Citadel's Reset Warning: 5 Reasons Stocks are *about* to SKYROCKET

Holy smokes, somebody just sent me a massive document from Citadel and it outlines a really bullish reset. I'm going to go through the really important components of this and we're going to balance it with other data to see are they just trying to stroke us or are they on to something? Because when we hear Citadel, we should be a little suspicious to start with. Right. Last week, we literally saw Citadel on Tuesday say, you know, we think the Fed's going to build some credibility here. They're going to go for a surprise rate hike, which sent the market down more. And that happened to be 2 days before Leopold got reportedly his entire stock portfolio that was public liquidated because Citadel bought it all for a discount and everything's basically V-shaped recovered from then. I mean, in fairness, some of this could be unrelated. Some people are like, "Oh, well, those those are different parts of Citadel." Other people are like, "I don't know, man. I hear Citadel, I get a little jaded. I remember the Robin Hood days." Okay. [laughter] Yeah. No, I I I get it. And we've got a lot to talk about, but I have to say there are some really impressive things going on data-wise, and we're going to analyze those in this video. So, first let's start with their comment about elevated single stock volatility. They suggest that we might be seeing elevated single stock volatility that has made trading a little bit harder over the last few weeks. I personally argue this has to do with leveraged ETFs. In fact, this is really one of the first cycles where you can pretty much find a leveraged ETF for any kind of asset you want. If you want a 2x Nvidia ETF, here you go. Is 2x not enough for you? No problem. We'll jump in right to here. We've got a 3x ETF. This extra le leverage that we're seeing doesn't even show up in FINRA margin debt statistics, which I actually put a chart of that in this Citadel doc. Take a look at this. FINRA margin statistics. This is the current outstanding balance, $1.5 trillion. We broke a trillion last year and it's been growing ever since, right? But I want you to know the growth rate. The one month growth rate between May to June over here was 6%. Which if you multiply that by 12, you get a 72% almost a doubling of margin debt uh happening in in the sort of monthly pace here. It's not as bad when you look at from January to June. This isn't even the July data yet, although some of this might actually have gone down in July because the market uh the market had a rougher July. But, you know, debt was skyrocketing. But this relates to the ETFs. So, from January to June, we actually saw a 17.4% increase, which is about a 34.8% annualized increase in margin debt. That debt in margin doesn't even represent all of the debt in leveraged ETFs. That's really important. We're going to talk about that because Citadel actually says this right here. They say retail cash in equities. So this here their their headline here. Let's read this right here. Zoom out a little bit. Okay. Uh retail behavior shifted meaningfully following the record retail activity observed in May and June when we saw those margin levels go up. Activity moderated during July. Average daily retail cash equities declined 20% from June's record but remained exceptionally elevated. It was the fourth most active month in the Citadel platform history that they've been observing. And while volumes normalized, retail behavior changed in July. investors increasingly shifted from buying weakness, so buying the dip to instead reducing exposure. In fact, the last week of July saw the largest week of retail selling since 2022. Who here remembers 2022? [laughter] I actually I have this like really long like Bill Aman length tweet that I sent yesterday and I think it's really good. I think I I might make a video on it, but I actually talked about how I got hit by margin in 2022. I never got margin called, but I I went through a bunch of details of like numbers like, "Hey, here's what happened. Here's how margin affected me and what it did to my psychology." It's just a free tweet there. You can check that out. Uh, but I might make a video on it, too, because I think I can add even more context to it. But this, what I wrote in that tweet is actually really similar to what you're seeing here. Instead of people buying the dip at the end of July, people were having to liquidate their positions probably because of this margin debt increase we've seen, but also what we've seen with leveraged ETFs. Now, Citadel goes on to say that much of this technical deleveraging reset is now behind us. and they said that we believe investors can increasingly spend less time focusing on positioning now and more time focusing on fundamentals that maybe we just pulled forward the typical August weakness into July. Now, some things that I'd like to say on this note here about where they say volatility grind higher. Uh I don't know if this is a lower volatility grind higher. uh it feels higher volatility because we're seeing some crazy movements. Now, in fairness, when the market goes green, usually we see volatility come down, but you can actually see volatility is up 2.4% today because of the magnitude of the movement. So, uh I typically don't do this, uh but I'm I'm going to do this. I want you to see this. So, uh, yesterday morning, the NASDAQ 100 was sitting at, uh, like 684 from the close on Friday, maybe 686. And what's really interesting is in my alpha report, I called for I think we could see QQQ trend to 17 by Friday. And then I actually wrote, I think there's a better trade. You know, that's