Transcription
S&P's trying to break out, but obviously we sold down today. I think there's a couple things to really go over here that are super important. We have a ton of earnings to go over and we have a big announcement by Tesla after hours that I have to address with you.
But I do think it's really important to just note here what exactly is happening off the open. We just dropped precipitously. And then if we just take a note of this and I'll show you this in a couple different formats, but there's the 10:30 level. First hour of trading and you get absolutely pummeled and then from 10:30 on you start to see it dissipate and then start to turn around and then right to that 10:30 level like I mean literally like clockwork you can time it. It's that it's like that crazy and it it's really important to get this. So there's that 10:30 level and then we're bouncing down and then within one 5-minute bar it takes you right back to that area.
Why that's important is the first hour of trading is predominantly retail and what they tend to do is they try to trash retail and then get involved. So what you could what you're seeing here is this is all retail dumping and panicking and then institutions towards the rest of the day are just buying. We've seen this pattern a lot. I would expect when we're setting up to break out which we are that you're going to start seeing this more and more and a lot of people might be looking at today and saying does it really look like we're going to break out? Um, and I think more so than before.
So, I'm going to clean this off and just show you this is really what you're doing. This is just one big liquidity grab. We came all the way back down, didn't break anything, came to 6,900, stopped just literally on the dot, and then from there just reversed and head and heading back up. So, while most people would look at this and say, "Oh, today was pretty bad, at least off the open." All we did in the community was just stay out of the way. I was pretty vocal about it. You know, I do think that we are setting up to break out. If we take a look at this on a weekly and you look at that on a weekly, does that really look like anything's broken? Now, we have to get through tomorrow. Watch this on the NQ too, and then we're going to dive into this in a little greater detail.
But if you look at this on the NQ weekly, and you look at the close, and you look at where you're at, look at our move, and then I'm supposed to be concerned about this. Far from it. And I'll tell you why you don't get concerned about this for a couple reasons. Number one, the very first thing you ever do when you have a bar like this, if you're concerned, go to measure the bar. Then from there, what you want to do is go to settings and we're going to get rid of everything but the 50% line. And what you'll see, and it's pretty clear to me, I didn't mean to make a rhyme there. I apologize. I will try to keep the rhyming to a minimum. If you see that, you see where the 50% line is. See how the wick is down here? That is price rejection. Wicks are price rejection. You guys know this. So, what we're doing here is we're watching this very closely and we are rejecting this, meaning this was a liquidity grab. And then you look at the area where you closed. Yep. Did you not get through? Really don't care. You have a possible war going on. You have geopolitical uncertainty. You have a lot of what-ifs out there with Japan. Don't really care because I have one thing that they all don't. And that means I have earnings. And when you have earnings, nothing else really matters. So, you're going to get these kinds of moves. And these moves are nothing more, as I'm going to say it again, than liquidity grabs. And they're just massive ones. When you start cracking like this, all you do is just start watching the levels, see where you land. And what a shock right to the 55. I use a 12, a 22, and a 55. You should use what you're comfortable with. And I don't have to measure this one. You guys all can already see what's going on there, right?
So then if we go and drop this down and we look at our little level here, and what we'll do is we'll get rid of everything there. And we'll look at this. And what are you saying? Same exact pattern. And then by 10:30, you can see right in here. And then you have one five-minute bar that just takes it all out and goes there. I think that this is really important to get and I cannot stress this enough. I think it's really important for everyone to understand this and how significant this is. You could have easily easily have fallen out of bed here and you didn't. And again, one thing that we always like to do is just look at the RSI and we could see here and we could see the same level and then we can always see those divergences. And I think that's important. We'll show you a couple more of those in a moment.
