Did the Stock Market Crash Just get STARTED? Know This First

Summary

The video script discusses the recent market downturn, highlighting the S&P 500's breakdown and the impact of hyperscalers like Google, Microsoft, and Meta on market sentiment. It emphasizes the importance of understanding market indicators such as RSI and the significance of corporate buybacks in influencing market trends. The speaker also shares insights on trading strategies, including hedging techniques and the importance of macro, fundamental, and technical analysis in navigating market volatility.

Takeaways

• 📉 The S&P 500 experienced a significant breakdown, with levels being breached like 'Swiss cheese', indicating a weak market trend.
• 🔍 An 'obvious' hourly chart pattern was highlighted, suggesting a strong downward trend that filled a gap, which is often seen as a positive sign for market recovery.
• 💡 The importance of RSI (Relative Strength Index) was discussed, as it's a key indicator used by institutional investors to gauge overbought or oversold conditions in the market.
• 🚀 Mention of 'hyperscalers' like Google, Microsoft, and Meta, which experienced significant drops, possibly due to their heavy investment in AI without immediate revenue returns.
• 📊 A comparison was made to the market conditions of 1995, suggesting similarities in rate cuts and technology stock performance, which could indicate a pattern for future market behavior.
• 🛑 The correlation between the 'Blackout Window' for corporate buybacks and market drops was noted, with anticipation of a potential rebound once the buyback window reopens.
• 📈 Discussion of individual stock performances, such as Nvidia, showing a pattern of breaking the 55-day moving average before earnings, which might suggest a strategic market move.
• 🛍️ The potential impact of corporate buybacks on market supply and demand was explored, with buybacks expected to provide a bid to the market.
• 📉 The VIX (Volatility Index) was mentioned as a key indicator to watch, with historical levels suggesting potential market panic or correction points.
• 📊 The concept of 'macro, fundamental, and technical' analysis was introduced as the three pillars for understanding market movements, emphasizing a top-down approach to trading.
• 🧩 The idea of a 'stock picker's market' was introduced, suggesting a period where individual stock performance will matter more than market trends, requiring a more nuanced trading approach.

Q & A

What was the main focus of the video script discussion?

The main focus of the video script was to analyze the market trends, particularly the breakdown of the S&P 500, the role of hyperscalers in the market, and the potential for a market bounce based on historical patterns and current indicators.

What does the term 'hyperscalers' refer to in the context of the stock market?

In the context of the stock market, 'hyperscalers' refers to large companies that are heavily investing in AI and data centers, such as Google, Microsoft, Meta (Facebook), and Amazon, which are significant contributors to the S&P 500's capital expenditures.

Why did the speaker mention the importance of filling gaps in the market?

The speaker mentioned the importance of filling gaps because it often provides a sense of market resolution and can be a sign of market stability, making investors feel better about the market's direction.

What role do RSI levels play in institutional investment decisions?

RSI (Relative Strength Index) levels are used by institutional investors to gauge overbought or oversold conditions in the market. It helps them understand their position in the market's pecking order and make informed decisions about when to enter or exit trades.

How does the speaker suggest using the RSI indicator?

The speaker suggests using the RSI indicator to understand the market's sentiment and to identify potential turning points. For instance, an RSI level of 11 on an hourly chart indicates a highly oversold market, which could be a precursor to a price bounce.

What is the significance of the corporate buyback window mentioned in the script?

The corporate buyback window is significant because it represents a period when companies are allowed to buy back their own stock, which reduces the supply available in the market and can provide a bid to the market, potentially stabilizing or boosting stock prices.

What does the speaker mean by 'top-down' market analysis?

The 'top-down' market analysis approach means starting with a broad market perspective (like an index), then narrowing down to sectors, and finally to individual stocks. This method helps to identify overall market trends before making decisions on specific investments.

Why did the speaker discuss the importance of the VIX index in the context of the market's volatility?

The VIX index, or fear index, measures market volatility and investor sentiment. The speaker discussed its importance to highlight that while the market may seem to be crashing, the actual increase in the VIX could be a sign of a market adjusting to new information rather than an impending crash.

What historical event was the speaker comparing the current market situation to?

The speaker compared the current market situation to the market conditions in 1995, highlighting similarities in rate cuts, increased productivity, and the impact of technology stocks on the market.

How did the speaker use the term 'island reversal' to describe the market's movement?

