Transcription
Oil jumped 11% after the president's speech, and Thursday we saw a lot of movements. We're going to talk about those movements and what to do in the coming week.
After five straight weeks down, we saw the S&P have its first weekly green. We're going to discuss this specific pattern. And the good news is negotiations are ongoing with Iran. And while certain indicators are shaping up, we have to watch the dollar and the macroeconomic backdrop. We're going to talk about one thing to watch very closely: not only the dollar but what is happening with treasuries. We started off with this rally in the yield, and all of a sudden they are buying bonds again, which could signify a couple of things. It could signify that we're getting into somewhat of a recession here.
Smart money, dumb money, and overlaying this with various periods of time has been extremely helpful, and it's something we're going to do as well. But we also want to watch yield and the correlation between these. Let's get to it.
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One of the first things you're going to notice that we haven't seen in five weeks is that we're actually green. And this is really important from an S&P perspective. And I'm just going to show you why. If you start looking at what happened from February 23rd, 2026, and watch these bars, one, two, three, four, five, you'll note that they're all red and they're all getting bigger and bigger as we're dropping. So, the move is actually accelerating to the downside. And then what we get when we just drop it here, right on that level, we have the undercut of that bar. And not only do you get the undercut, you get the rally. And then we get the green close, and that green close is above the open. This is technically pretty much everything you want for the beginning of a possible bottom.
Now, we have a lot of different information out there, a lot, but this is usually what it looks like in some format. If you go back and take a look at April 2025, when we got done all that winning and liberation, so much we had to pause it, you had something very similar here. You had that gap down, then the sky is falling. This is it. We're really going to break. And then the arrival of a bottom. Then you had the test, the undercut again, and then it solidifies itself. This is some a pattern that you'll see over and over again through time. Even on smaller scales, you'll see back here in Jan '25, the undercut of that red bar and then we close over. They solidify bottoms. For how long remains to be seen, but you'll see them, and it's really hard to miss. And I'm not just talking about ones where you just miraculously go higher, but it's the undercut ones. So, and the reason the undercut ones are so vicious is because you have people that are short or sold out of position. So, people sold here and then they're out of position. Remember that's April 4th or 5th, I think that was. That was August 4th, 2024, and that's when Japan decided to get involved in the currency exchange and everyone learned what a carry trade was. But you'll see them over and over again. You can't miss them once you see them.
And does it play out the same way? Do you roll back over? Statistically speaking, if you were to look at these kind of piercing patterns off the bottom, they're better than a coin toss. So, if you're trying to look for edge from that, these are definitely stronger kinds of positions than something like this. Now, we can go through history and look at this, but I, I'm looking for the ones that are undercuts and green, and they're not that common. So, even in here, when I'm undercutting, I'm not capturing the whole movement of the bar, right? It's just I'm wicking. So, that's a little different. I did do it here. But if we look at even something like this in 2023, it's the green ones that start getting into this bar that I really like. These are a little wonky. They still are forming that bottoming pattern. And of course, this did call the bottom, but it's not the pattern. So, I'm always looking for similar patterns because they tell me exactly what I want to see. They tell me that, hey, if I see this again, these undercuts and rallies, whether it's a full rally or whether it's a half rally, but it's that lower hanging wick which grabbed everybody, got everybody scared, and you can see them all through time. It's a very common pattern for putting in a bottom. And if you go historically and go look at the past 20 years, 30 years, you'll see them.
So, does that mean that you, you can't roll over? No. You can 100% come down 50% of that. But do I think that you have a really good probability of putting a bottom in? I do. And I know that you're, we're in the middle of an excursion, a war, a quagmire, whatever we're calling it this week. But I do think that there's some significance to that also. And we've been formed on this chart for some time. We've really been paying attention to it. What I'm seeing in a lot of the stocks that we're going to go over today and the indexes that we're going to go over today and the sectors, you're seeing some pretty trough valuations. When we start looking at where like the PEG ratio is, it's kind of crazy that it's actually getting to the point where it's lower than 2025. But when we look at something like the 5-day, remember guys, and if you're new here, this is the five, the 20, the 50, and the 200. And these are percentages of above those moving averages. So, right now, you're at an 80. We usually back off an 80, but on the 20-day, we're back over 50% of all stocks are above their 20-day moving average. Well, that's something that we haven't seen in some time. And we're putting in these double bottoms on the bigger ones, too. Now, the short term's telling you you might have come up too far too fast, which is totally fine as long as we get to the point where we get into that where we come back down, retest, and build. But when you start hitting these kind of double bottoms on the 50, this is the 50. This does tend to mark a bottom. And this is something if you're in the community, you heard me ramble on about four about a week ago and then two weeks ago saying, "Hey, we're kind of getting to a level where we really want to watch this stuff." And I thought we were about 30 days out when we did that. But anyway, so when I see something like this, oh, we're making the higher high. All right. Well, what's the market doing? Is the market making the higher high? And you're like, well, no, not yet. Okay. Well, that's called the positive divergence, meaning the breadth of the market is better here than it is here. So, that's called the positive divergence, and that's how I look at those. You should do it. You're comfortable with. Now, I'd like to get that over 50, but what I like and what I'm going to get are two different things. I do think it's really significant that we closed at 48. We're not at 50 yet, but when you flip 50 here, you will see net buyers come into the market. You will see institutions going, "Okay, 50% of all stocks in the S&P are now above their 200-day moving average." That's a long-term thing for them. And you can see that period of time. I'm going to mark this off here for a while. And you can see that level. And this coincides perfectly, like literally perfectly with what we're seeing when we start looking at smart money, dumb money, and how they've positioned themselves. So, let's go take a look at that and dive into it. And then we have some other fundamental stuff we have to get to before we get to the fun stuff with which stocks are moving and which ones are going to move next week. Let's do it.