another trade we're talking about as well. But you can see that right here in our alpha report. This was the one posted yesterday morning. I think we could see QQQ trend towards 7:15 by Friday. I have to say I am blown away that we have already hit 7:15. We are at 7:18 now. So literally yesterday morning in the alpha report we call, hey, we're going to go to 7:15. And I kind of agreed, hey, we're back from vacation. We're going to get jobs data this week. We're going to have this slow grind up to 7:15 by Friday. But I was actually wrong. We didn't hit 7:15 by Friday in 5 days. We hit 7:15 in a day and a half from 684. That is massive. I mean, from 684 Friday's close uh divided by or 718 divided by 684, that's a almost that's a 4.97. So, call it a 5% increase in the NASDAQ 100. The index level. That's nuts. You know, obviously, you've got some other potential breakouts coming here as well. Socks, by the way, is sitting between the 100 and 200 uh DMA right here. That's a technical opportunity. Look at Bloom Energy. We did an analysis on Bloom Energy just within the last few days uh in the course member liveream and we noticed that it has this tendency of bouncing right here. uh and mostly we say that uh because of the ceiling here. Look at that. So that level's about 181 which also aligns with your 200 day moving average technical opportunity. You can kind of balance technicals and uh fundamentals. The other thing that we were looking for was IGV breaking 100. This was something I thought would take at least 5 days. No, look at it. It skyrocketed from 95 right through that 200 day moving average to now 101. This is your software and cyber security ETF. So these things are actually moving a lot faster than expected. Now I'm really grateful that like Palunteer is up 26% because I just bought more Palanteer at $118. I actually publicly said this, you know, publicly last week we had a video and I called it buy. Part of it was because I'm like, "Hey, like we all know when Meet Kevin comes back from his vacation, it's probably gonna go green." [laughter] And that's literally I I mean, I even wrote on Twitter. I said, uh, you know, I posted a family picture and I posted this on YouTube as well. You probably saw the picture, but I posted this. The greatest effing rally is about to begin. And I quote tweeted, "I stopped going on vacation August 3rd. until the night and good luck and you know I bought the dip last week. Uh and now you know Palanteer this is not a low volatility grind and that's my point comparing to the Citadel piece. This is not low volatility. This is high volatility uh movements to the upside. It's happening and it's coming way faster than we thought it would. And I hate it when things come faster. Wait, it's actually good for stocks. Anyway, so this is actually also very interesting on Palunteer because this morning Palanteer in pre-market was trading around 144. It was in no man's land between 130 and 160 and its next line test point was 16089. I'm blown away. We went from midpoint this morning in pre-market all the way up to 160. I'm really surprised by that. This is a high volatility grind up which is good. It's just aggressive, right? It's good if you own it, but it's it's aggressive. And to me, I think the reason, and this is sort of the punchline here, I think the reason this is happening is I think I think people are remaring. I think people are like they raised cash in July and I think now they're going back into margin debt and they're buying the dip. basically the reversal of what we saw on this chart where this debt is like, "Oh my gosh, people don't want to get margin called." People are getting screwed with that psychology. Now, if you want more of these alerts, I'm going to do like a quick 20 second pitch. Use coupon code vacation green. We're going to do it. Uh we're going to give you some time on the expiration of the coupon code here. You know, we do raise the price over time, but I do think we keep adding value. see our fundamental analysis, see our technical analysis, see our calls in the alpha report every day before the market opens up. In addition, you get all nine courses, every trade alert, every private live stream, every alpha report. The membership includes everything that we've got on this website. So, go check it out over at meetke.com. Okay, with that said, let's keep going with the Citadel piece. So, back to Citadel. If we then scroll forward, look at this. Last week, retail investors have been net sellers every single day this week. I actually saw very weak retail buying volumes last week and it was one of the reasons I made a YouTube video called buy because when everybody's selling, I like buying and then also pulled the trigger and bought. You know, it's one thing to say, but like did you actually buy? It's like yes, multiple six figures. [laughter] Okay. Uh so retail cash equities, this is just that chart in a different way. technology uh was the overwhelming concentration of selling 5x the usual selling but again I think that's driven by debt and now people are relevering okay this I thought was very interesting apparently last week they say that software drove outflows recorded the largest one-day retail liquidation in the sector that may have been why Palanteer got all the way down to $118 I mean gez at 159 divided by 118. That's a oneweek return of 34.7%. That's freaking crazy. Uh but again, I think that's releveraging. So people get squeezed out. They create those opportunities because they get burned on margin. Uh and then, you know, the people who aren't in margin are able to swoop in and get those opportunities. So there's a lesson there. But I actually