But again, why why do I feel this way? And it all boils down again for me it boils down to this stool. Let me get rid of this. So you have the macro side of the market, you have the fundamental side of a market, and then you have the technical side of a market. And this is where it gets really, really important. And I cannot stress this enough. So what we'll do is, let's just put the top on there. We'll draw it like it's hot. The kids still say that, right? And you'd think I'd get better at drawing this after a couple years. But that's freaking hideous. You know, if I guess if I just use the points to measure to here, probably someone that's like an artist or a graphic designer is probably rolling over and just like literally yelling at a scream right now. Anyway, so what we have here is the stool and then what we're what we're looking at is sometimes we focus on the macro, the fundamental, and the technicals. Why do we care about this? I'm trying to make it better because I just picture this poor guy screaming at the computer right now. Anyway, if we look at this, pardon me, if we look at this, I think it's really important for us to understand that sometimes we're focused on the macro, sometimes we're focused on the fundamentals, and sometimes we're focused on the technicals.
But there is one thing that I learned. Now, if you have a macro event that changes everything, i.e. a pandemic, i.e. a war, anything macro that's like a major global shift, all bets are off for what I'm about to say. None of this matters unless it's that bad. If the fundamentals are going up, if earnings are increasing at a pace that no one has expected, if capex is increasing at a pace that nobody expected, and earnings are doing that, nothing else matters. Literally nothing else. There are books out there that talk about this stuff that you should probably really read. So, The Alchemy of Finance does a really good job of this, and it's really that simple.
If all these tech names start crushing, and some of them are really crushing and expanding out, we're going to talk about this. If they're all going to start crushing the way that they are, that means that the NASDAQ EPS is going to go up. It means the S&P EPS is going to go up. Then you get into whether or not you're going to have the EPS contract on the PE side or expand. If you don't, if all things are equal here, meaning there's no pandemic, there's no war, there's nothing goofy going on out there, there's not double secret tariffs, there's no winning and liberation, right? If it all things are equal and we just have fundamentals going up, it's not feasible for the NASDAQ to just go sideways. Eventually, it will start lifting because it has to catch up. The PE will only contract for so long. And the PE to equity ratio is dependent upon where the 10-year is. And then that has to do with what's going on with the dollar, too. But it's just not feasible. Eventually, you will trend and you will break out of this. You just don't have a choice because people will buy the earnings. See, when the earnings go up, and I'm just I'll leave it here and then we'll get into this on Saturday. And you're going to want to watch Saturday's deep dive for this discussion. But when the earnings go up, that means that certain pension funds, they have to put more money to work because of the growth of the underlying earnings of the indexes. They don't have a choice. Pension funds have to allocate more capital that way. But we will cover that. But this is a really big deal and I and I'll explain why.
Before we get into some of these other names, I really want to address what happened. So, the one thing that we keep hearing about is that capex is going to decline. Capex is going to decline. That's all we keep hearing about. They keep yammering on about it. And what's capex doing? Is capex declining or is capex not declining? So, you have a pool of capital. And that pool of capital looks like this. And then this is the amount of capex. Now, Microsoft came out and said they're going to keep it flat, even though they're just bombing on the cloud side, which is not a surprise, but we can talk about that on Saturday. What did Meta say? We're taking the numbers up, boomers. We're taking the numbers up. Which means that capex, and I'll try to get this so you can see that is actually like this. So, that means that all the spending that was going on out there that everyone thought that we were not even going to just stay here, but everybody on the street was like, "We're going to contract." Well, we're not contracting. Not only are we staying where we are, but the that this pie or in this case the circle is getting even bigger.
Once you get that and you understand, well, what are they buying? And I'm well, I'm glad you asked because not only are they going to go out there and buy compute, which means they're going to buy more Nvidia chips, which is one of the reasons why people are like, why why is Nvidia up today or looking at some of these semis, right? There's reasons for this, but look at Lamb Research. And I would suggest if you like listening to conference calls, which is a great idea, listen to Lamb Research's conference call. Look at the bookings, how the bookings tripled for ASML. So, when you start looking at those bookings, and that's going to tie us into all of this. It's going to tie us into why Micron's up another 14 after hours, why SanDisk has a six handle. It's off the screen. Why SanDisk has a six handle and it's pushing, right? There's reasons for this on these calls why this is actually happening right now. SanDisk absolutely unequivocally crushed and it's raising its numbers ridiculously. SanDisk beat earnings so badly that literally when it came out I was trying not to laugh. 360 is what they're saying. It was actually a little lower than that, but you're almost 100% over on the beat. It's it's absolutely insane. So people have to take their numbers up. They're going to have to raise their targets on these and they're going to have to raise the the price points on these. And we saw something similar to this with Micron. Take a look.
