Hi everyone, hope you are all enjoying the weekend.
For those who may be less familiar with my recent posts, I have been extremely bullish on US equity markets since mid/late April, noting:
Capitulation out of the post-Liberation Day lows
Multiple breadth thrusts including the Zweig Breadth Thrust we anticipated in April
A Power Trend triggering recently, which indicates an “all dips get bought” environment until further notice
The newly elected White House shifting sharply from a message of austerity during Q1 to the realization that they have to overheat the economy in an attempt to “outgrow the debt” - completely unrealistic, but informative for risk-on
Persistent bearish sentiment and lack of price recognition, overall a sad state of affairs for the bears
Let’s review the state of the market.
MARKET REVIEW & OUTLOOK
SPX (weekly chart below) continues holding around these new all time high levels, as it has been largely rangebound for the better part of 3 weeks now.
In looking at this chart, I continue to believe seeing this V shaped recovery look more like a “cup and handle” within the next few weeks feels extremely logical. Something like what I’ve crayoned out below.
I’m not trying to be overly prescriptive with exact price and time estimates, but a retest of levels near the 21 week moving average (green line) make a lot of sense to me. By the time it happens it will likely be at around $6k. The below chart from Subu Trade is also a solid indicator of how far along we are in this rally and what tends to happen at this point in time.
With sentiment indicators like AAII and NAAIM back to not particularly bullish levels, any headline driven tree shake feels like it would get a lot of folks very bearish very quickly.
PRIOR MARKET ANALOGS
In reviewing how the market has effectively been rangebound at new all time highs for about 3 weeks now, I thought it might be a useful exercise to compare where we are to similar situations in the past where we had capitulation followed by breadth thrusts.
2020
When we made new all time highs off COVID in Summer 2020, we had about 1-2 weeks before the market pulled back sharply. We required a brutal 2 month base with numerous whipsaws before SPX was ready to resume higher.
2019
The 2019 market couldn’t sustain new all time highs for much time at all. We had just a couple sessions at these new levels before 5 months of absolutely horrendous, significant chop ensued - numerous violent whipsaws in both directions before the market was actually ready to resume higher.
1999
Easily the most bullish analog available, 1999 proved to be square in the middle of the dot com bubble and continued to proceed higher without much issue.
However, if you zoom in, even 1999 had a meaningful base after racing to aggressive new all time highs early in the year.
In summary, 1999 / 2019 / 2020 all had significant 5+% bases that lasted at least 2 months after reaching new SPX all time highs. Just something to perhaps be mindful of given where we are at in price and time off capitulation with breadth thrusts prevalent.
MAG7 CHARTS INTO EARNINGS
Given how little I’ve covered the MAG7 stocks here recently, I thought it would be useful to dive into each with general thoughts given chart structure.
AAPL
Still an obvious laggard given the uninspiring move off the April lows relative to basically every other stock I look at, but AAPL does look like it’s in the process of carving out a bottom. Tight setup here on the daily, looks ready to either test that declining 200 day moving average at $222 where it will almost definitely fail, or alternatively reject sooner and continue to carve out a bottom. I suppose you can try and sell long dated puts on this at $200, but unless you have a $200 million account there’s quite clearly better opportunity everywhere else in the market.
META
One of the stronger performers in the group but clearly rejecting that all time high retest, META looks like it’s also in the process of working through the “handle” portion of its cup and handle. Something like the below, perhaps (not precise, just directional).
I wouldn’t be in a huge rush to get involved as I also actually haven’t seen a ton of bullish put selling on the name either. Would imagine further dips towards $650 do begin to generate interest and that’s when I’d also be inclined to get involved.
MSFT
As clean of a visualization as you can find for a big base breakout, MSFT has been cleanly trending along its 8 day moving average for 3 months since its earnings gap.
In trying to pair my thoughts on the market with the MSFT chart, a potential retest of this breakout could theoretically happen although it’s not something I would actively express with my own money. In the event such a test happens, that $455 level looks like a really obvious place to target getting long.
Similar to AAPL, I frankly have much more productive things to do with my money than sell MSFT $460 puts to collect less than what muni bonds yield, but hey it’s definitely a brainless trade you can put on if you so choose.
AMZN
Very constructively gliding along the 8 day moving average (orange line). In the event of any market consolidation, the red line pointing out old all time high pivots at ~$200 look appealing. Hard time seeing it consolidating much lower below that. Another name that I’m personally not in a rush to pursue, but very well defined risk levels not too far below which you can’t say for faster names in this rally.
NVDA
Not a lot new to say about NVDA as it has made the breakout to new all time highs written up a few weeks back. Dips down to retest that breakout in the low-mid $150’s should be very buyable if they do occur. I own some Sep $160 puts as a general market hedge but would anticipate dips back to that red line to be extremely buyable - note that NVDA could just as easily consolidate in time rather than price and just go sideways for a few weeks into its print.
