The Daily Ticker: EP2 Advance Decline, Bullish Sectors And The VIX

In today's episode of The Daily Ticker podcast we discuss the last seven months of bullish sector rotation and the three sectors we're tracking with new buying interest. 

The bullish baton keeps getting passed to new sectors and we'll be there to keep you in sync with the order flow.

We break down how one of our favorite market internals, the advance/decline told us the recent bullish run in the stock market was out of gas.

Speaking of gas, we also outline the key levels in crude oil that we're watching for a potential breakout in energy stocks after the OPEC announcement this week.

And we finish up with key levels in the VIX that would make us want to hold swing trades longer.

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 Hope everybody had a nice night last night. Boy, yesterday was a certainly a different type of day after. The market internals felt almost broke yesterday, but boy, they were on the money. And when I say broke, I mean we just had massive moves in bolt directions and then some tech. Close near the highs.

We'll get to that in just a minute. You can see the market's actually following through again. We did mention Boeing yesterday, which had its. Consecutive bullish day. You can actually see it's actually down now this morning. It could not hold the two 15 level again closed, just above there. And pulling back now I do want to talk about Nvidia just for a minute.

It seems like a m d has lost a lot of its bullish mojo. Really mostly selling or melted candles, right? I know it's up a little bit this morning, but it seems like Nvidia just has a little bit of a better bid underneath it, at least at the moment. And if you didn't see this rally at the end of the day yesterday, which again, I just want to keep highlighting this because it's critically important for those of you that are considering yourself day traders, at your screen, you just can't leave during the day, maybe take that time off in the middle of the day, 1130 to 1230 type time to grab lunch, stretch your legs and that kind of thing. But we keep saying it over and over again. These afternoon rallies are money. I don't know if there's any other way to put it. So you gotta be available. This was just a vicious move to the upside, almost $5. And, pick your entry.

You got a 1, 2, 3 bottom. You start continuing to make higher, low. You gotta push and a pause, a push and a pause, a push and a pause, a push and a pause, a push and a pause. There's five different entries here and all of them followed through. So just a reminder to everybody who is in the day trading universe that you gotta put in that extra time and keeping it in context.

Whether or not the morning part of the day is not as perfect as we would like it to. Putting in a five hour day is not the hardest thing in the world that I could think of. 99.9% of the people that I know who would love to be sitting in their house, in the air conditioning working a five hour day from their spare bedroom or from their garage Just if you happen to be a day trader, make sure that you're involved all day.

It's very important. One upgrade to speak of today. Etsy actually got an upgrade this morning. Last I looked, it was just over 3%. So again, just to keep the tone that we're talking about. How much? 4% Now this is a upgrade catalyst. This is not an order flow trade, obviously, it's still in bearish order flow.

It's got bearish order flow for the last couple of months inside, months so far inside. So you got inside, inside bearish in front of that. And quite honestly, you could actually make a case that this is a big pener looking to consolidate, but the upgrade is actually a pretty significant one. So again, we are looking for a catalyst of bullish price action off of the upgrade.

It's not an order flow trade. We're looking for the catalyst to carry through during the day. And if you haven't traded this stock at all, just to give a little bit of heads up on how to. It can trade a little bit thin and move relatively quickly through prices. So as we talked about on last night's coaching session I'll have the edited replay up.

You can click the link from yesterday if you wanna watch it. But working your position size, especially in stocks that are a little bit thinner, is the smart way to do it because if you just go in with all the bigger share size or whatever your uncomfortable share size is on all of your original Regardless of the volatility or the liquidity of the stock, there's a good chance you're gonna get shaken out on a lot of good ideas. And we covered in quite a bit of detail last night on how to trade and work your position size, and especially depending on liquidity and market condition. So this is nothing more than a upgrade catalyst.

So speaking of catalysts, I just want to bring us back into crude oil here. So you can obviously see the 82. Is and has been the big level. We're still pausing right in front of that and actually pretty good that we haven't pulled back at all into that level. So you wanna be aware of this?

It's a part of fin Viz, whatever software you happen to be using above 82 will be a big level and crude oil, which will obviously then catapult even further. A lot of those energy stocks that just rocketed higher yesterday. And. Never pulled back at all, really. I would think that best case scenario, absolute best case scenario is to get some feedback from the market proving, quote unquote proving that it's gonna stay and hold this gap, and the longer it goes sideways and the longer it rests right here.

The greater the odds of this actually taking off. I know we mentioned MPC and Oxy and V L O, those were the three stocks that were breaking these short term moves. Actually recent Downtrends. But ExxonMobil, which we had mentioned yesterday is not that far from all time highs again, so you gotta be aware of this one again.

I would love to see one more day up where we could day. Pause right around this one 18 level, the same way that crude would pause there and then have a really nice, clean grinding move higher, which will help all of us pay for the higher gas prices that are probably coming. They've already started to go up over here.

