🚨 The Stock Market is About to Go Crazy

Without exaggeration, this is the single most important week in the stock market this year. And here's how we're trading it because I definitely do not want to miss this if we get this type of drop premidterms. And the events that occur this week, which I will break down for you concisely, will affect what type of correction we see premidterms. First is the FOMC. Kevin Worsh has an FOMC on July 29th, his second this year. And what's interesting is there is almost a 40% chance for a rate hike. Even though I don't think Kevin Worsh is going to hike rates, I think they will keep rates steady. And although this Fed is shying away from forward guidance, he will have to acknowledge the $30 trillion Treasury market selloff. This is the sell-off that nobody is talking about as everyone is focused on stocks. But this bond sell-off has caused a rise in the 10-year as the 10-year is the highest it has been this entire year. getting close to the 4.72 mark and since July 4th weekend, oil is up 34% as the Iran war seems to have reescalated and that is the reason that a chance for a rate hike has been rising steadily to now 40%. Now, if that wasn't enough, we have the rest of the MAG 7 minus Nvidia reporting. Microsoft and Meta report on Wednesday, July 27th. Apple and Amazon report on Thursday, July 28th. And of course, we have a bunch of other earnings from PayPal to Boeing and Coca-Cola to UPS to Bloom Energy to Visa to SoFi, Robin Hood, Vertive, as well as all of the oil companies reporting on Friday. And although I have a stake in some of these companies, the one thing I will be looking at is what happens with Microsoft, Meta, Amazon, and Apple. And the reason is referred back to my last video. Google came out with negative free cash flows for the first time in its history, which shows that it is willing to dive to to dig itself into negative free cash flows in order to continue scaling the AI buildout and complete its objectives. Last week, the Mag 7 on Thursday, July 23rd, has the had the worst single day performance in 5 years as it dropped 4.6%. And there is clearly a ton of hedging going on. I posted this on Twitter, but if you look at market maker positioning, you could see the gamma exposure for the S&P sitting at 7,300. And just looking at S&P here sitting at just above 7,400. If we get to that 7,300 level, there's a chance that we take out June lows. And if the S&P 500 drops further, then you can surmise that the NASDAQ will likely drop as well. And there is a 100 day moving average right here. Now, I make a habit of buying the indices anytime they drop minus 10% or more. If the NASDAQ gets to this 100 day moving average, it will be down 10%. And here's why I would be a big buyer at that position. Not only because here are the statistics of midterm years when we get a summer correction, but as I've mentioned before with the mags in general minus Tesla, we are getting insane value for our money. And it might not be soon that we see a return on that money. Again, refer back to my last video when I talked about why the mags might see a slowdown, especially if they start reporting negative free cash flows in the same way that Google has. But those pundits that are comparing this to the dot bubble, the NASDAQ 100 was full of bubble companies and it hit a PE ratio of 86x the time the dot boom busted. Right now, we are sitting at 24x. As a matter of fact, the NASDAQ right now is actually pretty historically cheap. And that's because the biggest companies in the NASDAQ, if you look at Microsoft, PE ratio of 22, forward PE of 19. If I pull up Meta right here on Alphascope again, PE ratio of 21, forward PE of under 17. You get the picture. So, these cash generating machines are absolutely getting spanked here. And the one that isn't is Apple. And why? It's because it's not spending cash in the same way that the other hyperscalers are. So to the people that ask me what what do you think is going to happen if Google, Meta, Microsoft, and Amazon stop spending money on capex? And my answer is exactly what Apple is doing. And because I'm not a fortune teller, there is a scenario where Amazon, Apple, Microsoft Meta, actually we can leave Apple out of that, but Amazon, Microsoft Meta, where they actually don't go into negative FCF and where they keep their capex expectations exactly as is and they generate positive free cash flows. I think a scenario like that can stop the bleeding in the Mag 7 because when Google reported Amazon, Microsoft Meta, nothing fundamentally changed except for the potential expectation that they will also follow suit. So, I actually have no idea how they're going to guide. I'm going to assume that they are going to come in with higher capex, but I don't know how much higher and whether that is going to affect their negative or their free cash flows to where their free cash flows turn negative in a similar fashion to Google. But I just know that as I said before, these are a great value here for the long term. And although you may not get rewarded in the short term, once these companies stop spending money or when the