The term 'island reversal' is used to describe a situation where the market gaps up or down, creating an 'island' of price on a chart that is later reversed by a gap in the opposite direction. The speaker used this term to illustrate the market's volatile movement and potential for a trend reversal.

What trading strategy did the speaker describe for managing option positions after hours?

The speaker described a strategy of hedging option positions by shorting the underlying stock against the purchased calls. This allows the trader to lock in gains and manage risk, especially in the after-hours market when options may not be as liquid.

Outlines

00:00

📉 Stock Market Breakdown and Hyperscaler Analysis

The speaker begins by discussing the recent breakdown of the S&P 500 index, highlighting how it pierced through support levels like Swiss cheese. They delve into the importance of filling gaps in the market, which they suggest brings a sense of relief. The focus then shifts to 'hyperscalers', a term unfamiliar to many but central to the day's market destruction. The speaker uses technical analysis, specifically RSI, to assess market sentiment, comparing current market conditions to historical data from 1995. They emphasize the significance of institutional support levels and the potential for a market bounce, suggesting that despite the downturn, there are signs of potential recovery.

05:02

🤔 Market Hedging Strategies and Sector Performance

The speaker offers advice on market hedging, suggesting that instead of picking individual stocks in sectors like healthcare, a better approach might be to buy ETFs like XLP or XLV for broader coverage. They discuss the break in XLK and the loss of institutional support, hinting at potential signs of a market bounce. The speaker stresses the importance of a top-down market approach, considering macroeconomic factors, fundamentals, and technical analysis. They also touch on the significance of corporate buybacks, which can influence market dynamics by reducing the supply of stocks available for purchase.

10:04

📈 Analyzing Market Volatility and the Role of Hyperscalers

The speaker discusses the current market volatility, referencing the VIX index and historical panic levels to provide a baseline for understanding the market's behavior. They mention the concept of 'hyperscalers', large companies investing heavily in AI and data centers, and how their market performance is tied to broader market trends. The speaker points out that these companies, despite not generating significant revenue from their investments, are key to market direction. They also draw parallels between the current market situation and events from 1995, suggesting a pattern that could be indicative of future market movements.

15:06

📊 Market Indicators and the Impact of Earnings Reports

The speaker examines various market indicators, including the rate of change and the advance-decline line, to analyze current market trends. They highlight an unusual occurrence where advancing stocks had more volume than declining ones, despite a significant market drop. The speaker also discusses the impact of earnings reports on specific companies like Nvidia and the potential for market reactions 41 days after earnings announcements. They emphasize the importance of understanding market dynamics, such as corporate buybacks and the end of blackout periods, to anticipate future market movements.

20:07

💡 Trading Strategies and the Importance of Market Understanding

The speaker shares personal trading experiences, including a detailed walkthrough of a trade involving CMG calls, demonstrating how to hedge option positions effectively. They discuss the broader market context, including the impact of QE on market skew and the importance of understanding these dynamics to trade successfully. The speaker also emphasizes the lack of safe havens in the market, suggesting that traders need to be well-versed in market indicators and trends to navigate volatility. They conclude by advising viewers to watch the video multiple times to grasp the complex concepts discussed.

Keywords

💡Earnings

Earnings refer to the profits that a company makes over a specific period. In the context of the video, the speaker discusses the impact of earnings reports on the stock market, indicating how they can cause significant market movements, as seen with companies like Google, Microsoft, and Meta. The script mentions 'earnings again this evening' and 'earnings as well this is the kind of stuff that I do,' highlighting the importance of earnings in stock trading and market analysis.

💡Hyperscalers

Hyperscalers are large companies that operate massive computing infrastructures, often providing cloud services and AI technologies. The video script discusses how these companies, such as Google, Microsoft, and Meta, are investing heavily in AI and data centers, which affects their stock prices and the overall market. The term is used when the speaker says, 'if you don't know what a hyperscaler is, congratulations you will by the end of this video,' emphasizing their significance in the current market dynamics.

💡RSI (Relative Strength Index)

The Relative Strength Index is a momentum oscillator that measures the speed and change of price movements on a scale from 0 to 100. In the video, the speaker explains the use of RSI by institutional investors to gauge overbought or oversold conditions in the market. The script mentions, 'I use RSI because institutional investors they use RSI,' showing that RSI is a key indicator for understanding market sentiment and potential shifts in stock prices.

💡Gap

In financial markets, a gap refers to a price jump between two trading periods, indicating a significant change in sentiment or news impact. The video discusses the concept of gaps, particularly when the speaker says, 'you really filled the Gap,' suggesting that filling gaps can provide a sense of market resolution or stability. Gaps are important for traders as they can indicate potential support or resistance levels.

