Transcript of We Usually See This During Market Crashes...
FX Evolution - Trading Academy
0:00Less than 31% of stocks in the S&P 5000:03right now are trading above their 50-day0:05moving average. Something we usually see0:08in a market crash. So, how is it then0:10that markets around the world are still0:12staying so resilient? In today's video,0:15we take a look at some of the big key0:17reads that we're seeing right now along0:19with the 25 basis point hike that the0:21Federal Reserve just did. With the new0:24dot plot, a big put support being hit0:26over the last 24 hours on both the S&P0:28and the Nasdaq, and oil hitting into the0:31first level of supply, there's a lot to0:33discuss. Whether you love stocks,0:35commodities, or cryptos, don't go0:37anywhere. Let's get into it right now0:39together.0:43Well, welcome back. It's great to have0:45you here. And today we have a lot to0:47discuss because we have got the latest0:49in macro, a big 25 basis point hike from0:52the Federal Reserve, and of course a0:54whole bunch of Wall Street flows over0:56the last 24 hours where we saw markets0:58sell off and then rally by the end of1:00the session into the aftermarkets trade.1:04Actually almost bringing back everything1:06that was lost. Before we get started1:08though, I thought I'd just quickly bring1:10up this very interesting stat. The1:12median household income, as we know, has1:14not been going up enough over the last1:16couple of years. But take a look at this1:18chart here from the Atlanta Fed and bar1:20chart. It shows that housing in America1:23has never been more unaffordable. And1:25although that will come as no surprise1:27to most people in pretty much any of the1:29advanced Western nations, yes, this is1:32still a bit shocking. And considering1:34we're now back above 7% for house loans1:37and we're seeing less transactions than1:39ever before, could these interest rate1:41hikes be something that breaks the1:43camel's back? That is basically causes1:45some form of real pressure in the1:48economy between the stock market which1:50is loving life due to AI and capex spend1:53and the real economy which is separate1:55and people's jobs and of course1:57delinquencies etc. Let's go through what2:00happened though over the last 24 hours.2:02The big one here was of course the FOMC2:04press conference and this chart here2:06from Blue Kurdic Market Insights breaks2:08down what we already know about markets2:10but also why it's so important to pay2:12attention to the press conference. So we2:14got the interest rate hike and nothing2:16much happened. But then came the press2:17conference and as soon as Kevin Walsh2:19said anything, the markets went down.2:21What I thought though was interesting2:23was that as soon as he said my business2:25is not to give forward guidance, markets2:28continuously fell off and we ended up2:30getting down to that allimportant 75002:33zone which many of you if you've been2:35watching for a little while would2:36remember is the major net expiration put2:40call. So what was more surprising about2:42I guess this interest rate hike was that2:44everybody voted yes. Now, of course, you2:48kind of expected that not everyone would2:50necessarily agree on the Fed chair2:51board, but they all did, and everyone2:54voted for an interest rate hike. But2:56when they released the dot plot, it also2:58came with more people expecting an3:00interest rate hike again potentially3:03this year. Really following on from what3:05JP Morgan and many others have been3:07saying, which is the general expectation3:09is two rate hikes for this year. So,3:11we've got one. Will we get a second?3:14What do you guys think in the comments3:15down below? The other thing I noted3:17about this dot plot was that effectively3:20when you look at it, it shows higher for3:22longer than we've seen for quite some3:24time with interest rate cuts not really3:27happening for quite a long period. And I3:29think that was probably a little bit3:30more interesting because as you can see3:32here on Duality Researchers chart, the3:35percentages here of rate hikes and then3:38cuts. We don't really see cuts coming3:40into the market until late 2027 at this3:44stage. Remember back at the start of3:46this year, it was expected that we would3:47get rate cuts this year itself. So, just3:50shows you how fast things move and why3:53you need to be less paying attention to3:55what these guys are saying and more to3:57the price action, the data and the3:59flows. Another thing that caught my4:01attention today before we get into the4:02rest of the market and actually what's4:04moving around was that OpenAI is4:07reportedly discussing another funding4:09round valuation of $1.2 to $ 1.54:12trillion valuation across the board.4:15Now, this is potentially roughly double4:17its March's the March valuation. It just4:20goes to show that if they can get this4:21done, firstly, that should tide them4:24over to next year, which is where4:25they're planning to do the IPO, but it4:27also shows us that there's still a whole4:30bunch of money chasing AI. I thought it4:32was a really interesting read that we4:34saw just over the last 24 hours based on4:36the news. Million-Dollar Freight may no4:39surprises. If