Transcription
Bit of a wild day, but we have a lot to go over. Short time to do it. I definitely want to cover MSTR because what happened there? We should go through this level. We went through it pre-market, but a lot of people don't have it. So, let's do it.
For those that are new, welcome. We go over pre-market every morning around 8:15, 8:30. Uh, and we just do it publicly. Now, the reason I bring that up is this is the exact level that we talked about. And even if you can't attend them, you might just want to watch because we usually give fairly decent areas to watch. And I'll show you exactly what happened here. So, let's go to this and go to pre and post. Get rid of that and show you exactly where we're at.
So, what I've done here is this is the peak of the S&P and I'm going to take that off and show you exactly how to do this so you can do it for yourself. You drop an anchored VWAP there. It's all I've done. Anchored VWAP from the peak. Why from the peak? Because that's going to show you the most where the pain point is. People that own the high, they're going to have the biggest pain point. And you can see how we've been fighting that area. So, for those that aren't aware, this is the value high. This is your value low. This is your point of control. And that's what we want to focus on, the point of control, because that told us everything today.
Now, you have another level at 680, which is more intensive. Um, it's where your gamma level is, and it's where your gamma level will flip. For those that know what that is, it's 680. If you don't know what that is, I can do a whole video on it. But I think it's important to note that you're getting close on the point of control to it actually dropping. So when you have the most amount of trades at a specific area, that's going to be point of control. That is very different than what you're going to see when you drop a VWAP. So here's VWAP. We could drop that VWAP down. And that's the volume weighted average price. We can see what happened there. Right? Point of control is just where do the majority of people own stock or the index at a specific price from a specific time. From this pain point, the high, the price that the majority of people own it is 68310. Why is that important? Because it shows you what they're doing when they get there. They're selling.
So today, we could see this starting to set up a little bit early this morning. And when you hit here, wham, we hit like a ton of bricks. It was a complete matumbo. You just absolutely hit there and it was a hard reject. And it's what we refer to as a hard reject because of how it comes down so hard. It's not rocket science. I mean, I didn't really coin anything new there, guys. It drops hard. So, if it sits up here and starts eating up the supply, then maybe you're going to flip. If it comes down hard like this, the chances are that that's pretty much it for the day. And that marked it off fairly well.
Now, when this happened in the observations room, all I do in our community was go out there and say, "Hey, the Q's are rejecting the previous close, but point of rejection." And then I just say, "You're react. You're rejecting the point of control, the peak. Be careful." Because once you reject here, you know you're not going any higher. You know, that's pretty much it. And that pretty much nailed the level. If you go look at futures, it's same exact thing. Same soup, reheated, different name, different numbers, but it's the same thing.
So why is this important? It's important because it's telling you that the people that have bought from the peak at that price point, they still want out. So if we go and take a look at, hey, what's going on up here? They still want out. So we can tell ourselves that the bottom's in, and the bottom could very well still be in, right? We've been talking about this. I do think that you have bottomed here. I think we've gone way too far on one side here. And I'll give you a great example of this in a second. But if we take a look at this, you can't be feeling warm and fuzzy that you rejected here.
So what we want to see happen and what we're going to be watching for is this. We're going to be wanting to see does the volume start to pass right in here. If this volume at 680, which is roughly where your gamma level is, if this area down in here, if we start to do that and flip, meaning this area right in here, if that point of control drops, then what will happen is you'll be under point of control. Think of this as a weight on your chest as you're in the water, and think of this as a buoy or a ball of some kind underneath you pushing you up through the water. When that flips, one gives you support, the other one pins you down. And that's exactly what's happening here. It's really important to remember that if you take nothing from the rest of this video, remember that at the same time that was happening, you could see the cues from the previous close and they rejected.
If we take a look at the RSI, you could see that we hit and then you made a lower high on the RSI which gives us what a negative divergence. So that told us again that we were struggling there as well. And if for those that are keeping track, you are having a distribution day. The technical definition of a distribution day simple. Are you under 25 basis points or more on the market? Yes. Is the volume greater today than it was on Friday? Yes. Now, you could argue, well, Friday was a half day. All right. So, go to Wednesday if you want to split hairs. And you're roughly right there, right? And you do the same thing here. You would say you would have to use Friday, but Friday was a half day. If you go to Thursday or Wednesday, rather, no, it wouldn't be a distribution day. So, it depends on how super technical you want to get. Did the market feel a little heavy today? Yeah, it did.
