's coming to an end." And then wham, right? We get that suck salad. And you're like, "Okay, well, that didn't work." But then you're underneath here and you're forming that. Now, when that starts to form, and we had that pause, that movement down killed people that was only two or three days tops, and that was 13%. So, are we going to get something like that again? Here's the big answer. Nobody knows. Here's what I saw today, and this is where I think I could add a little more value to this. If someone's going to say, "Gun to your head, what do you think?" I think you're near the tail end of it, and I think the tail end of it is going to be the most vicious.
So, in Saturday's video, I walk through VX. VXM is the VIX in the emerging markets. The reason that I walk through that is so that people could see that this is widespread and it's getting worse overseas. So, we're watching names like South Korea that are running, and now they're here where they are. If we start taking a look at something like EWT, they're not getting beat up as much, but EWI is because of the memory space. Now, people thinking that growth is going to slow, they're going to rally the wagons. They're not going to spend. You have companies in EWT that are trading at four or five times next year's earnings. Micron, right now, with no revisions, is trading at four times earnings. Yet, it was my greatest short today because there's no rhyme or reason to this. You see when you get to these levels with the technicals, and we've gone through this in the past, and for those that are newer, I just want to bring this concept back because it's a great concept. And really, what you have to understand is when they derisk, they don't care. So, when you understand the concept of the stool, which everybody should actually be taught at this point, probably be taught in MBA classes, probably be very fortunate to learn about my stool anyway. If you take a look at the stool, you have the macro, the fundamentals, and the technicals, right? All right, cool. And right now, we would say we're that we're being macro-driven by events that we can't control and we don't even understand, except if we go on Twitter, we'll find someone that's a complete expert on it. Now, the fundamentals really haven't changed yet, but we're assuming that they are. But then you have this area over here that's macro-driven. Sometimes we're leading on the technicals, the fundamentals, or the macro. Right now, what they're leaning on, hands down, unequivocally, is the technical side of the market. There's no doubt that they are leaning on the technical side of the market. They are looking at technicals and technical breakings, and they are just simply playing a game of tag. "You're it." They're breaking and saying, "Okay, it's time to go." And what they're doing is they're rotating through these. So, the saying goes, "They come for the generals last." Well, the generals of this market have been four big names. And we're going to show you those names in a second here. And this is one of the things that you always have to pay attention to with the market because there's no rhyme or reason to this. Micron didn't downgrade their earnings. When you look at EWY, and we could probably even pull up Hynix here for a second. So, SK Hynix did not go out there. See if we can pull it up real quick. They did not go out there, and they certainly didn't change the 15% that they are going to give ASML for a new machine. They're giving them 15% more for a new machine if they can get it to them in six months because you have that much demand. It's a $400 million machine. So, when we start looking at these names and what's happening out there, "Oh, AI's dead, they're not going to spend yada." Okay, the demand's there. The demand's not going anywhere. But that doesn't stop these names from coming in because people are derisking their portfolios. So, we no longer care as much about these as we did. Why? Because you're going through what we refer to as fear and greed. And when you panic, that's the way the market works, right? It always works until it doesn't work, and then people start to panic. And that's what you want to feed off of. You actually want to feed off their panic. I know it sounds bad, but it is what it is. Whatever. So, when we see these things break, we don't say, "Oh, it's trading at four times earnings, therefore I have to buy." That's cool if you're going to look out six months to a year. But if you're not going to do that, then what you have to do is say to yourself, "Give me something I can hang my hat on."
