Major Market Sell-Off: Buy the Dip or Sell the Rip?

[00:00:00] Speaker 1: Once we rejected that critical level on the CPI, things became a lot clearer. We did the same exact thing on the Semiconductor Index today. We're going to cover both of those and CPI in detail, but the NVIDIA story is starting to spread and more details are coming out about who knew what, when, and how deep it actually goes. And the story is actually getting worse. It's not getting better. And the question is, how much weight is this actually putting on semis? At the same exact time this is going on, we have the U.S. Treasury yield trading like a meme stock. We moved 21 basis points on a two-year Treasury. The last time we did that was back in 2025, and that was during the period of winning and liberation. So you had a lot going on today with the CPI, and there were reasons behind it. But the most important thing is to go through those two levels and set up our plan for tomorrow. 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. Once CPI came out, it became clear that it was a hot number, and we're going to address that. But the thing that I really want to show here is I want to give you two levels that you should take with you and you should watch tomorrow. The first is going to be the 200-day moving average. You can see from the date that we broke it here, you can take a look straight across. You can see how we tried to rally up through it. Monday was a complete rejection. Tuesday, we tried again, complete rejection. So we are hitting it one, two, three times, and we are rejecting. Before we can even think of the question of, is this a bottom? One of the things we brought up yesterday was, are we oversold, due for an oversold bounce, or are we going to form a bottom? Meaning, is a hot CPI going to give us that? There are some concerns here about some other issues going on, and we'll get to that with oil. But for me, that's what I need to say. So the minute that we rejected that today, from a short-term trading perspective, that's a big no-no. If we take a look here, all I did was take the 200-day moving average, and I just dropped a line on it. Dropped it like it's hot, like the kids say. And they do say that. My son wouldn't lie to me. If we look here at how we act when we get up into this area, we are constantly rejecting that 200-day moving average. Does that mean that you're not going to get through it? No. But as we talked about yesterday, you were setting yourselves up a little bit for a perfect storm. You're grossly oversold. You're coming into a rally. You're making this higher high. So you have some things here that were actually working for you. And we can obviously see how the market reacted, came back down, undercut perfectly on that news today. It was actually just a beautiful trade overall. I mean, it's really hard to not look at this and really like it. But as always, we mark off those five-minute bars. And if we mark this off perfectly in here, you'll see it. Once you started to fade from that level, and then you broke the high of that CPI bar, that was it. That was the top of the market. You never got any higher. End of day from around 1245, when the one o'clock, you had a 10-year bond auction today. When that hit, you did lift from that auction probably because it wasn't as bad as what people thought. And that 1240 level, if you go through your charts, you actually saw a lot of buying around there on these names. They have a lot of these divergences here that held pretty well. And they did trade these names back up. AMD rallied as well. And they're all right around that same time, that 1240. They just started buying right into that 10-year auction. And they traded up a little bit, the hot names on the day. But nothing like you saw here on these rips. And I think there's a lot of reasons for that. I think a lot of people felt like I was thinking that, is this going to be an oversold bounce? Or is this going to be the bottom? And if it's the bottom, they're going to want to hold. But then you had nasty rejections in here. And once you saw those nasty rejections, it was time to get out. But this presented a lot of opportunity for traders today in AMD, in Intel. When we were live pre-market, I actually bought the SOXL on that print because it was such an easy trade. I mean, if you're from here down, you never broke those CPI bars. There's a reason why I always tell people to mark these bars off. And then sometimes what I'll do is I'll even cheat them a little bit and give it like a dollar stop from underneath there. Because sometimes the outgoes will try to wick you and then rip it back up. They weren't even really able to do that here. I'll leave this here. I'm not going to run through all the charts. But I'll just show you what we did off the open. And then we also did some why I bought SOXL pre-market. But SOXL, there's the 930, the timestamp. And what we did was buy that when that hit. And I wouldn't let it go past my break even once it started to lift. But we also went long Intel and AMD