I mean, one of one of the things that we were going over was F5FD, was the fact that whenever you get up to this level, that 9596 level, which is super rare. It means 96% of all stocks were above their 5-day moving average. That's why using that is like your key metric to buy. You got to be super careful with that. You know, if everything's over it, it doesn't matter. If it's if it's over your 5-day moving average and only 20% of them are up, it's huge. But if 95% of all stocks are above your 5-day moving average, it's not really telling you relative strength. It's just telling you what everything else is doing. So yeah, you want to buy over your 5-day moving average, especially you short-term traders. But you need to make sure that when you're doing that, that 95% of them are not also over their five-day moving average or who cares, right? It's there's no relative strength there. So flipping the five is relative to where you are on this chart. Anyway, we could do a whole video on that if you guys want me to. Uh, just drop it in the comments. So, I want to start doing more educational stuff.
Anyway, see see how you're sitting right here? If you go back and look at these dates, you'll see that these just marked short-term. And it doesn't mean that you're going to completely capitulate and fall down. It just means that you moved a lot in a very short period of time. So, some backfilling here is not the end of the world. And I that really leads me to where we are in my opinion with the fear and greed. And we can look at that if we really wanted to, but we can just see it in the way people are trading right now.
So, if we take a look at the spy and we have our levels up here, let's clean all this off. And what happened? We opened up. The open was what the low. We tried to go higher. We we rejected, but we didn't close below the low. So, you still had net buying from the open. It's it this could have been a lot worse than what you know, for what people were acting like was going to happen today. And tech was a little weak for sure. There's no doubt about it. But what wasn't weak? Well, XRT wasn't weak, was it?
Now, XRT actually made another higher high. So, we have pockets here. Now, a lot of people aren't really watching the retail space, and I think they're doing themselves a huge disservice. We've been covering this for some time. What I see a lot of in the market, and it's kind of crazy to me because from a trading perspective, you have access to more information than you've ever had, but it's almost like you have so much access to information that everything stays surface level. Maybe it's done by design, but when we see something like XRT off those lows, November 20th, you don't really have a day where you've ever made really a lower low. You haven't really had that.
And if we look at some of these names, just pick any one. Start with Walmart. Here we are again, another all-time high. All-time high closes. This doesn't happen in a recession, just in case people are wondering. Walmart doesn't hit all-time highs in a recession. It just does not do that. So, not that we are in a recession, nor did anyone think that we are in a recession, but if you think the consumer is weak, this is a really weird way for the consumer to look weak, right?
And that takes us into some of these other names where you've seen Macy's and how Macy's is setting up going into this. And you can see earnings are coming out Wednesday. Okay, they've already given some guidance here and that's one of the reasons why the stocks move so well. But if we take a look at this, we can just kind of go through the names and and just look at them. Here's Gap setting up another flag. And of course, you have the Abercrombie & Fitch which is just ripping everyone's face off. Abercrombie & Fitch just absolutely slaughtered it. And this company was trading at six times trailing earnings. Opened at 77. You're at 102. I think you were at 104 at one point today. You're just absolutely ripping here.
And people, you know, I understand we all trade tech. We love trading tech, right? We love it. But at the end of the day, it doesn't matter. It's three, you know, it's three or four letters and four four three numbers, something like that. Three numbers, four numbers, five numbers. Like, it depends on the size of the stock. It doesn't really matter what it is. What when you're trading technically. So, where's the money going? Here's Kohl's went to 25, hit its call wall, backed off. AEO has earnings tomorrow. What happened last time? Everyone had to own those fancy jeans. Did everyone stop buying the fancy jeans? It doesn't look like it the way the stock's acting.
So, we look to it looks to me like we finally got back up to that level, cleared it, and when we start looking here at the volume side of it, the volume's already jumping into tomorrow night. Disclosure, I have a position in this, and it's fairly large going into earnings. By the time I'm done with it, I'll probably be fully hedged on it. But, you know, you have another quarter like this where they just absolutely blew it away, like another 100%. And this is going to go again. You can have another move on something like this, very, very similar to what we've seen with Abercrombie.
