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Market Lab Report - The Last Gilmo Reports 8/23/23 Edition

For Gilmo Report members who may have recently transitioned to VirtueofSelfishInvesting.com I have been posting the final four reports (at a time interval of one report later) here for informational purposes. The last and final Gilmo Report will be posted on August 30th.

Below is the report from this past Wednesday which makes for an interesting read since it reflects my thoughts that afternoon right after Nvidia (NVDA) had reported earnings and before the massive market reversal on Thursday.

August 23, 2023

5:27 pm ET
I noted over the weekend that by Friday the market had reached a potential reaction rally point as it dipped below the June 26th low within the context of so many individual stocks, mostly AI meme and other high-PE techs, becoming quite oversold. As we know, the top in AI names occurred 3-4 weeks ago, and by Friday things were getting parabolic to the downside, as the daily chart of the Global X Robotics & Artificial Intelligence (BOTZETF shows below.

On Friday the NASDAQ Composite had also closed below its June 26th low at 13334.42 as the indexes entered intermediate correction territory at down 8.00% off the July 19th highs. That set up a U&R move on a gap-up Monday morning that faltered early but regained its feet to close near the highs of the day. Breadth, however, was negative as the rally was mostly about oversold AI meme stocks and other techs staging reaction rallies off Friday’s lows.

Yesterday, Tuesday, the index gapped up again but ran into 10-day moving average resistance where it reversed to close roughly flat as the S&P 500 and the Dow both closed in the red. Another gap-up open this morning pressed higher all day long with the NASDAQ running up into 20-dema resistance as the crowd leaned quite bullishly into NVDA’s highly-touted after-hours earnings report.

Frankly, I cannot recall if I have ever seen so much certainty of a bullish outcome from the crowd when it comes to an earnings report. That does not mean that I haven’t, but Nvidia (NVDAearnings were certainly the marquee event of the day. As I write, after hours, the stock is trading just above $500 after closing at 471.22. That is not a huge move so we will see how this opens up tomorrow.

Yesterday, the four AI meme stock semiconductor names I have discussed in recent reports all played out as short-sale entries. Advanced Micro Devices (AMDreversed at its 20-dema while Broadcom (AVGO) flipped out at its 50-day moving average where a clean short-sale entry was had.

Both stocks marched right back up to their 50-day lines today with AMD falling short and AVGO just barely clearing the 50-dma. AMD is in a short-sale position using the 50-dma as a covering guide. AVGO’s light-volume rally can be watched for any reversal back below the line which would trigger a short-sale entry at that point. Keep in mind that AVGO is expected to report earnings on August 31st.

Marvell Technologies (MRVL) also gave shorts a convenient entry yesterday as it too flipped out at its 50-dma. And then today it also marched right back up to the 50-dma where comes back into potential short-sale range using the 50-dma as a covering guide. Keep in mind, however, that MRVL is expected to report earnings after the close tomorrow.

Adobe Systems (ADBE) rallied on Monday just past last Thursday’s high before reversing. It now sits just above its 20-dema where any break below the line would trigger a short-sale entry using the 20-day as a covering guide.

Arista Networks (ANETstill refuses to break down, but it also does not seem intent on posting any kind of strong-volume breakout through the 190.64 left-side peak of August 1st. That could potentially play out as a double-top resistance level so should be watched carefully for any potential short-sale entry triggers as ANET pushes up towards the $190 level.

CrowdStrike (CRWD) gapped up through its 10-dma, 20-dema, and 50-dma on Monday in sympathy to Palo Alto Networks (PANW) which had oddly reported earnings last Friday after the close. PANW gapped up through its own 50-dma, dragging CRWD and other cybersecurity names up with it.

CRWD rallied strongly past the 20-dema on Monday but has since gone no further. For now, 20-dema could be buyable but any break back below the line would trigger a short-sale entry at that point. CRWD is expected to report earnings on August 29th.

CloudFlare (NEThas pulled a little dead cat bounce off the 200-dma, which makes sense, and came very close to the 50-dma today before stalling along the 20-dema. That brought NET into short-sale range at the 50-dma using the line as a covering guide. Further rallies into the line would do the same so can be watched for.

