Transcription
Are we out of the woods? That's the question. Well, yes and no. And I know that is kind of convoluted, but I think there's a lot to it. I think there's more to it.
The first thing we have to do is just the basics. You did close on the spy and you did close under the 12 for the first time. And I do think that could be an issue. I'm going to clean this off and just show you that the Q's closed on it. If we had to get super technical about it, I would say that you've actually closed above it. I would note that the volume here is not as great as the selling was, but there's some things going under the hood that we should talk about, specifically the breath. Let's get to it.
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Okay, we have some construction going on here. And that construction is getting what I would refer to as constructive. Now, if we look at that, you're starting to see it start with the five, the 20, the 50, and the 200. Remember, if you're new, 200, 50, 25. These are above their moving averages on a percentage basis on the S&P. And what we're going to start with, we're not going to look at the 200 cuz you're flatlining. So, we're going to close that one down. I want to start with the five. And I want to go through this and just say that what you're looking at is yesterday's numbers because today's numbers aren't out yet, but they would actually be more constructive today based upon the movement that we saw. The 5-day is bouncing and getting over some previous days. That's exactly what you're looking for.
Now, I don't like to do stuff where I'm looking at this and saying, "Oh, we're breaking out of this trend." You can, but it's so skewed that I find that very difficult to do. What I would say is this. You're definitely seeing more names get above their five-day moving average, which means you're getting a flattening of the bottom. And this is going to be really important for what we're going to talk about because we're going to go through three different stages. There's only three stages in the market. You're either going up, down, or sideways. So, if you look at how you're setting up here, you would argue that this is kind of starting to lift. And that would mean that the body of the meat of everything is getting a little stronger. And that's important for us to remember.
If we look at the 20-day, you're starting to see that we're coming off that bounce of that 35 and you're getting back up to that 44. We want to get this over 50. Again, I'm not really going to be huge on doing this kind of thing, but I know some people like to do this and draw a trend line on it. I wouldn't go as so far to say that you're flipping. I'd be wanting to see like a close over a previous level. And you might get that today because of what's happening with semis that we're going to cover in some detail. But this did happen. We did get back above the 50% line on the S&P and that's probably not something that's going to happen if we're going to have more of a longer-term problem.
And so what I'll do is I'll explain. So if I go to the 50 here and you'll see it right there. Once you're here and you start holding it, you tend to hold that. Now when you break it, I don't usually rally up to there and then come back down. It's pretty rare. You usually break and then that's it. Just like here, pop goes, Louis goes pop. Third base anyone. and then you start lifting, right? Test and then you break. You don't have to fall apart, but it's not normal to do that. So, in other words, getting back above is a pretty good sign. What would denote this or what would be a real problem if you took out that line right there and I will actually put an alert on this. You can put an alert on there and you can put alert on all your indicators and oscillators. You guys probably already knew that. But if I take that out, I want to know if I take that out. I don't want the breath of the 50-day to get worse. But it is starting to get better and that is a really good sign for us.
Also, if we look at the NDX, which is the NASDAQ 100, and we look at NDFI, people ask me why I use this versus the composite the which would be NCFI. I just like looking at the big dogs. I don't want to look at all the garbage. Now, if we see here, we've been holding 50 and we started to rally yesterday. That's really what you want to see. It's a 10% increase in the increase of breath of the market and you're not even hitting highs yet. You're in what I would refer to as a consolidation phase. I think this is really important for us to get.
One thing that I do want to point out because I did notice this and we're going to get rid of this now is that move is starting to creep up and that is bond volatility and that is buying and hedging your bonds. Just something else to keep in mind because I know a lot of people are looking at the VIX and wondering why it's going sideways through all this. If you look at move and we're going to talk about the bond market, what's going on there, but most importantly, I want to talk about how I think you should be playing this and give you a couple real-life examples so that you're prepped for tomorrow.
All right, guys. I want to talk about what stage of the market we're in. So, when we look at stages, we look at many stages. Let's clean all this off so that we can understand where we're going with this because you have consolidation, you have rise, and you have fall, right? And you really don't have anything else. It's just a function of what order they're in, right? People always say that there's more order than that, but realistically, what do you have? You're either going up, you're either going down, or you're either going sideways. I mean, that's just one of those is happening. You're either going sideways, you're going down, you're going up. You're at the stage in the market where we're starting to go sideways. And the reason I'm bringing this up specifically with semiconductors, and I'll point out as to why I see that, but most importantly, when you understand this, you can play both sides of the trade. Whereas recently you were in that down phase so it was a lot harder and here let's go and take a look at this because it's index sector stock and I want people to get this. So everything that I do is index sector stock and that means that I am a top-down trader meaning I watch the index and then I watch the sector and then I watch the stock. It doesn't mean that I don't care about earnings. I do. I care a lot about that and that helps me choose my targets. But I really care about what's happening with the index sector and stock and the alignment.