💡S&P 500

The S&P 500 is a stock market index that measures the performance of 500 large companies listed on stock exchanges in the United States. It is often used as a benchmark for the overall U.S. stock market. The video script refers to the S&P 500 when discussing market levels and its breakdown, as in 'ES S&P 500, breaks down,' indicating its role as a key indicator of market health and investor sentiment.

💡Institutional Support

Institutional support in the context of stock trading refers to the backing or interest from large financial institutions, such as mutual funds, pension funds, and insurance companies. The script mentions institutional support when discussing the significance of the 55-day moving average, stating 'that is a level of institutional support,' indicating that when this level is broken, it can signal a loss of confidence or interest from these large players.

💡Top-Down Analysis

Top-down analysis is an investment approach where investors start with the macroeconomic environment and then drill down to sectors and individual stocks. The speaker in the video advocates for this method, stating 'everything that I look at is top down,' and explaining that it involves starting with the index, then sector, and finally the stock, which helps in understanding the broader market trends before focusing on specific investments.

💡Corporate Buybacks

Corporate buybacks refer to a company's practice of reacquiring its own shares from the market, which can support the stock price and signal confidence in the company's financial health. The video discusses the impact of corporate buybacks on the market, with the speaker noting 'corporations are going to start being able to buy their own stock,' suggesting that this can create a bid for the market and influence stock prices.

💡VIX

The VIX, or Volatility Index, is a measure of market expectations for near-term volatility conveyed by S&P 500 index options. The script mentions the VIX in the context of market panic, stating 'if you look at where, where were these levels marked that created panic before,' using the VIX as a gauge for market fear and potential volatility. It is an important indicator for traders to anticipate changes in market behavior.

💡Hedging

Hedging in finance is the practice of reducing risk by taking an investment position that offsets potential losses in a different investment. In the video, the speaker discusses hedging strategies, such as buying XLP or XLV as a way to protect against market downturns. The concept is further elaborated when the speaker describes shorting a stock while holding calls to lock in gains, demonstrating a practical application of hedging in options trading.

Highlights

The S&P 500 breaks down, indicating a significant market movement.

Market levels are discussed, showing a breakdown and subsequent constant movement throughout the day.

The importance of filling gaps in the market is highlighted, as it provides a sense of relief and stability.

The concept of hyperscalers is introduced, explaining their impact on the market and why they are being heavily impacted.

RSI is used as a tool to understand market position and the potential for future movements.

An 11 on an hourly RSI is discussed as a critical level to watch for potential market reactions.

The potential for a market bounce is discussed, with reasons why it might occur.

The significance of the 55-day moving average as a level of institutional support is explained.

The top-down approach to market analysis is emphasized, starting with indices, then sectors, and finally stocks.

The role of corporate buybacks in influencing the market is discussed, especially in relation to the blackout period.

Nvidia's stock performance is analyzed, noting the correlation between earnings and the 55-day moving average.

The concept of a stock picker's market is introduced, suggesting a shift towards individual stock analysis rather than sector trends.

The potential impact of hyperscalers' earnings on the market is discussed, particularly their lack of revenue generation from AI investments.

A comparison is made between the current market situation and the 1995 market, drawing parallels in technology stock performance.

The importance of understanding market volatility and its causes, such as margin interest and QE, is emphasized.

A detailed explanation of a trading strategy involving call options and stock shorting is provided, demonstrating a hedge approach.

The potential for increased market volatility is predicted, advising on the need for understanding the skew and its implications.

The lack of safe havens in the market is noted, suggesting a widespread weakness across different sectors.

The anticipation of corporate buybacks as a key factor in the market's future performance is reiterated.

