The Set-Up, Again
Last Friday, CDNS printed and closed at all-time highs.
Looking at the chart, it’s the all-familiar pattern (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
Unprecedented
The market rally’s unprecedented; like never before.
Will it be the same on the way down? (not advice, not a recommendation).
Adam Taggart says in the latest Ed Dowd interview:
‘Vertical moves don’t correct by going sideways’
Some Highlights
The entire interview is worth the time. However, some excerpts are below. Time stamps are in (parentheses).
Market summary (2:20)
Double ordering of inventory (8:28)
Helium shortage (9:00)
The beginning of the end (9:30)
Bonds, long term lows (10:48)
All you need is one company to slow ordering (13:30)
‘You don’t crash from tops’ (14:18)
‘I’ve never seen anything like this’ (14:40)
Price washout, sets up opportunities (19:30)
A.I. creating more problems than it solves (43:20)
Nvidia to retrace 80% – 90% (45:30)
This is my third rodeo … it’s all echoing (47:25)
‘It’s going to be fast’ (48:07)
Oil breakout (49:15)
Gold, source of liquidity (59:20)
Buffett’s at 40% cash (1:01:00)
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The Danger Point®, trade mark: No. 6,505,279
Hourly Numbers
When you add it all up, if the SOXX was going to reverse from all-time highs into a sustained correction, Friday’s close would be a good place to start (not advice, not a recommendation).
Prior updates have been consistent with the (Wyckoff) premise, upward thrusts are covering less net distance.
SOXX Hourly Details
First, the markets are fractal.
We see the same repeating pattern of ‘spring to up-thrust’, on the hourly as on longer timeframes.
Second, tops and bottoms are different.
The characteristic of the ‘spring’ bottom and the ‘up-thrust’ top are how markets behave.
Bottoms, ruled by fear, typically sharp and well defined.
Tops, ruled by hope, typically wide and rounded.
Semiconductors SOXX, Hourly
The top shown above, is what David Weis used to call, The Danger Point®, where risk (cost) of being wrong (on a short, in this case), is least.
In his video, he points out this type of action, saying ‘the market could just keep on going … so what’.
His meaning was, it’s the point where there’s instability, therefore, potential for reversal (not advice, not a recommendation).
For those who don’t have that video, it is timeless wisdom, still available here.
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And Then?
For the past two weeks, the SOXX has been discussed within the context of ‘shortening of the thrust’.
That’s a Wyckoff adage:
‘When a move is nearing its end, the amount of net progress (between waves) will become shorter’ (not advice, not a recommendation).
Even though the past four trading days have closed higher, SOXX net upward progress, is still getting shorter.
Semiconductors SOXX, Daily Close
Next update, we’ll move closer-in to the hourly.
That timeframe shows a clear ‘spring to up-thrust’ set-up (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
Fuel Price Hit
Walmart slammed lower on earnings.
From a price action standpoint, it sets up several interesting dynamics.
As we’ll see below, the long-term monthly view, shows a bearish MACD divergence (not advice, not a recommendation).
On that same chart, there’s (so far) an outside-down bar, otherwise known as a ‘key reversal’.
Daily action to be covered in a subsequent update.
Walmart WMT, Monthly
Going all the way back to 1995, the long-term view shows indicators like MACD, have literally gone ‘off the chart’.
Look at the size of the MACD divergence when compared to the past 30-years!
Meanwhile, as Ox Talks tells us, the crowd seems to be partying like it’s 1999.
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The Danger Point®, trade mark: No. 6,505,279
While Nvidia Erodes, After-Market
Five trading days ago, On Semi, posted its all-time high.
The difference between ON, and semi leaders like, NVDA, TSM, and AGVO, the prior all-time high for ON, was years ago, back in July of 2023.
Since that time, it’s been in a wide trading range.
ON Semiconductor, ON, Daily Close
The standard set-up, seen many times, labeled as ‘spring to up-thrust’ (not advice, not a recommendation).
Depending on how price action goes from here, we’ll update accordingly.
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The Danger Point®, trade mark: No. 6,505,279
Back, in the Day
It’s no secret, bonds (TLT) are at a critical juncture; primed to break significantly lower (not advice, not a recommendation).
Breakdown, is almost a ‘no-brainer’.
Almost.
For those old enough, remember back in the early 2000s, the S&P had formed a near-perfect Head & Shoulders?
Remember, how price action was printing lower, ready to penetrate the down-sloping neckline?
Then, just as it got there (week of 10/11/02), from out of nowhere, came a launch upward that didn’t stop until October of 2007?
Rember that?
Of course, we found out later, the ‘hidden hand’ was at work, preventing a melt-down; leading us to where we are today. 🙂
Let’s all keep that in mind as we watch the bond market flirt with disaster (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
Multiple Tests
The last update on AFRM, link here, said to watch for a test of the reversal.
After that, there was a test; in fact, two of them.
The last one (so far) was this past Thursday (not advice, not a recommendation).
Note how the reversal bar (zoom area) nearly touches the 38.2%, retrace exactly.
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The Danger Point®, trade mark: No. 6,505,279
Bond Market Catalyst
The bond market’s on fire; yields screaming higher, bond prices lower.
Since the end of the forty-year bull market (TLT) in 2020, the view on this site, has been consistent.
That is, ‘unless there’s a market melt-down and even if there is, bond prices are likely to remain under pressure’ (not advice, not a recommendation).
That sentiment, recently echoed by Ox Talks, link here (Time Stamp: 6:40).
All of which, brings us to real estate.
Real Estate ETF, IYR, Daily
There were twenty-days struggling at resistance, forming a terminating wedge.
Day 21 (this past Friday) was the breakout to the downside.
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The Danger Point®, trade mark: No. 6,505,279
Interesting Numbers
Trading professional Tom Hougaard has already told us, if Friday’s market action trades below the prior day, Thursday, then Monday tends to be lower as well (not advice, not a recommendation).
There’s a lot going on in the S&P chart below.
S&P 500 SPY, Daily
The current move bottom-to-top, was 33 Days
If the SPY retraces from Friday’s close to the ‘Measured Move’ target, it’s a drop of approximately –3% (not advice, not a recommendation).
Let’s throw in some SOXX, stats as well.
SOXX all-time high (5/11), was 533.74. The ‘test’ high (5/14), was 533.13, closing at 530.03, a daily gain of +0.33%.
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The Danger Point®, trade mark: No. 6,505,279
The Danger Point® 