So you can see very clearly here if we go and take a look at the cues today, we had a a definitive level, right? And so parts of this you're going to want to watch again, but this will really help you with what you're dealing with right now. And if you were watching the pre-market live that we do public, we went over this where the put wall stayed exactly where it was, meaning they did not move the put wall. They left it where it was. You can see we were below it for a period of time, got above it, never broke it again, and stayed there. Right? So, we're hitting a period of consolidation along that line, which tells us that we may be entering and you never know, but we may be entering a consolidation or oversold phase, and then we can go from there. We can identify those phases through different time periods and then looking at that and overlaying an oscillator. I tend to use RSI. You should use what you're comfortable with. But if I start seeing an RSI like this that's hitting higher highs and we're dropping, that usually means a period of consolidation is coming versus if I'm up here and we're watching it roll over and then hit again and roll over and hit again and roll over. You can start seeing the change in trend in this. Right? So then you could make an argument that we may be hitting what? A period of consolidation versus what? Just dropping or a period of where you're just ripping everybody's face off. All right? And so you're gonna have these mini areas within major areas and it depends on the time frames that you're trading.
I want to get into what happens today or what happened today so that you're prepped for tomorrow. But it's important to get this because I want to show you what we did today so that you can learn how to do it for yourself. So all right, so we know that the index is going through a consolidation phase. Is if we go and take a look at the socks so that we have that one done and we go and take a look at the socks then we would look at that and say to ourselves all right well top the major trend here is what busted hands down busted but if we start going into contra trends within that period of time you're going to find rallies within the day which is overlaid which is weak right so it depends on your time frame and you're going to see something very similar in here and then you catch down up and then we can see the catch we can see the higher high right in here off the RSI and then we can see the rally till we get to an overbought spot and then you can start seeing it start to sell down at the end of the day and you don't know that that's coming. There was some news here that we'll talk about in a moment but I want to get the concept index sector and then we go stock.
So when we look at Micron you'll see this divergence right here and you'll see that 3:00 from yesterday and then you'll see that right in here and we know that the put wall was right here at 650. And so that was my target when I'm short. So I have a trade that I do today that was short. And then I have a trade that I do today that was long. When you're in a consolidation phase, you want to know where your put wall is, your call wall is, and your supports and resistance because you're going to start trading. Well, you can do whatever you're comfortable with, but you're going to start trading in those ranges. You're going to start seeing those ranges. And then when you see them, you can act on those specific ranges. It just makes life a lot easier. You can go long and short, literally the same names. When you're in a consolidation phase, the beginning of the consolidation phase is where you're going to make the most money on that. So, I'll say that again. The beginning of that is where you're going to make the majority of the money because over time, this will start getting tighter and then you'll either make a decision where you're going to break out, yay, or you're going to go down. Boo. Right? One of those two things will eventually happen. It'll get tighter and then it'll make a decision. And you've seen this before where it gets tighter and then breaks to the upside and then everyone goes, yay. But when you're in those consolidation phases, you can do this.
Now, off the open, we did a bunch of shorts. We shorted Micron, Western Digital, SanDisk, and they all did really well from a short perspective. AMD, I tried that actually wound up going against me and then rolling down. It just didn't catch it at the right time. Caught it too early and then it started getting away from me. So, I closed that one. I stayed short those. But when we got back to these levels, we started to hold the 400 level. And if you look at the chart, you look at AMD on a 15-minute, you'll note that I don't have the same kind of pattern here. So, even if it works, it just doesn't fit my criteria.
All right, let's get back to this and I'll show you what I mean by this. So, this held my criteria. So, what we wound up doing today, and I'll show you the other side of the trade in a second, but what we wound up doing today was we actually wound up putting a swing long on at 11:15 on this trade. 685 meets all the criteria. Market starts catching. They flesh out retail for the first hour and then we get the setup and then as it's going up, I'm trying to stay in the swing and then it got to a point where we were up 30 on the day, pull money out and then we're starting to watch it roll over. From a swing perspective, you have to make a decision on what you're doing. In a consolidation phase, you might actually be catching the bottom. You really don't know how hard the bounce is going to be. So when you bounce and you form a consolidation, you can trade literally back to where you were on something like a Monday, come back down, start working. So you just you don't know what you're going to get. So I want to make it really clear despite that we caught a big chunk of this up and a big chunk of it down. You really don't know what's going to happen, but you set your targets.