Transcripts

hey everybody welcome back a lot to

cover we have earnings again this

evening we have to go through that we

have to go through what's happening and

what we're expecting to happen on Friday

and what you can expect tomorrow so this

is going to be packed there's going to

be a lot in here let's start ES S&P 500

breaks down we had our level it went

through it like swiss cheese if we just

zoom out for a second and look at our

levels right here you can see how we

broke and then from there it was just on

and it was constant all day we actually

went through these levels earlier this

morning in the Market live that we do

publicly every day and I just want to

show you something that is pretty

obvious we're going to zoom in on this

hourly right here and then once you

broke I'm going to leave that level

right there but once you got there that

was pretty much it and you can see it it

was on like Donkey Kong and then all of

a sudden you're just into the Gap so

there's some big levels here but here's

the good news you really filled the Gap

and you like to fill these it it makes

you feel good right everyone feels

better when these gaps are just filled

and they're done all right and straight

Down's not a pattern but it was for

today and there's a couple reason for

that we've been talking about the

hyperscalers if you don't know what a

hyperscaler is congratulations you will

by the end of this video and you want to

want to pay attention to them they're

the names that were actually getting

destroyed today and there's a reason why

for that but straight down is not a

pattern will we see a bounce what I

always like to do before we even go any

further is you just take a step back

look at RSI and go where are we in the

food chain now why do I use RSI I use

RSI because institution investors they

use RSI if you ever look at any

institutional research or any buy side

kind of guy they're always looking at

RSI and where you are not so much to act

but they just want to understand where

they are in the pecking order for

example if you're oversold here and

you're still dropping you know you're

about to have a bad time of it so if

you're overbought here and the Market's

still going higher and you're hitting

lower lows like you're doing here and

you're still going higher then it means

you're at risk and we knew we were at

risk we've been talking about this for

some time but when you get to that like

11 on an hourly what you always want to

do with these is just take a step back

and go okay what's 11 on an hourly do

for me and then you drop this down here

and you can see very clearly what an 11

on an hourly will do for you it'll get

you to a level that you really want to

pay attention to right and because if

you look at it well we do tend to bounce

around here and there's a couple reasons

why we could bounce and what's really

interesting is somebody noted that

gentleman at sentiment Trader noted and

I'll show you what he posted that were

very similar to something that happened

in ' 95 and I agree with that I for a

long time I've been saying this reminds

me so much of when I traded 95 I think

gosh I guess I was 20 21 22 22 at the

time wow anyway if we take a look here

yeah that's crazy gosh I've been trading

25 years anyway if you if you take a

look at this you can just see that

you're starting to slice so can you go

lower yes you can if we clean off my

levels and we just take a step back and

we look at the simplest of indicators a

12 a 22 and a 55 we can see the

consolidation around the 12 the 22 the

break and the 55 we don't want to break

a 55 why is that that is a level of

institutional support how I look at the

market before we go any further is this

I look at the market and say okay a 12

is do I want to do a swing trade in that

index remember everything that I look at

is top down for those that are new here

and una aware of top down it basically

means sector stock yes but index so it

always starts there index sector stock

okay that's how I look at the market so

I want to see what that index is doing

then the sector then the stock and

you'll see that today when I go through

this trading and you'll see what we

bought today in the community and what

we sold today the community but overall

you want to watch this and you want to

pay attention to it now the important

thing about this is is it over here's

where I always run into an issue as a

Trader you never know but there's some

signs already that yeah you're probably

going to sell down a little more but I

do think that there's eventually a

bounce out there and that in a bowl of

soup gets you a bowl of soup and I'm

sure you're going to drop in the

comments on that one and tell me thanks

Rocky but let's go through this and just

look at what happened today so these are

all the sectors that I watch I don't

even have the home builders in here

because it's a sector but it's not

really a major one as far as on a

percentage basis market capitalization I

just keep the big dogs I guess I could

put it in here put it put mark it down

if you want me to throw that one in here

as well but where' the money go to the

Utes two Utes and then they bought some

healthcare and then they went from there

but it was pretty orderly they're

getting out of tech we know why they're

getting out of tech or you should and

you will by the end of this video I'm

going to cover it in a moment here's the

important part of all of this where'

