This Stock Market Rotation Is Not What You Think!

[00:00:00] Speaker 1: We keep hearing about all the carnage that's going on out there, yet the market has hardly moved. If we take a look at the NDX, you might get a little bit of a different story with the gap down after the window dressing in the end of the quarter. And the question is, how deep do we have to go to find the quote-unquote carnage? Semiconductor index moved up 12% in two days, only to give it all the way back, being down almost 14% from the high on June 30th. And the question is, was this something that is systemic? Are we going to see more of this? Or is this just an unwinding of window dressing? Manda's news on the week on Wednesday was pretty interesting, where they said, hey, the rumor is they're going to get into the neocloud business. And then the next day, it became clear why they're getting into the neocloud business, which actually reversed. And we're going to spend some time on this. And we really need to spend some time on how it's going to affect not only the losers, but who's actually going to win from this. And we're seeing some absolutely glaring indicators here. So I want to go through that smart money, dumb money as well. And we have to really spend some time on the breath and looking at the breath in a couple different ways. Let's get to it. 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's already in. The important thing is you get the information, education that you need. Subscribe. Let's get to it. I want to look at a couple different breath indicators here when we start. But the most important thing for us over everything is the smart money, dumb money, and then how I really view the world on what's about to happen. And I think understanding the framework, I've been asked a lot to go over this, but understanding the framework is going to be super helpful. In front of us, very simply, is the S&P divided by the NASDAQ, which gives you relative performance. And if we look at this on the RSI, we're starting to see this lift, and we're starting to see this higher high, and we're starting to see this actually break out over here. And what this is leading us to believe is that it's time for the S&P to play catch up to the NASDAQ, which means longer term, you might start seeing more comparable movement. And it might be time for that considering how focused we did get on semiconductors. But I don't think it's over for semiconductors. I'll start there before we really dive into it. But we want to not pay attention to this at our own peril. Now, there's a couple of things that really stand out to me here. Here, I'll show you this on the weekly so that you can see this. When we dive into this, you're at levels on outperformance on the S&P that you have not really been near besides.com. And you've seen this over some time, right? It's just the way that of the world, the way that it works. And so obviously, people want to be in the NASDAQ because that's where the growth is versus the S&P. But when you have these shorter term looks on the market, whether that is an hourly or four hours, anything like that, it does give you an understanding short term on what's going on. So if I start looking at something here, and I'll show you this on the hourly, because I think that this is absolutely glaring, as somebody likes to say, left head, right shoulder, neckline, and we start looking at the RSI, well, that's telling you that you're setting up for a period of outperformance on the S&P versus the NASDAQ. Now, here's the part you have to get with this. When I'm talking about this, what are we really talking about? From top to bottom, you're talking about 3.8%, right from all the movement that you've gone as extreme as it's been, and that's from top to bottom. So it's not as if it's this huge movement, but it's definitely something that we have to pay attention to going forward. Now, if you've never seen this before, it's a chart that we use a lot. And I've gone over this quite some time. But if we take a look at this, the S&P up top, and then this is the 200-day, the 50-day, 20, and 5. And these are all the moving averages, percentages above their moving average. So 200% above, 50, 25. If you've never seen this before, congratulations, now you have. So what's important about this more than anything is, I'm getting stronger. So as we're talking about the market having a hard time, we're at 65% here, we're at 67% here, 67% down here, and then on the 5-day, you're over at 2%. So the breadth of the market as a whole for the S&P is actually getting stronger as the week went on, despite what you're seeing in the market. So this does tend to lead us to where we find ourselves in situations where we're breaking out. In other words, it's very rare for the breadth of the market to continually get better, and for the market to stay stagnant. It just doesn't really work that way. Now, you might have some of the big dogs that have to come down on a percentage basis before it catches up to itself. But it's not realistic if you think about it to keep seeing a broadening of a market for it to go sideways. Eventually, it's going to give. It's not an if, it's a when. Now, I really want to spend time on the new highs, new lows, but I just want to point this out. In front of you is NDFI, and this is the NDX below. And if we look at the breadth of this, which is still above 50, NDFI is stocks above the 100-day moving average, or 50-day moving average, I'm sorry, NASDAQ 100 stocks above the 50-day moving average. You can see the decline, and we can see the decline here. So we're aligned. We're not really seeing anything different here. And if we now get rid of this, and let's go to this, because you can already see the pattern down here with the higher lows and the lower highs, it's the same exact pattern. So if we just click off of this for a second and dive into where I'm going with this, I'm not really seeing anything that's telling me anything different than what the breadth of the market's telling me. And I am seeing something different when I go and take a look at the S&P. When I go and take a look at the S&P here, we went through all those breadth indicators, and they're already telling you which way we're going. That, hey, we have this set up here, and we can all see how we're wedged in. And they're saying, hey, we're setting up to outperform. So I do think that looking at the diversification is not the dumbest idea right now. And we're going to get into some charts. I want to do some index work today and some sector work and then walk through the theme. But I think looking at the new highs, new lows will kind of really clear some things up here on what's going on under the hood and get rid of a lot of the noise because there's a ridiculous amount of noise out there right now. So this is a really interesting way to look at the breadth of the market and what's going on. And anybody can create this. And what you're looking at is new highs versus new lows. But you're doing it a little differently. Instead of looking at it relative, what you're doing is you're minusing. You have new highs and you minus them from the new lows. And what you're getting is this chart, which is showing you something that the market really doesn't look like it's doing right now. And I think this is very important. So in other words, the breadth of the market from new highs minus new lows is actually getting better. And it's been getting better. And this is not something that you normally see if we're