think this software outflow is a mistake. I believe that in the third and fourth quarter, we're going to see a software bottom. Uh, one of the places that I think you could see it best is actually Salesforce. This is another technical one we've been watching. It has that important line here that it did lose yesterday of 191. But if you look here, you've actually been trending up for about 6 weeks now. That is the longest uptrend we've seen on a software stock like Salesforce uh in probably about a year and a half. Uh so usually we see these little short-term rallies in software where you get like 2 3 4 weeks uh and and so this this 6 week rally is is um seems to be a little bit more lasting. It seems like the bottom is starting to form in software stocks. So I do think there's a big opportunity in that mostly because I think it's a little overblown that you all software companies are going to get replaced by AI and there are a lot of opportunities in artificial intelligence uh combined with good software technology leveraged ETF assets have fallen uh about 40%. Now, this is interesting. I think this is still cooked up. Like, it's still pretty elevated, right? But you can see this is almost a little bit of a reversal to trend. If I draw this, you know, under here, the semiconductor exposure is this line right here. It's a little bit more of a trend reversal. We really got carried away there. And that reiterates my point that even though they're talking about leverage, Citadel is calling for a low volatility move up. But I think what we're actually seeing is a high volatility move up because people are taking on the debt again, which of course just, you know, sets up problems for the next oopsy dupsies. But that's that's okay for somebody who's buying for the long term. You're not so worried about those week-over-week movements. Uh I added a trend line over here. This is the S&P 500 semiconductor weight in the S&P 500. Also pretty much back to trend going all the way back to um really only March. So this isn't really a useful chart because I think it's too short term. Uh then I had a little bit more here I wanted to talk about. Take a look at this. In this section they say that consensus expectations for second quarter S&P 500 earnings growth have increased from 22.4% to 45% marking one of the strongest earning seasons outside of postrecession recoveries. I actually think this is incredible. Companies are really crushing it with earnings. And I think one of the reasons is not only, you know, the capex cycle, which I'll talk about in just a moment that keeps going, but I also think it's in part what we see going on with, let's go to this tab right here. It's what we have going on with jobs data. Take a look at this. This is another thing that uh yesterday morning at about 7 a.m. in the course member liveream, the ISM uh Monday report came through and we in the course member live stream yesterday morning found this to be very bullish. Now, I posted this today on on the public website here, but we were analyzing this yesterday morning and we're like, "Oh, this is actually a really bullish setup for our 715 target." Listen to this. The index for the ISM manufacturing uh employment data is in expansion for the first time in 33 months. Of the six big manufacturing industries, three reported higher levels of employment uh in July and overall panelist commentary indicated that hiring was essentially that there was a hiring ratio of 1.5 for every one comment of firing. So in other words, first time even though not all of the sectors are expanding, this is the first time we've seen an expansion in 33 months in employment and manufacturing. And we're now seeing more comments about hiring versus firing. Now obviously there's still more layoffs that can occur. You know, this morning we got Jolt's data which missed. Uh the quits level increased though. And usually quits don't increase unless people think that uh you know they they can get another job. And so in a low hire environment usually people don't quit but more people quit in the Jolt data. That's very interesting which doesn't signal a weak labor market. Uh then we also have uh regarding output uh 60% of panelists reported their companies are hiring and inventory remained in the too low territory which could bode well to future manufacturing. And then just sort of some extra data here. I I went into the household data a little bit more deeply here uh because the household data showed a negative 720,000 uh read for the households data year uh sorry from May to June and uh that's also a negative 700k hit from June of last year which isn't good but a lot of that was due to this shift in Hispanic employment uh particularly the Hispanic employment uh participation rate Now, why does this matter? Well, if you actually look at Hispanic employment from June of last year to June of this year, it's actually up 500,000, n 450,000. But if you look month over month, it's down 500,000. And what you find is these Hispanic employment numbers are actually very volatile. We to some extent, unfortunately, would expect some of this to go down because of uh you know, the ICE situation. And so this like uh you know June of 2025 decline in the labor force participation rate or or whatever. Maybe you could explain some of this because of ICE. I I don't know. Uh but the point is this data is very volatile. So being bearish about that household data and the jobs report last month might be overstated. could actually like the more I look at the actual data and what we're seeing with you know some of the other points like uh the the manufacturing surveys hiring is still happening and