Stock Market & Bitcoin Analysis for Week Ending 10/16/26

[00:00:00] Speaker 1: Good afternoon, everybody. Today is Friday, the, what is it, the 16th of October, and we had a pretty ugly market this week. The S&P didn't really show the details of what happened here, but semiconductors and in particular the AI trade is where the main selling came. So let's take a look at these markets and make some sense of it. Before I do that, I talk all the time about having a strategy and the strategy of not buying dips and not buying while we're below declining five-day moving average. In fact, a week and a half ago on October 8th, I said, my problem with buy the dip is no one ever defines what that means or qualifies what it is. They don't give any risk management, et cetera. I followed that up this week on Tuesday to say, don't buy the dip, buy strength after. And I was talking about, in particular, the semiconductors and how they were below the declining five-day moving average. Well, if you look at what happened the rest of the week with these semiconductors, it was just a brutal devastation, and there was no reason to be a buyer all week in here for anything more than a day trade. So let's just go back to the S&P for a moment. We'll come back, of course, and talk about those semiconductors in more detail. But for now, the S&P, it really, you know, it's still stuck in this bigger range that it's been involved in. I mean, we saw the breakout, and that breakout led to a failed move, but we're still in the midpoint of this, a little bit below the, towards the low end of the recent range that we've been in. And we've got this anchor off of the summer low, which we're still holding above. So, you know, not much real damage done in the S&P 500, not on the daily timeframe, but it doesn't mean that can't change. I mean, you know, the thing is, we stand aside and don't buy the dips below the declining five-day moving average because we never know if it's just going to continue lower, or maybe we're going to see a quick undercut, like we often see a quick undercut of a previous low. Then we get a bounce, and it'll be, depending on the quality of that bounce, whether it does something like this, comes up to the five-day moving average, maybe turns sideways a little bit, and then turns higher. That's certainly a possibility, or are we going to see it undercut that low, bounce up to the five-day moving average, then the next leg lower, and then what we have to do is we have to go back and look at an anchor, maybe off of this gap, and say, that could be the next level that we pull back down to. A lot of people are talking about this is seasonally a strong time of year, but the market is saying, don't listen to that. Seasonality, as I just posted on X here this afternoon, seasonality is a time of interest. It says, hey, you know, Santa Claus rally is often something that happens, but for the last couple of years, we've seen the market fall apart during that time, and it's a reason to say, okay, I'm going to pay more attention during this time, but it doesn't mean I'm going to buy into the abyss because someone came up with a study that said it's a seasonally strong period of time, just like the fundamentals. I'm not going to buy a stock like Micron just because they have strong earnings, and I think it's down too much at the 20-day or the 50-day moving average, or some other, you know, maybe the anchored volume-weighted average price from the year-to-date low. I'm not going to buy just because of a fundamental event, and I'm not going to buy just because it touches a level of interest. This is the level of interest. Instead, we take all that information and we say, what seems most likely? Does it seem most likely that rallies are going to hold? Well, with a declining five-day moving average, my answer is always going to be, let's treat it with kid gloves. If you're going to get involved, you get involved for a day trade to start. If you get stopped out of the day trade, no problem. We're not going to transition a loser into an overnight. If you have an overnight and you held it and you felt good, well, then look at it and say, first thing in the morning, if it undercuts the low of the first five minutes, then I'm going to get out. And you take your loss. And you don't continue to hold the loser. You can always get back into a name, but if you start thinking, you know, start bullshitting yourself into holding and say, well, it's a good company. The earnings were this and that and whatever, you know, you tell yourself. What if Micron does this? It's not probable, but it's possible. What if it continues down to the 200-day moving average? Not to make it about Micron. Let's go back and look at the NASDAQ because the NASDAQ undercut the anchor from the August low. And now, as I often say, people ask me a common question is, you know, Brian, I have all these anchors on my chart. When do I get rid of them? Well, I previously got rid of this anchor because over here, it was providing us with zero value. It was no longer a reference point. But since we broke this anchor and we're, you know, below the 20 or below the 50-day moving average, we look and say, well, what's the next level of interest? Where was a key pivotal area? Well, this move in April, the April low for the market, the average price since then is right about that $695, $700 level. And that's the anchor off of that low. So, to me, that is a level of interest. We might be in a seasonally strong period of time is what they say based on averages. But averages