Now with Micron, what we're seeing after hours is another move up. But I just want to just spend a minute on this. So, what I'm going to do is I'm going to just take all this off and then we can just kind of see the the low on the day down to that 417. And this is really what tends to happen when you start seeing the indexes and the volatility start picking up in a trending market versus a market that doesn't trend. Start seeing these lows. You can see right here how we hit that low which started becoming that high. Came down to this level today and bounced off. We had a really nice trade on this uh early in the day and we will walk through it so you can see it. But then we got out of the way. I'll walk through that trade in a minute here was actually pretty nice because you can actually see the RSI playing out and everything but in point after hours you're seeing what happened with SanDisk and everything else and we'll address this uh on some of these other names as well.
I think the important thing for you to realize is that as you're coming out of a trending market I'm laughing because you know I had this whole talk today that you're coming out of a trending you're coming out of a basing market into a trending market when you look at something like this and then you know within the first 45 minutes the market just implodes. Um, the purpose of me explaining this today, and I was going to say it again, you can even see this divergence right down here. I mean, this one was perfect. I like when people say divergences don't work. More for me. Uh, but when you start to see stuff like this, you're like, "Oh, that didn't work." Okay, only called the bottom. Um, you just actually whenever someone says RSI divergences don't work, you could screenshot this and you can just send it to them and you don't even have to say anything. You don't even need words.
So the important part about today that I really want you to to take into account is you start looking at that first hour and then you drop to the first hour here and you're like all right so the majority of the move down on the entire day happened when and when you start really understanding what they're doing and you look at that and go okay well down we were down 2.45 at one point out of that 2.45 four, five, 2% was the first hour. It was retail. All right. From that, what happened from then on for the rest of the day? And what's crazy about this is you start looking at that flip, which marked the bottom. And then you start looking across and then from there, all you did was just grind higher. That's literally all you did from the from that area that we're talking about right there to the close, you went up 1.22%. So, you actually retraced. If you go and take a look at the retracement on the day, just so you can understand this, here's your 50% line at 620. From the lows you closed over 61.8% 8% on the day and people were selling into this and you're selling into and this is what what always confuses me about people when they don't understand not just the stool but the fundamental analysis of what's going on. Forget SanDisk but Meta last night comes out and says everything's great. You know, we're raising numbers. We're raising capbacks. Like earnings are up. When earnings are going up across the board across multiple companies, you're seeing Western Digital tonight. We saw Seagate as well last night. Stocks don't go down. Stocks go up. Like like just remember that if if it's if it's broad-based across the board and everyone has to take their numbers up, stocks will go up on a fundamental analysis basis. And this seems to be lost to people, especially on the retail side.
What I really think is happening on the retail side, and I am seeing more and more of this, this is why I wanted to wait before I did the strength report, and we'll get back to the strength reports next Wednesday, because you're seeing a massive shift. I I think it's really important to state this that everyone has so much information that they're not doing any critical thinking. And if I could just suggest one thing that people start doing is start thinking critically. It's impossible for a company to keep coming out and beating earnings and beating earnings and raising guidance and the stock to not go higher. It's just it's literally just not possible. Is if if it's a one-time event, sure. But if they're going to consistently come out and raise like SanDisk did tonight where they're literally doubling their earnings, it's just not feasible for that to happen. And what this does is it presents a huge opportunity for people that understand these and understand these patterns because when everybody's getting out of this even here, this presented a huge opportunity for us. Just this very simple trade that was $10 just off of that. And then later in the day, there was another opportunity very clearly. And you can see the bottom here again. And there's those divergences that, you know, people say don't work. But you know, again, you just take a photo of it. You can screenshot it if you like. And just save it to your desktop. If someone says, "Oh, I don't use RSI. Doesn't work." You just screenshot that and send it to them. Here, take a look at this. Oh, that's interesting, isn't it? Might be worth trying that. Like that. I'm going to buy micron here. Up two bucks. That was fast. Trimmed. It was just a very simple failed H pattern with a positive RSI divergence. Trimmed 43780. I got on the last bit. Selling into the positive slippage is really what I'm trying to do. I'm going to trim enough of it at my cost that it doesn't matter what happens. And then I'm going to hold the rest to the low of the day so I don't have to buy it back. I can just leave the runner on all day. Up five. All right. Good. Man, we nailed that, huh?