going to quote unquote crash. The behavior in the market, we're going to go through some of these sectors in a moment. And the market itself to me looks like you may, maybe you have a sector issue. And I'm going to use the word maybe, maybe you have a sector issue. But overall, all that is doing is just rotating in the different sectors. And we're going to go through a bunch of those sectors today before we get into the rotation we're seeing and smart money, dumb money, and how I think you need to look at this market. But from my standpoint, yeah, you came down, you rallied right back up and they're in there, they're buying. So if we did something simplistic as, all right, well, let's go and take a look at where we're at here versus, and let's just make sure that we have this set up properly down below as the S&P. And if we just start looking at where we're at and start marking these levels off like June 23, right here, and then you just go, all right, let's go to June 23, and see what happened right there. You kind of see that that bottoming of that marks the bottom, even if the market drops, the breadth of the market's been getting better the whole time. So what does the market do? It just rallies back up. You can't have the breadth be bad or worse, and then find yourself in a position where the market is not going to eventually catch up. So if I mark that 12th off and then we come into here and we go 11, 12th right here, what do you get eventually when you peak? Well, you gapped up even though you peaked on Monday. We could see that right there. And then what happened? That was the high. So it's not possible for more names to be hitting lows. And then when they're hitting lows, it's not possible eventually for them to reverse. So I do like the signal because I find the signal extremely helpful. If you go and take a look at like May 15th right here, and again, I'm just picking random times so you can see it. 14, 15, and then right in this spot, what do we get from that May 15th? That's the low. And then what happens from there? Oh, well, clearly that low. And then what do we do from the 15th? We start going higher to the 18th. Even though it's dropping, the breadth starts getting better. And then eventually, as the breadth gets better, leading it because it's taking all of the supply out of the market, right? So the more supply it takes out of the market, the better. And then you can start seeing how we're turning. You, of course, are going to get all these huge marks where you're actually going to see this bottom before the market bottoms. So here, if we mark here, there's the 20th. And then if we went to here, well, since that 20th mark, you'd say, well, the market kept going down. I'm not saying it's going to just miraculously stop, but it'll start eating it up. And it's not possible. I mean, if you just think about it from a supply and demand point, it's not possible to keep hitting more new highs minus the lows and not find yourself in a situation like this. So like when you start to see this, you're like, oh, that makes sense. This divergence actually makes, you know, this makes sense. That might actually bottom because of what's going on here. This is super helpful. And if I was to look at this and tell you what it's telling me, if we rolled back over, because, you know, you have had some issues at this level at March, that might be one thing, but we don't know that yet. We don't know that we're just not going to start seeing broader markets. And we're going to get to some sectors here in a second. But I do think we have to look at this from a breadth perspective and say, yeah, this is broadening out. This is actually getting better. And I find this very helpful because it tells us more ahead of time. So again, I'm just giving you the example of the 23rd. When you see that you're gapping down, you can actually see that, yeah, the market kept going. But even though we knew that the breadth was getting better, so that allows us to put money to work. So when we look at some of these indicators, we get a lay of the land, right? But here, let's clean this off. And as always, I do these unedited on purpose because I'd rather just keep the stream going, like the way that I think it's more helpful. Either that or you find it annoying, but either way, here we go. So I think it's really hard for us to look at the market and think that this is over. In other words, that we're in a lot of trouble, the market's going to come in. Maybe we have certain sectors we have to look at, but when we look at industrials and we start seeing this kind of pop over on the industrials and we overlay that with like the dollar, we could see that this is right around the same time the dollar kind of started to roll over, which means that really the only thing that was holding us back was what? The stronger dollar. Industrials tend to do better in those kinds of neighborhoods. So I think what we want to understand is one sector might come in, right? We all know that the Sox is obviously getting weaker in here, and it's not really rocket science. In other words, if we go and take a look at this, we can see that rally up, down. So what do we start to get? Well, you start to finally get a lower low. Now to be super technical, this is the high and then this is the previous low. So we really don't have a higher high followed by a lower low. So that's really what you want here, right? So in other words, here's the low. So you have a high, low. None of those have broken. So until you've high, low, and then you've broken a true lower low, which would be this 518. You're really not in this like major downtrend, but you're seeing signs of it here. And for sure, we all see this, you know, rounding here and we'll get into the reasons behind Meta and what's going on and what may be going on and what might not be going on with Micron and DRAM and semis. We'll get to that. But I do think we have to look at this and say, all right, well, does everything look this bad? Or is everything like it's rolling over? And the answer is not even close. So if you start taking a look at the Dallas hitting all-time highs, you start looking at industrials and industrials are near highs. So there's not this huge implosion. And I think that this fits the narrative. So you look at the 10 year, right? And the 10 year is at that 4, 4.5%. And so you're like, well, what does that mean? Then you go and take a look at home builders and you're like, all right, well, home builders are breaking out. They've come back down. They've got filled and now they're holding. You're seeing other areas as well. KRE hit a new high and then sold back down, undercut. So you're seeing regional banks get bought. If you go take a look at financials are breaking out, right? So they're going after this and they're going after these sectors really hard. And I think that's very important for us to know and to look at. So from a broad-based standpoint, when we look at those breath indicators, it's very difficult for us to look at this and say that we have some kind of massive issue out there. If we take a look at biotech, biotech's on a tear, like just an absolute unequivocal tear, you're not getting any chances whatsoever to get involved. If you look at something like LABU, you pulled back all the way back and then it's just like, that was it. You had the window dressing day and then you had day one and then everybody got back in. I tend to, instead of going along this, I actually just short this because it's easier and it's