around 508. I bought a bunch of AMD calls. And I also bought a bunch of Intel calls. The Intel calls didn't act right. The AMD calls were just an absolute monster trade. But the point that I'm getting at here is you had this huge run. So into that run, I'm thinking, all right, well, maybe we're going to come back and start forming a bottom. That's not what happened here at all. Matter of fact, if you look at what happened here, you can actually see that you got to these critical levels, and then you just rejected them. And I think that's really important. For example, if you look at AMD, the first level that I had to get through was right around here. It was this particular area, this 515. And then you had a lot of a lot going on pre and post market on these earnings dates that right here in that date. So it was pretty wild, to say the least on these days. And it was definitely something that when you look at it pre and post, you can say it, but you run right to the 55 and you reject it. And this is what we're seeing a lot of we're seeing a lot of these rejections of longer timeframe moving averages, which is not great. I've seen great before. That's not how it goes. You need to start getting over this stuff. But it does present you with some really great trading opportunities during the day and take advantage of them. Because eventually, I think one of these oversolds may become a bottom. But today just was not that day. And a lot of it had to do with the Treasury market. But what you want to do is you want to constantly be analyzing them and watching where your stops are. So with AMD, it was a very simple trade with SOXL, it was the same thing, same superheated. What I'm really doing is just watching the highs of those days, and then just seeing if I'm going to get through them, and then how I act. But I'm also tying that in with some of these levels that we just talked about on the SOX. And I think that's important as well. And we should cover that. But more importantly, I want to go through this AMD live, so that you can see how we actually handled this trade live today. What did they do with AMD? Did they buy it? They're buying it. They're going to buy these names. Watch this bar right here. There it is. I just bought [00:06:42] Speaker 2: some AMD. I'm just getting exposure. I'm trying to figure this right now. December 490s. That's what I watching play out. Up $4. Trimmed. There we go. But the 490 calls. December on AMD. 50% stop. It's double that. It's triplet. Because you're going to go. 4 max there. I'll use like $25 or $30 as a stock. I'll buy more of them. I think I do. More calls. More AMD. I'm beyond max on AMD and those calls. Trim some AMD. Up 10. My stop is now $5.13.5. $5.13.40. Already trimmed enough. And I have the calls. [00:07:12] Speaker 1: Let's keep winning. I love it breaks out here. Because then for the rest of the day trade, I can [00:07:16] Speaker 2: just use $33.00 as a stop. I trimmed some of the December 490s at $70.00. I paid $55.00. And I am out of my AMD day trade. The rest of those will break even. Just keep moving your stops up. Understand [00:07:30] Speaker 1: that you're trading on the long side, which is really a counter trend of what you have. Make what you can. Pretty clear you have a downward trend. And I want to explain why that's so significant. Because if you watch Saturday's video and then you watch how all these videos are connected, yesterday, I'm of the belief looking at the queues going, geez, is this peak CPI going to be the bottom? So I have that in my head. But I trade what's happening. I can have an opinion all I want, but I will trade what's happening. So when CPI comes out and the US two-year does this, you have to start thinking like, geez, maybe I'm wrong. And so let me see how this starts playing out. And that's when it all starts aligning. So that's when you're looking at things like the queues and you're, you know, you're watching that 200 day moving average and you're rejecting it. You might think that it's a bottom. I can go into it thinking that maybe we have some kind of bottom in here. But at that time, once it starts not breaking, you have to start saying, all right, well, hot CPI, we're not breaking. They don't want to buy. There's too much uncertainty in the market and they're staying away. If you look at the SPI, it actually held up a little bit better, actually. But in regards to semiconductor index, there were so many key levels here that we're just going to show you so that you can watch them tomorrow. To start with, you can't even get above a 12 day moving average. So what we'd like to see is we'd like to see a rally pull back. And then we'd like to see this come down as well. We didn't get any of that. What we got was a rally up and then the rally failed at a couple of critical levels. And I'll show you them. But the most important for me is if I take a look at this low right here, you see that's where we closed last time. That's where we're closing this time. If you take a look at where this close was here, we