Hey everybody, it is Monday the 31st and that is the end of the first quarter of 2025. We started out in a pretty bullish environment here with the market holding above the year-to-date anchor and then it broke to a new all-time high here and from that failed move higher came a fast move lower. Now we've got a new low on the downside here and as I always point out, selling short down here or setting stops under here is an amateur way to get involved. Instead, we often see turns from those levels. So we undercut that low in the SPY and then did bounce higher. As I mentioned in the midday video, buying in here with a stop underneath this level, it was up, up and away throughout the day.
So hopefully if you're a day trader, you were able to participate. Looking at the four major ETFs, the SPY in the upper left corner, the NASDAQ in the upper right, bottom left is the semis, bottom right is the Russell 2000 and what happened in all these markets? Well, we broke below the prior low from earlier in the month and then buyers emerged. People who sell short after the market has already declined this much on a breakdown are going to get exactly what they deserve.
People who set their stops underneath those obvious levels are going to have their stock stolen from them. This isn't a new message from me. I've been talking about this for decades really, but just over the weekend.
I spoke about the possibility of a breakdown below this level and then a reversal. So is it a reversal of the trend or is it a bounce? Right now I'm looking at it as a bounce.
Why? Because we're below the declining five-day moving average. That's the orange line. So to me, it's just a bounce and a downtrend. Maybe it ends up being the low, you know, and we go on to five-year new bull market highs.
I kind of suspect not. Why? Because again, we're below declining 20, 50. and 200-day moving average.
The markets will do that. This is what they do. They decline a little too much.
It gets a little too obvious on the downside. And then you see the buyers come in, the shorts start to cover their positions, to lock in gains. And now what are we going to be looking for?
We'll be looking for evidence of possible continuation. Ideally, tomorrow, we pull back down to the new week-to-date volume-weighted average price, which will be the two-day VWAP. And then maybe we get a tradable bounce to the upside up to the five-day moving average or the anchor from here. But right now, we have to look at it and say, okay, the sellers, they had a good run here from 576 down to a new low for the year.
And it dropped 30 points in here, about 7% on that leg lower. Let's talk about maybe a retracement. I'm not going to do this for every market, but maybe you're interested in doing this yourself.
Maybe if we retrace all the way up to the 61.8% retracement, we get up towards that level, the five day moving average. That's certainly possible. It's not a prediction. I'm not here to make predictions. I'm here to say, let's look at these key levels.
And as it breaks those key levels, you don't want to be the dummy who sells short down there. You want to look at it instead and say, okay, as I mentioned in the midday video, if it gets above here, you could buy it with a stop under there for a day trade. There was tons of opportunity to make. money in here on the long side, 462 all the way up to 469, seven points, 2% almost.
So the opportunities are there, but I don't trust this rally because we're in a declining We have a declining five-day moving average. Great little day trade in there. That's awesome.
Maybe it ends up being the low. I'm not interested in what's possible. I'm interested in what's most likely.
I'm interested in possible, but I'm most interested in what's likely. And I know that when we have a declining five-day moving average, it's most likely that these rallies do not stick. So I'm skeptical, as always, when we're below declining 20, 50, and 200-day moving average. The Russell 2000. Did finish with a loss, but the same story here. We undercut that prior low.
And actually, Tanner pointed this out to me. We came down to the anchor from the 2021 high. I hadn't had my eye on that, but that is definitely worth noting, as is the anchor off of the 2020 low. If we do continue lower, that will be the next level of interest on the downside. I don't view that as immediately interesting, though, because we are in bounce mode.
And. Just like the other markets, I think maybe if we pull back down towards the two-day VWAP, we don't want to buy at the two-day VWAP. We want to wait for the daily volume weighted average for us to get back above the daily VWAP and then set a stop below here for a potential day trade opportunity in an oversold market.
Now, maybe you're holding some of a long position that you got involved in today. That's fine. Just know where your risk is.
Maybe you bought it thinking, hey, today's got the chance to be the low. And you've got a different risk tolerance than I do. So, you know, just don't let them turn to a loser. That's what losing traders end up doing.
Semiconductors, we got an undercut of the prior low here as well. Now, are we going to get a bounce as I just erased that? But are we going to get a bounce, you know, after that and then start to do this again and continue lower? The weekly time frame, it's still ugly. It still seems likely that we're going to see stuff like this.
So this is, you know, again, do you short the new low? No, you don't short the new low, not when it's extended. If we want a shorter low, we want a shorter low that looks like this. One that comes down over and over again. The range compresses.
The more times it's tested, the more likely it is that support fails. And then with those lower highs coming in, if we can short it here with a stop there, beautiful. We can't short it here with a stop up there.
That's just stupid. Don't be stupid, obviously, with your money in the market. The biotechs.
They continue to be the worst group. They got a little bit of a bounce in here today. It's a bounce and a downtrend.
They'll likely see a bounce. I mean, they've had nice bounces, but the problem is most people are looking at these bounces and thinking, hey, that's the low. And they're just not lows in here.
It's highly likely that this becomes a level of resistance. Prior support broken tends to act as resistance. I still say stay away from biotechs as a group.
Maybe there's some individual ones out there that are. behaving better. Financial stocks made it right back up to that five-day moving average. This was a strong group once again. So something's going on with these financials and it's just not going to make it easy for a top to develop so far at least.
So if you were short in here, you've got to look at the definition of trend, lower highs and lower lows. It breaks that higher high here. That's where you got to get out. If you're looking to get back involved on the short side, maybe it does this, holds below. or you know bounces along that week today volume weighted average price holds the support then breaks down similar to what similar to what we saw with the uh s&p 500 last week when we saw the spy over here had uh undercut and you know the the anchor for the beginning of the week that's when the floodgates opened and maybe that's going to be true as well for uh the financial stocks but not quite yet energy names up a dollar for uh oil itself was up close to three percent you So maybe there is something bigger going on in here.
We'll have to consider those a little bit more seriously. Tesla, it gapped down and it got back above the daily volume weighted average price right here. It got back above here. There were opportunities on the long side if you're into day trading. Otherwise, what do we have here?
Well, it's nice to see we got back above that 20-day moving average. Now, that 20-day moving average is likely to decline for another day or two as we get rid of this data. So it's maybe becoming a little bit more neutral, but the buyers don't definitively have control yet because we are below a declining five-day moving average. So maybe it runs all the way up to there. Great.
Don't get too excited because what would be the best scenario is rallies up, pulls back, and then gets going. That would be a much better scenario for a long side trade over here. Palantir, again, it's broken. It had a little bit of a bounce right up to the prior support.
It's possible we head down towards 50, like I said in the weekend video. I'm not calling for that, but I'm saying don't be surprised if it happens. Here we saw a failed break higher and we're breaking lower. We have a pattern of lower highs and lower lows below the declining 5-day moving average.
It's just, you know, these markets are just not in a pretty position for longs. NVIDIA, it did exactly what it was supposed to. It came down and undercut the two-year anchor and then began to buy.
bounce. That's how they work. If you're setting stops below these lows, you simply do not get trading.
You should stop trading and learn how to trade in a disciplined way. You don't sell short after a drop from 122 to 105. You don't set your stop underneath that obvious low. That's where bounces occur.