So, if I go and take a look at this on the daily, and then I'll drop in the 200 again, and we'll see where that 200 is, and then we're going to go look at this on a weekly. We have to understand that we're way up there. So, where could you come down to? Well, the first real support is like 267. Well, we couldn't possibly get there, right? You couldn't trade that much cheaper. 100% you could. You 100% could get there. You were just there in December. So, to think that you can't get back to an area, test it, and rebuild, you certainly could. If you remember when we looked at something like Nvidia in April, and we were talking about, like, which names to look at, you know, we watched this, and it was literally a perfect undercut. When you say it, you can't really miss it. So, here's the undercut of the previous low on Nvidia. They undercut it. I think it was 10 times earnings or nine times earnings that Nvidia was trading at future when this happened. And then from there, what happened? Everyone that we had the pause, and then from there, we just ripped. Now, are you going to see something like that here? This is a little more long-drawn-out, and we're not in control of it, meaning the US. So, it's a little different. But let's just take a second and look at Micron and look at. All right. So, let's say you come down to that level. If you're a long-term investor, why do you want to pay 400 when you could pay 260? It makes zero sense to me. Everybody wants to be a long-term investor until it's time to be a long-term investor. You know, these turned out to be excellent shorts. One key thing that you might want to remember if you have access to, and we did this in the room today, we actually had longs on right off the open, flipped, and then just went short and bought a bunch of puts. But here's the thing about this. When you see this kind of thing and you start taking out the higher highs and then they reverse, that tells you they're looking for demand. But most importantly, if you have a put wall, and that put wall was 600, and they drop it like 10%, which they did. When you break, that tells you when you roll over, that tells you that you're in trouble. So, realistically, for this to get to the 550 put wall is probably nothing, which is where the new put wall is. But you really have to watch this reversal right here, that 515 reversal, because that's probably where you're heading. So, can this get worse? Yeah. And if you look at these names, Western Digital, and we start seeing how they're acting, well, all they did was roll over. They held and they rolled over. Go take a look at Seagate. And it's literally every single name that was last to hold. Even the semiconductor capital equipment manufacturers that were holding KAC, Lam Research, all these names, AMAT, they were all holding. What you need to do when you look at this stuff is realize that, hey, these things have broken. I'm just going to use the bodies. And then not now that they've broken, when they break, they can go back to the low of wherever that break took place of. So, if you understand that, then that becomes your first place, if you're a long-term kind of person, on where you would look at getting involved with these names. Super important because when we're watching UFO a couple days ago and we're hitting all-time highs, all they did was just lure people into their doom and crack you. So, one of the guys in the room was actually short. As the point that I was getting at with it was, and I don't know that it's getting there, but you have the left shoulder, you have the head, and the right shoulder. Well, your neckline's right here. So, if you come to there and you draw this out. So, if you break here, you have a crooked neckline. You break that, you have to assume the low end of the neckline is where you're heading. And that can happen. Now, people will say, "Well, that can't possibly because of this." When they want out, there's no price that they won't get out at when they panic. They just want out, and they'll regroup. So, your goal is to always be first. Like, the one thing that you guys and I have advantage of is that we can be first. Why can we be first? Because we're not managing billions and billions of dollars. So, when these things crack, that's the advantage we have as retail. We just get the heck out of the way and go, "Tag, you're it." I'll come back in a week and figure out, you know, which ones I want to buy. That will save you a ton of aggravation if you look at it that way.
So, what other signs do we have? Because we certainly don't have the VIX telling us that this is over. The VIX. Somebody needs to wake up, right? We can't even get over the other level before. And the question becomes, well, is that becoming a divergence or do we need to get over? I'll give you my opinion on it. I really feel like we need the panic. I really feel like we need to get over. I really feel that we need that to be commensurate with what's going on in crude, as crude makes a new closing high. You know, you'll remember this bar when we were told, "Don't worry about it, guys. Everything will be just fine." Well, everything's not fine. And now the question really becomes, what do we do now? Because now USO is breaking out. Do you stay with this? Do you not stay with it? You know, you're going to come in one day, and the people that are in it, they'll have a bad day. The question is, how much of that do they keep? I don't know the answer to that yet because eventually this will come to a head one way or another. But I think it's important to note something. When they want out, they will get out, and there will be no rhyme or reason to it. And that's what you're even seeing on the oil services. There's no reason for the oil services names to drop if this is going to continue. Yet, look at the movement that you've had here. Most