The other was Trump’s choice of Kevin Warsh as the new nominee for the Fed Chairmanship. Supposedly, Warsh’s views on lowering interest rates align with Trump’s desires for endlessly free money, but the media cited Warsh as “hawkish” primarily because of his well-established record of pushing back against QE and ultra-low interest rates during his tenure as a Federal Reserve Governor from 2006 to 2011.The NASDAQ Composite closed below its 10-dma and 20-dema on higher volume while the less tech-centric, S&P 500 and NYSE Composite sold off on higher NYSE volume but were able to hold 10-dma and 20-dema support. Meanwhile, the small-cap Russell 2000, as measured by the iShares Russell 2000 (IWM) ETF broke below 20-dema support on heavy selling volume.
This allegedly sent holders scurrying to hedge in the silver markets by selling silver off. While that makes for a good excuse, the bottom line is that both metals had gone absolutely parabolic in a FOMO-like phase. Heightened volatility on Thursday was the first sign of potential trouble as both metals swung in more than 10% ranges. Once the 10-dmas were broken on Friday morning in the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV), the absolute the correction was in full swing.
Tech names sold off as SanDisk (SNDK) reversed off its gap-up opening highs at 676.69 and plummeted to the downside after reporting strong earnings on Thursday after the close. The early move had all the earmarks of a potential climactic peak as the largest single-day point move in the stock's run over the past several months. It also closed below the $600 level, triggering a potential Livermore Century Mark Short-Sale entry at that level before closing at $576.25.
When looking for short-sale targets on a day like Friday, it is generally the immediately prior leaders that offer some of the better opportunities. For example, four names which we reported as long entries on the way up in January shown below all triggered short-sale entries on Friday. Advanced Micro Devices (AMD), which was reported on as a long down at the 50-dma previously, triggered a short entry on Friday as it broke 10-dma support, while, Alibaba (BABA), reported on as a buyable gap-up last week has cleanly failed, triggering a short-sale entry at the 10-dma as well. Note that AMD is expected to report earnings Tuesday after the close.Galaxy Digital (GLXY) triggered a short-sale entry at the 10-dma on Thursday and then a second short-sale entry at the 20-dema on Friday. Taiwan Semiconductor (TSM), which has already failed on a post-earnings BGU that occurred over two weeks ago is now flirting with a potential short-sale entry trigger if it continues through 20-dema support. In each case where 10-dma support has been broken, that would then serve as a covering guide.
Applied Digital (APLD) was reported on as a long entry at the 50-dma previously but failed on a breakout attempt this past week. That then triggered short-sale entries at the 10-dma and 20-dema on Friday, although the stock had already triggered a double-top short-sale (DTSS) entry on Thursday as it broke below the early January peak (dotted line).Semiconductor equipment make ASML Holdings (ASML) remains above 10-dma support so can be watched for any potential break through the line. Iren Ltd. (IREN) also failed on a breakout attempt this past week before triggering a short-sale entry at the 10-dma. It is expected to report earnings Thursday after the close.
As the market runs into selling pressure, members should review long position and risk-management plans, taking into account trailing stops as appropriate as the market sorts out a potential new wave of inflation and/or the perception of Fed Chair nominee Kevin Warsh's alleged hawkish bent. At times like these, maintaining emphasis on capital preservation vs. capital appreciation can take precedence, and it is best to have a plan in mind beforehand rather than reacting emotionally when selling reaches a potentially advanced state.The Market Direction Model (MDM) remains on a BUY signal.