Is the Stock Market Bottom In? (Peak CPI Tomorrow)

[00:00:00] Speaker 1: The semiconductors did the exact opposite of what everyone expected, up 6.5% on the day on the back of what happened with Jensen and NVIDIA. This is where it gets super interesting. That really was not the reason we moved. We can see the NASDAQ went up about 2.5%. At one point, we're up over 3% on the day, which is astounding. Now, Brent crude is collapsing ahead of CPI. Why this is so important is because tomorrow's CPI comes out. And are we trying to get ahead of this? And there's a couple of things to really take a look at here. Those traders are reacting to the institutional levels. What we're trying to get you to do here is to know what they're doing ahead of time. Subscribe, click all notifications. What we go over here is timely by hitting the bell. You don't get it after retail is already in. The important thing is you get the information, education that you need. Subscribe. Let's get to it. Last night on 60 Minutes, Trump says he sees no reason to escalate the war with Iran, touts his long-term goals of the conflict. Monday, meets with the Prime Minister of Qatar, who has mediated indirect talks between the U.S. and Iran, aimed at reaching a deal. Afterwards, President told Reuters news, the U.S. was ready to go anytime we want with new strikes, but was content with the U.S. naval blockade on Iran. No escalation. Talks are proceeding. Oil begins to plummet. Now, this is where I think the devil's in the details. Iran has already signed off on the Qatar broker terms, according to due diplomatic sources who spoke to Israeli media. Tehran would reopen the strait and halt all attacks on the Gulf. Washington would lift its naval and economic blockade of Iran and release $8 billion in Iranian frozen funds in Qatar. Under the turn, Iran drops its demand to control the strait and charge transit fees, refuses to put its nuclear program on the table. Neither governments confirm the terms, and then you have the people. Now, this is where it gets interesting. And I will say this, for those of you that have been watching this channel for some time and been trading for some time, this is about a level 10, meaning the amount of time that you have to put in to watch this stuff. This is why I spend so much time on it. This is, you're playing the trading market right now on hard. This is very hard because you're looking at technicals, but the tail doesn't wag the dog. Macros can fix a lot. And so if we take a look at Brent is absolutely imploding, and it's been since Monday, then Wednesday we dropped because of midterms. Now, it's becoming clear that the current administration wants to do something about this, because if they can get oil prices down, the popularity can go up, and then maybe he's not as much of a lame duck. What I find so interesting is he's not out here touting how much they want a deal, and he's not giving that hardline rhetoric. He's having Rubio do it. But this is what we're saying. Right after the speech, and then right after the meeting, he gave another press conference to Reuters. And we just saw oil come in really hard here. Now, do I think that this is a done deal? No, I don't know that it's a done deal. And I want to be very clear about that. Anything could happen. But you have to start thinking about what is the thing that we're not expecting that can happen that can affect us. Here's the other thing that's really interesting. If I look at BWET, and this is going to be your future contract on shipping rates. They've dropped obviously from 1000. Now you're down to this 580 level. Before any of this started, you were down at like 40. Just to put this in perspective, how much more of this can fall. And this, as a short, is not for the weak at heart. Because it's extremely volatile, to say the least. But here's where I'm going with this. And this is why I think it's so interesting. This is starting to come in, meaning the borrow is starting to come in on the futures contracts. So you have that along with what's going on in Brent. Now, there's no guarantees. But here's where I start looking at this and saying, all right, well, what's going to move the market? So let's just do a couple very simple things here. Number one, no technician in the world or no one that does technical analysis that has any clue is going to look at this bar and say, oh, that's it. It's over. So it's not a technical move that could get us to put in a bottom. If we look at the cues, it is literally impossible to look at this and say, nope, that's definitely it. If you did just the basics, and I'm talking just the absolute unequivocal basics, and we put in the 200 here, we are below the 200, hit it, and reject it. You are below the 12, the 22, and the 55. If I zoom in even more on a 15-minute chart on the cues, this is a 3, the 5, and the 8. I am below the 3, the 5, the 8, the 12, the 22, and the 55, and the 200. And to say, oh, well, it's very clear that we've bottomed. Well, they're all screaming down. It's not very realistic to do that. So what is going to be the thing that turns us? Well, the