Now, considering everything going on, this would be a great time to take a look at smart money, dumb money. But let's go through a couple things really quickly here. We do not refer to it as smart money or dumb money. No, the way that we want to look at it is really simple. We want to refer to it as institutions, meaning smart is institutions and retail. And here's why. The way that smart money is calculated is institutional order flow. Smart money also moves slower because institutions move slower. Dumb money is constituted through retail order flow. Retail order flow moves faster. Think the tortoise. Think the hair. We've gone over this numerous times, and I will continue to bring it up because I think it's really important you understand this because that's why one outshines the other. For example, when we see a situation here like we had in April 2025, when you see institutions just piling in and taking their time, retail does not take their time. Retail just gets in as fast as humanly possible. Institutions are slow to get out of their positions, and then when retail's in, they'll stay in until they no longer want to. But here's why I also think the distinction is somewhat important, despite speed. If we take a look here at someone who has just been invested the entire time and then they're getting out in, let's call it February, you know, retail was invested that entire time. So referring to them as dumb really doesn't make a lot of sense because they captured the move and then they got out pretty fast. Now, institutions have been building, and that's what we always want to pay attention to. It's also the relationship between these two that we want to understand. You see, it's that relationship that really constitutes everything. And once you understand that they're separate, and they should be separated, but once you understand that separation, it makes life easier because you, you can look at this and say, well, institutions cannot possibly really get more invested than they are right here, and we can't sell more than we possibly could right here. So, this disparity becomes huge. The relationship between these two, what tends to happen when you start to see bottoms like this and tops like this, what you're seeing is you're seeing retail and institutions make decisions. Institutions are saying, "No, this is pretty cheap, but it's done being cheap, so we're not that interested." And retail's like, "Okay, we might have puked it long enough, and now we're looking at getting back in." So, even when we made that most recent low on the market, you'll take a look at this, and you'll note we really didn't continue to see the retail puke. A matter of fact, the last time they started buying again. Now, they don't have to buy and stay in. They can buy and then change their mind. Someone can change it. So, we get more winning and liberation. All kinds of things can happen, but this relationship between these two is significantly important. What I would take from this very specific update, we went over this I believe a week ago and then again I think over two weeks ago. What I would take from it is retail is no longer puking. They're done, and that means that you may see some stability. Also, institutions are done buying, and from the standpoint of underinvested to overinvested. Doesn't mean they're done buying. I should be real specific about that. But that relationship, once that starts to roll over, that's actually what you're looking for because institutions will get out extremely slow where retail will fly into it, and that creates obviously the supply and demand we're looking for.
Now the relationship between these two, between institutional and retail, becomes very interesting, and you can see where we are right here. And what tends to happen here again is that when we get to this level right in this little area, when we break below, meaning when we break below this line or get to it, we tend to form bottoms. And you can see that here in '23. You could see that bottom here in '24. And you can see that right here as well. But it's not just getting to the line. It's getting to the line and then over. And we've done that here. We've gotten to the line and we've also gone over the line. And you can see this throughout history. And this gives us some level of comfort with it. And it doesn't always work. But I do think it's important. You can see it right in here. And then of course back in here. And that was '23. And then you can see it here at the end of '23. And sometimes there's an economic event. This is where Itchy said, "I'm going to stop raising rates." And of course then we had that 1.7 trillion we had to work off of. So by the time you're done puking it out, one area might work better than another area because you still have all the macro events that you have to deal with. But in any of these cases, it's still led to an upward move. And it's just a function of how long that upward move lasts for, right? Because it's one piece of data. And I think that's really important to get. But when we look at history, we can see that pretty clearly. Nothing makes more sense than looking at the pandemic because this obviously was before we had all the money that was just poured in and shoved down our throats. And then you can see it here when we had the first time that we were going to go deal with the tariff issue, and we can see how that played out. By the way, this is Sentiment Trader that puts this together. I have no affiliation with them. I'm just giving them credit for the piece of research, and I have talked to them in the past. They're fine with this. But I do think it's interesting and I do think it's something to pay attention to. And you can go through different periods of history. So here if we take a look around after the great financial crisis and you start looking at these areas, you can see here in 2010, up and over puts in a small bottom here, and then we rally back up. And you can see from the rally here that you're going to have a problem, but then it puts in that bottom, and that was right around September 2010. And we have the huge rally, tries again, bottoms, and then September. And we can see these areas, and it's not an exact science, but I do think you're remiss if you don't look at it. May 2012, 12, and that was really the bottom of this whole time, which probably took about a, a good solid three years to build that base.
Now I do want to point one thing out because I think it makes a lot of sense too. So in May, I think it was May 19th, or I'm sorry, March 19th, 2003, we went boots on the ground into Iraq. Now, I don't know how Iran plays out, and unless you have turned yourself into a Middle East expert, as most people on Twitter have. I'm not going to pretend that I know how this plays out because I don't think that most people have a clue. And so, for my sense of this, all I can say is that the can's being kicked down the road. We've gone from, it's going to take a week, it's going to take two weeks, it's going to take three weeks, and most recently, we don't know how long it's going to take. So, and it's not like it's stopping, it's escalating. So, what does this mean when we look at this? Well, it means a couple things. Number one, we're watching this area, and this is 2003. So by March, we're involved. By May, we're getting mission accomplished. Clearly, that was not the case, and we were there a long time. What tends to happen with these events, and I'm not saying it's right or wrong, but when you get clarity and certainty on what it is, that's when the market comes back. It doesn't have to be you're out of it. It doesn't even have to be that the straight is completely done or open. It could just be, oh, work boots on the ground. Okay, this is going to take another five years. You know, we'll be here in two weeks for the next five years. And so when we understand what it is, and I don't mean to be that callous about it, but that's what it becomes because then with the certainty, we know where we're supposed to put our money and what parts of the market are going to go up. So when I look at this area in March 2003 and I look at what happened here in May 2003, and you can just see the bottoming of this process, and from when it said mission accomplished, well, by the time it was mission accomplished and we're done, the bounce happened. And what we were trying to figure out is where we are now. And when I look at this area, it is very eerily similar to what we're dealing with right now from a smart money, dumb money, confidence spread standpoint. I'm not going to sit here and talk about the parallels between the two. But we can all see that we're a little washed out here. Undercut that didn't happen like it just happened to us in the S&P. But you have this rally up, the test, and now you pulled back right over our big line, which is exactly what we're watching for. And it really puts us in a very similar position to where we are right now. So my sense of this is once we have more clarity, good or bad, we have clarity, and then we know which way that people are going to start putting their chips and pushing their chips in on the table.