they go they got out and they bought

Utes two Utes so what does that mean for

us this this is where people get whips

solved they will go out there and

they'll go oh I'm just going to start

buying Healthcare and they'll go buy the

healthcare names and then all of a

sudden they're in the healthcare names

and then you know what happens all of a

sudden they start re-inflating the rrisk

trade if they do that and then what

happens you're long Proctor and Gamble

and wondering why everybody's getting

out of the market there's nothing wrong

with this in my experience in doing

these trades this has never worked for

me I have never really been the guy that

can time when to do the Staples and when

not to do the Staples and by Staples the

XL pay if I wanted to do this I think

the easiest way to do this hedge and you

could take my advice or don't it's just

an opinion it's just information I would

look at this and say just buy xlp if you

truly wanted to hedge and you're just

looking at it from a hedging standpoint

I would just buy xlp or I would buy the

XLV and I would do it that way and I

would be done with it and you get what

you get out of it maybe you get some

basis points maybe you don't but getting

out of those particular names the day

that it corrects and you want to be in

Tech it can be a pickle and you don't

want to put yourself in that position

now that's my two cents but let's take a

look at some things before we go a

little further so you can see the break

right here on xlk and we broke the 55 so

what does that mean when we break the 55

that means we lost institutional support

okay again so why are you saying that we

should be looking at getting involved

here not yet but I do think that there's

some really telltale signs here and I'll

walk you through it so what I always

look for is not where we are but where

are we going so what does this look like

in a week and we don't know what it's

going to look like in an hour less than

a week but you have to come up with a

kind of a game plan so I'll walk you

through how I'm looking at this and then

please put your comments in below but

I'll start here so the very first thing

that we we would notice is that you

rally and then you fall apart and then

you rally and then you fall apart and

this is because you have buyers in the

market right and then when you don't

have buyers you have a problem stay with

me because this is really important all

right so you have index and then you

have sector and then you have stock and

then on top of that you know you have

macro and let me hit this again again

just make sure you get in the habit of

doing this then you have macro

fundamental and Technical okay so again

and again and you're familiar with this

the stool I'm not going to bring out the

stool for time sake but this is how I

view it these are the three pillars of

the market that's why Goldman Sachs

Morgan Stanley's all these firms they

have economists if they didn't think

economists did anything they wouldn't

spend the money so you need to learn

macro fundamental and Technical you need

to learn that and you need to look at

the world from top down not just bottom

up okay because you want to look at

where the inflows are going and the only

way to do you know what who when on the

stool is to understand index sector

stock that makes sense right all right

so if you understand that you want to

find out where the money's going so in

order to understand where the money's

going you have to think about well who

are the buyers well corporations buy

their own stock institutions buy stock

retail buy stock and smart money dumb

money right we show that a lot but you

also have corporations and buyback so

you have these three subsets that

essentially rule everything around you

all right and these all interconnect

with each other and it's really this

flow and everybody says efficient market

theory in 25 years there's there's never

been anything efficient about the market

ever that I have seen I just want to

point something the last week of the

blackout period so I just walked through

that we have buyers and we have those

buyers and they are corporate buyers

they are institutional buyers and they

are retail buyers and I did do the SMART

money dumb money the other day and we

know that retail is pretty maxed out

right and we know that institutions are

starting to buy but I guess they went

out to lunch today we'll talk about why

this dropped and what a hyperscaler is

and you you do need to know this you

need need to be aware of it but what

we're going to see here is this as

you're doing this you need the big dogs

retail can keep the market up

institutions can and corporations can so

if you start to see this drop right in

here that drop correlates directly with

the last Blackout Window and the lift of

that correlates with when the window

ended you're running in and you're

setting up for next week next week not

this week next week after all these

earnings are out you're setting up for

the corporate buyback window and that's

going to start next week and that's

really important to get because

corporations are going to start being

able to buy their own stock and that

takes Supply out of the market it

doesn't have to be your stock that

they're buying back but it takes Supply

out of the market and therefore the

market will have a bid to it that's

really important to understand now if

you got that part of it let's go to the

next part this is pretty fascinating

stuff and if you take a look at Nvidia

and what happened today that you broke

the 55 and the last time that you broke

the 55 this is earnings and then here's

earnings as well this is the kind of

stuff that I do and people say you need

a hobby but my hobby trading all right

so there we broke the 55 and there's 41

days out from where you broke the 55

right okay we broke the 55 today 41 days

you broke the 55 here and that was the

low 41 days after earnings 41 days after

earnings you broke the 55 I don't

believe in coincidences like that so I

would watch this do I think that you're

going to miraculously lift tomorrow