just easier to lever it because you're just going to get the decay. So instead of going along, these names, I tend to just short the other three acts and that's been working exceptionally well. So overall, when we look at the market and we look at where this is going, look at the Mag7. What's the Mag7 doing? Well, Mag7 is hanging in there. We didn't break down and we start looking from when that time is. So what's really the issue? The issue is that maybe, I'm going to say the third time, maybe semis got ahead of themselves. And really what we're dealing with is two trading days. When you look at things like KLAC or Micron, it's really two major trading days that you've had these kinds of issues, right? Where we're rolling over. And a lot of that comes from what happened with Meta. But I don't think that we really want to look at Meta as the be all end all. I think that that's a losing proposition. See, when we start looking at things like healthcare, which is a defensive sector, they are breaking out. And that is something we want to pay attention to. So we always go and take a look at the defensive sectors and say, all right, what are they doing? And XLP, what are they doing? Well, they're moving as well. So we are rotating into those defensive sectors. And then what we can do is we can overlay that and say, all right, well, I like to look at once versus needs. So the easiest way to do that is go XLY and divide it by XLP. And then when we go and see that, and we're just going to turn that into a line, it's easier to read as a chart. We'll see that we're not really breaking out of once versus needs, but it is possible that the pendulum has swung so far to one side with the semiconductors that were due for some kind of rally in other sectors. So when we go and take a look at something like the SOX, and we divide that by IBP, for example, and we look at semiconductors versus IBP. And we look at this period of time, the double top. And then remember, we just talked about, we want those kinds of undercuts, because that'll tell us when we're really getting a true lower low. Well, that doesn't really get much cleaner, right? That you have a true, you know, in other words, I don't expect by looking at this, you would not expect biotech to continue to underperform the SOX in the same manner. So if I turn this into a line, and then if I go to this on a weekly chart, and we look at the outperformance that we've gone through, which has just been pretty darn insane, you would expect to see biotech catch up. However, it does that meaning out go up more than semis go up. But either way, it's relative. It's not absolute. It's not one has to lose and one has to win. They could both go up, but biotech probably goes up more. And I think that's what we're seeing. I think we're seeing that rotation into beaten down sectors where you're seeing things like healthcare breakout. And are they breaking up because they're defensive? Or are they just breaking up because everybody and their sister was injecting capital into semiconductors? And now we're starting to see that rebalance. So when we start to look at it from this perspective, where we start looking at the breadth of the market, and then we dive into it, and then we look at the individual sectors, you're seeing rotation into the market. It's not like we're seeing rotation out of the market. If we were not seeing the transports do this, and we were not seeing these names continually to push, then you might look at this stuff and say, all right, well, maybe there's some issues here. But when you go through like these leading names, like GE's hitting highs again, everybody was worried about Caterpillar. All right. But you have two days of Caterpillar, because Michael Berry came out and said, I'm shorting Caterpillar. So you get all the hoople heads that pile in the same trade. I just think you have to think about it a little bit more than that. You know, I just think you have to really take a step back and be really careful. See, the one thing that people don't take into account, we're going to cover some of this, you want to, it's like a perfect scenario what they did here. And I'll do it this way, because it's cleaner. I'll clean this off. So everybody window dresses in this scenario, right? Everybody window dresses means they all buy because they all say, yeah, we own semiconductors this whole way too, because all the limited partners and all the funds, they want to see that you were smart enough to pick this stuff up. People say that window dressing doesn't exist. I mean, it doesn't get any clearer than this. You can just show them this. So what they did was the next day they came in and wham, what do you have as much bad news as you could possibly have, right? Meta is going to do this. This is bad. The same time, you get all the sub stacks and the Twitters, and they just happen to be flooded with people saying, I can buy DRAM on half price on Twitter, right? All of a sudden, you get all that bad news into a light volume, short week. And then what happens Friday at the close, or which is today at the time of recording this in Asia, which is up 5% on the market. So you have to really be very careful when you have these areas where people can play with you. If you take a look at what's going on with smart money, dumb money, it really shed some light on more of a longer term theme on what we're saying out there. In front of us is smart money, dumb money. But if you watch this channel for some time, you don't refer to it like that. We refer to this as institutional versus retail. And there's a reason for this. Smart just defines that that's the right way to go. Dumb would define that's the wrong way to go. When you understand how this is calculated, your life gets a lot easier. Why? Because it shows institutional order flow versus retail order flow. So by understanding what we're looking at, it's very helpful. And there's a couple of things here that you always want to take away. Institutions move slow. Retail tends to move fast. So we always want to watch that because if we're rallying up, we could still be coming down even though institutions are buying because retail tends to puke a lot faster. Institutions are never really in a hurry where retail can't get in or out fast enough sometimes. And we've all seen this repeatedly. So I think it's important to point this out. There's a little bit of a development going here that I think is important. And it just started happening about, I'd say about a week and a half ago, but let's get into it. Now, just a couple other things I think are important. This is not by me. This is by Sediment Trader. I have no affiliation with them, but I've talked to them in the past and they're fine with me showing this. And you can see what we're dealing with in this little section right here. You have above our key level, which is going to be a level where that is extreme to the upside of enthusiasm and extreme to pessimism. So here, retail is extremely pessimistic. Here, institutions are extremely optimistic. So you can see why they might get these terms, smart and dumb, because this is when institutions are saying, yes, we're very optimistic. And then this is where retail is saying, yes, we're very pessimistic. But it doesn't always just work that way. So what I've come to realize in looking at this over the years is inflection points are pretty interesting spots. For example, if you looked here and said, well, retail is really optimistic, so we should get out of the