Transcription
sell off today, but shouldn't be surprised after the huge gap. We need to talk about this in some detail.
I've been to a lot of technicals tonight, tell you exactly what levels to look for. The spy and the Q are really two different stories. You can see how the Q came in. And this is really important to note. Gold was the top performing out of the top 40 sectors, but semis were the worst. And we have to talk about why this is happening and what to do about it. The VIX is at lows hitting that 15 and 3/4 16 level and yield is plummeting. And we can see the yield plummeting right here ahead of the Fed meeting tomorrow.
Now, let's get exactly into these levels because there's a really good chance that we're going to hit them tomorrow with the volatility with the Fed meeting, which I think some of this has to do with. Let's get to it. As traders are reacting to the institutional levels, what we're trying to get you to do here is to know what they're doing ahead of time. Subscribe, click all notifications. What we go over here is timely by hitting the bell. You don't get it after retail is already in. The important thing is you get the information, education that you need. Subscribe. Let's get to it.
Now, I'm going to spend a lot of time on the indexes because it was all really one big trade and then it just came down to the beta and I think that that's really important. So, obviously you have your 12 and your 22-day moving average that are right on this level. Now, where that ties in is if I just go here, go back to that basic chart, go to the top of this, that's going to take you right to 744. So, that's probably the top of the dogee that you want to mark off. And it's the top of the dogee. And you probably want to mark that off on your chart because you should hold that level. Now, for some chance, if you don't hold there tomorrow, the next level that you're really going to want to watch is that close. And that close should be 741.75. So, I'm giving you exact levels that you need to watch tomorrow. I can't stress that enough. You could argue that you're just going to get to the top of the control bar, which is going to be that 746.90, but I think you're going to get through that, and I think you're going to do a formal gap fill. So, I think you're going to get into this area.
Now, what I want to do here is we can see the breakdown. And why did we reject? So, if we come to the top where you had that reversal, let's just get to this. This is super technical and it's not really that enormous of a surprise. You've gotten right to the top of where you have the gap down. So, all those trapped buyers are able to get out into that push. After this, we now have the kind of the rollover. And to backfill, it's really not that big of a deal. It's pretty typical to actually backfill. And I don't really have a massive issue with it. A matter of fact, it makes a lot of sense that you would backfill in an area like this. So, shouldn't be overly surprised by it.
Now, some of the things that you can see if we leave that area right here and I have the pre and the post turned off for a reason. And we just want to know that resistance of 570. 757. Sorry about that. The dyslexia kicked in. So, you just have to watch that 757 level up, down, 1, 2, 3. It's a 4-hour chart. There's not really much to say here. You've undercut that low. What would make you think that you don't have to do that? And you can see that I'm giving I want to give exact levels for tomorrow because it's with a new Fed chair. It's absolutely wild. Especially one that's telling you that he might not even put a dot plot on there because he wants to get rid of that and the Fed balance sheet. It's going to be pretty insane. If you start closing over that 51.85, you start doing that tomorrow, you might have something. But from my standpoint, I can't see institutions, you know, putting money to work until we see something like that. Do I think that the top of this is important? I do. I think the fact that you came back to a level where you have the gap and you've gap filled and to come back and do some back filling is great. I also think that this is a great time if you know how to do options, it's a great time to be a put seller, but you have to know what you're doing.
I want to show you something on the cues because I think it's very important to understand exactly what's going on. If we mark off this level here and then we mark off the top here, you can see exactly what happened. You actually formed, let me just blow this up here so you can say it. You actually formed a dogee right on it, right? And again, we always look at the macro, the fundamental, and the technical here, but there's some really technical things going on here. So, people are going to go out there and say, "Oh, well, Billy Bob said that AMD is going to go down and SanDisk has a 99 on the like, okay, this is the same stories we've been hearing for a year." That's not really what's happening here. What you really have is you have a bunch of people that were trapped up here and now they've decided like, "Hey, I can get out. I can reset and take a look at things." What are some things that were actually fairly decent today was the fact that this bar did not accelerate into the close. So the retail 4 hours, as I like to call it, versus the institutional 4 hour is telling you a very different story, right? And that's how I look at them. I'm just going to say that again. So you have like the retail 4 hour and then you have the institutional 4 hour, which is not really even a 4-hour bar, but that they're usually telling you a different story, right? Right? So like if you look here for example, here's your retail 4 hour where all the panic comes in and then what happens the next day? Institutional reverses and you're like, "Oh, but it went down the next day." Yes, it did go down the next day, but what really happened? Well, retail sold down and then institutional just picked off whatever they could and then what happened the next day? Reversed retail buys and then institutional bar is actually even bigger, right? So I think that that's again very important. Retail bought retail bar for hour. Institutions just said, "Let's see what happens." Retail panics because they just bought and re and institutions say, "Yeah, we kind of thought that would happen. We might come back in and gap fill. We're going to wait for the Fed." Meanwhile, institutions are doing one thing slow, taking their time. And what's retail doing? Cat in a hot tin roof. I'm in. I'm out. I'm in. I'm out. Right? Very different behavior. You always want to watch the behavior of what retail's doing versus institutions are doing. That's why Friday at the close, that last hour is so it's so pivotal.
