Good afternoon, everyone, and welcome to Stock Market Today.It's Allie Coram and Mike Webster here with a breakdown of the action this week in the stock market, and what a week it was.Is it time to party like it's 1999, Mike?
I mean, we saw some incredible jaw-dropping moves this week. Really incredible.
Yeah, it was one of the most important weeks we've had in a long, long time.And yeah, we're going to talk a lot about the similarities between now and 1999.And yeah, should be a fun show.
Yeah, OK, lots to get to.So we'll talk about the major indexes, the sector action, some stocks to keep an eye on.So much is extended, but we'll talk about some perhaps aggressive strategies for this type of market.
Webby's got a bill story or two in store and some additional charts that give us perspective of where we're at in the overall trend.I think we should look at 1999.We did that this morning on IBD live, and I think that's pretty eye opening.
And then, uh, perhaps some homework at the end.So buckle up. Let's get right to it.So the major index is the Nasdaq today up about one tenth of a percent, but for the week, a huge week for the Nasdaq composite up 5.7%.
The S&P 500 was up about four tenths of a percent on the day for the week. up about 4.7% so a big move there.The Dow blue chips also participating in a big way at 4.6% for the week and small caps.
What was this percentage move like 8 1⁄2% for the week?Massive, massive, massive Webby.
Yeah, so we have a big shift in everything.And we'll talk about the IWM and the Russell in a little bit.Let's start off with Spy.And let's look at it on a daily.So
We went into this really huge risk event of after getting hit back through the 21 day.And that was a pretty bad break that we had.It doesn't look that bad on the chart because of the gap in there.But if you were to draw the full
bar on there from where it closed the prior day, that was a really big spread.And it just found support exactly where you'd want it to, right at the 50 day, which is that red line there.
And that's what a lot of algos are, you know, based off of, you know, trades around the NASDAQ, and more importantly, the S&P around the 50 day, everyone in the industry looks at that.And, and so that was
a big tell, because we really should have shooken out below that a little bit at minimum, just to kind of clean out all those stops that would have been sitting right there, the stop loss orders, but the bears couldn't push it through.
And then once the election results were out at a lot faster than everyone thought, you know, people were thinking, you know, it was kind of common thought that it was going to be days.
It took a while for the dust to settle. Yeah.
And so now everyone was worried, okay, how is this going to play out?And it's not so much the outcome, it's that we had an outcome, and we had a clear outcome.
And we didn't have, you know, a lot of, you know, fighting over, hey, who really won, it was clear cut.
Uncertainty was off the table at that point.
Yeah, the market hates uncertainty more than anything is uncertainties.That's why you always have these big risk events and going into them.You know, they're binary events, a lot of them.
And now we're past that we're and more importantly, then the election was the Fed a little while ago, switching gears and doing the you know, the the 50 basis point cut.And then of course, we have the additional cut this week.
But when that happened before, it really changed the character of the market.
Because what the Fed does probably has more of an impact on the market than anything, more than most political moves that happen and policy changes is, what are the interest rates and what are the trend of interest rates?And
I think Powell did a great job yesterday, a perfect job the time before.And yesterday he just kept that up of not boxing himself into any corners, kept things very respectful when he was asked certain questions.
And so it was a great tone, a great message.I give him an A plus for these last two. And I think the market is as well.They feel comfortable that they're going to be easing at the proper pace, whatever that pace is.
We might get another cut in December.We might not.And I don't think it's going to be this big worry the way we've had over the last several years.Is the Fed going to continue to make all the mistakes they made?
Because they made a lot of mistakes, just being honest.But now they're doing a great job.So you've got that behind you. You have the uncertainty of the election behind you.And this is just allowing the market to lift up.
And of course, you know, there's all the anticipation of what AI is going to do for efficiency from not just for the chip companies, but for every company on pretty much every level of just helping
drive efficiency very similar to what happened in the 90s with with the internet just driving the efficiency of all companies on on every single level.
It's so hard to think back to a time where you just wouldn't go on the web and get your information.I mean, I remember going to card catalogs at the
library, you know, when I was out of college and in the 20s, you know, I was working at T. Rowe Price and I'd go across the street to the library.
In the 20s?So that was in the 1920s that you were doing?
In my 20s.I'm sorry, in my 20s.That was a joke.
Come on, I'm not that old.
I'm ancient, but I'm not that old.So anyways, lots of change.And now we don't know how this is going to play out with the AI.Everyone thinks that they know who the leaders are.You don't know.
