Transcription
We are coming up on Christmas week in the stock market. This is traditionally when we see a Santa rally. Bitcoin is hanging on by a thread, but this trend is strong for 3 years. Most of the AI quantum high beta names are in a bare market. The good news is that we have some insanely cheap mega caps if we're looking at forward PE. The VIX here is absolutely crushed as CPI is out, FOMC is out, and we barely have any data left through the end of the year. And we will likely get a Q1 slowdown in the market as typically happens almost every single year.
So, here's everything that you need to know this week to potentially find some lucrative trade setups going into 2026. Let's get right into it real quick with the data and the news. As I said, most data has been released. We do have preliminary GDP coming out on Tuesday, December 23rd. December 24th is going to be a half day for Christmas Eve. December 25th, the market is closed. Now, the market will be open on December 26th, but it will likely be a low volume day.
As I said in my previous videos, I don't really care so much about the Santa rally as it relates to the indices. I do think that the S&P 500 will make a new all-time high, but typically we get about a percent and a half rally if the S&P 500 does rally. And right now, we're about a percent away from all-time highs. So, a couple of things that I'm looking at here, right, is what could potentially rally disproportionately because, you know, I'm not going to be in the S&P 500 just for a 1 or 2% rally. And two, are there any stock setups, any long-term stock setups that still look cheap? If we're looking at the forward PE for 2026, are there still some mega caps that still look cheap for me to position myself in?
Now, if we take a look at some AI/Qantum names, these stocks, as I said, have been beat up. But if we take a look at some of the high beta ones, there are a couple of interesting setups here if they confirm. So, if we look at D-Wave, which is QBTS, you could see that we broke the trend line that was started in October, this long-term trend line that took us down, I think about 42% or sorry, took us down 60% total. Right now, we are 42% down from highs. And if we measure this last leg of the fib, you can see that we have basically stopped at the golden pocket and bounced from there. This also happens to be a significant level because it is the previous all-time high. So you can see the bounce there, break of the trend line, and we have retraced into this fair value gap. Now, if we break out of here, then I think that we could get a nice little rally. So QBTS last year starting on December 20th, this stock actually ran 90% before the slowdown in January. Now, I'm not saying we're going to get a 90% rally here, but to me, this setup is low risk and A+, especially if we break out of this. And you can see that we are adhering to this long-term trend line as well. So there are a lot of points of confluence here. This fits the model that I described in the latest Chart Fanatics episode. So, if you want to know how I do technical analysis for swings on the long-term time frame, watch this Chart Fanatics episode here. In my opinion, it's excellent and it explains exactly how I look at these things.
Now, just to reiterate, I'm not saying that we are going to get a Santa rally. Although, if we do look at the S&P and the NASDAQ, it looks like, you know, we could gain a couple percentage uh points, but there will be an outsized move in some of these high beta names that have taken a beating. If you are looking for trades here, I will talk about investments in a second. So, CoreWeave here looks like a potential repeatable pattern that we saw in August. And if we take a look at the volume, this volume as of last Monday or sorry, last Friday, uh, December 19th, this was one of the largest buying days in Core's history. I actually think it was the second only to this buying day here in September, which marked the bottom. Now CoreWeave is still in this large channel, right? So it hasn't really broken structure yet. For CoreWeave, I would like to see something like this where we break above the last lower high and come back to retest it to at least get to the upwards trend line of this channel. You saw this back in August and September, right? We broke above and we retested it before going upwards towards that 153 mark. So, I will be eyeing this.
Now, one of the quality stocks that I'm looking at for a trade here is Google. You could see that Google making this stairstepping pattern, retesting the 921 EMA. We filled this gap here from November 21st. And I think this here on Google is a very low risk setup to potentially get back to all-time highs, which in and of itself is a 2:1 trade. So, these are just some examples of what I'm going to be looking at this week, seeing if there are any setups that I could potentially exploit if and when we do get a Santa rally that also provide a low risk setup. So, if I get stopped out, it's for a small amount.