missed it by like 20 cents. As soon as they got up to that close in that area, I think it's like 50. Yeah, I think it's more like 50 where we want to be because it's tighter than that than where it got. It missed it by like 25 cents. But when you go through these areas, as soon as it got near where those people were in from the gap down. And that's always so important about gaps. And you always want to watch these. I'll tell you why. Because the people that got trapped, all of a sudden they get to get out. And once they can get out, that tells you a lot. This was this was so fascinating today. Well, I think it's fascinating, but maybe I need a life. But if you take a look at something like MU and watch, watch how this just plays out. And that's why these are such critical areas to watch. I'm actually going to start putting out more educational videos. So if you guys have comments, I'd like to do one a week. But if you guys have comments about educational videos that you want to see, but I want to do them in series so that this stuff starts to make more sense so that you can link it together more. And then we'll just turn them into like classes or courses, and then they'll just be available to you guys. But if we if we look at here, like you flip over, you look like you're going to go, what do you do? You come to wick central, you form another wick, we call these devil horns, when you have two at the same spot, all of a sudden rejects, breaks down. And then what do you do? You lose that area. Whenever you lose that area, and it's that hot, you can't get back through it. Watch when we drop this to a one, we're going to drop it like it's hot right here. Look at how you started to try to fight to get back over it in Mutombo, Mutombo, and then it just can't go gives tries. And then that's it. It doesn't mean that the sky is falling, right? Because we're watching the Vicks come in and everything. And then you could say, look at how we held these levels. And we did we held that today. So like if you come in tomorrow, and you're down at 700, maybe maybe you want to look at Micron. But you want to watch how you're acting at the previous closes, because it's telling us something about those people. Do they want to hold? Or do they want to get out? Because if they want to get out, you know, that's a that's an issue. It's definitely an issue. You know, it's funny, I'm watching this on the tape with Anthropic right now talking about wanting to get out. And these Anthropic investors are out there shopping their IPO ahead of the IPO and saying they want a 3% fade. But really what they're doing is they're trying to get out before the damn thing even goes public. And and so you always want to watch and you get that public information from the closes. And so you always want to use the information that you have. Let's go back to the socks. So if we clean all this off besides those levels there, if we clean all that off for a second, and if I take this swing low and that swing high, and we go right to the top here, and then we're going to drop it like a top right here, you're going to note something about this. And I think it's really important. You came down from that measured move to about 23.6% of that fib retracement, you hit 38.2 and you rejected, you're still below 50% of the entire move, which is not a fib level. But don't you find it interesting that that's where the neckline is? Because I mean, I do. Again, I find this stuff fascinating. But look how you're just sitting there. So to me, yeah, we have to get through this. But we really have to get through that 160 as well. And I just don't know what the thing is that's going to be the catalyst. My thought is that this CPI could do it. And maybe it does over the next couple days. The problem that you're running into with the CPI side of this is that when you look at what's going on with like, the 10 year exploding like this, it's throwing off my entire equity risk premium thought process from yesterday. So yesterday, I was trying to explain the equity risk premium. And I'll get into it on Saturday because of all your comments. Those comments help me create content. But it doesn't matter where if I go to a two year or a three year, you can just see all the short term just absolutely exploded today. And when you go through these bonds, that's a real, it's a real issue. So does it help my equity equity risk premium thesis? No, it flips it on its head. So I can either stick with my thesis, or I could trade what's happening and make money. Take a look at these CPI numbers in some of the comments. Inflation came out above consensus. So core inflation, which is without food and energy, came in at 0.3. The previous was 0.3. Consensus was 0.2. Inflation month over month, 0.4 was actual 0.6 was previous. So lower, but higher than consensus. And we don't have year over year because October, we had a government shutdown. So there is no year over year comparison. Now this morning around five o'clock, no idea why five o'clock, but Fed Governor Waller stated Tuesday