because of that no do I think that

everything that counts out 41 days that

happens to match Works no statistically

speaking you need 30 data points for

that to even be statistically

significant what I'm saying is that

right now corporate BuyBacks are driving

this Market that's the thing you should

take away from this so when we know that

we go into the next blackout period we

know that we're going to go through this

we just went through the blackout period

right and now we're going to come out of

it I think that's a very important

distinction and based upon that I would

start watching this stuff and start

saying to myself okay I understand and

believe me I was one of the guys that

was shorting this today on the shortterm

I do have a long-term position in it and

looking at this and going how much lower

are we going to go and I don't know that

we're going much lower I mean I start

I'm starting to have a positive

Divergence right here already so I don't

know I don't know how much lower this is

going to go I don't know that we're

going to continue to break if we could

you you you could get a 90 handle on

this to think that you can't do that is

a huge mistake and I do have a lot to go

over but I want to show you how you

should be thinking about this I was

talking to somebody about this today and

I said we don't see any panic and he's

like well the vix is up 20% okay and

that's not panic so if you look at where

where were these levels marked that

created panic before like you look at

the past to determine what the future's

going to be not because it's going to

work the same way but so you have a

baseline to work off of so if I was just

wanted a baseline I go where did we Peak

and drop before and then you would go

and look at your trusty graph and say to

yourself well I'm glad I did this you

would get up to here and you'd say well

that 21 and then 21 here in October and

then you would go here and go April 19th

okay April 19th and November 1st I

wonder if there are dates that we should

look at and then you'd come here and go

oh April 19th oh November first what do

you think we should be looking for on

the vix before we even think that we're

near it doesn't mean it has to happen

but wouldn't that be a great guide for

us to set a level here and set an alert

and go hey I really want to know when

that's going to happen is it is it

prudent to be buying stocks with the vix

breaking out hitting new highs I mean

that's something that only you can

answer for yourself if you think that's

prudent or not right okay let's keep

going so if we jump into all this red

you're going to see certain SE names in

here that are red right you have Tesla

obviously dumpster fire of the day I

mean it was really bad last night and I

went through that at nauseum but over

here you're going to see some things

Google Microsoft meta Oracle these names

crowds just a dumpster fire onto itself

but when you start looking at Google

Microsoft the earnings meta why is meta

down why is Microsoft down and Google

why are these names getting destroyed

why is Amazon down why is Apple down why

is avjo down these are called

hyperscalers not avgo but these are the

names that are buying all the cap so if

you take the big dogs that are in AI it

is 38% of the S&P 500s Capital

expenditures 38% of it so you have meta

Google Microsoft the big dogs Apple all

competing Amazon with the data centers

and what's what's going into a Data

Center and the super secret chips but

don't worry Tesla's going to fix that

try not to laugh but when you start to

connect all this and then Google gets a

simple question last night and this is

why Google dropped we go back to this

and you'll remember this but why did

Google drop after hours and again

fundamental research when you understand

what you're looking for after hours you

can kill it so I mean you can just see

when they said the wrong thing you can

literally see it on the chart after

hours hopefully you can see that but

what happened here when they were asked

a question well you're putting billions

into Ai and when you're putting this

billions into AI what's happening oh

well our ad revenues going up it is that

it yeah that's it that's all it's going

on and then it was just like w w and

that was the end of it all right it's

really important to understand that they

don't have any Revenue generating real

Revenue generation from what they're

doing yet now the flip side of that and

I'm not going to get into it tonight but

if you want I'm going to explain to you

why they don't care that they're not

making revenue or not I'll get into that

later but if you're interested I'll

cover it on Saturday but Google's not

going to care meta is not going to care

Microsoft's not going to care that

they're not generating massive Revenue

off of it right now the Market's going

to care and it may punish their stocks

but this is the first wave and you have

to understand that this stuff is going

to go through w

and that's really important to get

because this reminds me a lot of 95 and

someone posted that earlier today to

start with I just want to give credit

where credit is due so I've been talking

about 1995 for some time now and and the

parallels between cutting rates and

increased productivity and there's a lot

of parallels here I'm going to show you

some of them but Jason put this out and

Jason's actually associated with

sediment Trader you'll see me show a lot

of their stuff I have no affiliation

with them whatsoever but he does put out

a lot of good stuff for free if you're

looking to follow somebody you might

want to follow him it's all objective

information you do what you want with it

but nasda composite is down more than 3%

but there's still more volume flowing

into advancing stocks than declining

ones this is really important I'm going

to show you this in a second over the

past 40 years more than 10,000 sessions

this has only happened one other time

and then everyone always tells me I'm

pointing out these things but this is

true now he's got these two pieces here

I'm going to show you that and then I