tail does not wag the dog. And this is where it gets interesting. We have something in the market called equity risk premium. And when equity risk premium shows the earnings yield on the S&P 500, meaning if you take all the earnings and you divide it by the S&P 500, you're going to get a percent rate of return on that yield. Then you take the 10-year. The higher the risk premium, the more attractive stocks are relative to bonds. This is why you care about that. If oil drops, if, and it's been dropping, then what will happen is bonds will start to get bought. As oil drops, bonds get bought. As that happens, the S&P actually gets cheaper on an equity risk premium basis. Now, I will get into this on Saturday on a deep dive. Just comment below if you want me to. And I plan on writing a piece on it in the free substack. So take a look at this. And there's a link in the description for the free substack. It just says free newsletter. Just click it and you get it for free. So the point that I'm getting at here is right now you've been under the zero line for some time where it is more attractive to own bonds than it is more attractive to own stocks. You're starting to try to get above this red line. But if yield starts dropping and oil starts dropping, there are a couple mechanisms here that will start to happen. And to be clear, these mechanisms are macro mechanisms that will then affect the fundamentals of certain names and certain stocks that will then drive up their earnings. And then of course, you're going to get the when, which is the technical. So the important part of this, as I draw my stool, is that you have a macro event that is going to change the landscape of the market if the market changes, because it's not technicals. There's nothing here technically that's telling me, oh, you know, the blippity bloppity bloop is definitely going to fix everything now. So if we look here, what could do this? You get some kind of peace deal with Iran. If you see that, then that can put us in a position here where bonds drop and as bonds drop and then crude oil drops as well, the equity risk premium of the market goes up. So I don't need earnings. In other words, what we've had here so far on the market when we've been driving up, the reason the market did this and the Nasdaq was because earnings were insane. You had the best quarter in earnings ever in the history of semiconductors. It was 96%. It was absolutely insane what you were seeing over there. And that's important to understand, like this was all earnings driven. It had nothing to do with what was going on in the war. It had nothing to do with oil. You can get a PE expansion market because you're getting more for your money with the equity risk premium. That is something that could put a bottom in the market. But to technically look at this, you need something. So then if we go back through history and think about this going into CPI tomorrow, we could think of this and say, all right, well, here's crude oil. That's Clorox. This is crude oil. And if we look at crude oil, we can see here in September that crude oil by September 30th was right around that $91 on average. And right now in October, if we look at it, you're right around that $94. So you're up a little bit. You're up about 5%. We could do the same exact thing with gasoline as well. But the point that I'm getting at here more than anything is that next month, and you can already see if this was to continue, and we just went to November 1st, right here, November 2nd, we can already see that this is already dropping below September and October. Oil drive CPI. We can all talk about insurance or housing or whatever we want. But the bottom line is if oil drops, CPI will come in. It is the driving force behind a hot CPI number right now. That is not really debatable to me. You guys can debate it, but everything is linked to oil. So the important part of this is, as this comes in, what do you get? You get peak CPI. So then if you go back through history and say, well, when was the last time that we had like a peak CPI number, and then things started to get better? I'm glad you asked. In 2002 or 2022, Jesus, in 2022, this was a CPI number, came in hot, better, like way hot than we thought. And then from there, we started to rally and said, oh, geez, that might be it. That might be our bottom. We came in again, and we undercut again with an insanely hot CPI number. That was the bottom of the market. That's when the S&P dropped. So can we see something like that in here? Because I just want to be really clear about this. Someone will show me something later and say, oh, well, this makes sense. I can go back in history and look at the RSI a couple of weeks later and say, well, I can see in here this drop. And then from here to here, I have it and therefore it builds, right? But the actual date, I'm not going to be able to look at this on the daily. It's not going to work that way. So that puts me in a position here where I have to say, do we get a peak CPI number tomorrow because oil prices have peaked? In other words, does oil come down because of the hope