Now, I'm going to be teaching you a trick, a little trick in TradingView. You can use whatever screener you want, of how to quickly find undervalued companies that are mega caps or that are large caps. It's not magic. It's really not anything novel, but it will help you try to determine what is currently undervalued and what isn't. So, if we look at the screener in TradingView, again, you can use anything you like. Let me just move the camera to the other side so my big head's not in the way. But if you click on this little screener button here, I already have one set up. The market cap is basically 200 billion and above. I kept it to the major indexes and I added forward PE as well. So if you sort this by forward PE, you could see all of the undervalued stocks. Now this will also help you in case you're trying to position yourself away from tech or or try to diversify your portfolio so it's not just so tech heavy.
Micron for instance with the latest earnings print absolutely mercked earnings. Its forward PE now is hovering around nine. And for those that don't know, the difference between PE and forward PE is PE is trailing. So the last 12 months, if you just take a look at the price of the stock over its earnings per share, that's how you get the PE. The forward PE is what it's the it's the current price over what it's expecting to earn in terms of earnings per share for forward year 2026. Now, mega cap tech companies like Micron typically trade in the 30s, 40s, even 50s in terms of PE. Healthcare companies like Merck typically trade in the low teens. So, if you're looking at Merck here and you're thinking that you're going to buy this and it's going to rally 100% in a month, that's just not how value names work. Same as the banks. Does it mean that they're not good buys? No. These companies are great buys, especially the financials. Just temper your expectations as to what you're going to get in the short term.
Now, one company that stands out here is Meta. And this right here, I took a look at Meta's 4PE. It's actually 22. I'm not sure where TradingView is pulling it from, but 28 is still crazy. However, Meta's 4PE is actually 22. So, we want to take a look at some of these companies' charts and see if there's a trade setup. And by the way, I'm not saying that the only companies to buy are ones where the forward PE is cheap. I'm just giving you an idea of how to look for undervalued companies quickly.
Another thing you want to look at is if the forward PE is significantly lower than the current PE. Why? Because that means that its earnings are going to grow. So if you look at uh Broadcom for instance, right, its forward PE is above 70. Its current PE is above 71. Its forward PE is around 34. That means that it will likely grow earn it's expected to grow earnings by 2x because its PE its forward PE is half of the current PE. And that's why a company like Palantir trades at such a high valuation even though some people think it's way too high. But its forward PE continues to be significantly less than its current PE. And it's been doing this year after year since it went public. And if you take a look at a company like United Healthcare, which I am bullish on, I don't think it's going to rally like crazy, but you can see that the forward PE is actually higher than the current PE, meaning it's not expected to grow. So there are a lot of things that go into this not just PE again I said this is a quick way of looking at it but if you look at Salesforce for instance, yeah the company looks like it's growing, however, is the moat there? Is the competitive advantage there? Is it at is it at a threat by companies like Microsoft that could develop or Palantir that could develop competitive products that have better AI? Or you look at Oracle? Yes, Oracle looks cheap, but the debt allocation or the amount of of debt that it has is not reflected in the price earnings. However, it is reflected in the free cash flows. As you can see, Oracle's free cash flows is actually negative because of that heavy debt position.
So, in terms of game plan, in my opinion, if there are stocks like Netflix, like Meta that seem undervalued now, right? Or even non-tech stocks like I said, like Costco, even though I think Costco could drop a bit more, even a stock like Amazon that's down 12% from highs, you know, these are pretty good dollar cost averaging points. But for me, I'm not telling you what to do. For me, um I think that I will likely wait until Q1 of next year to see if we do get a slowdown, especially if I wanted to invest in more high beta names.
In terms of my outlook for 2026, I think this is very realistic here. So there's a research company called Ned Davis Research and they developed a composite based on what happens in the fourth year of a bare market as well as the fact that it's a midterm election year and a year that ends in six. And when you combine all of those, they came up with a composite showing that the S&P 500 can make a pretty modest gain next year. Now, I'm on record as saying I do think it will be a pretty tough year. It's not going to be like 2023 or 2024. I know I said this last video that 2025 was relatively easy. It doesn't mean that we didn't have a big drop, but I think buying that April drop was a fairly easy decision. But 2026 to me, I I don't really follow this exact path here in terms of the month. So, I'm not really looking at that. But 2026 to me could be uh marred by period by a long period of choppiness and at the end I think we still ek out a gain.