Just like in the 90s, you didn't know who the leaders were going to be.The Googles weren't even around at that time.So there's a long, long a runway here.I think we've got that as our tailwind.So there are a lot of things that are off the table.
Now, with that said, you never know what news can come out of the blue that could hit us and test the market.When that happens, that'll tell you how strong the bulls really are.Whatever that news is, it could be, you know,
geopolitical, you, you don't know, you can sit around and guess, but the trend is your friend, the trend is saying that we are decisively up, we're in a power trend, we're at new highs.
And more importantly, the individual stocks are acting really well, but not too well, right?Because we saw a lot of blow ups recently.Right, Allie?
We did.There's a lot going on underneath the surface.I would say net-net, it's very positive.And even seeing a lot of comments on social media from some of our friends basically trying to keep people in check.You're not a genius.
We're in a strong bull market.So keep your head on your shoulders, that kind of thing.But yeah, that doesn't mean that everything is going to work.You're absolutely right.
And it hasn't been.And that's what you want, because that will keep people from thinking that everyone is a genius, because not everything is going up.And we've been having gap downs on earnings.You don't really
think about them much because if you have it, you just sell it and move on.That's what most people do, they follow our style.But there are a lot of things that got hit hard on earnings.
That's actually a good thing because it keeps that euphoria in check.Because the one thing that we don't want from 99 is the excess of euphoria.
But what I'm saying- National exuberance.
Yes, and I remember when when he made that comment very early on and and. So the market can keep going a lot further than you would think.But, you know, we'll tell you, we'll get through some charts and tell some stories along the way.
Exactly.I also just wanted to point out in terms of portfolio management, OK, how to handle a week like this week, we can tell you what we did.Right.
I think that Thursday before the election that spooked investors with that gap down on tech earnings, there was some disappointment there. I think that was a time that a lot of us were trimming a little bit.
Like you said, it was this big risk event that we didn't know exactly how it would play out.Once there was that clarity and the bulls started running, that's not something that we wanted to miss out on.
On IBD Live Wednesday morning, you and I were talking about some strategies for how to get in if you wanted to ramp up exposure a little bit, needed to ramp up exposure a little bit.So can you talk about that just briefly here, Webby?
Because I think that's something also important to talk about.
Sure.Well, first, starting with that gap down that you're talking about, you have to react to that.Now, depending on your style, some will react more.If you're more of a swing trader, you're going to react a lot.
And if you're kind of a long term investor, you just react a little bit.You might just react by not increasing exposure or just dialing some things back because that could have gotten much You know, it could have come down a lot more.
And so you did want to do some selling there.That was prudent.You want to stay flexible.But when you go back up after a risk event, that is where it's very tricky, because all the most individual stocks were out of position.
You always want to be thinking of your risk management tools.So your first risk management tool is where to have your stop loss.And if your stop loss is going to be 10, 15% below what you're paying for it, that's pretty tricky to get any size.
You can do tiny positions that way, but we don't like that.I mean, I like a three or 4% stop myself, but seven or 8% is fine as well.So that makes it very difficult to buy individual stocks that are running on a day like that.
So what I like to do is go lean heavy with ETFs because you get built-in diversification.You can get your exposure up very quickly.They're super liquid.
If you're more aggressive, you can do a double or a triple leverage, or you can just go with singles.For the most part, I do singles, meaning a QQQ or a SPY or an IWM.I own all three of those right now.
or you could do a double version or a triple version, whatever works for you.But getting that exposure right away, when you see a turn like that, you want to have a target level of whatever percent you want to be invested at.
So let's say you are going into that event, you were 25% invested because you would reduce risk, And you didn't know how the election was going to play out.
And then after that, and you see the reaction, you said, you know what, I want to get from 25% to 50 or to 75%.You can do that with individual stocks, but there weren't many in position.
So you go out and you buy the Q's or the spiders or the IWM or ARK.I did all four of those. or an iBid, I did that one as well.You know, wherever it is that you're seeing setups on an index level or that it looks like they're going to lift,
You can buy them then.Then that FOMO, that fear of missing out, is relieved.That pressure is relieved.Then you can sit and just wait for your spots.
And then as stocks give you an entry point, whether it's an upside reversal or breakout of a tight area or any other strategy that you like to use, Then what you can do is sell off use those accused or spiders or what have you as a source of funds.
Sell that off and then use those proceeds to buy your individual stocks.That's a technique I've been using for a couple of decades.I like doing that style might not be for everyone but I think it's if you like to trade
quicker, it's a good way of ramping up your exposure.And I think you did some TQQ and you pro as well, right?