So, you've seen it do this in the past. I walked through some of it in the past where you've just seen these absolute just rips after earnings. It depends. It truly depends on what's going on out there. But I will say this, when these things are this beaten down and you start looking at the earnings and going, "All right, well, this was 45 cents and yeah, you've had some hiccups where they had to turn it around." But if we get another 45 cents and you just took that over again and just said $2. Like let's just say every quarter just does what this one did. You're trading at 10 times earnings. That's saying that there's going to be no growth with this entire new market that they've just developed with these Sweden jeans, which we all know all the kids, all the cool kids are going to go out and buy them, right? So you start to see this kind of stuff. You have this entire movement going on there.
We can also see XBI, which has been absolutely ripping. Okay, you had a bad day. So what? Look at the way that this thing's been ripping. And I don't think a lot of these names when you really get into it did that poorly today. When you look at something like a Western Digital, you know, you wound up actually closing up on the day on Western Digital. You look at something like Micron, and I'll clean off my thousand levels, but look at this. You undercut the low. And we'll blow this up. Actually, let's drop it to here so you can see it a little bit better. But what did you do today? You you gapped down. You undercut the low. And then you just ripped all day long. And that's really all you've been doing is dropping down and then just ripping. And you've been doing it since the 20th. Frankly, if you look at from that 20th on, you can just see from 193, every drop has just been bought over and over again.
So, we are seeing those pockets. Some of these names are dragging a little bit more like SanDisk, they're not really getting that momentum. You're seeing some waiting here obviously on Nvidia and people worried about gross margins. People are looking at things like AVGO and saying, "Oh, that must be the end of it." Yeah, because it didn't hit another new all-time high, I guess, every single day. And and this is where people need to start doing their own due diligence because what happens in these environments even when we're seeing the VIX implode the way that it is or even when we're watching MOVE which does look here like you did not make a new lower low. So if you're wondering is that an issue it's something to certainly watch. I mean if you want to know if we're going to sell off again keep watching MOVE right you definitely want to watch that. You don't want MOVE to start trading back up. That is the bond option volatility. It means that they're out there buying what? They're out there buying bond insurance and people are concerned about that and should they be? Well, you broke four percent again on the 10-year. Is that an issue? It's not great and it does concern people because they started to sell some of their other names, some of these, you know, some of them. But I don't really think it's the end of the world because the market just rebounded right back.
But I do think it's interesting when people start wondering if they should be in PM or BTI, like are they going to miss a dividend payment? Have they ever? How many decades has it been? So, you have this fear, and that's where I'm going with this. And there was no bigger fear out there than this MSTR for a very long period of time. And what we saw happen with this was people just convinced themselves that people on Twitter knew what they were talking about, which if you've been around for more than a year, you know that people on Twitter very rarely have any clue what they're actually doing. And so, there was this huge talk of the fact that they were going to be forced to sell Bitcoin. This was the end of the world. This was it. He's going to be forced. And then he comes out today and there's a couple headlines.
Before we start, I just want to show you. So when I start getting into the chart, you can see our time stamps and what we actually did, where we bought the stock at today, where we bought calls, where I sold puts to open. So I buy calls and then when they when I want to pay for the calls and I don't want to use my own capital, I'll just sell puts to open to pay for the calls against it. Uh, and I'll show you some more of this. So when the stock went up at the end of the day, I was up about $5 in that swing. I took that chunk off at three and then I just left the other half on as a swing and left the stop where it was. And then the stock hit 168. I think it's 174 after hours and we had a double in the calls that we bought a couple hours earlier. I closed them and left a runner.
So, this starts with investors on Monday were digesting comments from the CEO who said in a podcast, "Bitcoin buyer could sell the token if the NAV broke. A ratio of enterprise value to Bitcoin holdings turn negative. Uh, we can sell Bitcoin. We would sell Bitcoin if needed to if our fund dividend payment is below 1 MNAV. and there would at least be a last resort strategy which has 56 billion in stock policy. It's MN NAV tumbler to 1.19. Here's the thing about this. They're nowhere near this. And he's explaining how they would do it. Now, why I think this is super important is all of a sudden the internets get a hold of this and say the CEO says they're going to have to sell Bitcoin and they smoke the stock.
Now, on December 1st, they come out, Michael Saylor and the CEO issue a company update on exactly what's going on. And to be clear about this, December 25, Strategy announced it has established a dollar reserve of 1.44 billion to support the payments of dividends on preferred stock and interest. The dollar reserves funded using proceeds from the sale of class A shares under its at the market offering. Strategy current intention to maintain US reserves in a sufficient amount 12 months of dividends. Strategy intends to strengthen reserves over time with the goal of ultimately covering 24 months or more of dividends. The maintenance of the US dollar reserve as well as terms are subject to their sole discretion whenever they want to do it. So in other words, what we have here is their ability to just pay the dividends at will to do at the money offerings at will and continuing to hold their Bitcoin.