Where I live. So that's one area of the market, obviously. We've also been talking about healthcare, which is really catching a bid right now. Some of them are breaking out cleanly, some of them are breaking out strongly. And the X L V, as we mentioned on Saturday has finally got out of this.

And you gotta push and a pause, a push, and a pause, and now a nice push for a couple of. Couple of consecutive bullish gaps above the 50. Look at this four week chart right now after melting lower. So healthcare stocks, and I don't know if Brian Carr happens to be on the call today he was calling out this trade in Merck pretty much all day yesterday.

So congratulations not only to Brian, but anybody else who might have happened to have. Taken this trade with them yesterday, which kind of brings up something else that I just wanna highlight really quickly with something I wrote about this morning. We actually had somebody who was thinking about coming into the community yesterday and mentioning to somebody on our staff that they're afraid to get into the market because they're basically saying that all we are right now, In a bear market, I'm afraid to get involved because it's a bear market, right?

So should you feel this way, should this person have a valid point of view? Now, we all know this quote by Jim Kramer. There's always a bull market somewhere, and if you like me and you were on trading floors and all that kind of stuff, it became irritating after a while because even when stocks were getting absolutely crushed, he's yeah, there's a bull market.

Some. And to a degree there probably is. But I want to tie this back into what we were just talking about here. Cause look, that is not a small move. That is a powerful move that barely pulled back. Maybe one little pull back here. But then again, you pull back, you go sideways and you go up again.

You pull back bullish u-turn, you go up again. You break out, you go sideways for a half hour and you buy the breakout. This is a significant. But more to the point is that it's happening in the sector that we have been talking about finding a bid. So this is very important and what I highlighted here this morning which is sector rotation.

And I've had a lot of people asking me like, what's the secret sauce of what we do. And I truly believe from the, from a long-term perspective and keeping your san. Perspective. I do believe that one of the big secrets of what we do is believing right from day zero that trading losses are okay, they're a part of any strategy.

It's a question of keeping those losses smaller or reasonable. And once you have that belief system, then that kind of frees you up to allow the edge to do the heavy lifting. The only thing you need to learn after that is how to find the right stocks and then have that same discipline on your profitable trades.

So that kind of ties me back to. What I wrote this morning, which is the fact that we are essentially in the midst of a seven month bull rally in the markets right now, and more specifically sector rotation. So if you are good at understanding order flow, which is obviously the slow accumulation of positions by hedge funds, and you learn to track and stack the order flow over days.

And hopefully months for those much longer term positions. Then the only other thing to really master, so to speak is understanding which stocks have stacked order flow. And the easiest way to do that is to have a process for tracking sector rotation from a day by day, week by week and month by month basis.

So then we're really just following the money. I know that. Insanely cliche, for somebody to say that they're afraid because we're in a bear market. But we can literally say that again, this is not after the fact. Especially, everybody who's been in the community now knows for a while that industrial stocks carried the market.

For the last four months of 2022. So for those of us in the community, there was a bull market in industrial stocks and we were all over it. This is not after the fact. Anybody who's been here for a while and then you start out the new year with a ripping three month move to the upside in technology stocks, and specifically for the most.

Semiconductor stocks, and you can see obviously Nvidia has been the strongest one out of that bunch, which it does seem like they're cooling off a little bit right now. So I feel very confident in saying that our community is in the midst of a seven month bull market because we have a very structured process of doing our research, doing our game planning, and ultimately saying where are the easiest trades right now?

Not where are the easiest trades hiding? Where are the easiest trades, the most obvious? And now we're shifting again after this magnificent three month run to start 2023 into where now we are starting to shift into, there's a catalyst for energy. We're starting to see healthcare come off the bottom.

And even to a little bit lesser degree, consumer defensive is still hanging out in the background because of all the recessionary conversations. So I just want you to be, Aware and awake that this is unfolding right in front of you right now. It's not a question of whether it's happening, it's just a question of do you have a process to be aware of it and then a process to take advantage of it.

And obviously that's the core of everything that we do in the New York Method and what we interact with everybody in the community. So I just want to challenge you if you're not at that point right now where you are not capitalizing on some of these moves and maybe you're making things a little bit harder than it ne than it needs to be.

A big part of what we teach is very intentional, which is making sure your software is set up properly to give you these ideas in real time. And when I say real time, I don't necessarily only mean day trading. Of course, day trading. Is a big part of active trading. But on the swing trading side of things, we have the same exact processes.

On the swing trade side, we're just reading that order flow and reading the tape and reading sector rotation on different timeframes. Okay. Very important. So taking that even a step further with the metrics that we produce every night, I want to tie that into how the market is unfolding this.

We're obviously the as of right now, was it April 4th at, an hour before the market is going to open and the futures are actually trading higher? Last I looked the DA up just below 10 points right now. The point that I wanna make is doing that little bit of extra work and we could see the spy in how it rallied and wasn't another bullish gap yesterday.