Now in front of us, I want to present some data, and then you guys are going to have to make your own decisions about it. But in front of us, we're just going to see the MACD, and then we're going to compare a couple other oscillators that I think are really important, and I think that can really shed some light here. Um, and I also want to look at the MACD, and I just want to look at the histogram because you can take a lot from the histogram, but we're going to do that separately. For now, I just want to show you the moving average convergence divergence, and then you can make your own important decisions from that. The very first thing I always look at and want to look for are extreme moves. And I'll show you what I mean. What I mean by that is we want to look and say, all right, so here on this MACD, we have an average of 370. So then I have to go through everything that's not 370 and then look at this and say to myself, is this at a level that is commensurate with what I'm dealing with? So, is this level commensurate with, you know, when we had all that winning and liberation? I would argue that you could make that argument. This was a little worse because we were affecting everybody at once, and we didn't even know how we were going to fix it. I guess you could make that argument here. But when we go back through time, we can see these MACD right around the same level, and that's where they reversed. So, is what happening now as bad for the world as a global pandemic? Well, clearly not. And that is why you have probably the strongest reading I believe on record over 20 years on the MACD. But when we go through this, we'll see different times. And I just want to be really clear about this so that we understand it. So here's '18, and then this would have been when we went through tariff.1. And hold on, let's just drop that there. And then you can see that got us tariff.2 got us past that level. All right. And not this is not an opinion on anything. Just looking at representative moves and then what happens when we get to those representative areas. No different than how someone might look at the peaks and make those decisions. But if we go through time, and we're not going to go back much further than 20 years, we can see these areas. Here's '11, and we can see in here that we kind of bounced. '15 coming down. We never really got to that. And then we needed a financial crisis, the great financial crisis to that we've ever been through since I've been trading. We needed that to happen in order to break this level. So when we look at this, we have to ask ourselves, does this get worse? I mean, does it get to a great financial crisis? It's certainly not going to get to here, barring, you know, just all out, you know, global war in my opinion. But when we see something like this, we have to say, well, this is pretty extreme, and that got us to the level of winning and liberation, and that got us back here when Itchy injected $1.7 trillion into the stock market. Remember all that? JPEGs were called NFTs, etc. And so we have to look at that for what it is and say that's an extreme reading. Does it deserve to be there? Some people might make the case that yes, it does deserve to be there because of what we're dealing with right now. And oil certainly is giving us that indication that yeah, there's some stuff here that we have to deal with. But that's why you're seeing the contraction of the market. We're going to get into this in some detail because I think it's really important. You're not seeing an earnings problem. You're seeing a confidence problem and multiple compression. And that's really a fundamental question that we'll be dealing with a little bit later. It's just important to understand that we're not dropping because earnings are going away. If anything, earnings are actually getting stronger, which leads us to believe that you eventually do bounce because earnings usually rule the world. So, if we look here, we have the up, the down, and then the rally. Then you would go up, down, rally, and then we crossed. Now, most people will use that as a buy signal. I don't do that, but I certainly am not going, you know what I need to do? I really need to add to huge short positions here. I'm certainly not thinking that, especially this far off the line. And if you go historically and look at this area where we are when we crossed, that's where you were bottoming. And it's not just once that that's happened at that area, but if you look at where we're crossing those moving averages, these are bottoms. Even with all that money and working all that money off, it would put in a bottom for about a month in those positions. So, you know, you should do what you're comfortable with. But when you start to see this, it's definitely a situation where you can't possibly think that we're just going to keep dropping. What will happen is you may roll back over again, but now you'll start seeing a lot more dip buyers. And you even started to see this on Friday, even after that speech, or I'm sorry, on Thursday after that speech, where they came in and they bought some of the names they wanted. Now, some of that was clearly a short squeeze, and we'll address that in a little bit here. But that doesn't mean that it doesn't keep happening until you get long net buyers.