way. And institutions really want nothing to do with the market. Well, if you did that, you missed a pretty big move. So we want to look at these extremes, but we always want to look at them from a different standpoint. We want to look at them, but we also want to look at pain points. For example, one pain point to me is where they cross. So if I look here, we can see that institutions or "retail" is getting in the market and getting along where institutions are getting out of the market. So if we point that up just from this area, to put it in perspective, and you guys remember this area, it's where we had all that winning and liberation. But what's transpired from there? Well, retail was long for a very long period of time. And you can see that they didn't really get out until December year end, where institutions were nowhere near as invested as they were up here. Really important concept, right? Because if we just went on the premise that, oh, institutions are always right, you would be out of the market. And so we want to just watch it for what it is. But let's take a look at this inflection point. The inflection points are interesting to me because it shows where you might, candidly, have a change in trend. So if we take a look here, we can see that institutions are getting in and retail is getting out. And as we stated earlier, institutions will take their time. Well, retail will just be in straight up panic mode. And this is obviously when we had the war or conflict or quagmire, whatever we are referring to on, you know, we're calling Iran these days. And so when we start to see this, it's like, oh, okay, well, that's super interesting, right? Because institutions are getting in, retail's panicking, peak retail panic would be what would take us right to this level, and I can clean this all off so you can see it a little clearer. So we're going to take that peak level where retail has said, you know, we got to get out. This is the least we want to have. And that tends to mark an area. But if we look at the inflection points, they're also telling us something. For example, when retail crosses to the downside and institutions are buying, what does that tell you? Well, that might be a top area. So if we go and look at those areas and mark those off as tops or go look when we break here and say, oh, well, that might be a top. And then we kind of look here and say, when it flips, what happens when we wind up going back up? And I think that this is an important concept. So what happened recently, we could see that retail sold down the same time that institutions really weren't buying. And a lot of this has to do with the end of the quarter. So institutions really are not going to commit a lot to the end of the quarter. So slighter retail selling, which is fast, and no institutional buying or slight actual selling is going to put us in a position where you're going to get extreme moves. And that's one of the reasons why we had some of the extreme moves that we've seen recently. But if we mark this off, we'll see that did mark a top area. You could actually even get more specific and say, well, what about this here? Yeah, 100%. That's marking that whole area. It's not drawn perfectly straight, but you get the idea. What's transpired, I would say about a week and a half ago is right here. You can see where retail is starting to buy again, and institutions are starting to get out. And this tends to mark an area that marks more of a, let's call it bottoming, or at least stop the bleeding. And if we go through history and look at these areas, we'll note that this is an area where maybe we don't go up, but we don't exactly roll over it. Now, it's not sector specific. So I'm not showing it from, hey, this is what's going to happen with semiconductors, or hey, this is what's going to happen in regards to this. But it does tell us that retail has been buying on that dip and institutions are selling. So when we look at this stuff, does that really tell me anything? Well, it tells me that in the past three years when this has happened and we look at those environments, we went back and showed you, we could do it again and give you a couple more examples of it. But if we went back and looked at those environments where we have those kinds of crosses, where retail crosses to the upside, we'll just note that, yeah, you might not just light the world on fire. And it also depends on where you are at space-wise. But when we get to those areas, you don't really drop anymore. You might put yourself in a position where you rally. And again, like everything, this is one data point. And all we're really doing is we're looking for anything, right? Anything that can give us an edge. So when we look at those areas, were there places where you really wanted to sell? Would you really want to get out there? Probably not historically. Probably wouldn't be the smartest move, right? It'd probably be an area where you would at least say, all right, well, the selling is probably going to slow down. And candidly, I think that's exactly what's happening. So if I go and take a look on the year, just to get a better sense of it, and you can see it really clear here on that year on when they got back involved. And here we go again. So do I want to bet against this? No. Do I want to buy just because it's happening? No, but I need to be cognizant that retail is definitely getting back in and institutions are doing what they do best, selling slowly while retail tends to move fast. And I thought this was super interesting. So you can break out dumb money by itself or retail by itself. And what I did was a three-year overlay of that. And now if I take that three-year overlay and I come to the 0.5 level, and you can see your numbers, they're right here. And we just come straight across here and we'll lift this up. And that strong got awful. So we're just going to leave that there and pretend it didn't happen. Don't look at it. And if we just come into this area and say, all right, when we get to 0.5 and bounce, what tends to happen? And so if we just, again, mark off those areas, and you're always just, again, looking for things, not so much that like, oh, that's definitely going to be it. But, oh, you mean we broke below it, and then we went back over the 0.5, what tends to happen? And it's not giving me, oh, we're definitely going to rally. But if you had to say, hey, dumb money broke 0.5 and closed above it, you might say, well, that usually means we're going to slow down on the S&P because that's what we're looking at, the S&P here. Well, the S&P is going to slow down its selling, and it may rally if this happens historically. It doesn't mean that, oh, no, we're definitely going to rip. But it does mean that you might be at a point here where the selling has gotten pretty far pretty fast. And now we're starting to see retail actually come back into the market, which is a little different than what people have seen over the past period. And this is a really good chance for me to segue into something because I do think it's important. But, you know, you had window dressing and some other issues, and let's dive into that. So I get asked a lot on how I view things. And people have seen me use this stool several times. This one's a very nice stool, much nicer than the one I usually draw. And so I think it's a good time, considering everything going on for me just to point out a couple of things on how I view the world. And then you can decide if it's something that you're comfortable