Don't Buy The Dip

Chilin with a glass of coffee

Swingly Exposure Status: Risk Off

Sellers in Control

 Large Caps

QQQ Daily Chart

  • Yesterday, we observed the NASDAQ continuing its march towards the $423 level we outlined earlier in the week, which aligns with the weekly 20-EMA.

  • Analyzing the chart above, we notice a significant increase in volume alongside the QQQ breaking below its daily 50-EMA, confirming the stage 4 breakdown.

  • In yesterday’s session, we witnessed several potential breakouts fail, indicating that sellers are still firmly in control, particularly in large caps.

  • The pullback at this point appears very exaggerated, and we anticipate a relief rally to occur imminently.

  • We maintain a defensive stance and advise against being lured into going long in anticipation of this potential bounce, given the heightened volatility and downward momentum prevailing.

Small Caps

IWM Daily Chart

  • The Russell 2000 is finding some support, resting on its daily 200-EMA and weekly 50-EMA.

  • We're anticipating demand to enter the market, relieving some pressure and potentially initiating a sideways consolidation phase. This could serve to establish a base for small caps, laying the groundwork for the next upward move.

  • In the scenario where the IWM breaks below the key support level of $191, it's likely to extend the time horizon of the pullback, possibly leading to a more prolonged stage 4 downtrend.

  • We believe there is a higher probability of a bounce and a low-volume relief rally to occur.

Watching Closely

Stock and Crypto Market Values

In today’s session, our attention is firmly fixed on the behavior of the largest and most liquid market leaders and staying in cash. Understanding how these key stocks are faring amidst a downtrend is paramount for navigating current market conditions. By closely monitoring their performance, we can gauge the pulse of the market and anticipate potential shifts in sentiment or momentum.

Examining the behaviour of the leaders also offers clues about sector rotation and the underlying strength or weakness within specific industries; some of which are more speculative or defensive in nature. As we navigate through the current environment, observing which sector’s stocks hold up, break down, or exhibit volatility can provide early indications of a market reversals or continuations.

Our Market Leaders

SMCI: Super Micro Computers, Inc.

SMCI Daily Chart

  • SMCI continues to hold up well despite its recent failed breakout, maintaining the sideways bull flag pattern with contracting volume. This resilience is notable, particularly considering SMCI's upcoming earnings announcement.

  • Historically, SMCI's earnings releases have catalyzed significant price inflation. Therefore, the current consolidation phase, coupled with anticipation surrounding the impending earnings report, suggests potential for renewed upward momentum in the near future.

WULF: TeraWulf Inc.

WULF Daily Chart

  • An intriguing development is underway in a Bitcoin mining stock, characterised by a substantial multi-month consolidation pattern accompanied by diminishing volume. This tightening of price action suggests a potential breakout on the horizon.

  • Of particular interest is the significant surge in volume observed late last year, coinciding with the establishment of higher lows in price. This pattern hints at substantial accumulation of shares, likely driven by institutional or fund investors. The confluence of these factors - a lengthy consolidation, declining volume, and notable accumulation - sets the stage for a potentially significant move in the stock price, reflecting underlying bullish sentiment in the market.

  • As we monitor this situation closely, it's essential to remain attentive to any signs of impending breakout or continuation of the current trend which will likely commence once the overall market turns back up.

OSCR: OSCAR Health, Inc.

OSCR Daily Chart

  • OSCR recently broke out to the upside just three days ago, accompanied by robust trading volume, signalling heightened demand for this prominent health stock.

  • However, yesterday's trading session saw an exceptional surge in volume, reaching a several-month record high. Notably, the candlestick formed during this session presents a characteristic long top wick, potentially indicating a reversal in the stock's price.

  • While the overall sentiment remains bullish, it's crucial to closely monitor OSCR's ability to sustain these elevated levels. The stock could either consolidate at current levels or continue its upward trajectory.

  • Observing how OSCR behaves in the coming sessions will provide valuable insights into its short-term direction and whether it maintains its bullish momentum or undergoes a rebasing process.

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