Now that was MACD, and we're going to go over now is McClellan Summation. McClellan Summation is a combination of the McClellan oscillator. So, if you don't know that, just Google it. I'm not going to spend the time on that because we've gone over it at nauseam. For newer members, if you're curious about what summation is, summation takes forever to turn and forever to break. The oscillator itself, the McClellan oscillator, takes very little to turn it, but we still want to look at some other things here besides this. But just understand this takes a long time. And you can see from March 5th when you broke to when you're starting to actually hold this area. And in here, it's usually around 500 that this starts to happen. Now, if we can cross over that, that's a bigger deal. It can cross over and then lead to false positives. But what tends to happen even in those false positives is you still wind up basing and bottoming. If I take a look here, all we did was undercut and then rip and then grind. That's all we did right in right into November. So, why does it happen that way? Because of how long this takes to turn. It's basically measuring every oscillator indicator from the McClellan. So, it takes a long time for this thing to kind of get going. There are upper and lower bands to it, and that's really how I like to use it. For me, I look for the extremes. I don't tend to trade on the long side with the extremes, meaning I don't tend to sell because it's there on the extremes. But, it does let me know that I may be in an area where I could see some kind of pullback when it starts to roll. It will tend to mark a high for a very little period of time at a minimum, but then it can just kind of grind right through them. I find greater value in if I see an extreme movement and I'm looking for a bottom. So for me looking at something like this, for example, I can go back 10 years and people would say, "Oh, well, that's not telling you it's bottomed." I would just make another argument about this and say, "All right, so this is where you've been, and this is where you've spent your time for the past 12 years. We're going to go back to '14. Okay. Despite the pandemic, which you're not in, how much lower did you go? All right, that's considerably lower. How much time did you spend in that area? And then you just start looking at it. Well, September '22 to November 1st. All right, so six weeks. All right, how much time did you spend here? 29th. September 29th to November. All right, six weeks. So even when you start going through the bigger time periods of this, you would say that you hit it, let's just say you stayed under it the whole time, October, and then you have two and a half months. So you have about three months roughly that you're there. The other times you're going to find on average are about six weeks if you're lucky. And so I'm not saying that you can't have another cascading effect, but you would have to look at this and say to yourself, if we did have another cascading effect, that's probably it. You want to be on the long side of that. Now, most people say, "Well, you don't know that." You're right. I don't. But what I do know is that historically speaking, over 12 years, this is what it's telling me. That doesn't mean that it's going to work every single time. Certainly doesn't work that way, but it certainly means that when you see this, you want to pay attention to it. The other thing that I really think we have going for us is this. And I want to stress something. We're looking at daily charts and we're looking at indicators created off of daily charts. So, it's not that you go and day trade your five-minute chart because the McClellan summation index on the daily is hitting a bottom, right? There's a huge differentiation between time frames. One thing that I think is really important about these kinds of areas, and you can even see it, and they did it here as well, when you start having these kinds of divergences, and this is the MACD, and this is set up just as an area because I think it just makes it so much easier, and really what you're looking for are those lows. Even in those areas when you start to see that kind of stuff, it does tend to really put in. Let's get rid of this magnet before it drives me nuts. It really does tend to put in a bottom, no matter where you are. And if you understand how they calculate the MACD, you know, the moving average convergence divergence, it does make a lot of sense. Whereas, you can see that if you're in a position and it keeps going one way, well, that's going to be a problem until that stops. And then, of course, you can see it stop and go from there. No different than you could mark these two points here in December 18th to the 30th and say, "Oh, we're putting in a bottom." And then you're not really shocked when you look at the MACD histogram. You're like, "Oh, okay. Well, that kind of makes sense." I mean, the moving average convergence, you know, looking at that, all right, I kind of get that. Cool. So, I, I would just stress that. I just think it's really important. Does it always work? No. But it's definitely there, you know, and usually at worst case it's threes. One, two, three. Like, usually it's in threes. So, when we see something like that, I want to pay attention to it. And I'll show you what I mean by that. One, two, three. So when I see that here to here, and you can go, well, from here to here, then to here. Yeah, you could mark them off as separate, but one, two, three. And then you're here and going, well, one, two, three. And let's do it this way so you can see where I'm going with this. So here's that peak, right? All right. So here's that peak, and we're going to mark that as the top of this doji. Why? Because I want to. So we're going to mark it right there. All right. And then what we're going to do is we're going to go and drop just an angle from there and say, "All right. Well, what really happened from there? How much have you lost since that happened?" 2%. Okay. Okay, so we've lost 2% from that area. And look how fast we got that 2% back right over that doji, the undercut on Friday, and then the bounce. And this is super important to get because it's giving us an area of interest. It's not saying like, oh, you're all clear, but it's certainly telling you that, oh, hey, by the way, we also flipped in this area on that news, and now the histogram is telling you you're green. And if you historically, if you go and take a look at these areas and when that flips, yeah, you tend to move. And not saying you stay there forever, but it does tend to move.
So, what do I think you have in your hands? I think you have a tradable bounce. I can see them buying the dips. There are some things that concern me about some of the moves that I've seen out there. They're antithetical, they're like the exact opposite of long-only buys, and they're just outright squeezes, especially the optic names. Like that stuff does make me somewhat nervous when they move that way because it's just, it's very clearly that it's shorts, and then when they get stuck, they run. They do run into a problem. But overall, I like what I'm seeing.
Now, one thing I like to do when we get to environments like this is we break out the stool again. So, you have all these macro events that are going on, and we can look technically at the charts, but things escalate, deescalate, uncertainty, certainty, that all adds up, but then you have to look at the fundamental side of the market as well. And the fundamental side is who's affected by what's going on. If oil prices continue to rise, then who's affected by it? But when we start diving into the fundamental side of the market, and I said this earlier, alluded to it, it's super interesting looking at the stool right now because the technicals are actually starting to get a little bit better with these rallies, these pullbacks. And they're actually setting up fairly nicely with just very simple, you know, down, up, one, two, three, down, should collapse, holds, and up, down, two, three, up. Right? So these are classic bottoming patterns. No matter how you feel about the market. You know, the market doesn't really care about your feelings. But when we start to look at the macro side of this or the fundamental side of it or the technical side of this, I think you're remiss in not looking at certain things, and not from a standpoint of, oh, the PE is here, so we have to stop, but understanding where you're at and then where certain sectors are at. I think it's super interesting. So, we're going to go over some of this briefly before we start covering some of the names I'm looking at. I always think it's important to just state where I get the information from. So this is from Yardeni, and I thought that this was really just, as someone likes to say, absolutely glaring, and I'll explain why I think it's absolutely glaring when we look at the forward USP for small caps, the price earnings of S&P small caps versus the Russell. When you look at this, if anything's going to get hit. So I always have people that will send me these comments, and I like all the comments because it lets me know where everybody is. So keep them coming. Not the ones that just disagree with me, the ones that disagree with me. You know, I've been doing this 20-some years. You never learn everything anyway. If the market gets hit, and you'll be like, he's out of his mind. This is going to be awful. You know, then all of a sudden you have to start looking at small caps because small caps are going to get freaking destroyed if this doesn't come to an end. Well, why? If you look at Russell, S&P 600 small caps, they're trading at roughly 15, or I'm sorry, S&P 600 small caps are at 15. Russell 2000 are at 25. We're not even back to the 2025 levels, which is kind of crazy. But you have this enormous spread between the Russell 2000 and the S&P 600 small cap. And it's not like anything you've had. If you go back and take a look at 2008, 2009, yeah, you've had some disparities and some spreads between these, but you've never had anything like this. So, this can lead to something extreme. And if this does get worse, it's the small caps that are going to bear the brunt of it.
