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What Did We Know, And When Did We Know It?

Hello, everyone. It’s Stephen Whiteside here from And I hope you’re having a wonderful weekend. The title of this weekend’s presentation is what did we know and when did we know it? And as you can probably realize now that the market has gone from long term risk on to long term risk off. And that happened this week, but it certainly didn’t start this week. If you’ve been with us for any length of time, we’ve been watching the seasonality chart of the major indices and the VIX in the month of March. We were anticipating that the VIX would shoot sharply higher. And of course, a rising VIX is usually bearish for stocks. That didn’t happen in the month of March. And so we anticipated that there might be a time shift this year in which what was supposed to happen in March was going to happen in April. And that’s exactly what happened. If we go back to our chart from April 5, we saw the VIX rise that week, over 23%, giving us a new weekly buy signal. And of course, for long term investors, that’s a big alarm bell and should tell you that you should become extremely cautious, of course, to get a weekly buy signal.

We were already on a daily buy signal, so short term traders already knew to be on guard. And then a couple of weeks later, here we are with the VIX continuing to move higher. And so we’ve had three weeks of fear, and of course, three weeks of fear is enough to put some downward pressure on the markets. And, and we have a lot of new weekly sell signals as of Friday’s close. Now, before the down move in, the overall market started, we are watching the semiconductors or the Sox index run up to the 5000 level. And of course, the market loves big, round numbers. You can see people wearing baseball caps with these numbers on them on Wall street. And here we are looking at the Sox index coming up to 5000. We actually traded above 5000 before coming down and closing just below it. So that certainly told us it was a big round number and a big round area of resistance. And so that was seven weeks ago. The chip sector peaked seven weeks ago, and now we’ve pulled back. At that time, we noted that we were seeing panic buying. And, you know, when people are buying up at these levels, they’re taking on extreme risk.

There’s no easy money to be made up at these levels. I know a lot of people wanted Nvidia to get up to $1,000, but that’s not what happened. So here we are the SOX index came down over 9% this week and is back on a weekly sell signal. Now, looking at a couple of the chips, stocks starting off with a daily chart of Nvidia, you can see we peaked right at the start of March, and then we put in a lower high and started to pull back. So anytime you put in a lower high after making a major high, that’s a very bearish sign, something you should always keep an eye on. And so on Friday, the, the stock was down over $84 on the day, down 10% on the day. Now, the chip stock that I watch the most is Advanced Micro Devices. And again, it peaked right at the start of March with a big reversal day, came down back on a sell signal, and it’s been on a sell signal ever since. A stock that a lot of long term investors watch is Intel, which is one of the Dow 30 stocks.

And you can see back here at the start of the year, it put in a high lower high, lower high, lower high. All of those are very bearish. Then it’s something you should keep an eye on. That when a stock starts making lower highs, that’s usually a sign that the market wants to continue to sell the stock off, and it’s looking for any opportunity to do so. Now, if you’re a student of stock market history, you know that Barrons has a history of being on the wrong side of major market moves. And on March 11, its cover was bet on the bull. And when a market was incredibly overbought at the time, it was certainly a warning sign that the market was probably about to turn down. And so far, that’s exactly what happened. Now, getting back to the VIX, the VIX is still on a weekly buy signal, so we’re going to remain long term bearish on the market as long as the VIX continues to close above 13.47 this coming Friday. If it doesn’t come down to that level, of course, that lower channel line is going to continue to move higher weekly.

Now, if you’re a short term trader, we’re watching the daily VIX. And right now, coming into Monday’s trading action, we’re going to remain short term bearish on the market as long as the VIX does not close below 16.03 on Monday. And of course, that is going to continue to move higher if we do not do that on Monday. Now, when the VIX is moving higher, of course we expect the stock market to move lower. We also expect price volatility itself to expand, which means you’re going to see a lot more days where the Dow might be up 500 in the morning and down 500 in the afternoon, and you could basically call that stock market turbulence. And so when the VIX is on a buy signal, if you’re a short term trader, you’re watching the daily chart. If you’re a long term investor, you’re watching the weekly chart. You’ve got to learn to play defense, which means you’re not trying to squeeze the last little bit out of the market. When the charts are up at the top of the Panic Zones, there’s no reason to take that last trade just because we get one more trade.

It’s a high risk trade, not a low risk trade. So it’s important to learn to play defense. Now, moving on to the major stock market indices, starting off with the Dow. The Dow, which generated a weekly sell signal last week, held up very well. This week it was almost unchanged. And the reason for that was a couple of financial stocks that held up very well going into the end of the week. And the technology stocks in the Dow have been hit hard already. And when you compare the dow to, say, the S&P 500, which was down a little over 3% on the week, now, the S&P 500 for the index, we were trying to hold 5000. For the ETF, we were trying to hold 500. In both cases, we broke down and closed below those levels. We haven’t broken away from them just yet. So it’ll be interesting on Monday to see if we trade back up and try to get up above them once again. But here we are, back on a weekly sell signal. Now, most of the damage was done by some of the big cap tech stocks, and you can really see this, that the Nasdaq 100 was down over 5% and back on a weekly sell signal, while the Nasdaq equal weighted was only down 3.88%. So the heavily weighted big cap stocks in the Nasdaq 100 really got hit hard compared to the equal weighted.