want to show you what we look like right

now now here's the article and I found

this fast inting but this is July 19th

1995 only a day after posting several

records the stock market fell sharply

yesterday in its biggest decline in

nearly nine weeks the drop is attributed

to some Traders concern about technology

stocks especially Microsoft 1995 could

you imagine the issues have been High

Flyers and have outpaced the overall

Market to reach record levels but they

now could be rising higher than their

earnings I wonder where we heard this

before the Dow Jones Industrial image

plummeted 51 points only 50 minutes

after the start of trading 51 points

circuit breakers rules on the New York

Stock Exchange designed to slow

highspeed computers there there they are

again with those internets and Comm

turbulent markets okay now this is the

graph that he posted and I just want to

go through this again it's sediment

Trader this is not mine but I just want

to give credit where credit is due look

at the rate of change right here okay

and then you can see that you're past

the three handle and then you can see

that you're up volume ratio so think of

this as an ad line and look at where

you're at right now and then look at

this drop that you're seeing right now

in the market now imagine for a second

and you're going to have to use your

imagination and we're just going to have

to go on it that you don't have any of

this up here and all you have is from

here over and all you can see is this

rally and that drop now we already know

where we are in the Vex we already know

where we are with the corporate BuyBacks

but take a look at this and I'm just

going to pull this out to

2020 and then just zoom out on it this

is rate of change and this is the ad0

line and please comment below if someone

knows how I can put some of these up

onto trading view so you guys can grab

these and just save these layouts

yourself let me know I'm more than happy

to share them with you I have literally

hundreds of layouts also if someone

could comment and let me know do you

know if it's possible to set up sectors

into like create my own sectors I have

my own sectors I don't have them in

trading view I'm more than happy to

share them if there's a way for me to do

that so let me know that too but let's

get to this so here we are on the cues

and they're saying there's only one

other time when this has happened so

what we're going to do is we're going to

go take a look at this this particular

time and we compare it to what just

happened and what he's saying and I

understand where he's going with this

and he's right so you're falling off a

cliff the sky is falling the sky FL

we've got this island reversal this is

actually an island reversal or an island

Gap continuation it's not really a

reversal it's just me speaking but it's

not it's like here's the island and then

you have a continuation so it's not

groovy like it doesn't shouldn't make

you feel warm and fuzzy right so what

what do we have here okay so we have the

rate of change that is well right around

the same area and at the same time this

is your ad line your ad Line's going up

as the Market's dropping your ad line is

actually going higher so the question

then begs well what does that mean well

that means eventually this will catch

like it's you're not going to fall apart

if your ad Line's doing that and this

Falls right back and you can just rewind

that one piece of it but this goes back

to this do you remember you might

remember this from two weeks ago here's

the RSP and what we're going to do is

drop that into a line chart and then I'm

just going to go to a bear and then

we're going to go here to the Spy and do

you remember what happened on July J

11th and you might not but that's why

we're going to go through it so on July

11th no you won't go back that far we'll

go to a five and we'll get rid of the

pray and the post and now let's rock and

roll all right so if we go to the 11th

we noticed that we had a change and that

change was the CPI pce is Friday

remember that so what do we have here we

had a change and we talked about this we

actually talked about this two days ago

you can see how all these videos are

linked together hopefully and what what

happened here why is this so important

because RSP took over equal weight took

over for for for the market cap weight

and RSP was winning for the first time

and what does this in a long time so

what does this mean well once they were

selling these the market weight right

here the equal weight caught up on the

sell side so why did that happen and

then that takes us back to this chart

that we just went over about I think we

went over this on Saturday we actually

went through it before we've been going

over this for at least a week especially

if you're in the community think you're

sick of me showing it but this breaks

down stocks below the 5day the 20day the

50-day and the 200 day and I said every

single time you get to this level you

have a pullback and all of them were at

that level so we're setting up for a

quote pullback people need to understand

that there is going to be more

volatility and I'm going to have to

break out the skew chart I can just feel

it but you have to understand you're

going to go through way more volatility

like you did in the in the late and

mid90s than you're used to people are

not going to be used to it that's

because of margin interest and we've

gone through that I'll get into it on

Saturday more but you need to understand

this going into tomorrow so you

understand why this is happening every

stock when they are above these

percentages here it just leads to I

better lock this in and we know that we

need a vix with at least a two handle

because we've seen that before and we

know we have the buying coming up all

right stay with me so now we know what

to look for on Friday okay we know we

should probably be watching this on

Friday correct pce Friday we know what

they're selling and we know what the

hyperscalers are and we realize that

they're not going to fix this problem