people will review that and say, "Hey, that is a reversal bar." And you know what? They're right. That is a reversal bar. If you look at the RSI and go, "Well, if we poke here and we crack under this, then I've got a negative divergence in here." And then you'll start seeing people look at things like GUSH and saying, "Well, you know, I'm trading at 84 times earnings. Like, how realistic is it for this thing to stay up here and not come in?" Well, eventually this stuff will come in, right? And this is where I'm going with it. Like, these VLO, MPC, which are the refiners, did they hit new highs today? Yes. And then they've reversed. Okay. Well, why would they do that if this is going to continue? That doesn't make any sense. Why would they be getting out now? Makes zero sense. How about XOM, right? Hit a new high and formed a shooting star. Well, that's not really telling me that we're going higher. CVX new high, closed at lows of the day, and then we look at where we are, and you have like an 84 RSI. So, why are they getting out of the energy names if this is going to be long and drawn out? Well, they're locking everything in because you're going into the end of the quarter, maybe, and then they're going to regroup after the end of the quarter. So, we have to be really cognizant of the fact that today's the 30th, tomorrow's the 31st, then you go into the first quarter, and then they don't have to report what they're buying. So, that might what they're owning going into April 1st might look a lot different because of that end-of-quarter switch. So, we always have to be cognizant of that. What I would point to you is, if they thought that this was going to push, they'd want to stay in these names. In other words, why would you be getting out before your mark? You wouldn't. You would just want to show your LPs, your limited partners, that you own all these energy names. There's something to that, and we want to pay attention to that going forward. I personally look at this and think that the market in and of itself is grossly oversold. And that doesn't mean it can't get worse. It can always get worse. Always get worse. And if I look at these levels, they haven't really marked them yet. We're still on Friday's levels. So, we have to see later. I went to see if they marked them. But you can see how ugly this is getting. You know, by today, when we come in here, you're at 20%. So, you'll be at what? You might be at single digits tomorrow on the 5-day moving average with the way things worked out today. And we're going to have to see how that plays. But the breath here is just god-awful. Longer term, I don't really have a lot that's turning here. Let's go back to this. I don't I don't have a lot here that's really rolling over. If I look at the S5FI, which is the 5-day, right? And we take a look here. This is not updated. I don't believe it's only going to give me Friday still at the time of recording this. That's not really the best, but you're at pretty trough levels. If we go here and take a look at Friday as well, you're at 14, meaning 85% of all names in the NASDAQ 100 are down. If we went and marked this off and just said, "Well, what happens when that happens?" And let me just drop it here and say, "Okay, well, here's April. Here's where we bottomed before, right? Here's April 24th when we had our flush. And that's, you know, it is what it is. And then this is when we bottomed." All right. So, that's where we're at again. Yeah. Now, it can get worse. Remember, it can always get worse. It's in between these lines where it gets worse. And what I'm what I'm saying here is that I I'm not saying I see anything technical besides oversold positions where I'm looking at Exxon, and it's got a higher PE than Nvidia, which makes zero sense to me. Unless you think that AI's, you know, just going away and we're all, you know, it's just Clippy, right? If you think that, then cool. But I I don't believe that. And the way that I'm looking at this is I tend to have a playbook ready. If this happens and they open up the straight, what do I buy? But what I'm suggesting is that the names that you're supposed to be looking at right now, if they're rolling over and institutions are starting to get out of those, then where do you think they're going to rotate into? And I will leave you with this thought because here's VUG divided by VTV. And this is growth versus value. Looking at names that are trading at, you know, cash positive cash flow and trading at book value and start running through those names like, you know, Harley-Davidson. I don't know if they're still cash flow positive. I don't know that they are. They might not be. You might want to look that up, but they're trading under book value. KBH trading under book value. Like, there's a lot K with a K. A lot of these names are trading under book value. And I think that's super interesting. Like, if you're going into recession, then rates are going to drop. If rates are going to drop, then XLE should be going up. XBI should be going up. But we're not following that pattern yet. Right? So, it tells you that when we look at the stool and go back to it, right? I'll just give you the one leg right there that we're still following technical and degrossing. And we don't want to be on the wrong side of that. Let them degross. Let it all burn to the ground. And then we'll just sort through the ashes later. That's it.
One final note. If you are trying to get in the community, please look for an email. They are going out. I do have time to start doing more of the onboarding calls. When people join, I automatically they get to do an onboarding call with me if they want. They're not forced to. But there should be a batch going out this week. So, just take a look for it. If you're trying to get on the list, link in description, and I pinned it in the comments as well.