So understanding that index sector stock, understanding the different phases of that, right, it makes your life a lot easier. So this morning they absolutely rip Micron up. And this was just to lure in retail. That's all that was. And if you caught it off the open, you killed it. You had a great day. But it's not really a controlled kind of trade, is it? Once you rolled in here, you had a target. Now, the first target that people are going to have on a trade like this is going to be the previous close. The second one is going to be wherever your put wall is. So, what you really want to do in environments like this is understand where your call wall is, where your put wall is, where your big points of resistance are and then some kind of oscillator where you can look at the RSI and determine which way that this thing is setting up. Meaning, are you setting up to lift and bounce? Do you have a positive divergence? Do you have a negative divergence? Are you going through a consolidation phase? That's what I expect even with Nvidia's earnings coming out the rest of this week to start looking like. and I'll show you a bunch of names where you're starting to see that piercing pattern and I'll walk you through that in a moment here.
Let's watch this play out live. The 650s are $13. I bought the heck out of the 650 puts. If we flip 700, then I will close them. I paid 13. 15 on the MU puts. I have a ton of them. I am trimming. I am going to close a chunk of those at 14 and probably regret it. 16. I got 15 and 12. I really think this could be a monster. So, I'm just going to sit with the rest. I can move the rest to break even, but I think I can get down there again today. I think it's possible. I think we can get to that 650 today. Oh, I'm up 100%. Yay. Trimmed a ton of them at 25. That's really my target. So, yep, they're done. Trimmed more at 24. I trimmed a ton of them at 22.50 and the rest are break even. Basically, a runner.
Now, what you take away from areas like this is start understanding that thinking in extremes is not going to work anymore. Meaning, and I see this in the comments, and I appreciate all your comments, but looking at this and saying, "I'm just going to stay short because AI is dead and this isn't going to work. I think mythos is bad." Whatever you guys think, doesn't matter. We're going to come down to here. See, I'm not telling it what it's going to do. I'm just allowing it to do whatever it's going to do, and I'm just managing my risk on the trade. It's very different.
So, you're starting to set up these kinds of patterns where you're undercutting the previous day and rallying over that level. What you want to do is you want to overlay this with other signals. So like for example, if I go here and I'll give you an example of this. If I look MU, here's the 12. I broke the 12. I think we might get over the 12. We do and we reject. And we'll talk about why I think that rejection happened. And I think there's multiple layers to it, frankly. But if we look at something like Micron, you might be like, well, it didn't close over. Okay, so that might not make your list tomorrow.
So one of the names that I was pointing out to the guys, and they're they're already in and they already killed it on the trade. I did not do this trade, but you have a piercing pattern here on Sienna, and you see how you broke the 22. You have your piercing pattern, and then you come through it. What you're looking for are these kinds of names. So, you can go and run this yourself. You're going to come to these, and you're going to want to mark the high and the low of the previous bar and see if you're over the 50% line. This one literally just crossed over it by like 8 or 9 cents. But if you go through these names, you're going to find ones that are going to be more or less. And then you're making your list. So when you come into tomorrow and you look at something like Sienna, you mark off your put wall, your call wall, you have an understanding of it, and then from there you could look at it and say, "All right, does this meet my criteria?" Your indicator or oscillator that you're making those decisions might not be RSI. It might be something else. And that's okay. You should use what you're comfortable with.
If I looked at this today, I don't see that, right? But I think it's really important to get this concept because as you come out of these kinds of phases, you don't know what you're going to get. So when we look at the cues and I'm saying this at the same time I think we're going through a consolidation phase and right now I'm right but anyone can see this like we could all see what's happening here with left shoulder head right shoulder. So we can look at this and say well I think we're going through a consolidation phase. Someone else can say this is a head and shoulders and we're definitely going to break. I don't know that you're going to break. I see the head and shoulders as well but I don't know that it's going to break. I see consolidation across a line that's been tested repeatedly and that we're not breaking said line. That's what I see, right? I see the breakout above it. I see the retest of it. I see the retest again. Could we break it? 100%. And there's some things out there that we should discuss. But more importantly, when it gets back down to this area, we just might want to watch it again and see how it acts and then go from there. If it does break down, then you're going to come out of that, let's call it consolidation phase, and then you're going to hit this phase. And then that means that index sector stock for me doesn't work anymore. It's not going to work. I have to go back to the other kind of trading where I want to short into resistance, right? It's a it's different. So different tools for different times. Right now it's my understanding by looking at this and the way that we're holding that we are starting to enter that consolidation phase a little bit. For how long that holds on remains to be seen.
I want to say what I think the issues are and then you guys can comment on this and what you think the issues are right now and you just drop in the comments below. I do read them. And for those that are trying to get into the community, there's a wait list, as you guys know. Please make sure you're on there. I did send out a batch. I think there's two days left on that batch for those people to answer it. So, you might want to check your email. I don't think I'll have time to set out another reminder tonight. So, you might want to check your email from last night if you're on the list.