with. And if not, then you're not. But this is how I see things. And it might make it a little easier when you're watching these videos. So I view the world of trading as sitting on this stool. And say you have like a bar over here and you're sitting on your stool. It would have been more helpful if that clicked and worked when I did that. I could say there's a little bar here. And sometimes when you're sitting on your stool, you're leaning on the back leg. You might be leaning on the side or you might be leaning on the front, right? So they all carry different weight at different times. So understand that before we even dive into this. And you've seen that. Sometimes we care what the Fed's doing. Sometimes we don't. But I think it's important to start there. Not all legs of the stool are equal at all times, right? Sometimes it's just a technical glitch. Sometimes it's macro. But I do think it would be helpful to just kind of walk through this and say you have the macro leg, which is your front leg. And to me, that is what? What is actually going on, right? Because if you have strong macro for one set of companies, it might not be strong for another. So when we think macro, think what is going on. When you think about fundamentals, what you want to think about is who's affected by it, right? So that what companies are going to be affected by it. And when you think of technicals, you want to just think of when. So if we go here and do this in order and just go technical and then go when. For example, you could say a company's trading at four times earnings. If you don't have some kind of technical setup, you could be sitting in that for years and just saying, I'm right. Everybody else is wrong. Let me know how that works out for you. But what we want is we want to understand what's going on, who's affected by it, and when we should act on the information. So if you take a look at this week, we've had micron, and micron's up and it's down. And you know, it went from 1200. Everybody loved it. Huzzah, we have to be hit up. 950. Everybody's like, I knew this was going to happen. That's technical. Nothing fundamental has changed. There is rumors that something fundamental has changed, but we don't know that, right? We're conjecture. So when we look at this, what leg of the stool are we leaning on right now? Well, the technical leg, more than anything, the macro picture's not changed. The fundamental has not changed, but people are convinced that something has changed, right? So when we look at the scenario like that, it's no different than looking at SanDisk at $50. Well, the macro didn't change, the fundamentals changed. And after the fundamentals changed, the technical started catching up to it, right? So sometimes you're leaning on one leg, sometimes you're leaning on another. I think it'd be helpful here to just take a step before we go to the next part of this, which is looking at it all from index sector stock, for us to take a look and say, what is a macro? What is a fundamental? What is a technical? Just real quickly. So when people say macro, this is what they're referring to so that you now will know and to be like, oh, that makes sense. So the Fed, anything the Fed does, anything interest rate related, inflation is definitely going to affect certain sectors more than others. GDP growth is going to affect all earnings, essentially. Jobs report would obviously affect other types of corporations. If people have jobs, they spend money. If people don't have jobs, they don't spend money, just the same way as recession. Monetary policy, is it easier to borrow money? Is it hard to borrow money? The yield curve, how much are we getting paid, right? In other words, if I go out there and get a bond at 7%, do I really want to take the risk of what's going on in the market? The yield curve can mean many things. I'm giving you one example. The economy, of course, rate cuts or rate hikes that affects the equity risk premium, which affects the market, et cetera. You get it. That's what people say when they mean macro. When people say fundamentals, you could say, all right, well, here's PE, here's earnings and the price earnings ratio. Some people get really hung up on that. I personally don't. But revenue growth, balance sheets, free cash flow, margins, book value, debt load management. You get a new CEO, sometimes it's a great person. That alone will lead credibility to the fundamental situation. The valuation of one company versus another. All of this, and these are just examples. They're not all of it. But these fundamentals, and you could see how these fundamentals could be affected by the macro picture. You know, you're going to have more revenue and more revenue growth if your cost to borrow is less, right? Because you're going to be able to grow and feed different ventures, et cetera. If your margins might be higher, if your debt structure is lower, if your debt load's too great and monetary policy starts getting a lot harder and they start raising rates, well, you might have a problem with your debt load. If they start cutting rates, the debt load might not matter as much. So there's an interconnectivity to this. Same thing with technicals. So when we look at technicals, really what matters is what is it doing technically, right? Is it at support, resistance, moving averages? These are just some of the things. Chart patterns, breakouts, trend lines, MACD, overbought, oversold, momentum. For example, but a great example of this before we go any further would just be what happened with Micron. Now in front of you is just Micron Technologies and I'm going to go to a daily chart. And over the past week, you've seen people have to literally just, they can't get into the name fast enough. And then all of a sudden they have to get out. Has anything really fundamentally changed about the country or the company? I'm sorry. Not really, no. I mean, there's rumors about what Meta is doing and is that neocloud? Does that mean excess capacity? There's a huge debate this weekend on that and we're going to touch on it. But what I think is important for us to get about this are a couple of things. Nothing's changed, but technically you're weaker. Matter of fact, one of the people that's piling on is we're watching Michael Berry pile onto this right now. And the one thing about him piling on is he's not giving you a fundamental reason why he's doing it, except that this thing goes in boom and bust cycles. He's not talking about that the fundamentals are ending. He was doing something as simplistic as saying this is too high off of moving average. So if I went and looked at it from that logic, his whole logic is just, oh, I'm too high. I think he was saying the 200 day moving average, we're too high off of that. And I'm not saying that he's right or wrong. But at the end of the day, that is a technical reason why the stock is dropping. There's nothing where you're looking at DRAM prices and DRAM prices are coming down. So there's a difference there, right? And we can understand those differences. It's no different than if we look at something like Walmart. Well, why did Walmart collapse? Well, Walmart didn't collapse because of a technical issue up here. Walmart collapsed because of a fundamental issue. And the fundamental issue was they said, we're going to cut gross margins. And because we're going to cut gross margins, because we want to take market share in the supermarket field. That's what they were doing. That's why the stock's acting the way that