you've been watching4:41anything to do with crack oil recently,4:43you would know that diesel price is out4:45of control and it is continuously moving4:48up pretty much each and every day.4:50Although it has potentially hit a little4:52bit of a resistance that we'll look at4:54later in today's video as we check out4:56the oil charts. But this one here from4:58Bloomberg shows that tanker earnings5:00exceed 1 million a day on benchmark. So5:04this is just an obscene amount. Look at5:06this difference. Wow. tank is absolutely5:10just destroying in terms of market5:12profitability and you can see the last5:14time we saw things like this was really5:15around CO and that was nothing compared5:18to these tankers soaring in terms of5:21value. So just goes to show how fast5:23things can change. Let's take a look at5:25the fear greed index. Usually you would5:27see extreme fear like this read here5:30from the CNBC one at some form of point5:33where the markets actually have been5:35selling a bit. We're barely down a few5:37percentage points from the top and we're5:39already seeing less than 31% of stocks5:42above their 50-day moving averages and5:44we're seeing extreme fear reads. Now,5:46traditionally, when you see extreme fear5:48reads like this, you would think, oh, it5:49should be a good buy the dip zone, but5:52yeah, it's a very strange market from5:53that aspect. And I think the reason is5:55so so strange is because the 5-year5:58corporates and in general just the bonds6:00market is starting to wake up. this6:02chart here from last week from Ryan6:04Detric and Top Down Charts. Again, I'm6:07just bringing it up to show you that6:09there was no fear in the bonds market6:11and there still isn't any fear in the6:12normal bonds market, but there is some6:15fear in the tech sector. So, that is6:17that the tech sector is kind of being6:18treated separately and they're saying we6:21need more money from this. But the last6:2324 hours also changed some of this as we6:25saw treasuries fall a little bit lower6:28and yeah quite a few things started to6:31appear as potential breakouts in bond6:34yields around the world. Now should we6:38then say well has Wall Street really6:40started to sell the market? remember the6:43next 60 days particularly into the6:46midterm election year uh and the the6:48date there really do become extremely6:51important because with when it comes to6:53overall flows generally the back end of6:56September from a seasonality perspective6:58is not very good and of course October7:00and mid midterm election years doesn't7:02seem very good either and this chart7:04here from duality research actually7:05shows that according to the latest S&P7:09500 asset manager and institutional7:11investor positioning They've actually7:13been dumping stocks for a little while7:15and although the stock market itself is7:17still just trading around here in terms7:20of this area, they've actually been7:22reducing their positions. So, is that a7:24sign? Is it a point of interest? Well,7:28certainly there are some people with7:29very different opinions right now. And7:31that's the good thing about markets.7:32You're always going to have bulls.7:33You're always going to have bears. But7:35the question is where is the price?7:37Where are the flows really moving to?7:39Inflation expectations. Is this really7:41the last hike? It's probably unlikely7:44based on charts such as this one here.7:46Tavik Costa, Azura Capital, basically7:48showing that more stocks on average or7:51more stock more stocks in the in the7:54commodities world and of course in7:56general just around anything to do with7:58commodities are going up. And because8:00the prices are happening here and8:02they're moving forward that usually8:04these should be fairly linked to8:06inflation. And right now we're kind of8:09trading around this point here. So8:11there's still a lot of catching up to do8:12if we are to get inflation under8:14control. And this is actually an8:16excellent chart and we will be tracking8:18commodities a lot more over the next 38:20to 6 months as we try to find out8:22whether the Federal Reserve is able to8:24actually place a cut or whether they're8:26going to have to continue to praise more8:29and more and more hikes putting a lot of8:31pressure under the property market, the8:32debt markets in general, and of course8:34the AI moves. Here's where the big8:37trades were over the last couple of8:39days. Big one I thought was really8:41interesting was ITB. Now, if you've been8:43watching the channel for a while, you'd8:45know that probably back in 2024, late8:472024, I really disliked this particular8:50sector. This is the homebuilders ETF.8:53And the reason was pretty clear. I8:56thought that we had an extremely good8:57run. I thought that also there were a9:00couple of signs of potential topping9:02patterns starting to appear. And since9:04then, it's actually performed pretty9:06poorly. But we did just get the largest9:09transaction ever recorded on ITB, which9:12I thought was really interesting because9:13it's back down at those levels of9:15support. Will it hold or is this9:17actually a sell to further pressure in9:20light of an interest rate hike. Wow.9:22Pretty pretty key zone. We also