Navigating Tech Cracks and Bond Yields
Earnings season begins next week, and the stock market has shown resilience lately despite ongoing pressure from the bond market. The 10 year Treasury yield surged to a 24 year high of nearly 5.37% on Wednesday before settling near 5.25% by Friday’s close, continuing to test equity valuations. Meanwhile, the probability for an October rate hike sits just at 18%, which has helped temper extreme downside fears.
However, it is crucial to watch the reversal unfolding in semiconductors. In last Wednesday’s mid-week update, I documented that $NVIDIA(NVDA)$ was setting up a bearish reversal. Sure enough, semiconductors, including $NVIDIA(NVDA)$ -2%, $Micron Technology(MU)$ -4.3%, $Advanced Micro Devices(AMD)$ -4%, and $Taiwan Semiconductor Manufacturing(TSM)$ -4.1%, fell sharply and closed the week in negative territory. On the flip side, $Broadcom(AVGO)$ proved its strength as one of my key bullish calls last Saturday, holding the line to finish +1.8% for the week.
Price Action as the Purest Indicator
Why do these shifts happen? Institutional players possess vast information, and their footprints show up directly in price action. An intra-week reversal printing a shooting star reveals institutional distribution, that happened this week with the $NASDAQ 100(NDX)$ after reversing at our monthly level of 31,201 in confluence with our weekly one at 31,190.
$Costco(COST)$ bottomed two weeks ago near to 881, a weekly level where institutional algorithms reacted printing afterwards a daily engulfing candle on Sep 25th, or $Tesla Motors(TSLA)$ bouncing exactly at 345 last week, that was the last line of support for the week (modeled here for paid subscribers), the price bounced off where institutional buy orders were stacked and a daily hammer candle was printed on Sep 30th. My bullish calls on those two paid off this week.
Price action is the purest, most real-time data we have. It forms reliable patterns that allow us to navigate markets with clarity. This week, my bullish setups with specific targets anticipated for $Amazon.com(AMZN)$ 258.8 🎯 (+2.9%), $Broadcom(AVGO)$ 372.0 🎯 (+4.7%), $Alphabet(GOOG)$ 349.4 🎯 (+2.7%), $Tesla Motors(TSLA)$ 381.5 🎯 (+2.9%), $Costco(COST)$ 945.8 🎯 (+2.7%), and $SpaceX(SPCX)$ 169.2 🎯 (+6.4%) played out as the tape suggested. The institutional levels modeled every Friday provide a tangible edge to trade the market effectively.
As a reference point, the Bank for International Settlements (BIS) Triennial Survey, along with estimates from JP Morgan and Bloomberg, puts algorithmic trading at about 60% to 73% of US equity volume.
As we head into next week’s earnings kickoff, let’s examine the institutional footprints, review the setups, and track the critical levels.
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