I did and I bet and some Tesla to round things out.
So yeah, I'm a big fan of the index ETFs and especially in a in a strong market where you're if you're having a good year, you can get a little bit more aggressive with the leveraged ETFs, but you do need to be very careful.
And I can say that from first-hand experience, too.They can burn you.But sometimes you get lucky, right?So it's been a good week.OK, let's move on.And anything else on the index level?Because I know we're going to circle back later with your chart.
Should we go to the sector ETFs?
Yeah, let's go to the sector ETFs, because we have a lot to go through.
Yeah, we do.OK, so I'm going to navigate to our sector ETFs.And let's do the worst first. Okay.I think that's how they are.Go ahead.
Okay.So what we're going to focus on right now are the big shifts with the relative strength.Now, obviously, um, you look at the chart in isolation, looks fine.You look at that RS line, it looks terrible.
So if you have any stocks in this area, you probably want to look at it, see, make sure they haven't triggered any cell signals.This is not the area that you want to be looking at to buy right now.
Now XLC, that was down some today, but Google and Meta in that group look set up.Now they were a little bit, Google's more on the laggard side.Meta is kind of in between.So this is an area that I would still look at, that RS line looks fine.
Obviously technology, that RS line on balance, you know, is kind of flat near term, but it's still, we're seeing a lot of strength in that area.So I would still look there, definitely look there.
RSP is a helpful, going back to the RSP for a second, is a very helpful gauge of general breadth because it's the, you know, the equal weight of SPY.
I had a very healthy day today, closing near highs, and you don't necessarily need to buy the RSP, but it is a good way of knowing, okay,
We had had those higher highs and higher lows, and then we broke that last week where we undercut the last marked low, the 176.41.So it was very important that we hit a higher high going over the 182.22. So we have that in place.
So for this uptrend to get back, you know, looking great as this pulls back, whether that's next week or three, four weeks or months from now, you want the next low to be higher than the low that we had.And then that trend is fine.
Um, you know what, it's firming up a lot better more than it has.I like the tight action over the last couple of days.So I am going to be looking there.
Yep.So yeah.Clearing a downtrend, roughly seeing that relative strength pick up next on the list XLV.
Mixed bag, in general, this one's tricky.XBI looks interesting.That's something we put on SwingTrade related in the day.I think this area looks better on balance than the general XLV.So I would focus more there.
OK, great.XLF financials.
Yeah, it looks great.Another thing that we put on, it was amazing how many of these small banks and big banks just had moves like you've never seen or hadn't seen in a long time this week.And so let's pull up like a Goldman Sachs or a Morgan Stanley.
And if you look at the small regional banks, they have massive moves.But this is the type of action you'd like to see after a gap up.So you've gapped up, you had a really tight day yesterday and a tight day today.
And that's telling you the market, both bulls and bears, are comfortable with this new price point, you know, went from just above 500 to just under 600 in the blink of an eye and it's holding in tight.
So, you know, if that can take out this week's highs, you know, that can be something that you could enter into.Otherwise you could just do it through an XLF.
Yeah.Okay.Here's XLI industrials.
Yeah.Kind of somewhere in between.So I would investigate that area.
xlp consumer staples um not a fan that it that it had a decent move uh today because in general you don't want the staples to be doing well um but that rs line has been terrible recently which is a good thing
Yeah, and the reason why is because this represents that flight to safety.So if you have the risk on type of market, then yeah, you this should be underperforming.
Let's go to xly consumer discretionary Tesla is in here.
Yeah, so we both have positions in Tesla is obviously too extended.But this also is, it's basically dominated by by Amazon and in Tesla.But you have other stocks like Lowe's and Home Depot.Let's let's pull those up.That
are trying to find support at their 50 day, they've got earnings around the corner.
And so that's kind of good for this XLV because, or the XLY because you have not just those two heavyweights in there, you have other ones that look like they're turning.So this is certainly an area where you want to look.
Let's pull up Amazon cause it's not as far out there as, as Tesla.So if that one could go sideways for a little bit, even a few days to give you something to trade off of, then that's an area where I'd be interested in.
Okay.So we were on XLY.Let's see if there's anything else.XLRE.
So some of this space had some funky shakeouts this week.So I think people are still trying to get a handle on where longer term interest rates and mortgage rates are going to be.So I wouldn't rule this out, but it's not my go to.
Yeah, so maybe they have to sit out a little bit.It's nice that it was up almost 2% on the day, but this is that mixed bag.Your AI plays versus your non-AI plays.So you really have to dig deep into that area.