Now, I want to break out some different sectors here and some different asset classes. But if we look at the Mag 7, the first thing that people are going to note is that Mag 7's around the 24 right now. And then if you took out Tesla, it's actually a lot lower, but it's in there. So, it is what it is. You can't take out the pieces of the things you don't like. If you take a look in the past, it's gotten as low as a 21. Okay, maybe it's got to go lower if you're going on PE. I don't think you want to go off of PE, but I have to show it because a lot of people look at it, including institutions. If I look at this move commensurate with what the S&P is doing, then you're going to get a pretty interesting scenario here where, yeah, you're still overvalued. And if we look historically going backwards at this data, you weren't always that overvalued, right? Sometimes you were in line with those names, and then it just got out of hand, and then that hand is just now getting a little tighter. Why is this so important? It's important because people are saying, "Well, we have to get down to 25." And then if you look at the mid-cap and the small caps, you can see where they are. Well, you have to go where the growth is, right? So whether the growth stays here or not, you're not back to where you were in '25. So if you're one of those people that's saying, "Wow, the PE should be here to be at a trough valuation." There could be some truth to that, and you should be able to see these lines, but I'll pop them in real quick. Now, if you look at where you were in '25, so I'm just going to take this 22, and we're going to come across here, and we're just going to drop that down. And we could see that when we got to 22, that's an area of interest, right back in '18 and '19, and then in '22, '23 for the Mag 7, and that area was an area where they stepped in. Well, if you believe that, then you still have to come down. You still have a ways to go. If we look at the '18, and this area, then you would look at this the same way and say, well, this is where we hit in '24. We still have a ways to go. You know, to be candid, you, you weren't really up here for a decade. So, you know, if the growth completely implodes, then yeah, you've got some issues. And then really, if you start thinking about it from a small cap perspective, and you had to get back there, these are the ones that even though they're cheaper, they're going to get annihilated. So, the small caps are really at risk here on a percentage basis on how far much further they would drop. I'm not sure that this is going to matter, and, and I'm not sure that this is the be-all end-all. I'm not going to say it doesn't matter. I think that you want to look at the growth in regards to the earnings, and I'll show you what I mean by that. So, the way I was trained on the fundamental side was real simple. It was like, who cares what the PE is? In other words, most people that are trading growth names are not going to go, "Oh, the PE is this." No, what we're looking at is what am I paying for the growth that I'm getting? So, I'll say that again. What am I paying for the growth I'm getting? And the easiest way to do that, the easiest way I teach it in the community is same thing. It's PEG, right? It is price earnings to growth. What am I getting for what I'm paying? So, if I have a stock and that stock's growing at 40%, am I going to say, "Oh, I have to pay only 15 times earnings for my 40% growth." No, I'm going to be like, "Well, the PE is 40, and I'm at 40." That's why when you have names like Exxon that are trading at higher PEs than Nvidia, which is exactly what Exxon was doing about five minutes ago, and then you're looking at it go, well, you have half the growth of Nvidia and you have a higher PE. Like, it just doesn't make any sense. Eventually what will happen is those kinds of areas, those PEs of of something like an Exxon will actually drop to that growth rate, and then something like a Nvidia, if that's the growth rate here, it will actually climb up, right? Hopefully you like my block scenario here. If not, there's not much I can do about it because there it is. So why do I care about this? Because then you're going to dive into what we refer to as the PEG ratio. And this is the one that I pay the most attention to. You should do what you're comfortable with. But if I go here and I just dropped that like it's hot. And I know the kids are still saying that because my son told me. And if we look here, you'll see that when we've gotten to this area in the past, this became an area of interest. What I think super interesting about this, and what we'll do is we'll come to that one and we'll come across to that one. And we're just going to drop it from the one to the point eight. And then if we look at that area there, and then I'll just do it this way. And hopefully this will make sense to you because it makes sense to me. I'm going to go to the one and I'm going to come across to the one and I'm going to flip that up to a one two. And then you're going to see in that area that you're not really putting yourself in a position where, let's get rid of this for a second. Can we do that? Yay. You're not really putting yourself in a position. Where are we going? Like, are we having a great financial crisis? Is that what we're going through? Probably not. We did have a lot of winning and liberation here in '18. We came off of that back in the day. Back in the day. Right. And then we obviously had more cardboard and more winning and liberation in here. So the question now becomes, what are we dealing with? You're actually lower. I just want to make sure people understand this. You're actually lower in here now than you were during 2025. Which means the market for the growth of the market right now. It's actually cheaper. And what I'm going to hear from people is they're going to say this to me. They're going to say that well, that's because this is going to happen and that's going to happen and the growth is going to slow. You don't know what's going to happen. You don't have a clue. And I'm not saying that as to, you know, anybody. But when you look at the market, I'm going to take this next bracket. And if you look at how much time we've spent here versus how much time the growth rate of the market is here versus what the PE is, and you're going to tell me that you want to buy 15 or 18 times when the PEG ratio is here. That's delusional. The times that you've made the most money in the market is when you're in this range. It's any time that you are below one to one two. Anytime that you were buying equities in that range, if you go back historically and look at this, that's where you've made money. Anytime when you're up in these ranges, you're not making anything over the long term compared to what you're making when you're between like one two and down. You just need it to turn, and we're not there yet. So, what I would say about this is if you think the growth rate is going to slow, of course the growth rate is going to slow if oil goes to 200 and then it sits there for a year, right? Like I'm, I get it. But if you think that that's what's going to happen, I don't agree with that scenario, and that's where my head is. So when I look at something like this on a fundamental basis, it makes a lot of sense to me to start saying the technical side saying that we're getting pretty washed out. The fundamental side on a PEG ratio is telling me that we're cheaper than we were when you showed up with that piece of cardboard. Right? So I, I think there's a lot to this and I'd pay attention to it.