But the s and p 500 closed, bid again, higher highs, higher lows, closed near the. But a couple of things that we need to notice for our trading conviction going into the day, which is significantly less volume yesterday on a candle that closed higher. Higher highs. Higher lows. So that's a, that's like a warning signal.

If we could put like a visual on that. If you're driving two cars in front of you, put their brakes. You're not necessarily gonna come to a screeching halt, but you better notice that, right? Then all of a sudden you start to work your way over, and you look at this monstrous difference between the advanced decline line from one day to the next, where it went from plus 4,700 to plus 334, despite the fact that the market also closed higher convincing.

So what we are looking at right now is it's absolutely still a long scenario, an opportunity to be a buyer. But as you start to make more distinctions as opposed to just saying, Hey dude, I ran a scan and we close higher, I'm gonna, I'm just bullish, blindly bullish. You need to start to notice these things and the more the same chart.

But the more you notice, the better the distinctions you make, the better your decisions gonna make. Sometimes that means adjusting position size. Sometimes that means getting out into momentum instead of building a position. So we are seeing signs right now from the market internals and the volume in the overall market.

Yesterday, the s and p 500, despite ETF, did half the volume that it did the day before, but closed higher. So we're cruising on momentum right now for aggressively putting on new longs. So what does that mean? That means that we basically need the market to reset to get us back to an optimal entry where the next swing trade makes a lot of sense.

So you really gotta drill down now into ideas that are pulled back for a couple of days, or paused for a couple of days that have a much better reward to risk ratio. So if we're taking that initial. There's a good chunk of rewards still left, but we're not seeing that in the market and we're seeing the engine of the market cool off a little bit.

So a another thing we talked about yesterday on the on last night's coaching call, which is very important is that does not mean sell short. What that means is to be a little bit more actively managing your profitable. And knowing right now before it happens, what kind of trailing stop loss you need to put on based on the indicators, the secondary indicators, quite honestly here, the advanced decline, new highs, new lows, and all that kind of stuff.

And what does that mean for protecting your profits right now? So for me, that means I'm gonna be a little bit more aggressive in moving up a trailing stop loss like we did in the c r M trade yesterday, where we booked that $22 profit. I'm okay with. The signs are telling me we're slowing down, and I'm perfectly okay with that, looking for the next trade.

But the point I want to get to is last night we made it very clear, which was one of the biggest trading mistakes that I personally made early in my career. Which was short selling strong stocks simply because they were starting to go down. It's not a good idea. And we saw that in that ripping move to the upside in a lot of stocks in the afternoon, especially what we saw on that Nvidia chart.

So essentially, it's still a buying opportunity, but we'd be shifting a little bit more into momentum. Type profit maximizer on new ideas right now, or open positions, then we would be looking to aggressively put on new ones until we reset that push into a pause leading to another good one. So this is a good visual description, especially with that chart of the advanced decline line that we're still bullish, but the signs are, we're at a guess.

I know this S P 500, the SPY specifically is continuing to hover right around that or above that four 10 level, which we mapped out as a place that was having a really hard time getting above and staying above. As long as we're above that, as long as we're still well bid, as long as the vx, oh my gosh, the VX below 20 is a bullish vx, which we saw in all of 2021.

The VX is below 19. That is a bullish swing trade environment. So that's tying into what Dustin's talking about here. Notice swing longs have been playing out more often. So again, if you've been in the community a while, we have mentioned this quite a bit, and you can go back to the chart of 2021 in the VX when the market was basically a raging bull market and swing trades, what?

You couldn't mess them up unless you really tried anything. Below 20 in the VX is a better swing trading environment and now we've had that for the better part of 2020. So again, these are all pieces of building arguments for the type of trade, the type of profit, the type of risk reward, the type of position size, whether you're adding or exiting.

As soon as it slows down, boy, as long as the Vic stays below 20 and E and dare I say, even continues to trend down, it's still gonna remain a bullish bias. But what we're talking about now with the advanced decline line, decreasing as dramatically as it did from one day to the. We're just gonna step off the gas a little bit and see, we'll follow through not only because of that, because a lot of stocks are well beyond the optimal entry.

So is that a mouthful? There's maybe 10 minutes of coming up with an argument for what kind of risk we should be looking at for this week and for the day. We also outlined crude oil and that 82 level. And if we finally get above that, then we could reset, which actually we talked about that this morning as well in a lot of these.

Energy stocks that had the explosion to the upside. Normally will say, wait for the pause because it's so far from the optimal entry. But if that thing breaks over 82 and the OPEC story stays the same, you probably want to have an initial position size on and read the tape in that as opposed to waiting for the pause because it's literally pausing right at that breakout level.

And you wanna read the tape while you got a little piece in your in your summary to possibly add to. No harm. Just a little piece, whatever that small piece is for you, we might call it, a P one type position. Okay. So that's basically setting the tone and learning to make more distinctions and more specifically how to make those distinctions.

We're not looking at a ton of stuff, but we are what we are looking at in a very structured way, in the way that we look at it every day.