More Into It

Got a bit of a diamondy pattern going on. Big break coming either way. I have puts.

Resistance Hit, Into It

A lot of charts look like great shorts again.

Mushroom Cloud Software

Technology advances such that what was once expensive becomes so commonplace one doesn't even think about it. If you are of a certain generation, you may recall "Game & Watch" versions of Super Mario or other popular games that were simplified versions on cheap LCD screens:

Today, there is a "Game & Watch" with Legend of Zelda games, the complete versions that ran on game systems such as the Nintendo and Super Nintendo.

In software, what was once expensive becomes cheap or even free. Nintendo's games and characters survive because they are copyrighted, but more importantly, popular. If another could make Mario games, Nintendo would be in deep trouble.

In the case of productivity software, the most important function is the task itself, which cannot be copyrighted or patented. "Paying a bill" is not a patenable function. Some have tried, like Amazon patenting "buy with one click," but that is more evidence of USG corruption than a repeatable busines model. Moreover, the shift to the cloud makes switching software easier than ever. If blockchain realizes its potential, consumers will gain more control over their data, forcing companies into greater competition for customers.

Many software and platform companies are valued on their platforms. Their growth is a function of the customer base growing into the future and collecting more dollars from their users. Instead, most are headed into a future similar to Docusign. Innovative to start, how much should it cost to digitally sign a document? What's to prevent competition? This is the classic case of a company built on a feature that will ubiquitous and free. The market has already figured out that day is coming:

I haven't done a deep dive into software companies. That is for after the decline, when picking the survivors will deliver great profits. For the foreseeable future, most companies will suddenly be valued as if Docusign's fate is their future.

Illuminating Shorts

If you're bearish right now...ILMN could be headed for a breakdown.

Goldman Sachs is more liquid a target for options and has a great chart, but I like Blackrock a little better because it has been underperforming.

I posted Cintas over the weekend too, and it cracked. Ready to go if the market goes.

Although it needn't fail right away, if this is a bear market, the h-pattern seen here in Domino's should reliably complete.

Fall Into Opex

A look at some charts that moved towards a breakdown or have broken down. Northman Trader noted that going back to May, all months except October and November saw weakness into opex. Bottoms were on the Wed before to Monday after. Given the current position of the charts, opex weakness would be the push needed for a break through support and send both the Russell 2000 and Nasdaq to their lowest levels in months.

Charts are after the jump. A lot of more that I've covered in the past few weeks are in "no man's land" without support or resistance nearby. Some are forming new h-patterns. For these, I watch the broader market. They could bottom whenever the broader market bottoms and they can collapse if the broader market slides.

Screen Part Three

In addition to biotech, ARK and recent IPOs, housing related stocks are also popping up. Also a whole bunch of stocks I already own puts on or have covered here in the previous three months or more.

Most Targets Broke Down

Still waiting on XLY, but ALGN, CTAS, MPWR, INTU, RH, MSCI, POOL, IDXX all broke down. Usually this is when the football gets pulled away. I added CMG and ISRG on possible breakdowns. NFLX also broke down. Aside from these, I see a lot of bearish setups. Mainly wading through them looking for the best setups. There are so many in the tech sector alone that no doubt many are out there.

The two next shoes might be SMH and BTC Bitcoin.

UUP tagged its 50-day MA today. I don't think the dollar matters much for the stock market right now, but down would be better for inflation trades and tech weakness, and up better for more general bearishness.

I'm going into Monday with guns blazing, but I'm here for the day the market doesn't bounce. There is growing bearish sentiment, but a lot of its is cautious from my reading. Looking for a 10 percent pullback tops. Fearful of the Federal Reserve, jawbone or policy shift. I don't sense much confidence or risk taking on the bearish side. History and support levels say maybe this dip was it. There's a case for a bounce and there have been face-ripper run ups from the support area the Nasdaq bulls defended today. But...if that support doesn't hold...there is nothing but air below. The risk-reward is heavily skewed in favor of bears thanks to VIX remaining suppressed. the 10-year yield held its breakout too. If the Fed opts for dovishness, they will probably ignite crude oil and the 10-year yields, and then the Nasdaq and all the ARKK trash will walk into an empty elevator shaft.

Support Lies at the Bottom of the Abyss

Amazing charts. I have had, have, and/or will have again, puts on all of these. These is by no means an exhaustive list of all the potential targets out there.

Netflix Breakdown, Intuit Possible

If the pre-market action holds today, it has sliced through both support lines. Bombs away. I bought a single weekly put on this one yesterday, but plan to roll that into a longer-term one if the breakdown holds.

Intuit is above the line in pre-market, but barely.

Update: both made the same opening candle.

Bomb Bay Doors Open

An intraday bounce is probably coming, but the weakness in the very areas I discussed before the open is clearly evident. Whenever this stuff breaks, my question is does it stay contained or does it become a generalized decline that takes down the whole market?

Wayfair Plunges Tomorrow

I think Tesla could get to $900 too, if Biden has hinted at a higher-than-expected CPI number.

Reuters: Biden says inflation data due Friday will not reflect recent drop in some prices

President Joe Biden sought to reassure Americans on Thursday that rises in consumer prices were easing somewhat, saying that inflation data for November due out on Friday would not reflect a recent drop in some prices including energy costs.

Maker forecast is 0.7 percent. I don't know if it is worse or not. That would raise the 12-month, but it'll take 0.9 percent to get a 7-handle.

Wayfair and Tesla are at support. The Russell 2000 futures crosses below the 1-year moving average again. IWM hasn't yet. If CPI comes in high tomorrow, I'm expecting a big down day for tech and related growth/momentum.

BTC looking ugly too.

This could be a bear trap. Maybe it's a dip and stocsk rip higher tomorrow or next week. I just want that caveat there to anyone taking on risk. I take on risks I can live with. I can reverse position at any time and do. But right now, I am betting the correction resumes tomorrow. XLY, TWLO, AAPL, UUP (calls) are my 4 largest positions. I have weekly options expiring tomorrow on ROKU, W, and XLE because I do think tomorrow could have some fireworks.

Shorting Strength Worked

SIVB and SBNY had relative strong charts, but both broke similar support lines today. SIVB from March 2020 and SBNY from November 2020.

Apple doesn't have an insane chart like say POOL or INTU, but it notable went to a new high today.

Selling strong bank charts worked today because the market expectation reversed with the Fed Chairman sounding hawkish on inflation. The crowd and momentum buyers end up stock in position when the tide turns against them. If the market rallies here (hopefully not since I'm not positioned for it), a stock like Apple could become a tantalizing short in a few days or weeks. As would any other stock that the bulls pile into during a relief rally.