Now, when we looked at the small caps and the difference between those, if I'm wrong, and you don't start to form a bottom over the next couple weeks, small caps are going to make a lot of sense. But if I break out P the PE ratios here versus the information technology sector. So, here's S&P, and here's where you are in the S&P. I think this is really interesting because you're actually coming in harder now on information tech than you're coming in on the S&P. So, that's not really normal. In other words, you're coming in hard, but when you look at it commensurate, man, you're getting smoked. You're really coming in a lot harder. So, in other words, when the S&P came in this time, it came in, but still has that higher low. When information tech dropped this time, man, they smoked it. You have names like Micron, and people say, "Well, it's not going to do you." Okay, Micron's trading at five times next year's earnings. You have companies like Samsung, six times earnings, seven times earnings. I think Nvidia's trading at half its growth rate. That's only going to go on for so long, and then eventually people are going to start putting money to work in those names because they're going to want the growth. But you have to wait till you get through this. And so where, where I look at something like this, it makes a lot of sense to me to realize that man, the difference between buying real growth and where we are is negligible. And we've already come in harder, which means that when we snap back, information tech will snap back harder. If you look at the difference between growth and value on the S&P, if you broke it out, you can see real clear what happened here. Growth got hit harder than it did in '25, and value is hardly moving. That might make a
little bit of sense, actually, with what's happening right now. And I actually think the XLR names are super interesting. I've been buying those and doing okay with them, quite frankly. I mean, I do should go back to that because I do think there's something to this that people are missing. Some of the value names like people like, well, value is not getting hit. Well, should it really be coming in if it's true value? Not really. And so, you know, great scan to run and you can do it yourself. Is just look for companies that are cash flow positive that are trading under book value. And you would say, well, that there's not going to be any. You you'd be surprised what's on that list that I just gave you. But you want to make sure it's tangible book value. You know, there's companies out there that that were trading and are trading under tangible book that are cash flow positive that pay dividends. It's kind of nuts that it still exists in a market like this, but definitely of interest.
Let's get to some names. Now, some of the things that we're clearly seeing are these dip buys over the past three days. And I want to go through the semis. So, that's exactly what we're going to do. So, we're going to go through the semis here. And let's just pull this up a little bit quicker. And I don't have time to edit these. So, sometimes you have to deal with some of my nonsense. But you can see the move here. And I think this is really important because a lot of people are going to miss this. And I just want you to get it. So, you gap down and everyone's like, "Surely we're going down." And then the next day you gap up and that's called the trap. So, what they're doing is they're trapping people. Meaning, you think that you're going to break down the next day. Clearly, anybody looking at this chart, uh, unless they're just, you know, Houdini, is going to look at that and say, "Oh, we're definitely going lower." Like, there's no way you're going to look at that and not think it. Next day, come on, you can do it. I believe in you. Next day, you get this and you could see that you're trapped right in there. Now, then you have the follow-through day, which is your second trap, right? So, that's a short squeeze.
Here's where the here's where this got super interesting for me. That dipped down and we were dip buyers that day. This was really important to me, and I I'll explain why. Because it tells us very clearly what's happening. And what I mean by what's happening is it's telling us in a certain way that if we were going to break down and the shorts were coming back, they had every reason to after that call, every reason after that conference call to have fear and instead what they said was, "No, we want to buy because we missed out." Now, what I think so interesting about these areas is, as I was doing this earlier in the pre-markets for people, was just marking these areas off and saying, you're in a spot here where if you measure out between these two bars, a lot of those were under the 50% line. So, you really should have had more sellers and you didn't. Now, if you take this from the whole move down from where the top that move is to the top of that move and then the undercut, it's 50% on the socks, which is just absolutely fascinating.
So when we see this happen on names like MU and you watch these gap downs, what I really liked about something like an MU was you gapped down, you wicked, and then you pierced, broke out. If you were going to break, that was your day. I'm not saying that you can't go lower. Anything can always happen, right? People could stop wanting memory chips, but we're not seeing that. We should have broken down and retested more of this and instead we held that area. And then you're starting to see developments like this. And I think it's important to point this out, especially in the hot sectors. So when we have red on top, remember red is our 8-day, orange or yellow is going to be the five, and then green is going to be the three, and then red on top means stop. I'm not the brightest bulb, so I just color code them and it just helps me because when I run charts like this, I can just go, okay, well red's on top, so I'm a net seller. And you can see over and over again since this date on the 19th that selling into the five or selling the rallies was really the right thing to do until we got to April and then we can see in Wednesday the rally up the retest and then we got right here and we got to the 8-day and we didn't even fill that gap and what we did on that Thursday was hit that 8-day, consolidate, and then break up through it and then get back to this level and gap fill. Super interesting that that's how that played out. Now, I'm not saying that this is perfect. Far from it, but you're getting a very clear picture here of a 5-day moving average that's starting to point up, an 8-day moving average. And it's not just that name.