it is. And that's why it's been acting the way that it is. So by understanding this, we can then overlay parts of the stool and say, well, what part of the stool were we leaning on here? Well, the fundamental side, so the technicals weren't ready. And that's usually when it gets worse. If the technicals aren't ready, and they're not giving you signs, and there's something fundamental, that's why it actually does. If there was a true fundamental problem with Micron, you wouldn't be looking at a nine handle, you'd be at seven or six. That's just a technical issue. So by overlaying this, you get an understanding of that. So that's one part of it. And you guys asked about this, and that's why I'm bringing it up. But the other part of this for me is simple. Everything I do is index sector stock. So I could have the greatest company in the world, but if everybody's selling the stock market, it doesn't matter what it's doing. They could be selling air and it's not going to matter. So everything that I do on top of that is then index sector stock. So I have to look at the underlying index of whatever that market is and see if it's strong or weak. And does that align with me wanting to be long or short? Then I would just go to the sector, which would be something like the socks in this case, we'll clean it off. And then I'd have to go to that and then say, all right, is that strong or is it weak? And if it's strong or weak, then that makes a decision on what I want to do. And then from there, then I would go through the names and see which names would hold up the best. But that is part, that part of it, the index sector stock is what's called top down, right? Where some people are just bottom up, where they don't care. They truly don't care what the index is doing or anything is happening. They're just like, no, no, eventually my name is going to go higher because of the fundamentals. And that is one part of the stool. It's not how I trade. So at least now you have an understanding of how I view the world and that might help you with these. So when we see things like someone saying, I'm shorting it because of the technicals or I'm shorting it because I think it's going to miss earnings. You would know that basically what they're doing is kicking one leg of the stool out and going to rely on the other legs of the stool. And I'm not saying one way is better or worse. It's just that this way makes way more sense to me. To think that a stock's going to go up when I have insider selling or I have pension funds dumping it doesn't make any sense. So when we look at something like smart money and dumb money to tie this all back together, we have to understand like that's one thing. Order flow is one thing. If something macro happens or something fundamentally changes, order flow is going to change, right? These are all just snapshots in time. So if you understand how I look at things, it should make your life a little easier when it comes to trying to connect the dots, right? At least watching these videos, I would hope. But if we take a look at something like Meta, we all saw this huge move up. And then from that huge move where it explodes, and then we watch it roll over the next day. One of the reasons why it's rolling over the next day is because a lot of what's going on out there, right? There are a lot of comments actually on Thursday by Zuckerberg himself. But I do think that this is a great time to overlay something like the fundamentals for a second and take a look at this. So for example, and this just helps us tie it all together. So in front of you, you're going to see this chart and this is going to be pretty hard to see, but we're going to do it. You're going to see that the PE is in the yellow and white is the stock price. And you can see the white stock is over here and then yellow is where the PE is. And see if we can just blow this up real quick so you can actually see what's going on. That's a lot better. And what you're going to see is you're roughly around like a 17 PE. It's one of the lowest PEs it's had in years. And that's really because the stock's just been a kerfuffle for lack of a better term. You can see that, you know, as you kind of fall apart and the PE drops, then you start to see it rally up again. So why did we rally? I personally think you rallied the most because people were like, thank God he's going to stop spending money. And this is a huge event if they stop really spending money on this. But there's some other headlines that came out with this that we'd have to overlay. And it might not be what we thought it was. It might be the fact that Meta doesn't know what they're going to do. Are they going to sell sunglasses? Is he going to change the name of the company again? Because everyone wants to, you know, kind of remember, but forget that, you know, we changed the name of the company to Meta for the metaverse. We put $80 billion into the metaverse. It didn't have any revenue, right? So like, this is just another what people are referring to as boondoggle. And now we're trying to figure out what we're going to do with it. What everybody would like Meta to do is the following: be an ad revenue source, throw off cash, pay dividends. Instead, he's out here trying to compete. Now, this is where, to me, it gets really interesting. So the one thing that we would all have to agree on is he's never seen an idea that he doesn't want to take and try to make better, right? Like, we've all seen it over and over again. And so there's a lot of take on this right now. I'm just going to put this on the screen. Bear with me as I cut this back. I just have to do them unedited. It's just easier. But this is what you get. So reporters are drawing a direct comparison to SpaceX, which signed a deal in May for Anthropic to use the full capacity of Colossus at $1.25 billion a month through 2029 with Google also getting access. Same underlying dynamic. And so, in other words, Zuckerberg was looking at this and saying, hey, well, if they can do it, I can do it, right? It's not like he came up with the idea for Reels, not like he came up for the idea for stories, you know, all this stuff. It's always like, hey, how can I do it better, right? That's really where his wheelhouse is. The issue is that the wheelhouse that he's getting into, he probably doesn't want to be in. And there's a couple of reasons for that. So this came out yesterday, and I think it's important. CEO said the company's AI agent development is slower than expected. And we'd all agree with that. You know, no one's really talking about, you know, Lama and how we're going to use this, and it's going to be open source. So what's he doing? He's trying to find a way to get out of the boondoggle or to create something. The problem with going after what he's going after, there's going to be secondary fallout of other companies. But to go out there, I think you're going to compete with AWS or Google Cloud. I don't know what he's thinking. He expects Meta Investments to begin delivering more meaningful results in the next three to six months. Okay. The bottom line with the company is, and we all kind of agree with this. I would think we all agree with this. Meta makes a ton of money on their core business. And then he finds ways to not return it to shareholders by doing these like really crazy build outs. So Meta's expect to spend $145 billion on AI infrastructure this year, make up a large share of the tax estimated $700 billion our investment in AI. It's a huge chunk. So if