Transcription
What's going on in the stock market right now is insane. So, last Friday, the VIX dropped 27% from highs. This is one of the biggest 1-day drops in history. All while the S&P 500 is still trading within Friday, October 10th's candle, the candle that dropped us almost 3% in one day. For five straight days, we've been trading inside this candle while the VIX bounces around like a yo-yo.
But does this drop, this 27% drop in one day on the VIX, does this signal something significant in the market? Yes, of course it does. But let's talk about it because this week could present one of the biggest opportunities for the rest of the year. So, let me get you set up with the trade plan for this week. Let's get right into it and I'm going to give you some tickers to watch as well as some trade ideas towards the end of the video.
All right. So, the S&P 500 on the weekly chart failed to put in a new low here. On the weekly chart, when we don't put in a new low, we cannot say for sure that we are going to continue down. All the times that we have had corrections and pullbacks in the S&P 500 is when we have made a new low on the weekly. When we don't make a new low on the weekly, then we could continue to melt up higher.
All while the VIX was spiking for seemingly no reason as Trump and China went back and forth on social media exchanging blows with regards to tariffs. We also had a little bit of jitter in the regional banking sector once again, but honestly it seems like no big deal as the last regional banking sector debacle was saved by the Fed and the Treasury and this one is a lot smaller than Silicon Valley Bank and First Republic. So, was this a stress test for the market where the VIX is spiking, but the market isn't really making a new low?
Now, we know on the fundamental front, this trade war between China and the US, things can change tweet by tweet. But so far, as of the time of this recording, it looks like reported by the Wall Street Journal that the US is going to retreat from the Trump era tariffs. So, they're going to be stepping away from the tariffs, at least with regards to China. And in that same report, it says the US will roll back tariffs on goods that cannot be grown, mined, or naturally produced domestically.
And on the news front, it looks like we're going to be getting CPI on Friday, regardless of whether the government is still shut down or not. But until Friday, we don't have much news. Now, earning season is kicking off quietly. On the 21st, we do have Netflix, and on the 22nd, we do have Tesla. But the rest of the Mac 7 doesn't report until the week later. And I think that that week, the week of the 27th, is where we will likely continue to be bullish for the rest of the year. So, in my opinion, the real opportunity is if we get any sort of drop this week. I know a lot of people were hoping for a little bit more of a correction here before we rally towards the end of the year, but I think that if it's going to happen, it'll be this week.
Now, let's talk about this VIX real quick before we get into the trade ideas and the tickers that I want you guys to look at for this week. If you take a look here, like I said, the VIX dropped 27% in one day. This is, I think, the sixth largest drop in the last 40 years. Now, does that mean that all things are gravy in the short term? No. As a matter of fact, when the VIX drops 20% at least from open, you could see that the next couple of days typically lead to some jitters.
Now, for those of you hoping for a bigger pullback, you better hope that in the next couple of days, it gives you a respectable pullback in order to jump into some of the stocks that you have missed. I still maintain a 1% hedge against my portfolio that I will likely close out this week regardless. So, whether that hedge is underwater or whether that hedge is profitable, I will likely be closing it out this week because my thesis is that the major bouts of volatility volatility will likely last this week.
Now, obviously I'm not Nostradamus. I don't know if Meta, Amazon, Alphabet, etc. I don't know if one of them says, you know what, we're cutting back a little bit on AI spending because honestly that that would really do it uh to the market in my opinion. I think that that could spur a correction if somebody says that. But I have no indication that that's going to happen and I don't think any analyst is expecting that either. Not for this earnings at least.
And if you take a look, I've showed you the seasonality data about October 12th to October 27th. This right here, this October 18 to October 27th, this is the really the apex of that seasonal weakness. So, if we look at the the jitters that happens when the VIX crashes like that plus the seasonality, I think that this week is the best chance for any sort of pullback in the market before the end of the year.
Now, the VIX rallying to 28, almost 29, and then crashing caught a lot of people off guard. But to be honest, if you look back in history, this is what typically happens during meltups and bubbles. So, the last time that we saw that was in 2020, and we all know what what happened in 2020. The time before that, we saw it multiple times in 98, 99, and 2000, which we have compared this time to that time to the dot bubble several times, right? we that's the most similar time in history that we have on record. So this is typical meltup behavior.