Now, if we go take a look at SanDisk, and let me clear this off. This is where all my notes for the community. I was doing trade plans. So, if we look here, red on top again, meaning all right, well, if I sold when red's on top, all right, I'm out at 740. All right, green here, green's on top. All right, I'm back in at 6:15. Like, it's not really rocket science. I mean, really, what you can do sometimes, and I'll do this, is just take those off and then you could look at just the crosses and act on the crosses. Like, it's not really, you know, crazy to look at it. And you can also look at the trajectory and the cross. And I just think that that's a really interesting way to look at it, but I don't know, that's just me going on one of my tangents on where my head goes. But anyway, so again, you gap down, here's your 5-day moving average, and then you're sitting right there. And to be clear, these aren't like crazy. This is a three, a five, and an 8-day moving average. The daily moving average on a 15-minute chart. I just like looking at them on 15-minute charts because I think it adds more value. You can see how it's acting real time on those levels. And what you're seeing is, all right, we're staying above that. I rather, you know, green be on top here. But you could have broken and instead of breaking down, you just kind of stayed in this range and you just accumulated. Now, that doesn't mean that everything's rosy and everything's going to go back up to normal, but I do think there's something to that. And it wasn't again just those names and semiconductors. And I'll tell you why I'm picking on semiconductors because you need semis and you need financials or you don't have a market. So, I'll say that again. You need semis and you need financials or you don't have a market. Energy can carry you, but energy can only carry you for so long because it's about 14% of the S&P. It's probably more than that now. I don't have the numbers in front of me. But if we go and take a and we just stay with that theme and look at semicap, same thing, and that would be your KC, that would be your Lamb Research, KA, your KA 10 Core. I don't think they call it 10 Core anymore. They pretended they didn't do that merger and take a look at ASML. They're all holding in. ASML is falling down because of the dollar. So, you know, when people start to buy the dollar, they're going to buy more, what they're going to buy more US names than buy more names that are in Europe. But none of it really exists without ASML, which is kind of just the facts. So, I do think that this is super important for us to get and I do think it's super important for us to, you know, to pay attention to. I don't know that you have to go out there and say that you're seeing the same thing in software. You're sure heck are trying to form a bottom, but you have some real problems there with software. So, I'm tending to stay away from that. I'm looking at stuff like the Mags and they seem to be following the Magnificent 7 seems to be following that level. If we look at the Magnificent 7 on a weekly basis, when we've undercut this before and closed over it, that has marked the bottom. This has only been out for since April '23. And so, there's definitely something to it.
Something else that I should probably point out before the ad kicks in. There is one called DRM that just came out. The crazy kids were buying this the other day. Is it not out yet? Do I not have anything on this? And then we would have this here and then go. All right. So, this is where we are at. And so this DRAM started. So as DRAM starts getting picked up on this, you probably start to see more and more people pay attention to to DRAM because now they can buy that. So then they're going to start getting involved in these kinds of funds. That's what I that's where I think this is going. But you know, we'll see how this plays out. But I definitely think there's something to that. That said, I think we should take a moment to look at financials. But there's some other sectors here too that I really think we have to pay attention to. If you look at financials, right on top means stop. It's tried a couple times, but the majority of time you have a declining eight. You're starting to go sideways here. We have done this in the past. Spoiler alert, it didn't work out too well. I'm wondering this time if I go to RSI and then I drop this like it's hot to a 4-hour. You're getting a change. And there's a couple changes that I'll talk about here. First, I would just drop it to that level. And then we're going to go here. And what we're going to focus on is that right here, that level. And then we're going to go right to that wick for a minute and then just see that you are fighting that battle. Now, a lot of people wouldn't do that. They would just go to the body. And I don't think there's anything wrong with that either. Just going straight to the body of this, which should be right in here. It sits right on there. Not now, Larry. And you can see that. And you can see that we've actually undercut in that area and then hit that area. Tested, hit it. And that does make a little more sense. So, it does look like your uptrend from '24 is completely busted, but that doesn't mean you drop forever. It just means you have to find some area. And so maybe we're finding something in here to kind of hang our hat on. And we'll see. What I do think's interesting about this is that you're starting to get above that on the RSI. So the RSI has been flat for some time, undercut tests, and now you're starting to hold. And a lot of these names are getting a bad rap because of what's going on with, you know, in the private credit space, but they're all not going to go to zero, obviously. And I do think that there's some value in that space. So, if I clean this off and I look at this over a weekly time frame, and you can see right here how you're back in this area again on the weekly and every time we've been down here, if you had a long-term outlook, whether you're looking and saying, "I want to be involved now or not," it holds that area. You know, really carefully, if you break it, breaks it. But historically, if you're getting involved, I mean, even during the great financial crisis, if you're bonking in that area, you're tending to hold it over a longer period of time. So, I do that think you're getting washed out. If I just say like where is just the drop dead on it? I really don't know that you're going to break this 42 and you're going to break the 200-day moving average without some kind of massive shift in the economy. Like something really bad is going to have to happen for that to break. And I'm not saying that it can't. I just think that it's going to be really hard to look at this and say, "Yeah, that that's not going to break." And you can see the rally up, the pull back to that area again. and it just keeps riding the lightning till eventually the lightning just puts in the bottom and then boom, that's it. And from there it just absolutely ripped. So I do think that there's something to pay attention to. You know, I I do I think there's definitely something like that we you know we really want to pay attention to. So I can't really, you know, I can't really stress that enough.
