Off your game?
Read our free, updated as of Mar 3, 2022, Dr K report on how to optimize your mind and body so you can boost your focus when trading the markets.
Meet Dr K !
Chris Kacher
  • Nuclear physicist
  • Stock & crypto market wizard
  • Blockchain builder
  • Bestselling author
  • Top 40 charted musician
  • Biohacker
  • Former computer hacker
Your email will always remain private.

Market Lab Report - End of an Era - The Final Gilmo Report - August 30, 2023

Note to Members: I am posting this, the final Gilmo Report that I will ever write, as a Market Brief. There are only a couple of Gilmo Report members with active subscriptions left that will expire on September 2nd, so I am making this available to members who may have recently migrated to TheOWLTrader.com. The rest of you get it as a bonus! - Gil Morales
Four days after posting what was probably the ugliest outside reversal to the downside that I have seen in my three decade plus long career, the NASDAQ Composite Index posts a so-called follow-through day (FTD). The premise of the rally that we have seen since last Thursday’s bearish reversal is again that the Fed is done raising rates and will soon return us all to that happy place known as the interest rate zero-bound.

Weak Consumer Sentiment and JOLTS Job Openings reports on Tuesday fed the narrative a little more, and this morning’s weakish ADP Employment Change and GDP reports furthered things a bit more. That set up another upside move in the indexes early in the day. Meanwhile, buying volume in potentially leading areas of the market (read: AI) has been less than impressive

Today the market edged higher after yesterday’s FTD on lighter volume. Generally, if a follow-through day is going to fail, it will do so rather quickly. In the meantime, on a practical level, one can certainly test optimal long entries where they can find them, but in my view most if not all of those occurred before the FTD.

Frankly, I have no use for follow-through days. The vast majority of follow-through days fail, as numerous statistical studies done over the past 20 years or more have proven. The critical difference is that if one does not find suitable long candidates in proper buy positions at the time of the follow-through then one does nothing, in anticipation of perhaps finding some leading stocks breaking out shortly after the FTD.

But if it is all about what the stocks are doing, I can simply employ Ugly Duckling OWL methods to be long certain areas of the market before any such FTD occurs. Case in point, the precious metals sector, where we saw a broad number of Ugly Duckling OWL long entry triggers among individual precious metals stocks and ETFs.

Weakish economic data over the past couple of days has send interest rates and the U.S. Dollar to the downside. The 10-Year Treasury Yield ($TNX) closed today at 4.118% but still in an uptrend as it remains above the key 4.00% level and about a quarter-point from recent highs. The dollar as measured by the Wisdomtree US Dollar Bullish (USDU) ETF has certainly pulled back, but for now USDU is holding 20-dema support as it remains in an overall uptrend since the mid-July lows.

Last week saw both gold and silver flash Ugly Duckling long entries as the SPDR Gold Trust (GLD) posted a decisive U&R along the prior 175.79 low correlating roughly to the $1900/oz. level in spot gold. That U&R remains in force using the 175.79 prior low as a selling guide. GLD is now extended as we await any constructive tests of the 50-dma as potential lower-risk long entries from here.

Silver was living below its 200-day moving average as of early last week, but turned with gold despite the fact that it did not post an Ugly Duckling OWL long entry set-up of its own. It saved that for last Wednesday when it posted a bottom-fishing buyable gap-up with a 22.03 intraday low on the iShares Silver Trust (SLV) ETF. The BFBGU remains in force but at this stage silver is extended on the upside pending pullbacks to rising moving average support.

Gold miners Agnico-Eagle Mines (AEM), Alamos Gold (AGI), AngloGold-Ashanti (AU), Equinox Gold (EQX), Barrick Gold (GOLDand Kinross Gold (KGC) have generally trended higher, some more sharply than others, as gold and silver move higher. Of the bunch, only AU posted a bona fide bottom-fishing buyable gap-up last Wednesday. It then moved tight sideways before gapping up into 20-dema resistance today.

AEM ran into 50-dma resistance today in an extended position off last week’s lows, while AGI has been one of the strongest performers in the group as it streaks right up into double-top resistance at the mid-July highs. It in fact triggered a DTSS entry at the 13.06 left-side peak of July 18th.  A pullback may be in order here as AGI is also far above well above any potential moving average support.