Nutanix (NTNX), like ANET, continues to defy gravity with a pocket pivot breakout yesterday to higher highs. It held that breakout today as it clears the 30.96 left-side peak in the pattern. NTNX is expected to report earnings on August 30th.

Snowflake (SNOWrallied today up into 200-day moving average resistance where it is potentially shortable, but with earnings due out today after the close there was no reason to take a position at this time. After-hours, as I write SNOW has reported earnings and trading down a few points. This could be actionable tomorrow morning depending on how far from the 200-dma it opens, so is one to watch.

C3.Ai (AI) has rallied back into its 10-dma where it is potentially a short-sale entry using the line as a covering guide. However, I would prefer a move higher, perhaps up to the 20-dema or even the 50-dma, although it is not clear that AI can make it that high without a serious catalyst. On the flip side, AI did trigger a U&R entry today along the prior 31.57 low of June 27th which then becomes your selling guide.

IonQ (IONQmoved back above its 50-day moving average on Monday to trigger an MAU&R long entry at the line and today closed above the 20-dema on low volume. Unless IONQ can set up along the 20-dema as a possible long entry, I would be watching for any break below the 20-dema as a potentially fresh short-sale entry trigger if it occurs.

Important: One point I want to make about all of these AI meme names discussed above, and that is that after-hours sympathy moves in response to NVDA vary among the group. But my thinking is that there may be some interesting set-ups that materialize tomorrow, so pick a few to watch and see what transpires.

Yesterday Standard & Poor’s downgraded five regional banks one notch. The five downgraded banks Associated Banc-Corp. (ASB), Comerica (CMA), Keycorp (KEY), UMB Financial (UMBF), and Valley National Bancorp (VLY). All five broke to the downside yesterday, but since none of them went out of business overnight perhaps today’s upside pause was a bit of a relief rally.

That of course had a deleterious effect on regional banks in general, as the SPDR Regional Bank (KRE) ETF broke below its 50-day moving average on higher selling volume. One can also review the group chart of regional banks shown in recent reports to get a sense of how negatively the S&P downgrade impacted the regional banking sector as a whole.

Big-stock financials Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), J.P. Morgan (JPM), Morgan Stanley (MS), and Wells Fargo (WFCresponded to the S&P downgrade news with more downside. These names have been under pressure for past three weeks with no sign of relief as oversold becomes more oversold.

We can see that while all six are in free-fall, JPM triggered a short-sale entry at its 50-day moving average yesterday. WFC was a potential short entry right at the 200-day moving on Monday and then again near the line yesterday.

The prospect of troubled banks may have impacted the steep uptrend in interest rates. Today the 10-Year Treasury Yield ($TNX) backed off to 4.198%, back below its March 2023 peak at 4.333%, after peaking on Wednesday at 4.474%. This also brought the dollar in a bit, but the  Invesco US Dollar Bullish (UUP), not shown, is still holding well above its 10-day moving average.

The S&P downgrade of regional banks put a bid under gold as the SPDR Gold Trust (GLD) posted a U&R through the June 29th low at 175.79 today. It closed at 177.89 so remains within buying range. One can also use the 200-day moving average at 176.88 as a tight selling guide depending on your risk-preference.

As I noted over the weekend, without any catalysts, the precious metals space could drift lower. But the S&P downgrade of regional banks raised the specter of more regional bank failures to come, and suddenly the backdrop for the precious metals space has change, just as it did in late September of last year and in March when the first wave of regional banking woes hit the market.

The iShares Silver Trust (SLV) began recovering as early as Monday as it pushed above the 20-dema and 200-dma  and then held support at the two moving averages yesterday. Today the SLV gapped higher in a buyable gap-up (BGU) move with a 22.03 intraday low and selling guide. Remember that BGUs in precious metals are tricky since they trade continuously and gap-up in the morning after moving higher overnight.

Gold miners Agnico-Eagle Mines (AEM), Alamos Gold (AGI), AngloGold-Ashanti (AU), Equinox Gold (EQX), Barrick Gold (GOLDand Kinross Gold (KGC) all moved with gold as they flashed a variety of long entry signals, some more decisively than others. KGC has simply rallied off 200-day moving average support so did not flash a long entry today.