that Iran is going to cut a deal or that they're going to work it out, which they seem to be? Statements like we're not going to escalate as long as there's talks. That is getting the price down. That is getting your shipping rates down. As that continues, that could lead to where we have a peak CPI number. And if you have a peak CPI number, I'll say it again. I don't need earnings. I could just have the PE actually expand instead of having an X PE. I have like X plus 10% PE. And that could actually put a bottom in the market. Now, from a technical standpoint, there's a couple of things that I saw. I don't think it's enough to hang my hat on to say, oh no, that's definitely going to stop. One of the things that we were talking about here and we were going over this in the community was, yeah, you have a trend line here. Is that the be all end all? We're going to hit that and that's the end of it? I don't think so. And the majority of the time, that's not really how any of this works. And I'll explain. You don't really have like an absolute catastrophic a day. And then all of a sudden things just get better and go, oops, that was a mistake. We should get back in the market. Now you have some extenuating circumstances that are coming out that could move the market today. For example, the Nvidia news was absolutely huge and really shook things up. And candidly, him with this lady, it is what it is. The issue that you're running into now is that there might be more smoke than there with this. And so that's starting to become an issue for Nvidia. So Nvidia gaps down on that today and then it starts to bounce at the same time that people are going out there and buying AMD. Why? Because AMD for some godforsaken reason is going to be a hedge to Nvidia. I don't really get that, but that's the trade. That's what they did today. Nvidia gaps up on it or AMD gaps up on the news. Like all of a sudden people are going to stop using Nvidia chips and use AMD chips. The only way that something like that happens is if Nvidia gets some kind of regulatory kind of slap on the wrist where they're not allowed to sell to anybody that is not in the US. And I'm really extrapolating out here on what could happen and how far out that is. I don't see that. But I do think it's interesting to look at something like Nvidia that gaps down on, you know, news that the biggest company out there by market cap or was the biggest company by market cap possibly got infiltrated here. And it's a big deal. And we bounced on that. So I think we have to look at that for what it is. And I think that that's very important for us to just take a step back and look at this. Overall, what do I think? I think that the Sox is not telling you a darn thing about what it could do here. I don't think you're technically getting anything here that is really letting the world on fire. If I clean all this off and just start over so you can see how I started all this. If I just took fib levels and I chop it from the top and I put it here on the bottom, what you'll see is that's going to get you that 23.6. Like, do you just stop automatically because you're there? Not really. It's more of a guide. And then it gets you that 38.2, which you're bouncing up into. But to look at this and say, nope, that's definitely it. We're definitely near a bottom. It's just, it's not that easy. So then if you go and take a look and you look at us here, yes, we're grossly oversold, but you can stay oversold for very long periods of time. If you go through history, you've had periods where you've been down here for like months and you can just go back through history and say it. It doesn't mean that you can't snap up and then just have a day where you rally and then they roll back over, but you need a driver. And where I'm starting to think is I'm thinking that we reprice the market based upon midterms. You get a peak CPI tomorrow. You get even a hot CPI. And then people understand that oil prices are dropping, whether there is real peace or there's no more bombing. So therefore prices are going to drop on shipping as well as oil. And therefore you're getting a peak CPI. Therefore we want to get back in the market. And then that becomes what names do you look at, right? But you can't really look at this and go, well, you know, we've been falling off a cliff for eight days and we're up one. So that's the bottom. It's not going to, it's not that clean. If I look at it on a, a four hour and I look at something like this for me, again, I'm oversold. Great. I bounced. If I go and take a look at a 15 minute, and I think that this is very telling you're already overbought on a 15 minute and you hit the 38 too, and you reject it. So I don't have anything here that's screaming at me. And to be clear, the reason I spent so much time on the socks is because if you don't have semiconductors, you don't have a NASDAQ, the IGV names are not going to carry the NASDAQ biotech is not going to carry it. It doesn't have the weight. We need semiconductors to at least not fall through the freaking floor in order to put a bottom on the market so that you