“Reflexes had got the better of me
And what is to be must be” I Shot the Sheriff, Eric Clapton (Bob Marley)
On Thursday, Mr. Market shot the big cap QQQ sheriff, but they did not shoot the small cap deputy.
“QQQ is the spear of speculation. NVDA is the tip of that spear…
Last week on the Hit and Run Private Twitter Feed we posted that NVDA projected to the 136 region. Why? From the April low of 75.76 NVDA “cubes-out” (a 540 degree move) up at 136.”
We wrote the above in Thursday morning’s Hit and Run Report showing the Square of 9 image below showing the price harmonics.
We went on say, “This morning pre-market NVDA is trading up to 136. IF IT REVERSES FROM THIS TEST OF THE JUNE KEY REVERSAL DAY, OVER COMING HOURS/DAYS, THE SECOND MOUSE MAY GET THE CHEESE FOR THE BEARS.”
Below is the remarkable slide in NVDA from 136 to 127 on Thursday.
Keep in mind this is 90 points on the pre-split stock.
What do I mean by the second mouse getting cheese for the bears? NVDA carved out a large range Key Reversal Day on March 8th.
It declined for 6 to 7 weeks following a test of the Key Reversal.
On June 20th NVDA also left a Key Reversal Day which was being tested on this drive to 136 mirroring the same pattern in March.
While NVDA roared back after offsetting the first March Key Reversal day on May 23rd, this second KRD followed by a test may be a case of the first mouse getting the squeeze followed by the second mouse getting the bear cheese.
In other words, after the first KRD in March players jump on the short band wagon .
They feel validated by their bearish posture when NVDA snaps its 50 day line with authority.
However, there was no downside follow thru and NVDA reclaimed its 50 DMA within a week.
It was potentially telegraphing higher.
Then NVDA traced out a Cup and Handle pattern.
Bullishly NVDA “came out” with successive Breakaway Gaps eliciting a runaway move.
The runaway move ran out of steam on June 20th, knifing down to the 20 dma.
The 20 DMA served as support directly off the top perpetuating a test of the June 20th signal reversal bar.
However notice the line-drive decline directly to the 20 dma on Thursday.
This follows what looks like a test failure of the highs.
Taking into consideration that a “1st mouse gets the squeeze and the 2nd mouse gets the cheese potential 4 month pattern, caution is warranted.
At the very least, the presumption is NVDA will turn its 3 Day Chart down with 3 consecutive lower daily lows. The soonest this could happen is Monday.
90 degrees down from the key 136 region is 124.
(136 being a key level to measure from as it ties to the all-time closing high).
Given Thursday’s momentum the 125 strike may be in jeopardy today.
Breakage below 124 opens the door to 114 which ties to the 50 day line.
Is it possible NVDA could test 114/115 in short order?
Turning to the weeklies shows a nasty pattern.
The week of June 17 shows a large range signal reversal bar.
You can see that yesterday’s action tested the highs and Jackknifed lower.
If NVDA closes at/near session lows today, on the Friday weekly closing basis, NVDA will have two
Distribution weeks in the last 4.
Moreover, from the October 2023 low NVDA shows a Measured Move.
From the October low NVDA ran up 58.20 points.
58.20 points added to the April low gives 133,80.
Notice how violently NVDA reversed after a Throw Over of the idealized Measured Move.
Indeed the highest weekly close NVDA has scored is 131.88.
Checking SMH, the semi-conductor index a bearish pattern.
SMH left a Key Reversal Day on June 20th.
It rallied back to make a marginal new high on Wednesday, gaped open to an all-time new high yesterday and cratered.
The key to the plunbe was the stab back thru the prior swing high of June 20th at 279.57.
The reversal back thru the June high triggered a Soup Nazi sell signal.
I created this pattern to help identigy falls breakouts and false breakdowns as fast moves come from false moves. We certainly got that on Thursday.
The criteria for a Soup Nazi sell signal is a new 20 day high that reverses back below the prior high within the 20 day lookback the same day or the next day. There needs to be at least a 4 day interval between the two highs to protect against a continuation move.
In other words, for the buyers of the new 20 day highs it’s “no soup for you.”
Indeed most all tech was in the soup on Thursday.
META off 23 points
MSFT down 12
AAPL, AMZN and GOOG down 5
NVDA shed 9
TSLA plunged 26
If there was ever a day that screams that the market is about positioning versus fundamentals…yesterday was that day.
The “funnymentals” didn’t collapse from one minute to the next on the Magnificent 7 and most all tech in unison.
Nor did the “funnymentals” improve en masse on the RUT all at once.
It’s positioning.
Virtually everything that was over-own was sold indiscriminately while nearly everything that was under-owned was bought promiscuously.
It was a Squeeze Play. Longs were squeezed to sell. Shorts were squeezed to buy.
It was orchestrated. Like an ambush with the excuse that the CPI opened the door for rate cuts.
If so then why did many cloud and cyber names get hit as well when the premise of lower rates typically produces a rally in these names ala multiple expansion.
My expectation is that when IWM exhausts and the tech generals dip gets bought and they are ‘together’ it will mark a top for the overall market.
Like Thelma and Louise…going over the cliff the two were fine…until all at once.
You can’t win a bull war by shooting the generals.
The troops alone, the IWM, can win a battle, but they can’t win the war without the generals.