are averages. They're not every time. So, we look at it and say, okay, we're in this downtrend. You know, maybe Monday we see a low and then Tuesday we see an intraday reversal and we bounce off that level. That would be great. That would be something I would be looking to say. Let's say this is Monday for argument's sake and this is Tuesday and then we get, you know, some kind of consolidation. We get back above the daily volume weighted average price. I would start it there as a day trade. And if that day trade does well, I'll continue to hold it. If it breaks below here, I'd probably sell half of it. If it breaks below the low of the day, I'd sell the rest. But if it continues to behave well, I will take some profit off. And then I will look to see if I can transition to a swing trade because this is a big level. This is the year-to-date low. If it can bounce in there, great. I want to be part of it. I might not wait for the five-day moving average for the full swing trade. I would get a day trade entry. And then if it starts to do something like this, then I would have a little bit more confidence and add to the trade and say, now we're ready for a swing trade. And perhaps it runs up to the 725 level where that 20-day moving average, which will be rolling over next week, meets up with the 50-day moving average. So it's always about thinking ahead and what are the potential levels and how do I get involved? If I wait for the five-day moving average when the market sells off super strong like this, it might mean that I have to chase it a lot. But if I start out with a preliminary day trade thinking if the market allows me to hold it, then perhaps I can hold it and get a very nice bounce. What you don't want to do is what somebody who responded to me on X did. I said on this day, the 200-day moving average, it doesn't look like it's holding. It's still below the declining five-day moving average. And someone responded, TNA, as if they're going to buy the TNA because it's at the 200-day moving average. That's the most foolish thing you can do. Look at how the five-day moving average rejected prices this week. We saw what? We saw a strong rally right into the declining five-day moving average. You simply can't make that up. And then it got sold off hard from there. That is not a coincidence. That is how stocks and markets trade. So is there any evidence of support at this year-to-date anchor? No, there is not. We're bouncing in here and we're maybe trying to establish support. But the trend on the daily time frame is still lower highs and lower lows. And of course, with the declining five-day moving average, we're not going to trust this market. It's at a level of interest. It's not a level. It's just something to look at and say, let's look for the evidence in this area. It's not a reason to buy. Just like a pullback to a 50-day moving average isn't a reason to buy. These are just indicators. You don't buy at the 20-day. You don't buy at the 50-day. I don't at least because I look at it and I value the 20-day. But when I look at the 20-day moving average at 600 and I say, is there any evidence of support here? It turned sideways for a day and a half, but then the next day it got the shit kicked out of it on the open. And it shouldn't come as a surprise when you have a declining five-day moving average. So as the semiconductors continue lower, there are a couple scenarios here. One, maybe on Monday we undercut this prior low. And what happens there? Who has their stop under here? That's not a smart place for a stop. If you bought, let's say, over here and you decided, I'm going to leave my stop under there, and now it's dropped 100 points and then you have your stop under there, you deserve to have your stock taken from you. That is horrible risk management. You should be taken at least partial off as it undercuts the five-day moving average up at 620 and then getting out of it as it undercuts 600 and say, whoa, enough's enough here. But right now, that might be the place that it turns. My preference next week would be I'd love to see a really hard flush down below that orange year-to-date anchor and the 200-day moving average undercut this low right here. And then that would be the place where we would likely see a bounce emerge. So that's kind of what I'm looking at. And as always, it's a fluid plan. It's not even a plan. It's a scenario. We're mapping out scenarios. This is what I call scenario mapping. So we're mapping out the scenarios so that when we wake up Monday morning and if we see the market down here or up here, we're not just all emotional responding to something, we're saying, okay, this is what I thought was likely. This is what I thought was possible. Where does my strategy fit in? And this is what I talk about every single day for Alpha Trends subscribers. Biotechs, they continue to be weak as well. We've been looking at the anchor off of the year-to-date low in here and they seemed to be bouncing. But again, what was the direction of the five-day moving average? The five-day moving average was declining. And the pattern here on the daily and the 30-minute time frame is very clear. It's lower highs and lower lows. That's a downtrend. Expect to lose money when you buy stocks and downtrends. That's just how it works. It's math. The sum of the declines is greater than the sum of the rallies. And we need to see evidence the buyers are gaining control before we get involved. I'd love to see the biotechs come down to the 200-day moving average as well. It's only 3.5% lower