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Good Morning, everyone, and welcome to Thursday morning. It’s Stephen Whiteside here from theuptrend.com. In the premarket this morning, stock index futures are mixed. The DOW and the TSX are trading slightly higher, while the Nasdaq and the S&P 500 are trading slightly lower. Commodities are higher in the premarket on Thursday morning. Now, the reason we’re seeing weakness in the S&P 500 and the Nasdaq this morning is a couple of those big cap technology stocks that we follow closely are pulling back off of earnings, but in both cases, not enough to give us a sell signal. Last time I checked, we had Netflix trading right around $449. We’re looking for a close on Thursday below $440 and 54 cents. Tesla currently trading around $280. We’re looking for a close below $274.24. Now, in both cases, if we don’t get sell signals on Thursday, those lower channel lines are going to continue to move higher daily. Now, yesterday we talked about Bitcoin. Bitcoin had pulled back. It is back on a sell signal. Pros are giving up control. That is no guarantee that Bitcoin is going to continue to move lower from here. Last time I checked, it was trading slightly higher in the premarket this morning.
Those Bitcoin stocks that we looked at yesterday, they were trading in the channel for the most part. If you go through them and look at the Hut 8, for example, both in New York and Toronto, still trading in the channel. In the channel is neutral, looking for a close below the lower channel lines on Thursday to give us absolute sell signals. Of course, I hope you’ve locked in some profits along the way. Now, this is about the third time I’ve tried to get through this presentation. Apparently, I want to be really chatty this morning, and so I’ve tried to cut things down as much as possible. The VIX traded higher yesterday, still at the lower channel line looking for a close on Thursday above $14.45. We did put in a bullish reversal day yesterday looking for a move higher. We’re seeing that in the pre market this morning. The pros are starting to take control. So if we’ve got a bullish reversal day in the VIX, that could help mark the end of the summer rally. If we’re looking at the Nasdaq here, the queues, and you can see we’re down just nine cents yesterday.
We’re down over two dollars last time I checked in the premarket. And so if we’re going to move down from here, you’ve got to expect all the levels of support port on our price target chart to hold, but the market may want to head down to the Flyaper Channel. Now, today, if we were to move down to the Flyaper Channel, that would be a 13 % decline. As time passes, that Flyaper Channel is going to continue to move higher. Now, just about every chart has open gaps in the chart and the market will probably want to go back and fill those at some point. If we were going to get a more severe decline and let’s say we went back to the high hs from back in January, that would be a 20 % decline approximately from where we are right now. Of course, time is going to pass. The Flyaper Channels are going to move higher. Each stock has an open gap that could be a potential target on a summer pullback. We’ll just have to wait and see. We might have to wait to September or October for those gaps to get filled.
When you’re looking at the Flyaper Channel, you can see the thinner the channel, the more volatile the stock over the long term. You can get a shorter term look at volatility by looking at the average true range. And you can see the bars have been fairly small over the past few weeks. So you’ve got dramatic long term volatility, much smaller short term volatility looking at NVIDIA. If NVIDIA went back down and filled the open gap from where we are right now, that would be a 33 % decline. And then looking at Meta, you can see it’s got a nice open gap here and over here. Those gaps could get filled at some point, but that is not a concern on Thursday morning. Now looking at Tesla, you can see that we’ve got the Flyaper Channel just coming up to the 230 level. So if we were going to pull back, you have to assume that the market is going to want to try to hold support here at the 240 level. If that broke down over the next couple of weeks, you’re going to find the Flyaper Channel is going to be up at that level as well.
So that could certainly be a place where Tesla traders would want to find support. Now for the overall, the vast majority of investors in the stock market, and I’m not talking about short term traders, I’m talking about investors the question is, did 2023 really happen? Because we’ve watched a handful of stocks move higher and most people, if they’ve got a broadly based mutual fund or an ETF, they are participating in this. But when we look at the overall market and we look at the big cap stocks that the markets are based on, most of them haven’t moved since the start of the year, whether you’re looking at a stock like Boeing or Coca Cola or IBM 3M is in anywhere near where it started 2023. Then you look at Caterpillar. Caterpiller has had an amazing run since the end of May, but where did it get to? It’s back at where it was at the start of the year. Now, when we look at the Canadian market, which has not done as well as the US market because it’s only got one big cap tech stocks, which is Shopify. When you look at those big stocks that are in the TSX 60, you’ve got BCE, you’ve got Canadian Natural Resources, the Railroads, look at them.
They haven’t done anything all year. Then looking at Imperial oil, or you’re looking at Loblaws for groceries, or you’re looking at insurance with Manulife, or you’re looking at banking with the Royal Bank, or you’re looking at mining with Teck, these stocks are where they were at the start of the year. So for the average investor, nothing’s really happened in 2023. It’s just those handful of big cap stocks. And I’m concerned at what’s going to happen to the market when those big cap tech stocks start to pull back, which they will at some point. History tells us that’s what’s going to happen. And if we get a major pullback in those stocks for whatever reason, the rest of the market probably won’t do very well over the coming six months. Okay, folks, that’s all for this morning’s presentation. Looking for a pullback at the open, but probably not enough to really scare investors. And I don’t think we’ll get a lot of overall damage from Thursday’s trading action. Enjoy the rest of your day. Next time you’ll hear my voice is on Friday morning.
Stephen Whiteside
Thursday, July 20, 2023