got9:24another number one over the last9:26session. Now, this happened before the9:27Federal Reserve's 25 basis point hike,9:30but it's a number one transaction in9:32bug. And if you known anything about9:34software at the moment or cyber9:36security, generally speaking, these have9:38been the best performers. And it moved9:40all the way up here to the highs. And of9:43course, we've seen a new number one. So,9:46pretty pretty specky stuff. No change9:49really in price since this has occurred,9:51but certainly pretty important. Now, on9:53to Bitcoin. Now, on the charts, it might9:54look a little bit weaker, but it could9:56still be in a pit, but certainly flows.9:58So according to the latest data here10:00from farside investors, we're seeing10:02realistically a whole bunch of sells. So10:05uh there's a whole bunch of negative10:07flows, couple of positives some days,10:09but the general trend over the last week10:11has been negative. So if you're liking10:14Bitcoin, you want to see this kind of10:16turn up and hopefully find a couple of10:18good inflows over the next couple of10:20days. Let's now check out what happened10:23when it comes to the market sectors10:25during the session of washes 25 basis10:28points. We saw a sell across the board10:30led by actually energy going down on10:33both but that was more because energy10:35had hit I think a key technical10:37resistance and then we also saw10:39interestingly enough financials going10:41down and I think this is a really10:43interesting thing that a lot of people10:44are missing. Financials generally like10:47interest rate hikes. So why are they not10:49liking interest rate hikes this time10:51around? And I think that's because10:53people are really starting to struggle10:55and the market is starting to see some10:57real risks here. When it comes to what10:59did best, semiconductors, biotech, those11:02types of markets had the best sessions11:04on them. And if we have a look here over11:07the last 5 days, it's been software out11:09in front, healthcare, staples, couple of11:11defensives here, but in general, it's11:14been kind of like a mix match market. So11:16actually gold and and metals have been11:18doing the worst. Now if we are to follow11:21a standard kind of year, let's say a sec11:24something that we're closely correlated11:26to right now, we're about here at this11:27stage, then we could still be in for a11:30bit of volatility. This one chart from11:32here from Blue Kurdic Market Insights11:34basically shows us that if the S&P is11:37going to decline, then the next month,11:40month and a half could be where it11:42actually happens. And then actually11:43markets may recover from that point11:46based on at least the 1970s theory,11:49which is still currently the most11:51closely correlated market to what's11:53happening right now. Just before we jump11:55to the charts and we take a look at all11:57of the key levels we're watching right11:58now, remember if you're interested in12:00one chart, one story, one market lesson12:02from my over 17 years of insights into12:05the markets on both the institutional12:07side and retail side, then you can sign12:09up for the newsletter in the description12:11down below. It's really awesome to write12:13those ones for you guys and got some12:15great feedback from last week's which12:16was all about lessons of history and uh12:20even I enjoyed uh checking out some of12:22those things. cuz I forgot about one of12:24them and um going back and doing a12:26little bit of research on it was uh12:27actually really awesome. So if you want12:29them links in the description and check12:31it out. All right, let's go to bonds.12:34We'll start off here with the charts in12:35bonds. First up, treasuries. This is the12:37Bessant level basically where Bessant12:40and the Treasury came in and said, you12:42know what, we are going to try to12:44support treasuries. Didn't really work.12:46That's the typical thing bonds do. And12:48at the moment they've pressured down12:50underneath. So you can see here Walsh's12:52comments uh basically led to a bit of a12:55move here in treasuries. We actually saw12:58it spike up and then sell off by the end13:00of the session. So we are still in a13:03declining market here on treasuries and13:05we don't know where the lows are going13:06to really be. But get ready for at any13:09point in time intervention to be caused13:12and I think that's the important thing13:13like this intervention could come in and13:16this could move treasuries quite a lot.13:18US 10year. You can see here that we have13:21a 5% kind of read. Still, it didn't13:24really go any higher. I do know that13:27almost everything on socials is talking13:29about this and everyone posted a bunch13:30of yield style reads, but really nothing13:34much happened. Like if you have a look13:36here at US30 wise, they are pretty much13:39at the same levels. If we look at the13:42Great British, you know, let's say two13:44years or something like that, they're13:46pretty much at the same levels or if not13:48dropped a little bit as you can see13:49there. And if we look at the JP2 wise13:51now, they're the ones that are getting a13:53little bit out of control. Look at these13:54Japanese yields. And