you'll note that I'm not saying let's

look at Google meta Microsoft you're

going to have to start branching out now

tonight cm CG came out with earnings CMG

had a really good call okay and you're

starting to see this individual names

are starting to break out we're starting

to see less correlation you're going to

start entering a period of time in my

opinion that is a stock Pickers mark

this was actually a decent call it was

actually up to 60 after hours and we

actually traded this and did quite well

with it now the important thing that I'm

getting at with this particular trade

that I want you to wrap your mind around

this was something that I actually

bought calls on and then I actually

shorted right here and I'm going to show

you this because you're going to say no

you didn't because I saying I shorted at

the high but here's a time stamp from

the room now I have two trades I'm going

to walk through I have a dpst trade I

need to walk through so you guys can

understand that I'm not going to have

time tonight but I plan on doing that

one possibly for tomorrow it was a

really good trade very easy for you guys

to walk through and then this is a

little more complex maybe I'll lay it

out on a Saturday but CMG 55 calls I

paid a buck and a quarter for you can

see the time stamp up here and then when

it got right up into this range I'm

shorting the stock okay and then it's

real simple I'm watching that lift and

then right in here I'm actually when it

got to 60 I'm actually selling into this

bar then I'm buying more when it starts

getting weaker and then I add it here so

what that does for me is it gives me a

hedge and then as the call goes on if

they say something dumb and and they

said something dumb and then all of a

sudden the stock dropped back to that

breakout now I have the 55 calls on and

I sold half of this so what this allowed

me to do is I'm telling you I'm shorting

the stock against the 55 calls locking

in a $5 gain the $1 calls Thank you very

much I still have half not hedge so I

left half off but the calls were only a

buck and a quarter so I lock in five so

my entire trade is free at this point

now what we do next is this once we're

up here we're hedged so I paid for my

trade see I don't need to make the most

on every trade guys I need to be

consistent I need to make money as much

money as possible on every trade and be

consistent but I don't need to make the

most start selling down and my goal was

if I got back to 55 I'm net on it I

would net five bucks it would pay for

more more than the entire trade on 50%

so it was basically giving me free calls

and so they say something silly gross

margins blah blah blah burritos are too

expensive and the stock drops back down

all the way to the breakout bar into

this I start trimming into that I start

trimming so I start covering and I made

$7 on that whole trade so now I've made

$7 after hours on 50% of the trade or $3

and5 on the full trade however you want

to look at it and I paid a dollar for

the option so no matter what happens I'm

netting two period if this is of

Interest this is somewhat more advanced

but if this kind of concept is of

Interest please let me know I think it

would be because I see so many people

after hours going oh I really wish my

options were would open you don't need

them to open you just need to know how

to hedge your option positions and then

once you learn how to do this it's

simple it's simple for me because of the

amount of time I've been trading and I

was a registered options principal for

nine years but this is simple stuff that

I can walk people through let me know

I'll do one of those like the price

stock action videos that I'll link at

the end of this I'll walk through this

so you guys can learn how to do this as

well just let me know I don't want to go

over things that you think are either

too advanced or you find boring now I've

been going through this chart with you

guys for at least a month now I'm going

to just bring it back so when you see

the volatility in the market your

response is going to be oh the skew

changed and you're going to be saying

well what are we going through oh we're

going through QE what does that mean fed

incentivizing long assets steep skew to

hedge so that means people need to buy

puts oh okay that's why we're seeing the

volatility all over the place and it's

very different than what you saw at 2020

when the volatility was dropping and

you're going to say to your friends when

they say the Market's crashing or when I

put out one of those clickbait titles

you're going to say the Market's not

crashing it's the skew Rocky and that's

going to be the end of it please

remember that the volatility is going to

increase now there were a lot of great

trades today from Tesla to Google to

meta on the short side and there's a lot

of lessons I can go through but the one

thing that I want to get through to

everybody is no place was safe there was

literally no Safe Haven today and people

need to get that like you could look at

this from a zero line perspective and go

well it looks like some things were up

yep if you want to go buy the solar

names and the EMP and the squeezes yeah

you could do some things today but

really at the end of the day there

wasn't a lot I like this chart a lot

what it shows me is it just shows me

that there's weakness so what are you

supposed to do with everything that we

just went over you're supposed to

understand that really what you need is

you need the corporate BuyBacks so if

you're saying to yourself as I get asked

a lot thank you for everything now what

do we do what you do is understand that

you're not not really going to go

anywhere or have a bid on this Market to

corporate BuyBacks and that ties in

perfectly with pce on Friday which will

then of course cover pre-market live

when it comes out so we have something

to trade I expect that to act just July

11th and we'll point out the names again

that we're doing but understand that

that's where this is all going there's a

lot in this video you might want to

watch it a couple times that's it