CapEx comes in, this gets into the fundamental side. If CapEx comes in, what's going to happen? Well, CapEx comes in, then a lot of the earnings in those companies are going to get hit, which is why we started to see those names rotate over. There is a lot of talk about this though. And I think it's important to point that out. That might not be the case. As a matter of fact, what some people are suggesting is it could actually ramp it up if he's able to rent this out. The problem with renting it out is that if everybody wants to rent those out, then the price point is going to drop, but making the large share of the investment out there, it's huge. So if all of a sudden this gets cut back, it does become an issue. Zuckerberg said that when he and Meta's senior leaders began planning restructuring in January, February, Meta is not moving quickly enough to keep up with AI advancement. So what they're doing is spending. It's somewhat of a vertical ship. And I think we all, we can all see that. Executives were very impressed by coding, Claude Code, Anthropic. Speed up efforts, reorganization, underlay layoffs, resigned thousands or reassigned thousands of employees' AI projects, increased the spending, concerns about workplace policies. So, you know, when you come and look at these names, I mean, Google's just absolutely crushing it, right? But here's the thing about Meta and this business. This business is lower margins for the company. So they're not getting into a higher margin business. They're getting into a lower margin business. So when we look at something like Meta and what the havoc that it wreaked when it came out with this news, what we saw were a couple of things. And I think you had a confluence of events, which we will get to. After we rallied up, the bottom line is if anyone believed that they were going to cut CapEx and that they were just going to work on being a cash cow, the stock would have followed through. That's not what it did. It did the exact opposite of that. It actually sold down when everyone started to realize what was actually going on, that he wants to do this so that he can go out there and increase to spend to build out. And it's not being perceived very well. So where I think we have to really look at this from a trading perspective is think that you're probably going to get outfield. That's the most realistic thing for it to happen. Also, if we go and take a look here, we can do it this way. Just drop it down here. We can see we got right to the 55 and we reject it. I think what you do for the week is you have a confluence of issues. And I will address that. But I do think that we'd be remiss to not talk about some of the companies that are getting absolutely unequivocally smoked because of this. So if you take a look at NBIS, why would NBIS get hit? Because now you have someone like Meta saying, hey, we have all this capacity. We're going to come play in your sandbox. Now, NBIS deals specifically with people that are overseas more than the US, right? Like if you're a Chinese company and you don't have access, maybe you go to a company in the Netherlands. And I think you are seeing a lot of that. But for me, looking at something like this, you came to the 55. The question is, do we hold here or do we break through it? So this is really an area where this is going to have a really big test. And we're going to have to see how that plays out. But it's not just there. It's also IREN, which is getting absolutely smoked as well. And again, just the fact that they're in that area, that alone is enough to set these things on fire and have these things come down. And that's exactly what's happening. The one that was most interesting to me, and you don't, you didn't even see any real kind of bounce on it at all. I would think you'd see something, but you just saw more selling was CoreWeave because CoreWeave is one of the largest clients of CoreWeave is Meta. But what's so fascinating to me about this is that when you look at this, like the CEO has been selling, I think the CEO sold $38 million worth of stock between like June 30th and now. So clearly they got a heads up on this. The question really becomes is, and this is why the socks got hit as well too. The semiconductor index was timed perfectly. For bears, this was timed perfectly. You had window dressing this day where everybody comes out and says, we were in semis too. And so what they do is they go out there and it's called window dressing for a reason. You go out there and you buy the stocks that were up the most so that your limited partners and shareholders, limited partners or investors all think that you were in those names, right? So they go out there and they buy, and then we'll go to the high of where your clothes, which was June 30th. It was 95%. Peak was up there as well, right? 99. And they got to 95 at the close. So everybody buys these names that they really don't want to own at those prices, which drives it up. It's why stocks move 12% and what two days. Now, once that happens, they want to get out. But what you walk into the next day is a piece of news that's negative for semiconductors. And all these people that want to unwind the window dressing as well are now selling into people that are also getting bad news. So I'm big on watching this stuff. I'm watching how it plays out. And what we saw on Thursday, which I'm sorry, on Wednesday was really just the beginning. By the end of Thursday, people were sending me tweets saying, Oh, look, you can go buy DRAM on this site for half price. Some of this stuff starts getting a little orchestrated with people putting pressure on there and actually using social media to knock some of this stuff down. So I don't really buy it. I really don't buy the cut in CapEx. And I'm just going to give you my take on this. So from looking at how, when we look at the stool, what do I think the issue is on the fundamental side? I think one company is getting crushed and I think that is getting crushed. And I don't think anybody's really, you know, doubting why. I mean, one minute you're trying to hawk some glasses, the next minute you're trying to make us a giraffe and now you're going to go try to compete with AWS who's been at it for 15 years. Okay. So what we want to do is we want to look at this and say, well, how do we profit from it? The fundamental side of this, I don't see anybody cutting orders to DRAM anytime soon. I don't see anybody cutting orders to any of this stuff anytime soon, but we have to be cognizant of that, right? We have to be aware of that. I mean, when you look at SK Hynix over the weekend, we'll just pull up the DRAM chart. They came out and said that, oh, they're starting new contracts. By the way, there's no price caps anymore. So, okay, well, is that positive or negative? Well, that's pretty darn positive, right? Like, no, there's no upper limits anymore. Like the price is the price. You either want them or you don't want them. Now, Hynix, if you're going to take a look at it, we can look at it through EWI. Now, Hynix, by the way, EWI was up 5% on Friday. So they bought their dip and you can see it came right to a core level and it held. They're building out for five years. And so what we're seeing is we're seeing these huge moves. They're building out like a trillion dollars. It's insane the buildup that's going on over there. And so when we overlay that build out, do you think they're going to stop because of Meta? Like, probably not. I mean, we all know CapEx at some point has to