And then if we look at the Next Generation, the next 100 stocks in the Nasdaq, you can see we’re down nearly 4%. So all in all, it was mostly technology stocks that got hit the hardest. The rest of the market certainly got hit across the board. The Russell 2000, the small caps, the micro capsule, all down sharply on the week and all back on weekly sell signals. Now, if we just go down our checklist and we see that money is coming out of technology stocks, it’s coming out of mid caps, small caps, and micro caps, that’s a risk off situation. And a lot of that money has to go somewhere. And this week it actually went into low risk plays such as utilities. That was the biggest winner this week, up nearly 2%. It didn’t really do anything relative to where it’s been trading lately. We saw money go back into regional banks and again, no change in trend there. We saw money go back into insurance, back into consumer staples and back into us banks. And again, no major trend changes there. But, you know, money’s got to go somewhere, and that’s where it went.

One of the reasons the Dow held up so well this week is because of American Express, which was up over 6% on Friday. We also had JP Morgan up just over two and a half percent on Friday. And those two stocks really helped the Dow from closing much lower on the week. Now, some people have to stay invested all the time. So that’s where you see money move out of high risk situations, into low risk situations, and then back and forth, because there are certain people, certain institutions, certain mutual funds where they have to be invested all the time and they don’t have the option that you and I have of either going to cash or even shorting the market or buying those long bear ETF’s now moving from the US market to the Canadian market. The Canadian market’s holding up much better because of commodities. Looking at the ishares for the TSX 60, we certainly traded down to the lower channel line during the week, but at the end of the week we were down less than a third of a percent. So coming into this week, we’ll be looking for a close below $32.72 this coming Friday to give us a new weekly sell signal.

The TSX also came down to the lower channel line, but again, did not close below it and was down just under half a percent on the week. We did see a pullback in mid caps, small caps and micro caps, but again, no change in trend for any of those areas of the market. Now, as I mentioned, it is the world of commodities that are holding up the Canadian market at the moment. Sometimes commodities help us, sometimes they hurt us. And here we are with gold stocks closing up a little, little over half a percent on the week. We do have some individual gold stocks already on daily sell signals, but certainly there hasn’t been a lot of damage done. On the weekly charts, materials were up a little over half a percent while the energy sector was down just over 1% after making a new high the previous week. So a little pullback. And you can see we closed below the previous week’s low. That’s a bearish sign. And again, we do have some stocks that have daily sell signals, but certainly we’re not seeing a lot of damage on the weekly charts just yet.

What’s not working? Well, infotech was down less than half a percent on the week. So here we are, a second week of a sell signal for infotech. Telecom services actually made a new low and then recovered, closing down a little over a 10th of percent on the week. So a new low for telecom stocks. They’ve been in the doghouse for a while now. And then financials were down on the week, just a tick over a third of a percent, and still on a weekly buy signal. So no change in trend for Canadian financials. Moving on to the commodities themselves. Crude oil has a new early warning signal. On the weekly Panic Zone chart, you can see we’re still closing above the upper channel line. $87.50 was resistance. It’s still resistance. $81.25 is acting as support. If $81.25 breaks this week, then we’d anticipate a move down to $75 and then possibly $68.75. Of course, that hasn’t stopped started yet. The pros look like they’re starting to get bearish on this particular sector. But nothing major has happened just yet. When we look at this chart, you can see the line that represents the public is pretty flat.

There isn’t a lot of participation by the public in the futures market. Unlike the USO ETF, you can see that there’s a lot more participation by the public in the ETF than there is in the futures contract. And then looking at natural gas, no joy here. Down a little under 1.5%. And the pros don’t look like they’re interested in taking control at the present time. Now moving from the energy sector to the mining sector, we saw copper continue to move higher this week. Gold was up on the week, having an inside week heading towards $2500. We’re stuck attached to the $2375 level. And then no change in trend for silver. We closed higher on the week, having an inside week, a week of indecision for the price of silver. Let’s finish off today’s presentation. Taking a look at the two stocks I most often asked about on the Canadian side, it’s Shopify. And Shopify moved up to the 125 level but failed and has come back down. We were looking to see if dollar 100 would act as support. It has broken and now we’re heading lower. Some people are talking about potential head and shoulders top here, which would certainly take us down to dollar 75.

There is some level of support here. We’ll look at that in a second. But you can see on the weekly chart. We had the bearish reversal week. And the market moved. The stock moved lower from there. And the pros are giving up control. So that’s a bearish sign. We started to break down below the daily flypaper channel. And we’ve moved down to the 200 day moving average. And currently that is acting as support. So we’ll have to see if that holds. And if we can start getting up above the 100 day moving average. That would be bullish for the stock. Stock. At the same time, we are still closing below the lower channel line. On Monday, we’d be looking for a close above $99.32. If that doesn’t happen, then we’d be looking for that upper channel line. To continue to move lower daily. And then it wasn’t that long ago. That we were looking at Tesla breaking the $218.75 level. And then breaking the psychological support of $200. And then continue to break and break. So here we are breaking the $156.25 level. Our next mathematical target is $125. And then the low from the start of 2023 was $101.81. So those are certainly legitimate targets.

To the downside, I have no interest in this stock whatsoever. On the long side, you can remain short. If you’re short the stock, you can see that we’ve made a series of lower highs and lower lows. And on Friday, we made another new low. So there’s absolutely no reason to have any interest in this stock at this time. If you are following this stock, then the first thing I’d look for is a weekly close above the previous week’s, this week’s high. And, of course, that hasn’t happened yet. If it does, that’d be the first sign something new is happening. That would not be a reason to buy the stock. We’re looking for a close this coming Friday above $119.61. We’re not expecting that to happen. And we’re expecting that upper trend line to continue to move lower weekly. Okay, folks, that is all. For today’s presentation. We posted over 34,000 brand new fresh charts on Saturday. Daily, weekly, and monthly charts. Of course, this is a very small selection of the charts from our database. I hope you found this presentation informative. Enjoy the rest of your day. Next time you’ll hear my voice is on Tuesday morning.

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Stephen Whiteside
Sunday, April 21, 2024

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