AEM, EQX, and GOLD all posted U&R moves through prior lows at 47.84, 4.72 and 15.86, respectively. AGI posted a U&R at its 11.86 prior low yesterday, and then today posted a pocket pivot as it slashed up through its 20-dema and then 50-dma. Note that AGI also posted a moving average U&R and a pocket pivot at the 200-dma on Monday.

AU flashed a very deep, down, and dirty bottom-fishing buyable gap-up (BFBGU) on an 80.9% volume increase. The stock has been in a nasty downtrend since early May when it failed on a cup-with-handle style breakout. We’ll see if this BFBGU can revive what was once one of the strongest big-stock leaders in the group.

Among the silvers I favor focusing on First Majestic Silver (AGwhich posted a big-volume pocket pivot at its 50-dma and then closed right at the 20-dema. Despite the stalling action the pocket pivot remains in force using the 50-dma as a tight selling guide.

Big-stock NASDAQ names have of course rallied with the market over the past three days. Apple (AAPLsnapped out of a bear flag breakout and reversed as it now clears the 10-dma but runs into potentially shortable resistance at the 20-dema. After-hours it is trading down slightly after NVDA earnings.

Microsoft (MSFTpushed back above the 10-dma which had previously served as consistent resistance since failing on a breakout attempt in mid-July. The rally carried just above the 20-dema where it stalled today, so now the question is whether MSFT or AAPL can push as high as their 50-day moving average in sympathy to NVDA earnings. Certainly, something to watch for.

Amazon.com (AMZNis up slightly after NVDA earnings so the sympathy response seems a bit muted, at least after-hours. I’m watching resistance along the 10-day moving average and support along the 20-dema as potentially critical levels where the stock may play out as a long or a short tomorrow, along with the July 14th left-side peak in the pattern at 136.65 which is DTSS resistance, once we see how things look at the open.

Alphabet (GOOGL) is rallying about a buck after-hours so there is no massive sympathy response to NVDA earnings. The stock has rallied back up to the left-side peak of the current four-week base at 133.74. It is possible that double-top resistance could come into play tomorrow so can be watched for.

Meta Platforms (META) and Netflix (NFLXhave both rallied back up into their 50-day moving averages with META throwing in the 20-dema for good measure. This brings them into potential short-sale range using the moving averages as covering guides.

Both stocks are rallying slightly in response to NVDA earnings, so we can watch to see how these both act around their 50-day moving averages tomorrow, depending on how things open up.

Tesla (TSLA) has meanwhile rallied back up into its 20-dema in an oversold reaction rally where it is now coming back into short-sale range. One would then short as close to the line and then use the 20-day as a covering guide. Believe it or not, TSLA is rallying about 2% in response to NVDA earnings which could bring it into play at 20-dema resistance tomorrow.

Semiconductor equipment makers and AI meme stocks Applied Materials (AMAT), KLA Corp. (KLAC) and Lam Research (LRCX) have rallied with the market over the past three days and are all about a percent or so in response to NVDA earnings. It is not clear what set-ups are at play here in the after-hours, so we will have to see how these open up tomorrow.

Intel (INTCis trading down in response to NVDA earnings, but only slightly so. However, it ran right into shortable resistance at the 50-day moving average today on a low-volume rally. If it opens up around here, then it brings INTC back into short-sale range using the 50-day line as a covering guide.

The market had its intermediate correction of 7-10%, at which point things got quite oversold on the downside, as I discussed over the weekend. This set up the logical U&R move on Monday morning by the NASDAQ Composite on Monday, and we have seen a three-day move into the 20-day exponential moving average.

Tomorrow we are likely to act up towards, possibly even through, the 50-day moving average. As I noted over the weekend, NVDA earnings will likely create some very interesting trading action, but what that will be precisely cannot be known until trading commences tomorrow morning.

Meanwhile, just to stir the market pot a bit more, tomorrow the Fed kicks off its annual Economic Policy Symposium in Jackson Hole, Wyoming. On Friday, Head Fedhead Jerome Powell is scheduled to speak 10:05 a.m. Eastern, 7:05 a.m. Pacific. Again, stick around, because the fireworks may just be getting started.

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.
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