Now a little bit more context on this and why I'm bullish. A couple of reasons is because we are now entering the fourth year of the bull market. And when bull markets pass the three-year mark, very rarely do they die off until at least year six. So you look at year four, which we currently just started last week of this bull market. There's only been one bull market in history between 1962 and 1966 that the bull market died in year 4.
And if we look at a little bit more context with regards to the VIX, when it jumps above 28, while the S&P 500 is still within 3% of all-time highs, it has proven to be an interim stress test, right? where everyone knows that the market is overvalued and the VIX has been subdued for a long time. So there's been a lot of complacency just like we had and so the VIX then jumps and it seems like a lot of times it jumps irrationally with little reason or no reason. But then the market does end up recovering and the bull market continues for 1 to two years before it finally does pop. And the data shows this that the jitters here really last one week to one month, but two months to a year later have been 100% green by a very healthy margin when this happens.
And if you look at the times that the VIX has dropped down by over 25% intraday, right, this is the sixth highest, like I said, I think within the last 35 or 40 years. If you look at some of these dates, there was some insane jitters within a few days of this, right? the these didn't exactly mark the exact bottom on that day. So, if we take a look at March 13th, 2020, for instance, when the VIX dropped 25 1.5% in one day, here's March 13th, 2020. The next day, we were actually down 12% and we dropped 17% before the market bottomed. If we look at July 16th, 1996, we rallied for a couple days and then dropped another 4% before finally bottoming out. April 10th, 2025. This was around Liberation Day. We rallied for a couple of days and then dropped 6 1/2% before bottoming out. And we'll take a look at one more here before we jump into the trading plan for the week. August 9th, 2011. We chopped around for almost 2 months, but then had a peak to drop decline of 13% before we finally bottomed.
All that is to say, a drop like this in the VIX doesn't mean that that is the bottom. We could still have some jitters for this week. And if we align that with seasonal data and you are wanting to see a correction, in my opinion, I think that this week will give us the best chance before mega cap and mag 7 earnings the following week.
And lastly, if we take a look at the semiconductor ETF as well as the technology sector of the S&P 500 500, so XLK and SOXX, they have held their 21 EMA throughout this entire ordeal. So to me, that right there is still a a pretty bullish signal here. It's very hard to be bearish.
So here are some of the tickers I'm looking at and the trading plan. First of all, in general, right, this is still, in my opinion, going to be a heightened time of volatility. And I don't think, as I said in my last video that I I'm still in kind of a protection mode here where I don't want to open up too many swing longs. I think that there will be a chance to do that towards the end of the year when the dust settles with the VIX or at least when this week is over.
But a couple of setups that I'm looking at here, Marll. Now, you guys know that I'm in Marll for leaps as well as for a long-term investment. I think that this is one of the undervalued AI plays that has a chance to get back to all-time highs, but it is currently holding this level here where it found support as well as resistance above that 85ish level. And we are now trading still trading above it regardless of what the rest of the market was doing throughout that jittery period with the VIX and when the S&P 500 dropped by almost 3% on Friday, October 10th. So depending on what happens this week, if this level holds, I think that there could be a trade for the end of the year to start trickling towards that 100 110 level.
Now, Bitcoin is real interesting because a lot of trades are based on Bitcoin. So, not only if you trade crypto, but also things like Micro Strategy and Bitmine immersion technology, which right now is taking a beating and Tom Lee's hairstyle uh is out of control because of it. So, Bitcoin is holding this really important level here. We have all these highs at around 108,000 which was the previous all-time high. On the weekly chart, we're still holding that, right? And it looks like we swept some liquidity there. Now, if Bitcoin can reclaim 115, then I think it is off to start making new highs towards the end of the year.
And if you take a look at Micro Strategy here, it is holding this triangle just right at where the trend line is here. And this looks very similar to the last breakout pattern, this last triangle here that you see from last year. Same as as Bitmine, right? Like this hit our target of 64. Remember I told you my first target was 64. My next target was this 72 range, but once it hit 64, it trickled back down to this trend line here. And if you're being conservative, you want to draw your trend line here. and Bitmine really needs to reclaim this because if it starts trickling down towards that 45 level, then I think that this could be toast for a while now.
