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Good Monday morning!
DA BULLS!! Even Michael Jordan is a bit envious of the markets "hang time!"
(hey...if you don't get the MJ reference please email me and I'll explain!)
There is not much else to say about one of the most incredible rallies I have seen in a long time on Friday!!! Wow is an absolute understatement. I have seen melt up, rip your face off rallies in the past, but this one one of the strongest, most consistent I have seen in a very long time.
When I said Friday morning before the open.....
"....the bulls defended their territory with authority!!!"
.....little did I know they were going to make Thursday look like a nice little stroll in the park. Shorts were absolutely massacred and thank goodness we positioned back to the long side after seeing what happened on Wednesday and Thursday.
Quick Recap as to why.......(and this is IMPORTANT!)
"Wednesday's late day short squeeze, and the huge gap higher yesterday morning, created the perfect storm!!! Those two occurrences had the sellers on their heels, and even with a few liquidation breaks during the day, shorts scrambled to cover and natural buyers stepped back in and continued with their buying operations."
"By the way, if we do not break lower then that is a very bullish sign....use the opening print and overnight highs as key lines in the sand.....long above or short below then as always monitor for continuation!"
Also said Friday morning...
"There seems to be this magical, never ending bid in the markets and buyers just come out of the woodwork to support and prop the market back up."
And Friday, that "magic" happened once again....and in a big way! Large cap tech stocks rallied, and of course leading the way was NVDA, which hit new all time highs 7 of the past 9 trading days! That was all traders needed to see to jump on board and hang on for the ride. The recent news out of China, and META with a huge order in the BILLIONS for AI chips from NVDA, had the markets and investors in a craze!!! They just couldn't buy these stocks fast enough.
The DOW, SPX and NDX (NASDAQ 100) All hit new record highs!
And all of this continues to tell me that the bulls are right back in control and dominating the current markets!
(Remember...always ask yourself....who is happy? who is sad? who is making money and who is losing money?!?!)
Please note however....the few things that are making me nervous:
1.) Complete and absolute complacency and lack of any kind of fear makes me nervous!! VIX back below 14!
2.) Even though some companies are absolutely crushing it (like AAPL, NVDA, MSFT, GOOGL, AVGO, AMD, TSM, etc.) since when does a handful of companies mean that every other stock should be enjoying the same kind of forward looking multiples and models on cash flow, revenue growth and bottom line EPS (earnings per share) growth?!?! Lets look the following stocks as pure examples. (Again, I am not saying these companies are not doing well!)
Think about that for a second....McDonald's is NOT selling that many more cheeseburgers! Coke is NOT selling that much more soda! Chipotle is NOT selling that many more burritos than is was six months ago yet these stocks are being treated as if they are going up exponentially with non stop new orders!!!! And THAT makes me as nervous as a long tail cat in a room full of rocking chairs!!!
The point is this.....and this is key....market participants are currently pricing stocks to absolute perfection without the slightest fear of slowdown or disruption in any way whatsoever. Now yes NVDA received about a $9 Billion dollar order from META for Artificial Intelligence GPU's but I don't remember seeing CMG get a $9 Billion dollar catering order, or MCD selling $9 Billion dollars more worth of Happy Meals lately! People are now not only hitting the bong but drinking the bong water! Its absurd!!
And of course the other main reason (and I can hear some of you saying it already) is because the top "Magnificent 7" large cap tech stocks are so heavily weighted in the indices! As the ole saying goes....a rising tide lifts all ships! (Even the dinghy's)
The S&P 500 VS the 'Magnificent 7'
Year-to-date returns as of Oct. 5, 2023
S&P 500SPX 12.4%
S&P 500 Equal Weight Index SPXEW 0.1%
Magnificent 7
Alphabet GOOGL 53.3%
53.3%
Amazon AMZN 50%
50%
Apple AAPL 35.2%
35.2%
Meta META 153.3%
153.3%
Microsoft MSFT 34.1%
34.1%
Nvidia NVDA 205.9%
205.9%
Tesla TSLA 111.1%
111.1%
Source: FactSet
Anyway, I'll end with this....DON'T FIGHT the current craze! Even with everything that is going on as far as stocks going straight up and valuations getting very stretched.....inflation is coming down (so they say), unemployment is still historically low and consumers are still out there spending like drunken sailors. Just these few things alone, not to mention dovish comments from FED participants lately, is all fuel to this market fire we are currently witnessing.
And by the way, because of the gap up and hold, we now stand with 14 untested points of control below us. This is quite impressive and yet unsustainable!
Futures are higher this morning with overnight inventory 100% net long and on a true gap outside of prior days range. Just like back on Friday, we are opening very close to or at my intraday targets so be on the lookout for a possible liquidation break lower to balance out the overnight long inventory. Again, if it does not re-balance at all, then that is a very bullish sign!
/ES upside target is: 4885-95
downside target is: 4850-40
/NQ upside target is: 17,575-595
downside target is: 17,320-300
*/RTY upside target is: 1970-72
downside target is: 1941-38
*Oh and by the way, looks like back to the buy side for the RUT as well! I don't mean to leave the small caps out but it's hard to write about everything.
Economic Data Today: Very Light Today
Leading Indicators @ 10:00 AM EST
More Color.......
/ES - Supply flipped to Demand at $4860. If Bulls can defend on a pull back anything
above $4800 I will look to play long targeting a new HOD. Demand below that from
before is at $4810 -$4820 then $4740-$4760
SPY - Consolidating between $481-483 over the weekend with Demand from Friday
below at $476-478 then below that at $470-$472. Until the price can get back below
$475 I want to play long. Once we can break below then it has to hold as resistance.
- Sell off over night into the morning above $479 ( Friday pre market high ) playing
a break and rest LONG from $480 to $481.10 first then new HOD
- Sellers at the open with price holding above $482 to play long target new HOD
- Sellers at the open pushing price below $477 holding below on a pull back to
play a break and retest short targeting $475 first then key demand $472
- Gap UP / Gap Down Pre Market playing a gap and go,waiting for price to break
out and then retrace to the open price playing the trend (either long or short )
SPX - Gap up at $4780-4790 - Ideally would like sellers to be trapped to play long
- Targeting $4800 , $4815 then $4830
/NQ - Consolidating between $17400-17500 with Key demand below at $17165 .
Chances of seeing downside isn't until we can break below $17050 as resistance.
- Key demand levels at $16700- 16720 then 16840 16880
QQQ - Supply flipped to demand at $409-$411 now consolidating below HOD at $422
- Need to see some more context ( selling , gap down , pullback finding support)
TSLA 30m Chart Downtrend line with Key Supply at $218-220 and then $223-225
AMD Need to see some pullbacks hold for support at $165 $160 to play long
- Key Demand below that is at $157-159
AAPL - Approaching Key Supply on 4H chart at $193-195
- Ideally would like to see buyers trapped to play a break and rest short with
precise holding below $195 targeting $192.50 first then $190.88
NFLX Peep the 4H Chart trendline from 10/18 $390 now HOD at $503
- Key Demand below at $475 -479 with Supply above at $490 then $505
META Supply flipped to Demand last week at $373-375. Demand below that at $357
Have a great trading day and a wonderful weekend!
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