Exactly.Okay, that's the sector look, but we also want to include two more ETFs here.IBIT, which we both own, had a big week this week, up 11% and breaking out.
Yeah, so I'm not, you know, I'm not an expert in the crypto space.I just trade the charts.And this looks like a very healthy. breakout.
And you could imagine with now with the election behind behind us in, you know, any thoughts of, you know, I don't think people are thinking the new administration, at least at this point, is going to do anything negative in this space.
So it's giving it a chance to lift.And it's been base building for quite some time.So this could have a decent move.
OK, and then ARKK, this represents more of the speculative growth type of area.Some might say also typically has Tesla as one of the key holdings there, up 2.6% on Friday.And Webby, this was up almost 16% on the week.
Yeah, so that's one of my bigger positions I'm playing and because it feels like, let's go to the monthly on this one.
This has been a dog for a while and now it feels like these are the type, I think it's a good way of trading that heat that a lot of them have very sporadic earnings or even sales in their story stocks, but those are the ones that are working.
So a nice way to get a a diversified, um, uh, to hold in this space is through, through arc.It's a, it's a bit extended obviously.
Yeah.Yeah.To, um, get rid of that single stock risk, especially when you're playing the, the heat and the speculative stuff.Okay.Well, um, something that we saw, uh, this week was a lot of strength and stocks where
Just when you thought that they couldn't get stronger, they did.And Applovin is the perfect example of this Webby.I would say this has to be the leader in the market right now.
I feel like even before earnings, it was because not only do you have this outstanding price out performance with a steady Eddie and strong uptrend, but you also had the fundamentals, triple digit growth.And it just seems like a lot of money
was flowing to this area.And then boom, you get the earnings report reaction, shares up 46%.It's got to stop there, right?Nope.This stock can't go down apparently up another almost 18% on the day to day.
So I don't know what stock is in terms of the fundamental and technical quality combined is more of a leader right now than this one.
I, it hurts my eyes and my soul and my heart to look at this stock because I missed it.On September 11th, we were on IBD live and it was one of the first ones to, let's pull up the S&P for a second and go to September 11th.
because that was kind of a very key day where it almost undercut that low from a couple days earlier, early in the morning.And if it did that while it was underneath the 50-day, we could have seen a fall down to that 200-day.
That would have been normal and natural. And the fact that it turned like that was telling you that the bulls were back in control.So pull up APP that day and I sat there and I said, wow, it's up four or 5%.
And, you know, it had been, that was not a perfect base in there.And I was like, ah, no, I'm going to let it go.And there'll be more along the way.And that's what happens.You know, that's how the, the best ones end up getting up and out of there.
Um, and then, you know, it always fell too far to chase.And I, and I think that's what probably a lot of shorts were in there saying it went up too, too quickly.They're going to short and then they get their head handed to them.
And then that kind of cycles on top of each other.So this is one of the reasons why I was saying that this reminds me of 1999.I. You know, I remember trading 99 like it was yesterday and let's pull up the NASDAQ in 99.Sure.
We can just keep the November date in there.Just change that.So people, if you didn't trade during 1999, everyone thinks of, oh, 99 was just like 1929.And in a lot of ways it was. but it wasn't this runaway bull.
The first half of the year, as you can see, was very choppy.And one of the things with the homework assignment is to study this timeframe and see how it moved up a lot, but it didn't do it in an easy way.
Like the first part of that year was not easy, although there was a ton of money to be made and anyone trading in the style did very well, most people did.
But then it was this turn here that you you're marking and that's what this week feels like That it was the the beginning of this next leg because everything was already up Everyone was expecting the irrational exuberance and everything that we were going to blow apart and we eventually did You know in March of 2000
but you have this enormous gap up.And if you had been sitting there saying, I'm waiting for a pullback, waiting for a pullback, you didn't get that pullback.Um, let's go out to like June of 2000.Okay.And
you know, it was that very tight trading above your 21 day from October until January.Then you had a couple of shakeouts in there, a test of your 50 day, tons of money to be made there.
But then once it topped out, that was, you know, that stock market was done for two years until October of 2022 or 2002.Sorry, it's been a while. That was brutal.That was a horrible time to be trading.So I'm not thinking that this is going to happen.
I don't look out that far.I'm just saying, what does this current market remind me of?And it reminds me of that part.There was also something in the late 70s on the Nasdaq side that had a move like this, but this is more current for everyone.