runway is clearer as to when they're going to stop spending money, then I think they will have a chance to finally grow into the cash generating machines that we know they are. And according to Bloomberg, retail net flow has dropped to the lowest levels since the pandemic. These are the types of things we see during unwinds. And then the last few weeks, something has happened that we haven't seen all year. Momentum has dropped along with the MAG 7. What we've seen all year is momentum rallying, MAG7 doing nothing. And then there there is a short-term rotation where where momentum slows down, the MAG7 rallies. But now we are seeing momentum and MAG 7 start to unwind. And as someone that's looking for an asymmetrical opportunity, I do think it comes sooner rather than later. And if you want to track momentum, a good way to do that is MTUM, which is a ticker symbol for the iShares momentum ETF. And in that ETF, we have Micron, AMD, Broadcom Intel Caterpillar Exxon Mobile, Johnson and Johnson, AAT, Lamb Research, and GE Vernova. There are a bunch more holdings in here, but those are the top. So, it's a great basket of momentum. Now, one thing I am expecting to see here and I think we need to see actually or else I think that the market could unwind further violently is a Trump taco. And as the 10-year nears 4.7 to 5% range, that is typically when we get a Trump taco. Because if the sell-off in bonds continues, and remember this is the sell-off that nobody's talking about, but bonds are unwinding probably even at a more drastic rate than stocks. And if oil continues to go up, I do not think that the Fed will be able to hold off for much longer. I think they will hold rates steady come this week. Remember, they don't have an FOMC in August. And then in September 16th is the next FOMC after this week's FOMC. And the chances for a rate hike are higher than the chances for holding steady, which are only at 19.5%. So almost 81% chance for a rate hike in September. And I know that Kevin Worsh is seen as a Trump loyalist and someone who's against hiking rates, but remember, he is one guy and I don't think that even he will have the influence to not get the other Fed members to vote for a hike if things get that bad on the war front, on the oil front, and on the rates front. And I think we get a much more drastic correction before the midterms than something like the 100 day moving average. If you look at the date of the low, especially recently for the midterms, it is actually super late. So in 2022, it was in October. In 2018, it was in December. In 2014, it was in October. July, June, October, August, you get the picture. Actually, October is the single most represented month in this data set. And remember, this is talking about the S&P 500, not the NASDAQ. Currently, the S&P 500 is only down 3% from highs. Even if we fall to the 200 day moving average at the place where we have all of this resistance, that's only a negative 8% drop from highs. You can see here the average is -7 1.5% and that's for the S&P 500. And if this entire rally was spurred by theou or the peace talks between Iran and the US, if this continues to escalate further and as of the time of this recording, supposedly Iran is accusing Ukraine of joining in. But the longer that oil spikes, the more that treasuries sell off and the higher that the rates go or the yields go, I think the more of this peace talks rally continues to be given back, which would be an absolute buying opportunity. So to reiterate, my plan is to buy every minus 10% down on the S&P 500 and the NASDAQ. Continue to accumulate the cash generating machines that are trading at really low pees. Here limit my swing trades because again, you do not want to swing trade in environments that are rough. You want to swing trade in environments that are smooth. I told you guys in my last video that I remain hedged in this environment and I have a hedge against semiconductors here. I will also be monitoring the VIX in case we get an intense VIX spike due to either the FOMC or any earning surprises. If there's any indication that any of the hyperscalers are going to cut back on capex at some point, that is when I would likely move all of the funds from the smaller AI portfolio over to the main portfolio. I understand this is a tough environment to trade and invest in because it is not very straightforward. Anyone who tells you that is lying no matter how much experience they have. So, I sympathize with you if you feel like you're struggling. everybody including me struggling in some form or fashion or some pocket of their portfolio for sure. So if you guys like the multi- video a week approach, I will try to get more than one video out a week. And if you want to trade live with us every single day at market open and you want access to all of the hedges as well as my regular market analysis every single week and the option swing trades, make sure that you come and join us. Link is in the description. Would love to have you. Get you an account at alphascope.trade. Subscribe to the channel. Hit that notification bell. Stay safe out there, traders. Peace.