Amazon and Meta to me are screaming buys here. Regardless of what happens, I think that these are buys for the long term. I think UNH is still a buy as well, but here it is forming a pretty nice pattern, holding above the previous bull flag and bouncing right off it. So, as as long as it holds this, I would like to see it trade back towards that 375 level.
Now, one thing I'm keenly interested in, not only from a fundamental standpoint, but also from a trading standpoint, is a silver short. Now, you might think to yourself, man, you're crazy. You want to short the metals. But silver is not gold, guys. And this may blow your mind here. I don't know how much how many of you have looked into silver. But this is not the first time that silver has hit $50 an ounce. As a matter of fact, in 1980, there was a silver hysteria. And like I said, silver is not like gold. It is much more speculative and easier to manipulate. It is cheaper, right? It doesn't have the cache of gold. It is less liquid than gold is. So, if you look, silver hit $50 an ounce and tanked all the way down to $3.5. Now, that is not the only time that it hit 50. It actually hit $50 an ounce in November and tanked all the way down to 11. and we are back at that $50 an ounce.
Now, if you compare this to gold, yes, gold does have periods of lost decades, which I pointed out before, but gold doesn't hit the same level and tank by 90%. Gold has hit that, you know, almost $1,000 mark. It took almost three decades to get back to it. Then it finally crossed to the $1,800 mark and it couldn't get to the 2,000 mark. And it took 10 years and it finally got to the 2,000 mark and now it's trading at 4,300. So gold doesn't have this reversion back to the lows, wiping out its entire gains. It is volatile, but it trades up sideways for a very long time, up sideways for a very long time. Whereas silver looks more like this.
One other thing here, when you look at silver trading at this RSI, I mean, look at how much it crashes. This could be everyone's looking at the momentum stocks and the AI stocks and the quantum stocks and the Oloss and energy stocks, but really I think that the the real short maybe for next year could be in silver. So, I will be monitoring for a break of structure in silver and when it's time to go short, I think that this short can pay as long as you buy enough time for that short. Like I I don't think that silver is something that you want to short for a month. This is something that you will likely want to hold for a year.
And then speaking of the momentum stocks, I don't think that these stocks are done. I don't think that QBTS, I don't think that iron, I don't think that uh Cubits, right? I don't think that Ollo, I don't think these stocks are done. So, I am really wanting to jump in for another leg. And I think that some patience here depending on what the market does, whether we do get a drop this week, like I said, due to the volatility jitters that we've seen in the VIX, or whether we make a new high and retest that high and confirm that likely there will be not any more downside for the rest of the year. Um, I do want to get back into some of these momentum names, especially when they when they have setups like this, right? where you have these equal highs. if it retests these equal highs while the market is still intact. That's just an example of a type of break and retest setup that you can look at on on these names.
But I think that these names for the short term, there could be a lot more juice here because I I know this might sound funny, but regardless of how crazy they have traded, and they certainly have traded crazy, the real top I think will be a blowoff top sort of move, right? where you'll get this. It it just will look unbelievable. Sort of in in the way that uh gold looks, right? If you look at gold's chart, this is what a blowoff top looks like. And I think that a lot of these names, not all of them, but a lot of these names will finally end when you get this sort of blowoff top in those momentum names.
And if you want to trade live with us every single morning, we had a banger last week. Took a short on AMD, short on gold, all live. And if you're interested in getting my moves up to date when I'm doing what, such as the silver short for instance, or if I'm planning on trading the momentum names, sign up. Link is in the description below. We also had our monthly investing call right before I recorded this video. So, I went over all of my holdings in my portfolio, all of the waitings in my portfolio. If you find that helpful, sign up. Link is in the description below.
Let me know in the comment section what are you excited to trade? What do you think is going to happen? Are you short the metals? Are you long the metals? Do you think that this market is going to continue violently down? Do you think that the market bottomed because of the taco tweets? Would love to hear from you. Subscribe to the channel. Hit that notification bell. Have a great week, guys. Stay safe out there. Peace.