GOOGL
GOOGL continues to look constructive with that golden cross pending at $173. I personally have a hard time seeing this taking out that horizontal red line at $190 given how longstanding the resistance is, but similar to some of the other names above do acknowledge that this is a decent name to sell puts on with the goal of being assigned at 5-10% below the current price.
TSLA
Tesla is my favorite chart in the current market and I believe it will go to new all time highs ($500+) in 2025.
The monthly chart above is about as appealing as anything can look in my opinion. We have:
Series of higher monthly lows since 2023 (cups drawn)
Double inside monthly candles (June is inside all of May, July is inside all of June)
Both May and June tested the 21 month moving average and held
That’s very appealing. What about the weekly?
On the weekly chart above, we see TSLA continue to consolidate below the downtrend line off all time highs in December. Last week the stock undercut and rallied through the rising 21 and 8 week moving averages. Again, extremely constructive.
What about the daily?
The red box above shows the daily moving averages into Friday, it’s gotten more bullish since the weekly close. We have:
Power of 4 Setup (8/21/50/200 daily moving averages very tightly clustered right below the current stock price)
8 day > 21 day, 50 day > 200 day. Two more day of sideways price action should get the 8/21 above the 50.
I went 12% long TSLA at $325 Friday and am willing to hold it until a 1% loss on NAV at around $300/sh.
Put sales could be worth a look, as on Friday we saw a 4000 lot put sale of 8/8 $320 strike → this implies willingness to take assignment of $125 million at $308, into the quarterly print no less.
While interest in TSLA at the same time as potential for an SPX downturn feels contradictory, I can’t ignore setups that are in line with my general approach towards trading. If TSLA doesn’t work then so be it, but any loss I take in it will be completely in line with my usual methods.
If the Power Trend continues to reign supreme through the rest of 2025, robotics is likely to pick up steam as a new popular theme. If that’s the case, small caps like SYM / PDYN etc can’t singlehandedly prop up the group → it will require a liquid leader. To me, it feels intuitive that Tesla will be said leader if the theme does gain traction. Also, it doesn’t hurt how hated the name has become again → meanwhile the chart has stopped caring about that.
If/when Tesla picks up further and closes weekly over $360, I will begin to get much more heavily involved similar to how I did into the 2024 election.
Let’s have a look at another one of my recent entries as well as one stock that’s heavily on watch into Monday.
RECENT TRADE - RDDT
I got long Reddit stock at $143.30 on Thursday morning. It’s a 25% position.
I’ve liked this stock and have done well in it over the last year, and believe it is poised to outperform towards the back half of 2025.
On the weekly chart above, RDDT had an incredibly constructive, minor consolidation over the last few weeks which culminated in a tag of the rising 8 week moving average on Friday. This has an undercut and rally look to it on the daily, as it closed above both the 8/21 and has potential for a meaningful wedge pop into the beginning of this week.
That purple downtrend line broke on Friday and I’d love to see follow-through ASAP.
On a longer term outlook, I think RDDT will be a good investment rather than a typical swing given the state of the business. For an investment rather than a trade, I like to zoom out and keep things simple.
Reddit:
Is a globally recognizable brand based on its name alone - both a noun and in some ways a verb too
Has the AI training angle given all of the user data it has available
Has $600+mm of cash, not nothing for a $27bn market cap company
Below is the list of websites in the entire world more trafficked than Reddit
Google, Youtube, Facebook, Instagram, ChatGPT, Twitter, Whatsapp. That’s it. Feels like more than a $27bn company to me. Anecdotally, people have been turning to Reddit to have detailed conversations about things they love, and often refer to Reddit sooner than Google anytime they want depth on basically any topic. I feel this will be a strong stock and am curious to see how the next few weeks shape up, hopefully I can get some instant traction in the name.
IDEA FOR MONDAY - USAR
HVE (highest volume ever) candle on Tuesday followed by a minor consolidation; highest weekly volume ever also
Obvious theme - rare earth. This has been a prevalent theme in the market led by MP and USAR is an obvious second participant
Double inside daily candles on Thursday and Friday with two tag and holds of the 5 day moving average
Wider timeframes are not stretched at all, as the daily golden cross is pending at ~$11.20 which is 3 ADR’s (average daily range) below the current price
There are numerous other names but this one is my primary watch into Monday.
That will be it for today’s recap. I hope you all enjoy the rest of your Sunday and will be back with the usual Tuesday night post in a few days.
Disclaimer:
This newsletter is for informational purposes only and does not constitute financial advice. The opinions expressed herein are those of the author. All investments involve risk and past performance is not indicative of future results. Investing in stocks carries inherent risks, and you should always conduct your own research and consult with a qualified financial advisor before making any investment decisions. The author is not responsible for any actions taken based on the information provided in this newsletter. By reading this newsletter, you acknowledge and agree that you are using the information at your own risk.
Great write up