Welcome back, everyone. I hope you all had a great session.
Yesterday’s levels worked out in our favor once again. Not only did we sell from the 6968 value area high (VAH), but we reached the 6932 point of control (POC) target before the open. During the cash session, we saw some selling once again from the 6968 VAH, but it ultimately fizzled out before a sharp rally took over.
We noted the low-volume node (LVN) between the two value areas as a pivot for the session. While below, we favored shorts; while above, we favored longs. With the short trade not working in the cash session, this resulted in a loss of 4 handles on the S&P before a reversal was triggered. Price rallied above the 6974 value area low (VAL), which was used as our long level. From there, we saw over 26 handles of upside, reaching 7000.
At that point, I sent out an update over on X stating it would be wise to put on a hedge for potential downside. With the S&P at the big 7000 level and the Nasdaq coming up on the 10-week EMA, this was the perfect spot to place a hedge.
By the close, we saw sellers step in, proving this to be a good idea. Now, I want to be clear: this hedge is meant to protect against sharp sell-offs. As I have spoken on previously, if you are looking to short, you want to focus on the Nasdaq. Tech is the main driver for any selling we have seen. Overall, with the long above the VAL and the hedge in place, this was a great start to the week. We are now positioned for either a rally or a sell-off, which will complement any day-to-day moves on the indices. If we see a surprise in the unemployment data with a strong increase, this hedge could not only protect us but bring a decent return.
I am no mind reader, but I think some folks are confused, thinking I am strictly bearish. The main thesis right now is that if we remain below the 10-week EMA on the Nasdaq, we could see further weakness. To solidify this thesis, I have been vocal about sticking with tech for shorts. The S&P is quite a bit stronger right now, as we covered with the RSP. The Equal Weight S&P is outperforming the standard S&P by five times year-to-date. A large portion of stocks are actually doing phenomenally well this year. My warnings have been based on tech and only tech stocks.
Looking back, this was a tremendous call; not only did tech get hammered, but the majority of stocks in our watchlist are actually seeing new highs. For instance, ASX hit a new high today while our building stocks continue to push higher. Walmart was one we posted in the low 100s, and it has now crossed 130! There are many others doing great, but there are also some that aren’t. For instance, PayPal (PYPL) got hit hard post-earnings, as did HIMS, which had a bullish setup with an expected bounce on the trendline. Just like APP and PLTR, this saw a daily close below the trendline and instantly became invalidated.
I am seeing so many people over on X up in arms about HIMS, but the stock told you to get out of the way. Once we get a close below a trendline, that is your signal to exit! This also applies to moving averages, just like the 10-week EMA that sent warnings not to be heavily weighted inside tech. There is no reason to over complicate any of this. Time and time again, you will see deep analysis on companies explaining why a stock may rise or fall. None of that matters if the market is quite literally telling a different story. I have said it many times and I will say it again: the only thing that matters is price. Your thesis could be right, but if price does not agree, then you’re wrong. Nothing else matters.
At this time, I don’t have any new stocks catching my attention. The weekly close this week could change that. The plan is to rotate back into tech once we see a weekly close over the 10-week EMA. Until then, the focus for longs remains on the stocks posted in the watchlist and on X. One that is working so far is the bounce off support on TSLA. We gave this out before we got the dip into support, so all you had to do was set an alert and wait.
Since hitting our level, the stock has rallied from 388 to 420 in three sessions. For the months to come, I want to see this stock attempt to break over key resistance at 490 and then make legs higher up to 600. This will be invalidated on a daily close below 388.
Another stock I want to mention again is ASX, with LEAPS up 450% today after the strong rally. This stock is the best performer so far, with almost a 100% move on commons since going long. This is yet another example of the power of longer-dated option contracts.
Besides all of this, we will dive into the S&P levels for today’s session.