EQX and KGC, two of my favorite junior miners, have both continued higher with the group. KGC posted a pocket pivot at the 50-day moving average on Monday which also doubled as an MAU&R at the 50-day line since it closed below the line last Friday. KGC ran into double-top resistance today along the 5.23 left-side peak of July 18th. As with the others, these are both extended on the upside so pullbacks may certainly be in order.

If you think you want to get long the current FTD after the fact, then I would keep things simple. If Artificial Intelligence is a dominant thematic for any market rally phase, then stick to the big-stock leader. That would be, of course, Nvidia (NVDA). The stock reversed badly last Thursday after beating on earnings last Wednesday evening, triggering a Century Mark short-sale entry at the $900 level and then a double-top short-sale (DTSS) at the 480.88 left-side peak in the base.

That was good for a logical breakdown to the 20-dema, which looks like an equally logical cover point since a late-stage failed-base is only confirmed when the 20-dema is broken. Covering a short taken higher up in the pattern at the 20-day line makes sense, allowing for the possibility of a long entry to set up or for any further break below the 20-dema which would then trigger a fresh short-sale entry at that point.

On Monday, NVDA shook out slightly along the 20-dema and then rallied, triggering a moving average undercut & rally (MAU&R) long entry set-up using the 20-day as a selling guide. That move held up well as the general market has continued to rally, allowing NVDA to re-breakout yesterday on strong volume. If you like to buy breakouts and missed the MAU&R at the 20-dema on Monday, then it remains in breakout buying range.

Meanwhile, the $900 Century Mark looms as potential resistance where a possible Century Mark short-sale entry might materialize depending on whether the breakout holds up amid a continued market rally as yesterday’s FTD shows some follow-through of its own.

Broadcom (AVGO) is another strong AI meme semiconductor name that is expected to report earnings tomorrow after the close. After reversing hard along the $900 Century Mark last Thursday, AVGO is now edging back up towards that same $900 Century Mark, closing about %1 below the mark at 892.28. This is one to watch closely after earnings tomorrow.

Advanced Micro Devices (AMD), Marvell Technology (MRVL) both look like busted AI meme names rallying into shortable resistance. AMD has pushed right into the 20-dema where the stock can be tested on the short side using the 20-day line as a tight covering guide.

MRVL has rallied to fill the prior gap-down falling window and so can be shorted 56.94 along that level and the 10-day moving average. In this case the 20-dema, about a buck higher, would work as a reasonable covering guide.

Adobe Systems (ADBE) is rallying back up towards its prior 552.94 left-side peak from late July 31st where it could encounter double-top resistance of rally past the peak and reverse to trigger a clean DTSS entry. The move higher over the past four days  off the 10-dma/20-dema has come on light volume so looks suspect. ADBE is expected to report earnings on September 14th.

Cloudflare (NEThas again rallied up to shortable resistance at its 50-dma as it did last week but this time has done so on weak volume. And again, this move offers a reasonable short-sale entry using the 50-day line as a covering guide.

CrowdStrike (CRWD) has reported earnings after the bell and as I write is roughly flat to slightly negative. If it opens up at these levels tomorrow morning it will remain just below the 50-day moving average. It rallied right up to the line today ahead of earnings, and that puts it in a short-sale entry position using the 50-day line as a covering guide.

Nutanix (NTNX) is expected to report earnings tomorrow, August 31st, after the close. Currently the stock remains in a DTSS entry position along the 30.96 left-side peak of late July. That said, given the indecisive action around that left-side peak NTNX is best watched from the sidelines while we await earnings tomorrow.

Snowflake (SNOWcontinues to live below its 200-day moving average. Today the stock rallied just past the 20-dema and 200-dma resistance and stalled to close in between the two moving averages. That puts SNOW in a short-sale position right here using the 20-dema as a covering guide with the idea of looking for a quick break below the 200-dma as confirmation.

C3.Ai (AI) Is for all practical purposes building a two-week bear flag as it remains below the 20-day exponential moving average. While it could spend more time extending this bear flag sideways, watch for rallies into the 20-dema as possible short-sale entries. As the 50-dma starts to roll over watch this to potentially come into play if AI continues to bear-flag base-build for longer.

IonQ (IONQwas a long entry two Mondays ago when it shook out and posted an MAU&R along the 50-day moving average. It has continued to rally with the market on light volume and is now approaching the prior July 11th peak at 17.74, with the August 1st peak at 20.14 potentially coming into play if it keeps rallying.