Anyway, if we can see that area right here, we can see how we've come back there. And so, they're the areas that I'm going to pay attention to. The other thing you have to think about is, yeah, you can 100% come back to the top of this. And a formal gap fill is going to be 721. And you can you do that 100%. You're not that far off of it. And you have a lot of things that started to sell off today that have been your driving force. And it's only down 1.5%. So what you may see here is you may see a situation where you wind up coming in on the, you know, on semis and some of these other names and then right into the Fed right after the first 4-hour bar, it might change like right after it gets into there.
Now, what are some of the things that you should really pay attention to with this? Well, the RSI on the 4-hour is really not telling you a whole heck of a lot, right? If we go and take a look at this on the hourly and we're going to clean all this off, you can see that we got up and then we broke. And then from that break over, you could start seeing that we started getting weaker. And I know a lot of people don't like the RSI, but when you start on that 70 and you break, you can see how that marked the high here and you can see that break and that marked the high here. And so people always say, "Well, why don't you sell when that always happens?" Because you don't know that you're not going to reverse right back through it. But when you start leaning on it, you start seeing it start to spread out over time. You have to pay attention to it. So like today, for example, once that happened, you had a dogee that was sitting right here. Well, once that Dogee was here, all we had to do today was just mark it off. And if you're in the community, you know we did this. We marked it off and just said, "Hey, this thing's going to choose. It's either going to reverse really hard or it's going to break." And all you had to do is just watch the hourly. And that hourly coincided perfectly with where you're breaking right here on the RSI and you can see the break and then you're down, right? And so you don't know, no, you don't know that it's going to happen, but when you see it, it's like, okay, well, this is what happened. I can either take advantage of it or meaning get out of the way or I can stay with it. And I think that there's something to that. And I'm a little concerned about the liquidity issues. And that's why I think that you can get to that level. And we'll get to that in a moment.
But if we then take a look at the same thing on a 15-minute, you're already oversold. So how long are you going to stay down oversold on a 15-minute chart on the RSI? Well, probably for a good four or five bars, which takes you to what? The gap fill. And then you take the gap fill down. And then the RSI gets back under the neutral. And then by 1:30, you know, we'll see what happens. But to me, this is pretty textbook stuff. I don't know really what's going to happen on this side with the 4-hour. I don't think you really have enough time for it to really be of interest. In regards to here, I don't really have anything that's great. If you look at the five, you know, the one thing to always look at with a five is like, are we above or below? And then if you're like below it all day, it's not really great. You want to be above it if you're day trading because it's always better to day trade when it's above that level. If you ever go look at like your great day trading days, if you're a long trader, it's always usually when the the RSI is like above there. So, we're not really getting a lot of information there.
Again, if we go and take a look at the spy, you'll see something very similar. Once it broke, it just kind of stayed below there all day. Look at the 15. You're already oversold on the 15 from overbought. You can see where it crosses right here and then you come back down. So, the question is, what do you do about it? I really think you have to give it time and see what happens with the Fed. You know, that's really what I'm going to do. You need to do what you're comfortable with. But that's where this is leaning and I think it was worth spending the time on this and having exact levels. You're always welcome to comment on it, but I think it was worth our time.
If we look at the socks, which is the huge driver, it's very important to note a couple things. So, you get back to the high here and that was your all-time high. Once you got over that high and you broke there, that 616 level, that was it. And you can see from 10:30 on, once we broke and we got below there, you're like, "All right, well, we're going to gap fill." And that's exactly what we thought we were going to do. And then the gap fill. We didn't bounce. Let's take a look at that for a second. You can see you hit it and then we hit it again. And once we did that again, I put on a a short-term SOXL trade asking how that went. Not very well. And then it just kind of reversed and then you can just see where you're at. So the fact that you're down here, there's a couple things here. Number one, you've already been here. Number two, you're undercutting again. Historically, if you look at that, once it starts flipping through again, it usually tends to put in some kind of short-term bottom. But you're dangling up here. So, we just have to be really cognizant that this has to get kind of washed out and then once it gets washed out, we'll go from there. So, washed out could be Thursday, could be Friday, right? We have to see.