to me the thing that really flips the cycle to negative is not necessarily just employment but it's also capex flipping negative but the problem is there's no evidence of any slowdown of capex so here's a chart I put together um with AI uh it's so I I always like to disclose when it's like AI chart. Uh but basically what it does is it takes the quarterly uh disclosed. So those are the real numbers, right? The quarterly disclosed capex spends from hyperscalers and I wanted to see the rates of change. Flat like early 2024 would mean they're not increasing their spending. Down is a negative number. So they're spending more money. So I know it's inverse. It's a little weird to think of. Uh, and if the line were going up, they'd be spending less money. And so here we have Amazon, Alphabet, Microsoft, and Meta. And you can see all of them are actually just trending into more quarterly spending every freaking quarter. Now, of course, some of that is because of memory prices and and memory prices and memory supply might not actually chill out until the middle of next year as we get a lot more supply coming online. But that doesn't necessarily mean the hyperscalers are going to stop building out infrastructure. It just means they might actually like flatline on capex spending while still building just as much much infrastructure because they're not paying like Microsoft said those $25 billion premiums on memory alone. Man, I almost just knocked over my Spongebob coffee mug. That would have been bad. [laughter] Mostly because it's full. Somebody asked me on the live stream, did you kick tea? I got another big thing to mention from from this sheet, but just tangentially still doing tea, but I will say when you go to Europe to get over the jet lag, you're pounding coffee, man. I'm also I think I got they call it cruise crud, but yesterday night I had like 101.8 fever, so I've just locked myself into the room with Tylenol and water and coffee. Uh but um I I have a tendency of getting sick every time at the end of a cruise. Now I have to say I feel very grateful, very grateful indeed that I was able to have this beautiful summer vacation of all the trips that we did which which was a lot and I apologize for that because it probably led to red and markets. Um but it was a buying opportunity and I didn't get sick on the trips so I feel grateful about that. Sorry for that tangential. Let me give you another piece. Thank you for staying this long in the video. My goal is always to just provide more value. So, here it is. That is a sexy sexy chart. And that's Sarah Eisen. Oh, sorry. Uh, so back to this chart. Uh, projected buyback window. So, uh, July 10th to September 25th, we're we're right here. So, the buyback window really starts, this is not necessarily saying we're going to get buybacks. This is just post earnings. How many companies could potentially issue buybacks? Like what percentage of them could potentially do buybacks? Uh and then as we get into the next earnings, you start seeing that decline. So really you have this juicy buyback window between like August 10th, which is Lauren's birthday, and about September 10th, which is my dad's birthday. So this is pretty juicy right here. And this along with releveraging I mean we got a few things going on. Okay releveraging too lifetime access vacation green. Basically I'm back from vacation and the alpha report says there is no vacation on the schedule. [laughter] We put my vacation calendar on the alpha report now. Uh releveraging uh then we have buyback window. Then we have capex accelerating right even and and it's in addition to memory prices plus jobs uh rebounding or or or jobs jobs data I would say jobs data mostly still positive right there is some angst about that ADP weekly data slowing we'll get an ADP report tomorrow uh we'll get claims Thursday and then on Friday we'll get the BLS jobs data but as long does jobs hold up this week. This is bullish and we could end up getting a dual rally here of uh hardware and software which you could almost argue that the NASDAQ 100 is like your hardware. I mean 2.75%. This is crazy. It's almost at 720. Uh and then uh IGV is up 4% today. If you get a dual rally here, there's almost no doubt that you're going to rocket ship to all-time new highs. So, this is really impressive and I actually think there's still opportunities uh to buy stocks at at good valuations. Uh there's actually [gasps] there's [sighs] shouldn't go into this yet, but there's a there is a stock that has fundamentally changed in our portfolio. I'll probably make a video on this, but I'll send an alert when the time comes. There's a stock that has fundamentally changed um in in our portfolio that we will probably sell. [music] Uh I think it's actually relatively close to a break even on that stock. You know, not all of them are big winners. Uh but um we'll be buying something that we think will be a big winner. So uh you know, obviously you'll see it first in the course live streams, but I'll probably make a public video on it, too. So if you're not subscribed yet, consider subscribing. Folks, I appreciate you being here. No sponsors on the channel. You just have to deal with the coupon code every so often. The price does go up over time. Uh so make sure you lock that in. We'll see you in the next video. Goodbye, folks, and good luck. Why not advertise these things that you told us here? I feel like nobody else knows about this. >> We'll we'll try a little advertising and see how it goes. >> Congratulations, man. You have done so much. People love you. People look up to you. >> Kevin Pra there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.