be cut, but I don't think Google just raised $80 billion and just is going to go, oopsie. Like, I just don't see that. I don't see Amazon stopping and Oracle, which has just been in straight freefall. You know, I don't believe that someone like OpenAI is going to be like the big dog and the big winner. And I do think that CapEx on some of these companies is going to come in and eventually it's going to lighten up the bottleneck. Yeah, I do believe that. Do I think it's going to happen on a, you know, a Tuesday? No, I don't. I think it's gonna be pretty darn clear when it happens. And if you're trying to play the game of I'm just going to guess because I read this sub stack and this guy shorten it like, okay, good luck with that. Like, that's not going to work all the time. You need a process. And I would be really careful here with just assuming that you're going to call the top. I'm not saying that you haven't moved a lot in a very short period of time. Far from it. One of the things that makes a lot of sense to me is I did start buying a lot of like the mag seven names. They do make sense to look at because they are so beaten down. And I do think that you could start seeing not more fiscal responsibility. I'm trying not to laugh when I say it, but like more like, okay, well, these completely overshot. And since we began the beginning of this quarter, what's happened since the window dressing? Well, the mags are going up and the socks is going down. So what are they really doing? Right? So if we look at something like that and go mags divided by the socks, I'll bring it all back in a second. We'll get back to the point. But like, if you look at the mags this way and we turn it down here, right? And there's the RSI and then we'll drop it to a four hour, like it's hot. All right. Well, low, lower, low, higher. Now we're starting to go higher, right? Starting to lift. So you're starting to see these areas where, oh, okay, well, the mag seven is starting to outperform. And if we start to see that kind of outperforming, well, maybe we want to pay attention to that. Maybe we are going to outperform that. Does that mean to me that semis are going to implode? No, but you came a long way in a very short period of time. So even though these names are trading at huge discounts to the PEs and growth rates, which Micron still is, I get it. I've read the articles too about, you know, it's a cyclical business and all this. They're still sold out for three years. So I get it. You want to call it a cyclical business? You know, things change. I do think that you can come in pretty hard when people panic, just like fear. Fear will do that. They'll make people panic. And that goes back to what we talked about with the stool, right? Where you have the one leg of the stool, which is the technicals and the fundamentals. Did anything change about the fundamental side of the market? No. The macro side, did anything change? You know, the macro side could also be tied to capex numbers. So you could say there's a possibility that you have a macro change, which could fundamentally affect the company. Now, you know why I use that draw that picture versus just sitting here trying to draw one, right? You've seen this real time. Can't unsee it now, can you? So if we take a look at this, I do think there's something to that. So you could make that argument like, well, that there's a macro issue. If they cut capex, then the fundamentals here. And then that means the DRAM price is going to be dropped. The good thing about DRAM price is you can look at them every day and all they're doing is just keep, they keep hitting highs. So when you look at DRAM pricing, you look at what Micron's doing, what are we saying? What I would suggest is that when you overlay and you look at the world this way, it starts making it simpler. So like there are things that Meta said that would concern me. Like if I was long IREN, I would be concerned if I had like a behemoth getting into my arena. Would I be concerned about Amazon's AWS? No. Am I worried about Google's cloud because Meta's going to try and do this? How long is Meta going to try to do this for? 18 months before they slap another pair of sunglasses on some type of Instagram star? Like, okay. These guys have been at it for a decade and a half. It's very different. And people know that too, where they're going to put their data and who they want to do business with. And I do think that is significant. So what does that mean for semiconductors? Well, everybody loved semiconductors until when? Until Meta came out and said, yeah, we're spending all this money. We don't really know what we're doing, but we're going to mix it up. And here's a picture of Kylie Jenner. So now we have to watch and see how this acts at that 518, 519 level, which would also be the 55. Could you get there? Maybe. I think you have a shot at it. Do I think it's the end of the world? 10%? Probably not. It'd be great if it did because you'd have the opportunity to really get involved if it does happen. If you believed in it, you can always call the top. People have been calling the top for forever. I mean, Barry's called what? 16 of the last three corrections. So eventually it's going to be right. But if we look at it, you're going to get that opportunity. So when we go back and look at this and say KLAC, everybody wanted to buy KLAC. Oh, I knew it. I knew it. I knew it. And then you're at 306. Now you're at 235. Nobody wants it, right? So this is a great time for you to think about what you're really trying to do. And if you think that the top is in, because if you do, that's one side of the trade, right? You should do what you're comfortable with. But if you look at the other side of the trade, you're looking at this stuff going, well, wait a minute. I was just 750 and I'm 600. So if I have the patience and the time, this might be an area for me. And then the other side of the trade is going to be, well, no, this is definitely the top because meta stops, that's going to be 15%. If they stopped it, that's going to be 15% of this number. And then, wow, that could really hurt pricing pressure. And of course, the market is a discounting mechanism to the future. So that can affect these names and rightfully so. But I do think that when you really think about it, you would have to say that, yeah, like names like Corweave, like there's a problem there if your customer is now your competitor. And if someone else is getting into your arena, yeah, there's an issue there. And that's why those names are acting the way that they are. I don't think it means that the market's in trouble. And I'm just going to just leave it with that. Like the market does not crash when the Dow is hitting all time highs. And we tend to, you know, we tend to get so caught up in the tweets and everything else that we have to kind of see the forest of the trees. Like that's not really the way this ends. It doesn't end with, you know, the dollar kind of rolling back over and saying, well, maybe we got ahead of ourselves. So how does it end? Yeah. I mean, for the Sox, it ends when they start cutting estimates, when CapEx starts cutting, that's when, and you'll be able to see it and you will see it in DRAM pricing. You 100% will see it in DRAM pricing. If you're trying to get in the community, make sure that you are on the waitlist, links in description and pinned. We're sending out more invites this week. And then after that group of enrollment, then it will be pushed out to September. That's it.