we've been talking13:56about we've been talking about a lot,13:58but this is going to continuously put13:59pressure on the carry trade, the the14:01treasuries and those types of things.14:03And this one actually is probably the14:05one that everyone's gotten sick of it14:07because most people14:10think of the Japanese um yields as being14:13a problem for a long time now and they14:14have. But at the same time, it's still14:16accelerating. So if it's accelerating,14:19it can instantly become a problem out of14:21nowhere. And what I'm really looking for14:24is US dollar yen to actually show us14:26something in the technicals. So if we14:28went down here, notice that we're still14:30above some of these key levels. And you14:32might see I've got a little alert under14:33here cuz that would be the fear of the14:36unknown. So unless we're getting down14:38there, it's not really too much of a14:39problem. Let's have a look here at14:41financials. As we mentioned before,14:43financials have been weakening. And if14:45we actually have a look here at14:46financials versus SPY, uh we're starting14:49to see this supply getting pressured14:51down. But yeah, you usually would see14:53financials do well off interest rate14:56hikes. They're not doing so. We first14:58saw this a few weeks ago and it15:00continues to be a little bit nasty15:02there. The VIX 17, not really concerned.15:06It's above 20 that you start thinking15:08about the VIX, but still off the lows.15:11So 17.72, it's not 14 anymore and it is15:16certainly starting to come back up. The15:18RSP, the equal weighted market, as we15:20talked about at the start of today's15:21video, less than 31% of stocks trading15:24above their 50-day moving average. this15:26is continuously falling off a cliff and15:29that shows you basically the breadth is15:31really bad. So the general underpinning15:33of a strong market should have good15:35breadth but luckily for the market the15:37magnificent 7 has been holding up15:39better. So you can see here mags versus15:41spy currently doing a lot better. So, as15:44long as that holds up, you're probably15:46okay. But even have a look here at this15:49New York Stock Exchange. We saw this.15:51The advanced decline line continues on15:53down and it continues to weaken across15:55the board. So, you might think, well,15:57that's really negative and so is this.15:59But I would say at the moment, the main16:02thing is that some of the most important16:04sections of the market are still holding16:06up. Speaking of which, copper. Copper16:09managed to hold its 20 moving average16:11again on the weekly here. You can see it16:13looks a bit like a pin bar at this16:15point. That's a really good sign. You16:17don't really want Dr. Copper weakening16:19at this point in the markets because we16:21do want, you know, AI capex spend or if16:25you're a bull anyway, you want it to16:26continue. You want people to generally16:29be building stuff in the economies and16:32Dr. Copper often shows us that. So, in16:35this case, the weekly to close and hold16:37above the 20 moving average, I think16:39it's a pretty good sign. On to gold and16:41silver now. Now, these have been pretty16:44terrible in terms of recent action. You16:46can see each rally has been rejected16:49against. So, here are the rallies. Bang,16:51bang, bang. So, what we'd like to see16:53is, of course, a higher high being16:55formed. At this stage, it's still16:57holding that level of secret demand. I16:59guess it did pressure that. A lot of17:01people don't like interest rate hikes17:03for gold because it's a currency. I tend17:05to agree, but at the same time, it's17:08been pretty resilient considering17:10interest rate hikes really are not that17:12great for gold and silver and those17:14types of market metals. But you can see17:16here that at this point, we're basically17:18at the demand and we have a critical17:22resistance coming up. So, if we can get17:24through that, that would be good. And17:25silver is pretty similar. You can see17:28here silver tried over the last 2417:29hours, fell on Walsh's comments, and has17:32since recovered a bit from that point.17:34and we're still underneath 6530 and 68.17:38So these two levels pretty critical here17:40for silver and hopefully it can get17:42above them. Onto semiconductors, nothing17:44going on. We did see a couple of large17:47transactions at around this level, but17:49still trapped within the zone and that's17:51in line with what we've been discussing.17:53Since we saw the crash, we thought it17:55would go into a kangaroo market and17:57that's exactly what it's done at this17:59point. Nvidia still kind of just barely18:02holding on. Has it closed to a new18:04all-time high? No. But it's still18:07holding on through the last couple of18:09sessions. So, I guess that's a good sign18:10for that. And US oil, well, I guess18:12congratulations if you18:15um you know got it to that level or18:17whatever because 105 106 did get reached18:20and that was actually a pretty critical18:21resistance. We saw it as18:23crossorrelation. when we saw Brent as18:25well hitting the same levels and we also18:28had even like the energy markets in18:31general kind of completing some of their18:34moves