You have your divergence right here, which is pretty darn nasty. And that developed today. You were up here today and then you weren't able to get any higher. So, now you have this divergence. So, what do those usually mean? Well, they usually mean that you could be in for pain. But where does that pain usually take you, right? If things don't align, usually takes you back down to a support level. You know, a lot of people will look at these RSI divergences and you have to just understand like it's not the end of the world. If you go and put a let's go here and put a like a let's put the 55 in and let's put the 22. And we could say, all right, divergence. And then this was pretty technical. I was just talking to someone about this. It came down to 22. Here's another divergence. What's it do? Come down to the 22. If you get another divergence here, what's it going to do? Probably come down to what? Say it with me. The 22. So then you just kind of stay out of the way. Let the whole thing melt down and then figure out what you're going to do from there. I don't see anything here besides a bunch of people and lack of liquidity and panic. That's what I tend to see here. We start seeing people chase these things up and then when they come back down to support levels, people think that they're going to call the great financial crisis. If you called the great financial crisis every Tuesday, you were right once in 20-some years. Probably not the best investment strategy, right?
So, let's get back to this. If we take a look at the socks and what the socks is doing, I don't think it's unrealistic to have this thing drop another 5%. And usually these specific types of patterns which get you right back down to what that 22 or maybe something in here like that gap fill, but you're already gap filled. But let's just say you came back down to this 560, 540 level, right? Let's say you come somewhere in there. It's really not the end of the world. And usually when you get these kinds of patterns, you're going to see that kind of behavior. And the reason that you see that kind of behavior and those kinds of patterns on days like today is pretty realistic because you get the hopers and dreamers the next day. If we were lower, I'd say that, hey, you're into the 22, you know, you might stop. But when you have these kinds of days where you have one big day down, let's look at the volume, you usually will have another follow-through day. It's pretty rare to not have it. And again, what you're doing is you're gap filling on the chart and we'll see how this goes. But for me, it presents opportunity.
Things that I'm looking at that I think make a lot of sense are things like DRAM. You know, god forbid the stock goes back to a level it hasn't seen since yesterday. And so we came out, took out all-time highs, and then it comes right back down. But these kinds of environments are great if you know what you're doing and you know how to sell puts. This is probably the best put selling environment I've seen in gosh, it's got to be since the pandemic. Like it makes a lot of sense to sell puts these days if you know how to do it. You know, I'm selling like the what did I sell today? I sold the 68s for two bucks and then I was selling the the 66s to open. I'm selling them to open for like a dollar and change. So you can sell a boatload of them for that amount of money. And if it doesn't get there, you take you take it in. But if it does get there, okay, so I own 65 DRAM by Friday. Like, oh no, don't throw me in the brier patch. So there's different strategies for different environments. This one's pretty clear what's going on. And I bring up memory because memory names got hit. And you know, it's funny. When we were live trading today, one of the things I said to the community, I said, "Everybody wants to be a swing trader until it's time to be a swing trader." And what do I mean by that? Exactly what I said. Like everybody wants to be a swing trader when they're going up. When they're going down, they don't want to go for the swing. For some reason, people think that the swing looks like this. The swing does not look like this. It looks like this. It's ugly and it gives you gray hair. All right, just FYI. So, when you start to see this, you have to understand it. Well, gez, where could this thing come back to? I don't know. Maybe levels you haven't seen since Friday, right? Maybe it could come back down to 1860. Pretty darn easy. Usually, if you break out and you come back, you go back to the breakout area. That breakout area is going to take you down to 1868, which is very realistic for something like that to happen. It's very realistic for something like that, especially when you have a follow-through day. And I don't know that a lot of people are going to be that crazy to want to pile into these names, but it's very possible that they do. Hence, you have to decide if you're going to be a swing trader or you're going to be a day trader.