So let's take a look at this and go forward. But I also like looking at these names lately. So, I've been looking at something like APO, and I think that this is super interesting because a lot of firms coming out and defending it, and you're not really hitting new lows anymore. So, I think some of these names that are associated with private credit. I'm wondering if that's it. Like, that might be enough. AL is an absolute pig. I'm still short it. They just got a redemption for 41% of their private credit and they're like, "Oh, we can give you 5% back." You know, these the the companies like this where they're paid for performance. I mean, candidly, these companies probably should never have gone public because I, and I was talking to somebody about this. If you're paid and you have a high water mark, you're just going to put a key in the door, give everyone their money back, and start over. The smartest people are just going to leave and start over because they're not going to get paid. So, companies like this probably go to zero. You know, we'll see. We'll see what happens with them. But I I'm wondering if the financials are starting to catch here. And by the way, we're starting to turn on the RSI. It's starting to lift a little bit where we're making these highs on the RSI and you're in here. I'm leaning that way.
Where are we with energy? My sense of energy is that that's probably the a top on it. And I'm going to get a lot of probably egg on that one in the comments. You're always welcome to comment, but I'm leaning that way. I've been shorting that and doing exceptionally well. I've been shorting Gosh and just absolutely killing it. So, I'm going to keep doing that cuz it's working. But I do I think that the oil and exploration, the EOP names, I do think that's probably it on the on the aggregate. I think there'll be other companies that'll do well, but I do think that they're the ones in my opinion that have just gotten ahead of themselves. The refiners, they're probably going to do okay, but I do think you have to start paying attention to those. I actually start thinking you have to start wondering about the tankers, right? Like, do the tankers start breaking out, right? And you're starting to see a little bit of that where people are starting to go like, "Oh, I might want to own the tankers. They said they're going to open up." We'll see because people are going to be thinking like, "Oh, I missed it." You want to be super careful with these because when they turn, they're going to be vicious, but it's going to take some time. It's going to take some real time to see that and then all of a sudden it's just going to really open up the floodgates for these names. But FRO, STNG, DHT, like those names definitely are on a radar that I would be paying attention to.
And one sector that I really think people are not getting and they really need to pay attention to the UFO sector. You know, with SpaceX moving up its date to go public, a lot of people are not getting this. This is something we've been in for a really long period of time. This SATS, and I don't think people fully understand how much SpaceX they own. I'll save you a bunch of time. It's 3%. You really might want to spend some time for those guys that like doing fundamental analysis and long-term, you might want to look into that. You know, there might be something there. We actually bought this thing at I think we bought this at 80. We were playing with it here and then when they came out and revalued SpaceX I'm like people aren't didn't understand it. I still don't think people fully understand it to be candid, which is really rare. I say that but then no one's really doing fundamental analysis on any scope anymore. So I think that there's a lot to this name. I have a very large position in it. I've done quite well with it. The only thing I did with it with the news on Friday with SpaceX's new valuation was add to it. But what this will do is it's going to pull all these other names up with it. ASTS, Rocket Labs, all those names are going to get attention because of it. I just think you're better off playing as close to the vest as possible with this stuff. And so to me, playing SATS makes the most sense.
I also think that it's super interesting to watch this bidding war going on for GAD. And if you're in I'm going to leave you with this. If you're in such a bad economy, you know, you watch companies like SBAC say, "Hey, we're putting ourselves up for sale." And you know, we actually caught this one. I'll grab this really quickly so you can see where I'm going with this. So, I just think this is important for me to show that when we do this. I have like hundreds and hundreds of trades I did live that we recorded. So many. And I'm thinking about putting them all into like one big video. Be like hours long. You just leave it on. Some people were saying to break it out into like year by year, but I just thought it might be interesting to see like all of them, but it'd be hours long. I mean, I guess you just leave it on or come back to it. I don't know. You guys can always comment on that stuff. SBIC to explore sale. I'm just showing them tagging people that want to be interested in day trades what I'm doing. And my break even was 181 on it. But this is just like a textbook trade. People ask like how do you know the difference between these? I do teach this stuff when we do the educational classes in the community. If you're trying to get in, make sure you're on the list to get in the community. But really all I did was, you know, look at this and I use a proprietary indicator that I created. But if you which you don't have access to, but so let's do it this way. Let's just give you a plain arble on that. And then what we'll do is go to this on a one. And then what we'll do is get rid of these moving averages. And you can look at it this way because it's very similar, but there's some differences. I'm at the brightest bulb, so I like everything color coded. When you see something like that out of nowhere, anything that's like on your moving average, and I'll tell you how this one's set up. It should be set up at 50. I'll go between 50 and 30. But what you really want to do here is the LM length on that is 50. Look back bars on for average are 30. But really what I'm doing here is it's got to be 5x at least 5x whatever that line is. So whatever your line is if it's not 5x I don't even bother and that'll save you a lot of time. So you can remember that. So if they have news that hits and it's like wamp like no one cares bro. So that's how I look at them. And then you always want to just watch that first bar and then watch how the first bar interacts. You don't have to wait to act on the first bar. If you can look at the time stamps, you'll see that we I didn't. The fact that body is encompassed in that wick means the first rejection they held and then as it's buying up, I'm going forward. But names that are that are putting themselves up for sale because the valuations are so silly. You wouldn't move like this. You just wouldn't move like this if people didn't think that someone was going to come out and buy them. And I think that that's pretty telling for these times.
You see that you have this disconnect that's going on in the market between the 10-year in my opinion. Let's get rid of this. And I touched base on this in the beginning of the video. There's a big disconnect here between the 10-year and the dollar and what's going on in the market. So, I do think that you want to pay attention to that. But really, you always want to watch stuff like SBAC, and you really want to watch this kind of stuff and say, how's the market responding to that? For example, like SpaceX raising the valuation of their IPO to possibly $2 trillion really bodes well for that space. And you don't see those kinds of things in environments where where it's going to be where it's going to be bad for a longer period of time. You you just don't see that kind of stuff. So that's