Now past 2026 I think that it is a lot more murky. And if we take a look at the bond market, people forgot about the yield curve, but the 10-year 2-year yield curve fully uninverted now, and the 10-year 3-month as well fully uninverted now. And you could see that we've never had a yield curve that inverts and then uninverts without getting a recession, which are these gray bars here, both for the 10-year 10-year 2-year as well as the 10-year 3-month. So I think that like I said, the picture is murky. The jobs picture is extremely murky, which is part of the reason why the Fed cut even though they didn't have that much visibility into data due to the government shutdown. But we've barely added any jobs in 8 or 9 months and the unemployment rate is now 4.6. Not to mention the fact that in my last video I said the OpenAI stimulus package is no longer a draw for the market. It used to be that you can announce a partnership with OpenAI and your stock gains 20 30% overnight and we're just not seeing that. I think there's a little bit of AI fatigue for the top of the market. I don't think we're in dangerous territory.
I actually did this comparison on X. Follow me on X and Instagram for free daily trading and finance content. But I said that in 1999, the top tech companies here was here were the top tech companies and their respective PEs. A lot of the PEs in the hundreds, even Yahoo was almost 2,000. And right now if we look at the forward PE Nvidia, Apple, Google, Microsoft, Amazon, Meta, Broadcom, Oracle, Palantir, ASML, besides Palantir, most of these forward PEs, actually all of them, none of them are above 38. So this part of the market to me is not overvalued. And I do think this supports further inflating the bubble that that we're currently in.
So I think people get confused because there are we we talk about different time frames, right? You can be bullish in the short term, more cautious in the long term. You could be aggressive with your trades in the short term and more defensive in the long term. And maybe I don't do a great job of uh differentiating the two. And certainly a lot of people go by YouTube thumbnails in order to try to distill a picture, no pun intended. But honestly, I I do my best to tell you guys what I think is a trade versus what I think will happen in the future. And that's why I get a lot of messages saying, "Oh, you're bullish. Oh, you're bearish." I just don't think some viewers take the time to really draw out different pictures for different time frames. Now, if I was just a long-term investor and I said, "Yeah, I'm bullish for the long term." That would be easy. But I try to also give you guys a sense for uh if you are a shorter term and mid-term trader and you also do long-term investing, what those two different pictures look like. So, I hope that I do a good job of that and I hope that makes sense.
Anyway, traders, if you want to trade live with me every single morning at market open, link is in the description below. You also get the full range of my market analysis and what I'm looking at in terms of swings. I'm going to leave an example of what those live sessions look like at the end of this video. Go watch that Chart Fanatics episode if you want to learn how I look at the market. Leave a thumbs up if you got anything out of this video. Subscribe to the channel. Hit that notification bell. Stay safe out there, traders. Peace. Merry Christmas.
All right, that just about confirms it. Like I said, I'm taking in NQ and real money. I think lunch can make a new high here. I'm going to set my stop to break even. Up 2500 here. That was so fast, man. That [ __ ] accelerated so quick. Get above 930. Come on. I want to see it get to at least that low right there, which coincides with the golden pocket. Up 3K now, guys. 3100. Let's go. We are at the 0.5. We can take one off here. I want to get to that breaker. Nut number one. Nut number two. We're hitting this major level here, which is close enough to my first TP. So, I'm going to take one off here at this first nut level. What a [ __ ] day, bro. 1,300. Waited all day after that 1300 pre-market win to enter a real money trade. Nut one achieved. Let's see if we can get to nut two. I trailed my stop to below that wick. So, if it hits, that's about 4,200 on this trade. Boom. Okay, a little around 4,200. Not willing to give anything back. Beautiful trade.