Now, if anybody has followed this channel for any time, you've known that I've been very active in this name. And when it was doing this kind of stuff up here, we actually blew it out and actually were short for a period of time. And I've been short the MSTX for a very long period of time. I'm no longer short the MSTX now, by the way, and I did exceptionally well with that. What has come very clear to me is this idea that they're going to be kicked out of these funds. Now, there is talk that they might be kicked out of these funds, and it very well may happen. They seem to think that it's not going to happen. They, meaning Saylor and the CEO, they think that they're going to get away from it. If they do or if they don't, wake me in 30 days. Until then, this stock at one point today was trading at about 0.85, 85 not diluted shares but just basic shares of their net asset value of Bitcoin. So if you believe that Bitcoin is going to go up or flat, if you just believe that Bitcoin was going to go up or flat, if you look at that chart, looks disgusting. Agreed. A lot of it was probably because of fear that they were going to have to sell. It's better for Bitcoin holders if they have to sell because the price will get crushed and then we'd all be able to buy Bitcoin a lot cheaper, which I'm I'm fine with if that ever did happen. But what's happening here? Bunch of people piled into a name waiting for an outcome. That's not going to happen. They are not going to miss a dividend payment anytime in the next 12 months. And considering they can sell stock at the money, they're not going to miss a dividend payment for at least two years. So, people are now short of stock that has the ability to make dividend payments for the next two years and is trading at a discount to its underlying net asset value. That's a problem. And by the way, you have 10% of the float that's short out there. Now you're already seeing as of today you're already seeing a slight decrease in that. It went from 2538 to 252 it looks like. So you are seeing people going, "Oh boy, I've got a problem." And yeah, they have a problem because if you look at the volume today, all you volume commenters on on Fridays, there was a bunch of you trying to explain volume to me. Thank you. If you see this today on what's happening on Monday, look at it. Look at the amount of volume that you have that's going on out there right now. It's absolutely insane versus some of these other levels and what you've seen. Now, you might say, "Well, that's kind of common. That happens all the time." Well, from my volume line up, it's two times my VA line. That doesn't happen. It just it very rarely are you ever going to see anything like that. You saw it happen here, but it is very rare for that to happen to my VA line and for you to be above all this stuff. A matter of fact, if you go back historically and just look at this and drop the pin just so you can see how crazy this is, you're probably top 10 volume out there. You're certainly one of the top five areas that you've ever been at in before over volume.
So, you have a bunch of people that are short here, something that was trading at a discount to its NAV. Now, let's be realistic about this. Let's take the other side of this. You could still be short that thinking that Bitcoin's going to absolutely implode and people are going to want to get out of their MSTR. That's a completely different trade because you're right, the whole NAV will drop if this goes to 73. In other words, my discount to NAV evaporates. Like, let's play devil's advocate. Take the short side of the trade. There's nothing wrong with looking at both sides of a trade, guys. So, if you look at that and say, "All right, well, 15% drop." Well, that puts me at NAV roughly. Now, it's changed a lot because the stock from when I bought it at 61 161, which I showed you, you're at 74. So, now that now that's obviously flipped. So, now you're obviously higher on that. So, you're probably closer to like 0.92 93. I'll see when they put the numbers up tomorrow. But the the problem that I'm getting at here is allow the stock to tell you what it's going to do. I think too many people don't see the forest through the trees and they don't do their own due diligence. And I would strongly suggest that you do and you take a look at some of this stuff.
I I thought it was fascinating that I actually had people comment on Meta that Meta was going to stick with GPUs when they clearly came out and said that they were not. I thought that those comments were just absolutely fascinating. I love your comments. I read them all the time. I answer them all. So, please keep them coming and I learn things that I, you know, I don't know everything. So, when you drop something in there, I actually will go and research it and take a look at it. But there's very simple things that are going on in this market. And you do have this three-pronged approach. Now, I would be concerned if XRT was rolling over and people weren't buying their super fancy jeans and Walmart was talking about the consumer getting hurt. I would have concerns, but we're going to get more this week. You're going to have Dollar General this week. We're going to have Dollar Tree this week. We'll have Five Below this week. And we're going to see what's going to happen with these super special jeans tomorrow night.