And a lot of people probably remember this.So you want to stay on your game because you never know when they're going to pull the rug out.So it's not like just pedal to the metal and buy every dip along the way.
But I would suggest that everyone this weekend, they go through and study it, study that market prior to that October gap up. and then study it afterwards and ask yourself, how would you have traded that?Look at some of the key stocks.
Let's pull up Qualcomm.Qualcomm was the poster child.Bill O'Neill, the founder of IBD, made a fortune in this one.And you could see there were a lot of similarities with the APP and how this one traded.
And I would do a change date over the weekend and just go back to the like that April gap.Go back to the April 99 gap. And yeah, a move like that.And at that point, how much was that up that day?
Yeah.And I know that Bill had trimmed it going into that.And then he bought it back or bought those shares back plus more when you had that big gap.
And so big gaps scare most people, but, and it did, you know, end up coming back and testing it, you know, at the 8606. But that was a monster, monster move and worth studying this weekend.
I would also suggest that people study the axon from the 2003-2004.Back then it was called taser at the time.Now, this was kind of the polar opposite of Qualcomm.Qualcomm was a big liquid name.
And I would study this one and go bar by bar and say, how would you have traded it?What rules would you have used?
And just a bit of advice, look at that green line, the 21 day, and study it, its entire move, and you'll be surprised at just using that one rule of holding it while it's living above your 21 day and not closing below it, how that captures that move.
Absolutely.OK, so in terms of APP resetting to today, it seems like this week traders were rewarded. for being aggressive.And that doesn't mean that they're not going to get burned in another couple of days.
If things fall apart, we don't know where things are going to go from here.But something else that we talked about this morning on IBD Live is A, knowing what type of market you're in.
And that can mean you can you can get away with being a little bit more aggressive.But B, that doesn't mean that you shouldn't have those risk management rules in place.
Maybe you're buying something out of position, but that doesn't mean that you should just, you know, hold your nose, you know, if it does go against you and all of your your profits evaporate and the stock starts falling apart.Right.
I mean, it could work fabulously from here, but we don't know.So having that risk management is key.
Yeah, risk management, there's two aspects.There's during the trading day and then there's the overnight gap risk.The overnight gap risk is pretty much unless you're using options to hedge, there's pretty much no way around that.
You can get a downgrade on valuation that tends to happen on things like this and you'll see it down 10, 15 percent or what have you in a blink of an eye.
you can't um adjust for that but you can intraday while the while the stock is is trading have your stops and know how much risk you want to take so if you're going to trade heat then you need to know
above all, how much risk you're willing to take on that stock during the day and then also look at it and say, okay, well, if a gap, how much did a gap up or how much did it move yesterday?
48% or so.So with a 48% move up, you know, then
And it can come down, you know, 20% in a day and just look normal on the chart, right?It's not going to be a big blip.So you can't buy it here without having the fear of overnight risk.So you're waiting for it to give you some sort of entry.
So I would all these really hot stocks that are up and out of there. If you don't have it, like, I don't have this one.I'm just sitting there waiting, saying, OK, where is my entry point?
And that's what Bill would do, too, when we would miss things, you know, just like IBD has Swing Trader and Leaderboard.At his company, we had the institutional watch list.
We called it the Nesme list or the new stock market idea list that I managed with him. And when we would miss something like this, he would just say, put it on, put it on, get it on the list, even out of position.
And we're gonna try to find a way to get into that.And I think now would be a good time to pull up Reddit to kind of explain how to do that.
So this, I do have a position in, it didn't have it on the gap up, but this is what, you know, if he was with us, with a stock like this, he would have said, okay, it has that big gap up, let's get it on the list.
We would have to wait 24 hours before all the PMs could trade it.And then we would be waiting for exactly what you marked there that day.
And that's when I started buying it because your expectation was it should move higher because it's settled down for three days there.Then it started making a move above the prior day's highs. now you had a line in the sand.
Your line in the sand was that red day, you know, the day before that you have marked.And if it would have gone back below that, that would have been normal.
Then you would have just sold those shares, but you could have bought it there and then added to it as it was going into new highs.
Now, with that strategy, you're taking on a lot of risks because again, anything that gaps up, you know, 10, 15, 20% can gap down that much. Um, oh wow.Um, you know, it can, it can gap down a lot on negative news or downgrades.
So you do have that risk, but your other risk is not participating in these things.So you want to position it accordingly.Maybe it's only a 2% position for you just so you have some, maybe it's a 5%.
