Today was a horrible session for those looking for longs. As we saw, the market took a sharp turn with a gap down that continued all the way into the lower 6800s. Luckily, by sticking to the levels in this newsletter, we remained on the right side of the tape for nearly the entire session, see below:
Looking at the overnight lead-in, we saw a sell-off to the 6854 VAL, which nearly marked the exact low before a 50-handle rally back above 6900. Entering the cash session, we used 6889 as our pivot. Even with a brief break to the upside, price quickly snapped back below and slipped to 6854 again, eventually flushing to the 6820s. We achieved our 35-handle downside target and saw an extra 30 handles of continuation.
Another great session in the books but a not so great day for tech.
I have been very vocal about the relative weakness in the NASDAQ compared to the S&P 500. This tech sell-off is driven by a simple realization: the massive CapEx spent on AI is not seeing robust returns for the service providers. While chip makers (NVIDIA/AMD, etc.) continue to see revenue from partners, the companies actually offering the AI services are failing to show ROI. As we head into this earnings season, the market is sniffing out the companies that over-promised on AI revenue last year. I expect these stocks to continue taking a beating.
Avoid pushing too much risk into tech while the NASDAQ is below its recent trendline at 25630.
For the S&P, we need to reclaim the 6970 trendline break. Both indices are now below their 10-week moving averages, and I don't see a sharp rebound happening until we get a weekly close back above those levels. If you are looking for a dip-buy, I would be much more focused on SPY near its 21-week moving average rather than QQQ, given the structural weakness in tech.
Friendly reminder, there is no data coming out tomorrow which leads us into tomorrows analysis.
Tomorrow’s Game Plan
Primary Levels: Price zoomed through the 6848–6854 Low Volume Node today with total dominance from sellers. As a reminder, price treats the Point of Control (POC) like a magnet, and we put in today’s low nearly directly off the 6827 POC.