can go out there and look at other names. But if they're going to completely implode like this, it's going to be an issue. So what we're looking for is to see if we can get to some level. Now, if we lose this area, there's another area here, which gives us about a 17 PE. I went through this in another video with you guys. And that is an area where we stopped in April 25 was a 17th PE. So if this goes, then yeah, I think obviously I think that that's going to be your next level. But I would watch this very closely. And then I would watch how we respond. And one of the things you can do is this. Now I'm just going to leave the fib levels in, but in front of you is an eight, a five and a three, and that they're just moving averages. They're just daily moving averages on a 15 minute chart because it can show you how they're going. When red's on top, it just means stop. It's always that simple for me. If red's on top, I really don't want to be getting overly aggressive there. It doesn't mean that I can't play bounces off of levels, but do I really want to get super aggressive with semiconductors? No. So if we start to see this get above right now, you're at like 150. If we started getting above 150 and these start turning up and they start flipping to green, well, that does give me more of an area that I want to play in. But in here, I have to realize that like, hey, I've got to be really careful. So getting above the 150, that would be something that would also take you up to that 161 as a shot. And that could be something. But again, we're already in a situation here where you're overbought on the RSI. So we're going to need some kind of event. And I'm wondering if that event does become the CPI number. Other than that, what do I see out there? I don't see a whole heck of a lot that I have to rush into. So if I go and take a look at the daily, and I don't feel like I have to rush into anything candidly, but I think it's important to plan for like, what if scenarios. And that's what I'm trying to give you. If I look at something like this and on the S&P and then go, all right, well, where do I have to get involved? Like to go and say, oh, no, I need to buy industrials here because someone bought a bunch of generators. Like that to me seems kind of silly, right? We could say we've come down, we've gap filled, and now we're going to hold that area. And I get it. Like people are looking at Caterpillar and they're getting excited because they sold some generators. But how I'm supposed to look at this chart and get like excited by it, I'm just not, I'm not there. These are not my kind of charts. They take a long time to rebuild. And when we go through all these names, they all look the same and they're all in these like, oh, we're going to break down, but not today kind of moves. So we're going to need some level of stabilization before we can get there. But that stabilization, in my opinion, could come from some kind of macro event and whether or not we actually have world peace for the 37th time or not, or whether or not it goes away again. I don't have an answer to that. What I do think is interesting is some of the earnings tonight were abysmal. So like Rocket Labs was abysmal. HIMSS guided lower. These are down, but they're not blowing up. Like they're not on their face. ASTS missed. Maybe they're having a good conference call. I'm not on it, but they lowered guidance. It's not a great conference call. Take two. They actually had pretty good news as far as they're selling or the GTA six. So you have some things there, but you didn't have like great earnings tonight, but we're not seeing that huge sell off. And I think that that's something else that we should be paying attention to. Other things that stood out to me is that you're getting follow through days. And that's pretty rare. If you're going to roll over because those people get out of the names and there's some, some larger, broader charts that I want to go through, but I always just look and see, do these names that are breaking out? Are they holding you from that breakout from that date, from the open, you're up $60. You're up three days in a row on something like that. If I look at MRNA, which absolutely crushed raised guidance, et cetera, you formed a three bar pattern and you broke out oil drop today. You take a look at the XLY names and they're rallying. And of course, things get cheaper for people if oil drops. So that makes sense. So you look at stuff like CCL, RCL, and you see how they're doing and they're breaking out. And that's interesting. Like there's actual follow through on those names. If you look at the airlines as well, they're breaking out. So the market is expecting oil to come down or they would not be buying these names. And to be very clear about this, this is not like Bobby Two Fingers on TikTok in his basement trading Brent. Like they can't do this to Brent. Only institutions and commercial traders can do that. So that puts us in that position. You know, one of the names I talked about when we were doing the public pre-market today was Victoria's Secrets. I didn't do this