If I look at something like the US30, and we can see that we're breaking out. This is just yield. This yield actually came back down today. and it came back down when Japan stated what they were going to do with their bond market and it started to look like we were going to be okay and then it reversed and it started to lift and go back up. 30 yield here and getting over that 5%. The fact that we didn't sell back down with what happened with Japan after we did sell down for a little bit is a little bit of a concern of mine and it's not a huge concern yet but if this starts getting like we start running buckshot on this it's going to become a problem. It's going to affect housing more than anything. It doesn't really seem to be affecting the consumer just yet.
We have a lot of consumer names coming out with earnings. You saw Home Depot kind of holding, right? Cavanite when we see Cava. Let's clean this off. Cavanite is actually up. Looks like the $72 avocado salad is back. Same store sales were up, so that's pretty good. You have Toll Brothers now. Toll Brothers on earnings. We'll see how this goes. It's obviously up right now, but their conference calls tomorrow. I thought this was super interesting, but we'll have to watch how that plays out. We are seeing the Costos of the world come out there and start to rip and hit new highs. I don't think there's really much to say about that. That is a super defensive trade and you are seeing us get more defensive in our names. We're seeing that with names like M O PM. So, the question becomes P BTI. The question becomes does that continue or do they start to unwind that? But for me, that's all tied to the US30. And that really is tied not only to how much debt and what's going on in the inflation side, but it ties into crude.
So if we look at crude here, it's really very difficult to look at crude here and not think you're going higher. And we showed this yesterday where this is where it was supposed to be over in a week. And if we just look at that pattern and you see how we just is exactly what we were talking about like what phase are you in? You're in a consolidation phase. Then if you go to a 15-minute chart, you're going to have up phases, down phases, right? Consolidation phases. So it depends on your time frame and then you have those many time frames and different patterns trends within the major pattern. So again, if I just go here, click off that and go hide, you'll see what you really have. Now, if I dropped that to a 15 and went into it and opened it up, you'll see you have a whole different world going on in there, right? But overall, what do we really have? Crude. And this is what crude's doing. And I drew that, let's call it crudely. See how I did that? Tied that together. So, what you want to look for is why is this happening? I think it's happening for a couple reasons. And I think it's easier to show this here. Let's do it through USO. And this is what I this is what I think's doing it. Now, you can always comment on it, but a couple people think this that it's not a big deal. I tend to think that it is.
So, let's get to pre and post get rid of it. And we can see the market and then we have this huge drop. This huge drop was when NATO comes in and says, "Oh, we'll intervene in what's going on in the strait in July." Now, why they have to wait for July, I don't know. Maybe they expect it to be over by then. But that was that move right there. And they said, "We'll intervene in the strait in July." They're probably hoping and praying that it gets fixed before then. This move here was a couple things. Number one was the vice president talking about these meetings, but around the same time, you also had a news article come out, and that's what we got really jacked up in here that the US took over an Iranian vessel in the Indian Ocean. And to me, I haven't seen a lot of talk about them taking tankers of Iran out of other oceans. And you can comment below on this, but I have not seen it been made this big of a deal. So, if you take a look at this and you overlay it with the volume spike on that led me to believe that people are leaning more towards escalation, especially when you saw the news about the UAE saying that drone attack that recently happened actually came over from Iraq, even though Iraq is denying it. Seems very fractured over there and there's a lot of reasons for that. So, this is the stuff that concerns me.
Other things that I think you should be aware of, I think you should be aware of IGV and what you're starting to see here. That's a reversal. So, that is a pop reversal close. Pop goes the weasel goes pop third base, anybody? So, and then we have everybody just wanted out of Microsoft today and I think they're all over it. Those kinds of reversals we want to pay attention to and I'll I'll just show you why. You can see it with Oracle and that's starting to get what we'll refer to as sleepy. But these names that we've been trading, Crowd Strike and doing really well with today. You're getting your first red day. You're getting your dogee. I'm not saying that's the end of it. Far from it. But we have to call it what it is. Today was a day where these things were finally red and it wasn't just buy them at any time. And you could see that behavior. And I'm just going to point this out because when you see a change in behavior, you want to pay attention to it. Before it was buy every dip in this name. And you can just see them over and over again. If you go back ever since back here, it was literally just by the open, it'll turn. But you got to a level today where it flipped to once we got back to the close. That close all of a sudden became what? Resistance. So when you start to see that kind of stuff, you just want to have your head on a swivel and go, I think that this is changing. And it did. It did change. So I don't know if that means that we're going to roll back into the socks. It could mean that that's exactly what's happening. And that's why we're starting to get that level of consolidation.
We have Nvidia tomorrow night. We have the Fed minutes tomorrow at 2. And you have a bond auction for the 20-year at one o'clock tomorrow. All three events could be absolutely huge. That's it.