that of course, CPI would arise by 0.3 or more. Central Bank may need to move by a larger half point increment in December. U.S. Treasury yields rose. They're actually one of the highest levels they've been since April 2025. It's one of the fastest moves they've ever had. We'll get to that. Opening lower after CPI releases, investors upped bets on a bigger rate hike. And this comment by Jeffries ties it really all together. And they did it pretty eloquent. So that's why I just figured it's just easier to show it this way. The report probably locks in Fed hike for December. It's pretty much a lock at this point. Another one in first quarter. And if you don't see any movement at all with Iran in the short term, decline in energy prices, it's going to be right in January. They're going to do it right after because of what we're seeing or what they're seeing in the market, because it was broad based. When we look at what happened and we have all items here and you can see that where you are for all items in the past couple months are going to be here, obviously, in a row. You can see we start to decline and then we had the big drop off and then going from there. But if you exclude food and energy and you take them out, the same three in a row are really where you're at. But if you look at groceries, groceries ticked up, electricity is ticking up. So these numbers are going higher. And these are things that people are paying attention to. Obviously, people are buying food. People are using electricity. I thought this graph did an excellent job of explaining exactly what's happening. So the yellow line is the Fed dot plot, meaning those dots that they show us every quarter. The pre-CPI pricing is the white line. And so you can see that pre-CPI, our guide was smoother in a way, but got us to the same spot in 28 as where the Fed was. We can see that very, very clearly in here at 27 and then the curvature of said move and then 28, et cetera. And of course, this dot plot doesn't do quarter by quarter. They just, when they get to 27, 28, that far out, they do year by year. But anyway, if we take a look at what happened post, you can see post CPI, you can see how we started to get a little wider in the swing here. And that is what people are looking at because not only are you over 50, but now that swings getting up to 75 basis points. And I just don't think sometimes charts do it justice. And I think that this chart did a great job of just explaining it, the daily move into your treasuries. You can see where you are today. And then you can see that you have not had a move like this since April, 2025. CME FedWatch, this is a free tool. Everyone has access to it. And there's a couple of things here that are definitely standing out to me, or as someone likes to say, absolutely glaring. And to be clear, what we're looking at here is January 27, 2027. And you can see the probabilities up here. And right now you're at a hundred percent chance of a hike by January 27. And what you can see here is where you're currently at, which is your 375 by 400. And I'll get to why you care about this. But if you look at where you're at on the current, this is where you're at right now. There is zero chance that you're going to stay current. There is only a 36% chance that you're going to have one hike. There is a 57% chance now that you're going to have two, and that is up from 19. And now they're actually starting to introduce even the possibility of three rate hikes. So this is a pretty significant move. And what we were thinking was going to happen with hikes. Looks like October, candidly looking in hindsight, they probably should have done it. And here we are in December. And now we have, while we're talking about 50 basis points into a hot number, which is starting to scare the market. So that helps us understand what's going on in regards to the bomb market and what the issues are, right? That gives us a snapshot of what we have to pay attention to. When I look at the Google story, my concern with the Google story is that this is becoming a weight on semiconductors. And I actually wonder if semiconductors would be doing better had this not been the case. For example, you're 9% of the SOX. So it's going away on the market. Now at the same time, AMD is trading up like it's going to solve the world's problems. And that's fine. I'll take advantage of it and I'll trade it. I have zero problem with that. But most importantly, these things that are starting to unravel with NVIDIA. Like there's some articles out here that are alluding to a lot of problems, who knew what, when. And I don't think this is over, is where my sense is. Matter of fact, the more that I see today, and I'll just show you this, because when I read it, I'm like, oh, okay, well, here we go. But what they're saying is here, and I do these unedited and roll and you guys know that, so you have to deal with it. Jensen suspected Chinese helped fuel 7.5 NVIDIA chip sales into China. Like, it's an issue. It's like, it's not like it's just like, oh, he