There is time and place to use extended RSI versus using regular RSI. We'll start doing those kinds of classes again. More advanced stuff. Trimmed micron up 10. Trade for me is a close below the open and then I'll get out of the rest. Yeah, that's not good. So, we hit a new high. Now, we got a lower here. That might be a problem for me, but we're going to let it play out. So, there it is. Give me one more tick down and then we're just going to kick the rest of it out. With the index rolling out, taking lows on the day. I don't want to play games in case the whole market just rolls over. And that's why we got out. You could see it coming. See that divergence and there's your divergence. As soon as you see that, you're like, "All right, well, I tried to get through. I made a higher high on a lower cell. That's not going to work." Now, that's going to take us back to all of this. It's going to take us back to SanDisk. Now, will they won't they? Uh, you know, tonight was pretty wild. I'm not going to get into everything with as far as trading, but it was I was very, very active all at the time of the recording of this. I actually got out of a lot just because it moved so far, so fast. Um, and I'll see how we are going into the close, but like this was just an absolute monster trade. Uh, so was Western Digital. And what's crazy about these names is they're beating and people aren't even reading the calls. They're just following the algorithm. Um, and then they're just getting washed out. But literally, if you understood the the revenue and you know how to read those with literally within like 3 minutes, this thing was up $30. And the bottom line is because the algorithm didn't have a clue what it was doing. It saw one tick, one thing, and it dumped on it. This is why I love the algorithms. And then all of a sudden, we had come right back down, you have a failed H, and you had another shot at it.
Really important to get this. So, when you see these names and you start looking at names like STX and wondering why it's up, or you start looking at something like WDC and wondering why it's up, a lot of people aren't getting that these companies are growing quarter over quarter at 10%. And that's just the Western Digitals and the Seagates. That's not the SanDisks what's going on there and what we saw with Micron. So, there's a lot a lot going on out there and I cannot stress that enough. So, it's definitely something that we want to pay attention to. It's certainly something that I think you should be paying attention to.
Now, before we wrap it up, there's two things that I really want to go over with you that I think are super important and I want to get this out a ASAP because you still will be able to watch some of this with with these names trading. Um, if I take a look at something like Tesla tonight, it's up. Now, I understand why it's down because they're basically coming out and saying, "We're going to be a robot company." And they're getting out of the car business. So, if you were an institution or you were a pension fund and you owned this, that's why this is doing what it's doing. It's not crazy why Tesla is falling out of bed. I actually like the story. I like what he's doing. After hours, the the rumors floating around there that he's going to take Tesla and maybe put SpaceX in there. I I don't think that's what's going to happen, but you know, what do I know? Or he's going to do it with X AI. And so you've seen other names sell down on that. SATS is one of those names that's selling down on that. Okay? Makes zero sense, but just let them sell it down. And I would look into the story, but you know, you should do what you're comfortable with. So I do think that to tomorrow Tesla, you're going to see a lot of people that got trapped on the short side. So you're probably going to see this actually pop.
Um, and I wanted to say that we are seeing that Apple after hours it had this huge move, but I just want to get this out there so that you're you're prepped. I I get it on the earnings side because he cut gross margins or he cut costs which increased gross margins, but this was not a really great quarter. Like a lot of things didn't really beat. Um, he keeps talking about huge demand, but you're not really seeing that to be candid when you start looking at it and you're going through item by item and he's saying it's supply chain issues, but I mean, how does Apple have supply chain issues? I mean, if you're not selling to Apple, who the heck are you selling to? Like, who are you holding out for? So, I don't know. I'd watch how this one acts tomorrow. I think this was definitely something that we have to pay attention to. And then of course, please be aware that you're going into the weekend where you might have a government shutdown. And of course, we also have issues with Iran. So, we got that going for us as well. That is it.