as well. Now of course every all18:36eyes will be continuously on crack which18:39is diesel price and at this stage it has18:42continued to hold up very very nicely.18:44So this is basically showing us that at18:47the moment yeah inflation's around real18:50supply constraints are around and of18:52course there are issues on the horizon18:55uh from that perspective. Carvana I'm18:58just watching this because I'm18:59interested to see what's happening in19:00the autos and what's happening in19:02America's delinquencies for now. Could19:04this be a head and shoulders? Is it19:06starting to weaken? Certainly weakened19:08over the last 24 hours but it's up an19:10after hours trade 1.44%.19:12But the real story was the put walls. I19:15mean, they almost hit it and nailed it19:18perfectly. And we've been talking about19:19this on and on and on on on19:23again, guys, because you know, I'm a big19:26fan of net expiration put walls. And we19:29hit 700 and it just so happened to be19:32the weekly 20 as well. And as soon as it19:34hit that level, it rebounded. And like19:37clockwork, you also saw the S&P do the19:40same thing. came down to 7,500ish level,19:44rallied off that, and at the moment,19:46it's trading back at 7,600 in the in the19:50uh the futures market. So, it just goes19:52to show how important some of these net19:54expiration levels are. And you can see19:56here, this is the current market with a20:00big rejection. So, if you can manage to20:01hold like this, I guess it's not that20:04negative for markets, is it? Even though20:05we've got less than20:0830, what was it? 31% of stocks are20:10trading above their 50-day moving20:12average. I mean, it's just a crazy20:13number. And and you know, even though20:16we've got weakness in the RSP and all of20:18those things, if they can hold like this20:20and we end up getting a higher high, you20:23know, that is still what it is. I mean,20:25it's a market rebound. And um yeah, at20:28this stage that hasn't happened yet, but20:30markets just hit what I would think is20:32the first critical kind of seller level20:35uh which is that 7500 and 700 point on20:38the Q's as well. I guess like we'd want20:40to see like a seven I still probably20:42want to see a 730 plus, but the20:45resistances came down to 720 on the on20:48the net expirations. Meanwhile, on20:50Bitcoin, what's going on there? Well,20:52Bitcoin call resistance you can see here20:54is 45. markets are kind of just20:56traveling in between at this stage. And20:59for the real market itself, as you can21:01see here, it's gone underneath where21:04most people would have their stop21:05losses. So, this is where most people21:07have their stop losses. It's taken those21:09out. If it then starts rallying and we21:12get like, let's say, positive flows on21:15some of the ETFs over the next couple of21:17sessions, then that could be actually a21:18really good sign for bulls. It's still21:20in a pit as far as I'm concerned. And21:22you might say, "But Tom, look at these21:23rejection weeks." But even better reason21:25that if it gets above those there can be21:27a short squeeze. See the great thing21:29about markets guys is you have the21:31patience. You get to see when the market21:33reacts to something and make a decision.21:35And you don't have to necessarily be a21:37full-on predictor. So like we always say21:40in some of our quotes, you know, it's21:42really important to to check these21:44markets out from the perspective of when21:46do you think that you have the evidence21:48at hand. So guys, in light of everything21:51that just happened, what's the summary?21:53Well, the main summary I think at the21:55moment is that we probably have to21:57expect another interest rate hike for21:58this year based on the fact they've22:00started a hiking cycle. Why? Well, they22:03don't usually start one and stop.22:05There's usually more to come. So, let's22:07say that's possible based on the dot22:09plot and everything we're seeing with22:10crack and diesel. The other thing is22:12that when do these markets start to22:15really freak out? And that probably22:17comes back to both for high yield credit22:20default swaps like these types of things22:23are what we will be looking at the most22:25and with uh OpenAI as well trying to get22:28their funding. Will they fail to get22:30their funding at the new rate cap spends22:33because they will remember reportedly22:35struggling just a few months ago to get22:38some of their money and people were22:39trying to move to their money to22:40Anthropic as Claude had the better22:43better LLM at that point. So guys, I22:46think it's really interesting. The22:48markets are always fascinating times.22:50I'd also be watching home builders as22:51well if that starts to weaken. That's22:53really telling us a lot about the22:55economy, particularly from the real22:57estate side, which remember is one of22:59the biggest debts in the world. So yeah,23:01a lot going on. If you enjoyed today's23:03video, then remember to subscribe, smash23:05that like button, and we'll see you in23:06the next one. And also sign up for the23:08newsletter. Links in the description23:10down below. Bye for now.
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