You're not gonna make it a massive position out the gate, but you can get in these.So what I would suggest people do is study the ones that have gapped up and continued running
and then go back and do a change date to, let's change the date to that, the day that you have marked there, and look and see how it looks on the chart, because the scaling will be different, and you want to look at it and say, okay, if I was buying it here, it's up 12% on the day, at what point during the day would I have bought it, and you would have bought it as it was moving over the highs of that,
Those both of those rig days And then you know just sat with it and let it like run a little bit That's the ideal way now.You can't turn back the clock and do that trade time Yes Yes.Good one.
So what you can do is study all of these during this cycle.For the hardcore folks, they can go back to the late 90s and study those, the ones that are still in the database, and study those moves because that's kind of what we're in.
We're in this where these things have these crazy moves.I think a lot of shorts are getting squeezed really hard, and you kind of want to take advantage of that.
Well said, let's also, and I'm gonna reset the date.We wanna check in on Alab because this is another stock that had an explosive move recently, Webby.This earnings reaction, let's check it out.It was up 37%, almost 38% on the day.
It was tested a little bit the following day, ended up being an upside reversal.And now it is very close to that century mark.
Yeah.So the century mark that we always talk about, that's, you know, an old thing that Jesse Livermore came up with, you know, you know, God, a hundred years ago, really.
And it's very important as you go through levels like 50 or a hundred, 200, 300, there are these psychological numbers that do have an impact.You know, if an algo is not going to care if it's a round number, probably, but people do.
So if it can go through there, and it looks like it wants to, then it could probably launch up to 120.I do have a position in this.Let's go back to the daily and kind of walk through this.
I had a position in this going before earnings, but I sold it before the earnings just because I didn't want to take that risk in what was going on with the market.And then, are we in the current date?
Yeah.It's funny.It said that.
Yeah, it did say, but the charging, you know.
Photographic memory helps every once in a while.So with this one, what we did today on Swing Trader was because you had a little mini upside reversal, it shook out below yesterday's low.We said, okay, we're going to go ahead and give it a shot.
We bought some and then, you know, I waited the 30 minutes and bought it in my own account. high probability that we get shaken out of this.Then it undercuts that because it just might not be ready yet.And that's fine.
We'll back away from it and then wait to get back into it.But this is kind of what you want to do if you're trading the heat.You want to study recent heat, historical heat to see how they trade because lots of the bases
Let's go over to Costco to kind of go to a kind of a classic type of buy.
This is a classic base breakout and I was just tied up and didn't do anything with this one yesterday or today, but really yesterday was an ideal buy point as it was going through your nine
10 marked high there and then you could add it to it today as it was going through its standard breakout.But this is probably for most people want stocks like this is going to be slower.
You don't have to worry at night like, oh, am I going to get a downgrade and is my stock going to be down 25% in the morning? That's very unlikely with something like a Costco can always happen.
But, you know, if you saw a lab down 25% on Monday, you'd go, yeah, that's probably, you know, that's normal.Costco down 25% on Monday.Wow.That would be huge news because that would be unheard of.So just manage your risk with your position size.
Um, this looks like a solid breakout, but just a slower poke your one.
Yeah, you definitely want to manage risk because you don't want to go off the rails like a crazy train.
My favorite one though for today, and it was sparked by what you said on IBD Live about this feeling like 99 is party like it's 1999.
I miss Prince.I wish I would have seen Prince live.I did dress up as Prince a few times for Halloween.I will not share those pictures with you.
Sounds good.We'll have to use our imaginations for that.Okay, Webby.So with all of that, are you ready to- Yeah, let's do it.
I'll try to get through this quickly for most of it.So we're going to take a step back.Bob Weir, take a step back and look at the weekly chart of SPY.Nothing out of the ordinary here.Big blue, perfect candle.
So what you want to do is look at other big blue, perfect candles like this week here on August 16th.What happened afterwards?Continued higher. This big blue one on November 3rd continued higher.
So that's your or even March 31st of 2023 continued higher.And we'll look at NASDAQ. The same thing there.So you look at this just to see, are you missing anything?And it's really hard when it's a perfect candle like that.Looks great.
So we will toggle over to something a little bit more interesting and we will look at regression lines. And here is the SPY.
So SPY was hanging on by a thread because you were underneath your minus one standard deviation on here, which is your solid green line.And your high was underneath it here on the fourth.And if this would have been a normal market,
where we weren't going into a risk event, you would have been getting ready to just say this trend is over with because you were living underneath there.But the context was the market was waiting for this event to happen.