Now, same thing here, MU. Everybody wants to be a swing trader when it's at all-time highs, but when it reverses, nobody wants to be a swing trader anymore. Everybody wants to be a day trader and be out by the end of the day and be flat. It just doesn't work that way, guys. If you're trying to say that, oh, I want to buy the I should have bought this when it broke out and I just should I would have stayed with it. If you weren't going to stay with this, you weren't staying with this. You just weren't. And that's okay. But just at least know who you are as a trader. It just makes your life a lot easier.
For me, looking at this, it's just normal volatility. The VIX isn't even up. The one thing I would just say is that the ATR volatility, because the VIX really determines the volatility of the S&P, right? And then you have the VNX which determines it of the NASDAQ. And what I was pointing out to people and I did this on Saturday as well, we did it in the Substack as well. But if you go and take a look at like ATR, you know, a lot of people, this is why it's so great for put sellers right now. Like the average range on Micron on any given day is 80. 80 points. That means on any day you could move $80 up, $80 down. And what are people doing when this is happening right now? Well, they're calling for the great crash. They're not even realizing that you're just in the normal band of volatility on the day. Super important to get this concept, guys, because it'll explain it. So, when you're trading a name and you're like, I can't deal with the volatility. It's too much. That must be crashing. And then you're like, oh, well, we're just doing this normal volatility. Either your position size is too big or you don't want to swing trade. And that's fine because this is not this is not the same levels you were dealing with here. And I know I did this on Saturday, but the point that I've been getting at was like if I go to here on the market. So, like here here's a great example of this because range is very different than the fear in the market, right? So if I look at the Q's for example and I mark this off and we just drop it like it's out here and I know the kids still say that. My son wouldn't lie to me. 1069. All right. So the average range in this particular spo spot in time on May 27th is 1069. Then we come here and it's June 16th at right same price. 16. You have a 60% increase in the average true range on the index. So to think that your stop should be the same here as it is here is called delusion. It doesn't work that way. Right? So when we understand this stuff and we understand why these things were created and we use them properly, it can save us a lot of aggravation. You might say, I don't want at this time I don't want to be a swing trader. I don't want to be in these.
So, let's just keep going. If we take a look at solar, I thought this was super interesting here and you just watch the down the H. Watch when we overlay these. These were the ones that people had to be in and you came down to the 55 over back down 1222 cross. Solar was the cat's pajamas. People had to be in solar and now all of a sudden these things are turning into hes. And I just thought that was really interesting that that's happening cuz you wouldn't really expect that when you're watching oil implode. You would think that they would be saying to themselves, wow, you know, maybe the solar is going to go up a little bit more, but it's all trading like one big energy trade, which I I thought was interesting anyway. Maybe you don't care, but I thought it was pretty interesting.
In regards to software, the best thing you could say about software is it's so depressed that it can't doesn't have much further to fall and nobody really cared to even sell it today. I thought the gold trade was super interesting, but you didn't really go anywhere if you look at gold. And so, what does all this really mean? I think it takes you back to exactly how we started. I would watch your levels on the cues and go from there. I also think that you're hitting a spot here.
And if you take a look at SpaceX today, and this was a great example, we did a swing on it. You rallied and then after that and this is where people really screw up because they're like, "Oh, no. I want to stay with it." Maybe it works, but you better understand you have options and hedging out there now. So, for me, when this thing's trading up like this, it makes a heck of a lot of sense for me to trim something. I'm up 10, 15% in overnight, pull something out, put the rest at break even, and then just see what happens. And to me, I don't know what happens overnight with something like this. You know, a large portion of retail here is in Asia. And they may look at this and say, "All right, well, I thought we were going higher and we didn't." And if we start looking at stuff like, "Okay, well, you broke VWAP today." So, the average person is down for the first time in their position versus here's VWAP from the previous day and we held and then you go here and you look at VWAP here. I always love doing this with IPOs. It's so interesting, isn't it? Like, where could we go to? Well, if we broke this 195 that those buyers are like, "No, we have to defend it." If you lose them tomorrow, then you'd probably be looking at the IPO price, which is 180, which I think is something that's pretty realistic. But if you're in this today and you bought SpaceX today, the IPO price or from this price rather, today's price, you're down. Not to mention that in Asia last night, it was trading at 230. Dent's favorite time of day. But why do you care about this at the end of the day? Like why do when you look at that what I'm saying? Like why do you care? Because for the first time, the people that bought SpaceX during the day are going to be down. And that's something that you need to pay attention to if you're going to trade this tomorrow, specifically now that you have options and people have the ability to pay for these. And my sense of this candidly is that those options were pretty insanely cheaply priced if you take a look at them. That's a