from here down to that 140 level. And I wouldn't think, hey, it's time to buy and put this away. I'd look at it and say, okay, well, maybe we find buyers in there that's good for a bounce. And then it's likely to roll over again because that's what markets and downtrends do. Let's talk about the bond yield. The bond yield, as you know, I've been talking about this for over a month now about how we expected it to run not only past this peak right here at 5%, but past the 2007 high right here of 5,316. And then to start to see magazine covers, news go berserk. And the economist had their cover on, you know, talking about bonds on this day right here. And bond yields have declined pretty much every day since then. I don't think bonds are just going to cave in here. Maybe they pull into the 50-day moving average, undercut the 5% briefly. But I think you're going to see more of a, you know, perhaps a price correction down there, but then some more of a time correction. Let's talk about the AI trade for a moment. If you're familiar with Jensen Wang's five-layer cake, let's look. This is just alphabetical. These are some of the stocks in that five-layer cake. Look at the, here's what I want you to see. What is the direction of the five-day moving average? When did we break below the five-day moving average? And when did you think it was a good idea to buy the dip? Which point on here did you think you had the low? Was it when it hit the 20- and the 50-day moving average? Maybe the year-to-date anchor? Maybe the 200-day moving average? Well, every single one of those is wrong. Levels of interest get broken, and we give the benefit of the doubt to the sellers below the declining five-day moving average. So that's what I want you to look at on Amazon. That's what I want you to look at on APLD. The stock was already in a major downtrend below the declining 20-, 50-, and 200-day moving average. Just a garbage stock here for the last six months. Arm, they reported earnings, and what happened? Straight down. It undercut the 20-, it undercut the 50-, it undercut the year-to-date. It's testing the 200. I don't see any reason to be a buyer in here. ASML. They had earnings, and what happened? The stock is below declining five-day moving average. It's coming in next week to a level of interest at about $15.75, so it's worth watching in there. And you can look at any of these stocks in the same way that I've spoken about the semiconductor index. That is, you look at them as, hey, are they coming into a level of interest? Is Broadcom? No, no. I mean, it rallied into the declining 50-, and then got smoked. So maybe, you know, and people get excited about these bounces and say, hey, it was up 8%. Great. Watch what happens next. BWXTI is another one. You've got BE. This one didn't hold the 20, didn't hold the 50. It's trying to hold the 200, you might argue. But is there any evidence the buyers are gaining control? None whatsoever. Wait for the evidence. BWXT, downtrends, CCJ, downtrends, CEG. Looked like it wanted to hold on, but this one broke support below the declining five-day moving average. Leave it alone. How about Datadog? It's, you know, it hit a new all-time high. And we always talk about new all-time highs, just like we spoke about Netflix, not Netflix, of course, but NVIDIA, and how buying the breakout has been a painful endeavor, and that we see lower highs and lower lows below the declining five-day moving averages in all of these stocks. The big one that everyone was talking about this week was, you know, the data centers like IRON. Horrible downtrend already. Why on earth would you expect it to go higher? What was the other one, the main one I was thinking of here? Oh, Nibius. And, of course, this one, you know, what happened? It broke support over here. It's below the month-to-date anchor, and then a pattern of lower highs and lower lows below a declining five-day moving average. It broke the 20, it broke the 50, it broke the 200. Risk management is your job. Learn to do your job. Intel, good company, you know, all that stuff that they say. Broke support, below declining five-day moving average, lower highs, lower lows. Why would you buy a stock where the definition of trend is lower? Wait, let other people lose their money doing dumb stuff with it, you know, like buying dips. You're not going to get the bottom tick. If you're trying to get the bottom tick, you would have thought, that's it, the 50-day moving average, 103. It's a good company. I don't care. I'm going to hold it if it drops down to 100. Oh, shoot, now what? I'm trapped in this thing, and I'm down, you know, 13, 14 points. That's the psychology of it. But if you use that simple five-day moving average as your guide, I guarantee you will never buy the bottom. But you will buy at a lower risk point because you have a higher low to protect yourself with, and you will buy the emerging uptrend on the 30-minute time frame. Then you start to look at it and say, okay, well, where does that have the potential to go? Maybe up towards that 50-day moving average and the 20-day moving average bearing down it. Let's talk real quick about Bitcoin. It had a little bit of a sell-off this week. It didn't come quite down to where my bid is, down in the mid-79s. But I still think it has the possibility to do that. The mid-79s are, as we know, the anchor from this point, from that handoff, and the anchor from the all-time high. That's going to do it for me. Hope everybody had a good week and you start to realize that risk management truly is your job.