And the thought process with using these regressions lines are when you come down underneath your one standard deviation.When you come back up through that, you're buying.
When you come up through the minus 0.75, which is your dash green line, you are hitting it hard because the thought process is it wants to revert back to your line of best fit, which is your white line.It's also called a regression line.
I just think of it as home base.
during a trend your stock wants to stock or index wants to go back to home base that's his happy place in the middle of that trend now it's just not going to ride it the whole time so you're going to have moves above it and moves below it
But your expectation is always if it's the trend is still intact, it wants to get back to it.And what did it do this week?It did exactly that.Picture perfect.Another sign that the market is acting extremely healthy.
Now, more interesting was the composite, the Nasdaq composite that didn't break your minus one standard deviation. And this was textbook.If we didn't have the election, we would have gone like 200% long that day.
But look, the election results could have dragged on and then we could have chopped along.You just didn't know.But now, this one is getting to a point where you want to be a little bit concerned that
you know what, it could settle down a little bit and it could simmer down here because it's up near, you know, they rarely get up to the one plus one standard deviation.
This is kind of where they tend to pause or, you know, want to revert back into your mean or your white line there, but it's still healthy, but you are being cognizant of saying, you know what, I'm probably not going to add to my cues up here because
how much upside is there in the very near term.You'd rather it kind of go sideways and then give it some more runway.We will look at RSP briefly because this one was in the doghouse, was too far underneath here.
So even though it's bounced back up, I'm not going to use this regression line here because I would just say it was broken and even though it's back up and looking healthy, I think it needs a new trend.
So sometimes you got to just throw out some regression lines. But IWM, now this is fascinating.Again, using the same dates, August 5th is your first point.And then we go out 50 days from there, October 14th.Those are for your regression lines.
So that's the data series that it's looking at.And now you're way above this first plus one standard deviation.So this looks like a massive character change. This regression line, you're using it in a different way.
You're now getting aggressive with it because it's so far up there and was able to hold.And now if it comes back in through your plus one standard deviation, so this red line, you want to start backing away. quickly.
You don't want to wait for it to mean revert back to that white line.So now it's kind of been just like RSP kind of broke on the downside.This is broken on the upside and you want to kind of treat it in a special way.
Now that I say that knowing that IWM has given us head fix for three, four years now, but this time this is so powerful and you do have a shift. This one, we'll see if it works.
It looks like it's going to work, but I thought it was going to work back in July.So that's enough on that.I'll just be very brief with your 50% retracement on NASDAQ.You have this move up from our recent lows here and October 31st up to today.
You just want it to stay above the middle point there.You know, same thing with SPY.
Now we can go on to the levels, the most important levels here on SPY, your first warning sign, and where the bearers will want to try to push it down to, to test, would be the low of the gap up. the sixth.
So that would be a natural place for it to try to get tested too.If it breaks that in any material way, right away, you want to be concerned if it can't bounce right back.
Lots of times after a big move like this, bears are going to use any negative news to push as hard as they can.That's when you want to interpret to see, are the bulls really there?And we'll do the same thing on NASDAQ. Um quite a bit stronger here.
We're using that level and then of course, um, you know the the lows here from the fourth, um for that one.And we will wrap this up by just glancing at the very simple version, which is just your 21 day on here.You're getting a bit up there.
So, um, a bit stretched from your 21 day, which is what you want to see when you, when you, uh, get moving at the very beginning of a move.And this is kind of resuming a move.
Um, so you want to see some power there, but you don't want it to get too far.Um, away, and we'll look at the Webby RSI in a minute and to kind of see that.
Exactly.Yeah.Thank you so much for sharing all of those Webby.Now we're going to switch gears here.He's going to set up two more charts that we are going to chat about here momentarily.
And as you mentioned, the Webby RSI, looking forward to seeing what that's showing.So take it away, Mike.
Okay, so with this, again, this is measured your low versus your 21 day expresses ATRs.Now, the little blue histogram down there is the number of ATRs, the distance your low is versus your 21 day.
And so if it gets up to three ATRs, and it's up to about two and a half ATRs, that's when, If you've been trending, you want to start looking, looking around and kind of backing away because you tend to get pullbacks.
But because this is the very beginning of a move, let's go back to kind of the November time frame.
And you could see how it was like a solid blue wall there that it got up to about three on November 15th of 03 or 23 and then stayed there in the blue for quite some time.