was running around with this girl. Suspected Chinese spy linked to romantically to NVIDIA CEO. And what's so interesting about this is allegedly leveraged her connections to help funnel 7.5 billion NVIDIA chips to China through a network of family-linked companies, according to a report on Tuesday. This report came out in the middle of the day. Chinese businesswoman helped move 240,000 NVIDIA chips subject to U.S. export restrictions. So this becomes a story unto itself. And what I mean by that is, everyone's going to be so focused on this, going into earnings and everything else, that this is going to become a problem. And this is next Tuesday. So I don't know that he makes this. I think yesterday I said I was at, I started the day at 1%. By the end of it, I was at 15%. Right now, I'm at a coin toss, whether or not he makes it through this. And I think there's a lot more risk here. And I think something like that, maybe that's the catharsis we need in semiconductors. And maybe there's some kind of washout there that gets us to where we need to be. But overall, from a technical standpoint, yeah, we might trade up. We might rally a little bit more here, but we're really going to need something to lift us. And we need something to stick our teeth into. So when I look at the core weave tonight, and I get it, they have a ton of debt. I get it, they're spending a lot of money. I get it, they increase capex tonight. But when I go through this quarter, it's like, all right, so you beat on revenue, they beat on earnings, they raise guidance, and their margins are higher than expected. It stocks up like 50 cents, and it's probably not even going to make it the way the way it's acting after hours. So you're hitting a point here with like, no matter what these companies are doing, you're not seeing this huge run into them, like it spiked up enormously on that news. And then it's just like, yeah, that's okay. That's not great. What about all this debt? Well, if they're able to pay the debt, what's the issue? And I get the fact that, okay, they're so levered. And then maybe these people have to pull. And that, you know, maybe they can't, they're not all going to survive. Or maybe it's their ties to Nvidia now. Now that's the problem. But at the end of the day, if they're making this kind of money, we're just still blowing it off. I think it tells us more about the sentiment of the market than anything else. So my thought was that you would see them buy bonds today, but you know, they were going to reverse the market by bonds today. And that's not what they're doing. If we take a look at oil today, oil came down again, that looks like we rallied a little bit. But the thing about oil, there's a note out that happened with why Iran is not being attacked by the US. And I thought that was kind of important. So here's the actual comment. And let me show you this as well. And I'm wondering if this is why we actually rallied. I'm just going to copy and paste it because it's just going to be easier for me to get this out there. Well, I thought this was going to be easier, but here we go. Oh boy. Oh boy. We're getting there. Okay. If nothing, you're entertained. Qatar Prime Minister Sheikh Mohammed, I'm not going to say all this. G7 foreign ministers in Paris secured at least two weeks of breathing room to pursue diplomatic aimed to avert US strike on Iran. That came following talks at the White House with President Trump and Vance. He didn't say it publicly, reached out to the press, diplomatic sources who spoke to this news channel and the Jerusalem Post. So I'm wondering this idea that we're closer to a deal is, hey, we're going to give you two weeks. And if you can't figure this out, then we're going to figure it out. And I'm wondering if that's why we saw that. So then if we don't get the oil to drop and the two year still is doing this, we might have issues. We might have these issues that we can't get around. So a lot of what I was hoping for yesterday or thinking that we were going to see with bond buying. Well, that didn't happen. We're not seeing the sell off more in oil today. We're not getting stabilization with NVIDIA. Like this story is not getting better or worse. And we're not really seeing that bottom yet. So what's it going to take? I think it's going to take more than something technical. Because technically right now, the very first thing that you would have to do is you have to close above the 200 day moving average. If you can't close above a 200 day moving average, which is at that 680 level, that would be the first technical thing that we could do that could say, you have a shot here at possibly this being a bottom. I get the undercut. I get the oversold, but things could always get more oversold. And if you really look at what happened already, you're already overbought on the queues. And I don't think anybody would have thought that you went to oversold to overbought that fast, but we did. And we didn't even make a higher high when we did it. So that's, that's very telling. That's it.