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Thursday, August 24, 2023

Market Update Thursday August 8th - What a difference a day makes!

 What a difference a day makes! 

NVIDIA/ AI hysteria persists 

I wonder what the options action on $NVDA looks like; I bet the $500 calls are rigged to pay; nice even number target; just seems so obvious; in hindsight!     

I don't know what kind of idiot buys Semiconductor stocks up here, but I like to buy low, and sell high. If I were an options trader, I might think differently. Buy high, sell higher?  

 But it's not just NVIDIA driving the latest rally. Semi's typically lead tech, as they've been doing all week 

$SOX - started rallying no sooner than the controllers got paid on their bearish bets (August OPEX). Trades into a powerful wave C, assuming the pullback in wave "B" is complete. 

Let's Look At What Else Is Driving This Rally 

It seems like we've been waiting for more than a week, for a decent trade and finally saw some decisive action yesterday. 

1. Gold finally broke out above the $1900 level - and I caught a nice 11% move in one of the leveraged gold miner ETFs. Cha-Ching! 

I could tell you exactly how the controllers engineered this trade, but then I'd be giving away, way to much.    

2. Oil tumbled, as I had predicted - in a tweet I sent out to Goldman Sachs - a day earlier - Cha-Ching! 

Of course this looks like the same sector rotation trade, that we've been tracking for over 2 years; out of energy, and back into Tech, and vice versa.  

Speaking of Tech 

3. China continues to lead the tech rally. 

It was definitely the best trading day for me, for the Month, and a good excuse to move into cash, ahead of Jackson Hole (uncertainty), and a much needed vacation. 

Getting back to the tech rally: It looks like I took profits on the Tech long trade a little early, but at least I was smart enough to see it coming, and not to go short. 

Looking at the Charts 

Nasdaq (tech stocks) looks like a typical wave A, or wave 1 (impulse), which is a trade few traders believe in, because that's the psychology of a wave 1 (or A) - the first leg up in a reversal.

$COMPQ - I can show you this chart, because I have no skin in the game. Support is going to become the 50 day moving average, but more importantly that breakout is going to trigger program buying. 

I think what were also seeing is another short squeeze ahead of the Labor Day holiday, which is only a couple weeks away, and in what sector is this short squeeze taking place? Technology, of course! This has been the trend for the past 15 years, so don't expect it to come to an abrupt end anytime soon! 

This has all the classic signs of short squeeze. Light volume, ahead of another holiday. Sector rotation out of energy, and back into tech. China is leading... 

Remember what I said earlier in the week about not putting all your eggs in one basket? I wouldn't be chasing the tech bubble for all the tea in China, but this is the only sector that seems to be performing, and money managers are going to be forced to chase performance. I mention that, because window dressing season is coming up, and money managers have to show that they are fully vested in the so-called "AI boom".  

To wrap it up: 

 This looks like an impulse wave, and just the beginning of a larger snapback rally, after 1 months worth of selling, which predictably came to an end on August Options Expiration, we're seeing a rally, which will likely take a few more weeks to wrap up. 

It's too early to find a pullback pattern, and pullback patterns in wave b, aren't easy to predict. 

 Watch for the $SPX to test the 50 day moving average, but beyond that I'm not sure what to expect. 

Good luck, AA 

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