But it backed away, so that's would be normal and natural For spy to get a little bit further before it pauses now the the NASDAQ Is a little bit different that tends to get a little bit higher than three ATRs when it's powerful
Don't have a recent example of this, but historically it tends to get a little bit further than what SPY does.And this is about, you know, again, two and a half ATRs.
So it still has a further to go, even though it feels like it's a nosebleed territory to show a little bit more power.
Okay, and now let's show the off high charts.
Sure.So here we've got SPY and not much to look at here exactly what you would think are kind of a line in the sand for any pullback to say that it's abnormal would be to look at your last number of ATRs that you were off your highs.
And so this was a little bit over three ATRs off your high. So you can do the math on this, the ATR, your average true range, the amount that it trades on a normal day over the last 21 days is 1.08%.So let's just round that down to 1%.
So what that's telling you is anything more than like three and a quarter off of your highs, that's when you start worrying that, okay, things might be, um, uh, breaking its character.
So that's where, you know, how I like to use this as you say, okay, when would I know that there might be something wrong?And with this would be, it would have to come down in undercut, uh, this area.
And then the same thing with, we'll look at the cues this time.Why not? Um, cues are at highs and same thing there.You would be looking at, you know, around, uh, three or so.Um, and this one is one and a half or 1.49 is your, is your ATR.
So you're looking at, uh, what, four and a half percent or so off your highs before you start getting concerned.
All right.Thank you, Webby.So in closing, feels like a game changer week, feels in some respects like 1999, 1999 vibes out there.But I think with that being said, traders should keep in mind, you know, maybe for those who
who didn't crush it this week or feel or had the FOMO or seeing APP like us up a gazillion percent this week and wishing they were in it.I feel like that doesn't mean that now we should be reckless.Right.
There's a difference between being aggressive and being reckless.So you got to keep that in mind as well.Your thoughts.
Without a doubt.So before you do any trade, the first thing you want to do is look at your overall account.Say, how deep in the market am I and where do I want to be?
Because it would be kind of like getting in the car to go for a drive somewhere and you don't know where you're going. Where are you going?Like, how are you going to get there?What are you going to do?
You just drive in circles and hope that you get there.So let's say you're 50% in.You're like, boy, I should really be 100% in.That's your guy.That's your starting point.Now, how are you going to get there?And how much risk do you want to take?
And you can look at your current holding and say, OK, I've got a bunch of Costcos in my account.I can risk buying some APPs if they get in position three weeks from now.
Um, but if you're up to your eyeballs in APPs, well, you might want to dial that back and buy some Costco's of the world.So that's the context of the risk management of what do you have and just realize.
There's going to be bad days out there and we're going to get slammed.And you want to look at it and say, okay, you don't want to be fearful of that, but you want to be cognizant of saying, you know, this is in the cards, could happen, will happen.
We just don't know when it will happen.And how am I going to handle that?Have that game plan ahead of time, mark it, you know, mark it down on a notepad or I always use my notepad constantly.Or, you know, that was something I got from Bill.
He'd always have a little yellow pad with all his notes.Or email yourself.Just say, you know, if this happens, this is what I'm going to do.And then have that handy.
So when you're in that battlefield, and we have that bad day, and this bad news event comes out of the blue, you just go, okay, well, I said I was going to get off margin, and then I was going to sell anything that I was down on.
And I would say that that's the one rule that I used back in the late 90s that served me very well during that time frame was
was if I went home and I was down on anything at all from where I purchased it out, it went, even if it was down a penny and I just, but I'm willing to just buy the stock back the next day if need be.
But, um, you know, maybe it's a half a person or a percent, but don't take big losses right now because there's so many stocks moving, you know, it's just not worth it.And I just want to add one thing.
I've got Steve Ray Vaughn there in the background.Go out and do a walk this weekend with your family, with your friends.This Sunday, if you're in Austin, I'm going to be doing a walk at eight o'clock in the morning.Everyone is invited.
We're going to meet at the Steve Ray Vaughn statue and just do about an hour mellow walk.We've done this before.It was a lot of fun.So if you're around, love to see you.Just chat, you know, about life, about music about the market, whatever.
Um, and if your dogs can handle it, um, an hour walk, bring those two.Cause I love dogs.
Awesome.Well, thank you so much for that Webby and thanks everyone for tuning in.That is it from us for this week.But of course you can check us out starting Monday on IBD live.
We'll have all the latest stock market analysis for you there, how we're handling what's going on in the market.It's always fun spending our mornings with you all.Investors.com slash IEB life for all the details on that.
And then of course, we've got you covered after the close every day on stock market today.So we'll see you back here on Monday.Thanks everyone.