⚠️ Buckle Up, It's About to Get Rough ⚠️
Markets are very shaky and fundamental drivers are knocking at the door.
Spotting bottoms in the stock market can be easy. If you can spot the top in fear, you can spot the bottom in stocks. Read enough of my posts, and you’ll learn about a major buy signal I use to do just that.
Basically, you look for intra-week reversals on the VIX… which measures fear. When the VIX peaks i.e. fear is at its highest - the bottom in stocks isn’t too far.
Most times, it’s within a few days:
I’ve blogged about this many times. VIX peaks at an extreme (i.e. Upper Bollinger), stocks bottom. VIX peaks, stocks bottom…. VIX peaks… stocks bottom. Go back far enough, and you’ll see it happen all the time.
Most of the time.
Two weeks ago, we had a peak in VIX fear…
But this time, I didn’t write about it. Why? Because I have some clues that my signal might be… a false signal.
Why I think my “buy” signal is a false signal (this time around).
First, despite a “peak” in fear… fear has been trending up, and second, the leaders like NVDA 0.00%↑ look like they’re going to crater.
Clue #1 - the VIX has made a series of higher highs and higher lows… meaning, fear is trending up (see blue lines) and could moonshot (i.e. send stocks plummeting)
Clue #2 - Leaders like NVDA and META look like they’re going to crater.
NVDA 0.00%↑ , META 0.00%↑ , and more - all have multiple sell signals, at price extremes (once again, the Upper Bollinger Band).
The Bearish Engulfing, sell signal which invalidates at $121.74. So basically, NVDA has to rally beyond $121.74 on Monday, to invalidate the Bearish Engulfing that formed on the Q1 candle.
Long Upper Shadows - i.e. these represent major rallies and reversals in Q4 2024 and Q1 2025. This signals a lack of buying power. Even if the Bearish Engulfing is invalidated… the long upper shadows would still constitute a sell signal. Long story short, NVDA has to rally to $150ish by end of Monday to invalidate these sell signals. Not likely.
Not to mention, these stocks have major declining money flows by institutions. Pull up major tech stocks like the MAG 7, and you will see similar sells signals.
Remember, when leaders lead, they lead on the way up, AND down… if we’re seeing sell signals on the leaders, that tells me they could drag the market down.
The Final Confirmation: this weeks price action confirmed the false signal.
With those 2 clues, I stayed short… I didn’t add any more puts… until late this week, when we got the selling confirmation I was anticipating.
And as it turns out, this week we had an "intra-week reversal” (something I write about A LOT). It goes like this - early in the week we had a big rally, only to sell off and close negative.
The mind of the market says something is going to happen, and soon.
Knowing we have a major set-up on the charts… I always ask myself what news can manifest the signals I’m seeing? Not for a validation, and not for any type of bias you might think I’m not aware of.
But because the mind of the market predicts big news events. I’ve seen it so many times. Pay close enough attention, and when you see reversal candlestick patterns at Bollinger extremes, it usually precedes news that drives the price to manifest the signals.
Just like no single person knows what’s going to happen in the future, the mind of the market does. And although the mind of the market cannot predict exactly what the news will be, it predicts that there will be big news.
April 2nd is Liberation Day for the USA (or is it?)
Trump’s retaliatory tariffs is the potential news that could drive prices lower. But that’s the obvious answer. And markets don’t respond to obvious answers, unless investors dramatically discount them (like they did with Covid)…
What’s not obvious is how bad the tariffs will be. Or how out of hand the situation in the Middle East will get. But the stars are aligning as technicals and news events all line up.
The market looks like it will react horribly on April 2nd, and it looks like these sell signals will manifest themselves…
After all, we do have a confluence of factors.
At this point I’d say buckle up ⚠️
Author Disclaimer: I will never blog about something if I’m not throwing capital into it. For the record, I am short many technology stocks like NVDA, META, DKNG, MSFT, etc. via an array of mid- to long-term put options. Also important note, I am here to teach you about when to buy, and not necessarily what to buy. If you’re curious about what to buy and where, I’d just go to ChatGPT and ask away. Use this prompt: “I like this stock (insert ticker symbol), I think it’s going to go (up/down), what are some possible ways to play it?” or “I think world war 3 is going to happen, what can I buy that will go up, if it does? Please include inverse ETFs” etc etc.