because of how thin it was, but you're seeing a lot of these consumer discretionary names get bids and we're seeing those names tend to move forward. And I do think that's really important. Even something like Amazon, which had really stupid news today about like a $25 Thanksgiving dinner. Like it exploded up and it was an awesome short. We shorted it and did well with it, but that should have gap filled down. And for some reason it just, it stopped. So to me, I would have expected more pressure today on the market had people not been thinking that there was going to be some expectations of a possible bounce, or at least let's leave it at this. Because again, I want to be real clear. I can't look at this and just get like warm and fuzzy, like and go, Oh, everything's fine. I should just get back in. I have to realize I'm going to need something and historically a hot CPI that is a peak CPI or even a peak CPI number can mark a bottom of the market. If you went out and I'm not going to do it, maybe I can do it in a Saturday deep dive. If you want me to do it, just put in the comments and I can do it, but I have the time. But if you took peak CPI before it rolls over and you mark the S and P off, you'll find it marks bottoms. And that's because you have a macro event and then they roll back in because of the equity risk premium. And I'm wondering if that's what we're setting up for tomorrow and why some of these moves are muted. There's a couple other things here that are happening that are worth your time. We did hit 38 on VXN and that does tend to mark bottom. So we did it here during Japanese Yen and we did it and we went crazy until we paused all that winning and liberation. In previous cycles, on smaller cycles, it was like 33. When you know that the VIX is rolling over or has the potential to roll over, you could always have another event. But if you take a look here, it's not this bar that tells you that it's not this bar, it's the third bar. Once you have a mid bar and then you close under that bar, which you did right in here, once you close under that, you have a bottom. Historically, if you go back and look at these moves where you're up inside bar and break below it, you have a bottom. If you have a bar here inside bar closes, you have a bottom. And you can go back and look at this on the S and P and it doesn't even have to get up to 38. But if you went and looked at these dates and like inside bar broke down bottom. When you see this stuff, and it doesn't mean it's going to last forever, but it's just it's interesting. It's worth your time. It's worth your time. You break out inside bar, you make a lower low. You have a bottom. So we close there below that. And I do find that interesting. Like, why would you be de-risking? Why would you be taking your, because the VIX and VXN and VIX move why? Because of puts and calls. So why would you be taking that off? Why would you be getting rid of your protection if you're so worried? You wouldn't, you wouldn't be doing that. If you look at the VIX here, we got up to 28. We have an inside bar. And then what we've done is now we've closed below 20. So these are giving signals of that. Now, if war starts up again or things like that, you can't come back and say, oh, you said, because what, the tail does not wag the dog. We only have a snapshot in time. And this is what we have. If I look at S5FI and I look at NDFI here, come on, work with me. Did I do it right? And I'm just on the wrong screen. No, I did it wrong. S5FI. And you got to deal with the, come on, use your fingers. Come on, sausage fingers. You got this. So if I look at S5FI and NDFI, whenever I get up into this range, that's usually where we have a peak. What's interesting to me about this is you can also overlay it with the RSI, but whatever here, let's get rid of this before we confuse everybody. But here's where I think it gets even more interesting. I undercut here, which is lower historically than any level I've been. And if you've been watching, we talked about this in here and said, hey, this is an area where you could run into, you know, a problem where you have the S&P relative outperform the NASDAQ, not absolute relative. Relative means that it's just going to do better. They both can go down, but relative means they could do better. Absolute means that it's going up or absolute means it's going down, right? There's a difference between relative and absolute. So people seem confused by that on the comments, but that's the difference between relative and absolute. But if you look at something like this, do I have to get there? Maybe not. Maybe because I undercut here. So that's another thing that was interesting and stuck out to me. But again, technically, man, we look God awful. If you look here on VTV, VUG, value versus growth, you've been leveling off. Are you breaking down? Not really, but you're leveling off value versus growth. And I think that's also a very important distinction for us. The best tell for us tomorrow is going to be if we get a hot CPI and they blow it off. And that's what we're going to focus on tomorrow. That is it.