Among the biggest of the big-stock names, Apple (AAPLhas rallied just past its 50-day moving average but so far without triggering any long entries on the way up. In this position we can watch for any reversal back below the 50-day line as a possible short-sale entry trigger if the stock is unable to hold the line in a constructive manner.

Microsoft (MSFTremains a little less than 2% its own 50-day moving average, but the closer it comes to the underside of the line the better it looks as a possible short-sale entry using the 50-dma as a covering guide.

Amazon.com (AMZNhas regained the 20-dema but overall is just moving sideways in a two-week bear flag. It also remains below the 136.65 left-side peak of July 14th. It closed today at 135.06 so is still in DTSS entry position with the idea of using a more decisive break below the 20-dema and then the 50-dma as potential short-sale entry triggers if they occur.

Alphabet (GOOGL) is the most impressive of the bunch after announcing more AI-related products yesterday, triggering a base breakout on strong volume. If you like to buy obvious base breakouts there you go, with the better idea of using the 10-dma as a selling guide vs. the typical O’Neil-style 6-8% stop-loss policy.

Meta Platforms (META) continues to rally into its 50-day moving average. In simple terms, this puts it in a short-sale entry position using the 50-day line as a tight covering guide.

Netflix (NFLXhas rallied just past the 50-day moving average as it approaches the highs of the short seven-day flag it formed at the beginning of August. Those highs sit in the 443-445 price zone, less than half of one percent thick, so can be watched for potential double-top action if NFLX keeps rallying. Otherwise, any reversal back below the 50-dma triggers a short-sale entry so can be watched for.

Tesla (TSLA) rallied through the 50-dma yesterday and today before stalling and reversing at the line today. It closed just below the line so is in a clear short-sale entry position using the 50-day moving average as a tight covering guide.

Other semiconductor big-stocks I have discussed in recent reports have obviously rallied with the market over the past four days. These include the three semiconductor equipment makers Applied Materials (AMAT), KLA Corp. (KLAC) and Lam Research (LRCX) and Intel (INTC). The rallies have taken the first three back above moving average support as they all approach potential double-top resistance near prior highs.

These should be watched for any potential DTSS entries from here. The recent rallies have come on light volume so may be susceptible to at least pullbacks from double-top resistance as well as Century Mark resistance along the $500 level for KLAC and the $700 level for LRCX.

INTC is still well below any potential price resistance as it melts back above the 50-dma. If it can consolidate along the 50-dma then that would be constructive to see. However, any reversal and break back below the line would trigger short-sale entry at that point so can be watched for.

Regional banks remain mostly in positions where short-sale entries come to mind when rallies into or failures along moving average support occur. The five banks that were downgraded by Standard & Poor’s last week, Associated Banc-Corp. (ASB), Comerica (CMA), Keycorp (KEY), UMB Financial (UMBF), and Valley National Bancorp (VLY) are all forming what look like bear flags, with CMA being the most readily shortable here along 50-dma resistance.

I would watch KEY and VLY for any breaks below their 50-day lines as possible short-sale entry triggers. ASB is hanging along its 10-dma but remains well below its 50-dma but rallies up to the line can be watched for as possible short-sale entry spots.

The SPDR Regional Bank (KRE) ETF meanwhile remains a short here as it tracks just below and along the underside of its 50-day moving average. Nothing too complex here, just a short entry using the 50-dma as a tight covering guide.

Meanwhile, mid-tier financials like Bank of New York Mellon (BK), Charles Schwab (SCHW) and U.S. Bank (USB) offer potential short-sale entries here at 50-dma resistance. The 50-day line is then, of course, used as a covering guide.

If you are a strictly O’Neil-style investor, all you know for sure is that there was a so-called follow-through day yesterday. If you see big, beautiful breakouts in leading stocks then I suppose you go ahead and start buying. If not, then you sit tight. If you are an OWL trader and investor, then you saw long entries in various individual stocks like NVDA and ANET or in the precious metals group at large before the follow-through day.

This largely negates the need to scramble for things to buy, since as far as those names go, the long entries were available ahead of time, enabling one to gain some cushion ahead of yesterday’s FTD. 

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
Copyright ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing.
All Rights Reserved.
privacy policy