Quick Market Views
Stocks: A defensive tone today with defensive sectors working today with a treadmill type of market awaiting NVDA on wednesday. Breadth is mixed with Nasdaq only up 150 issues with NYSE up 1600 issues. Small cap continues to work and the IWM is on day 8 of 9 with sell Setup and the GS most shorted basket which has correlation with the Russell has new Sequential sell Countdown 13 today. This is a good read on overall risk in the market. S&P is not far from new highs with the corrective lower high wave 2 of 5 still in play while the Nasdaq and other tech sectors have clearer lower high wave 2 of 5 patterns. Mag 7 is down today 1.3% while energy commodity and sector is strong with concerns over Mid East tensions remaining. Most ETFs are below today’s VWAP levels which is a sign of some underlying selling. I added a lot to this note including an upside on some current ideas and an update on Tesla deliveries so far this quarter.
Bonds: Eyes will be on Treasury issuance this week – $69b 2Y Tuesday, $70b 5Y Wednesday, $44b 7Y Thursday. Rates are up small ~1bps.
Commodities: Decent action with Crude up 3% with Natural Gas down 2.4%. Grains remain weak hitting new lows. Copper is up 0.9%. Gold up 0.45%, Silver up 0.6%
Currencies: US Dollar index is up 0.1%. Yen weakened after early strength and is at 144.40 with USDJPY. Bitcoin is down 1%
Trade Ideas Sheet: Little change with PNL with offsetting action
Changes: I continue to hold nearly 20% in cash allocation with 36% net short ex cash. Even the fund exposures are down in this chop but feel when I need to press on the downside I have ammo. I recently had some inquiries from a few people who wanted to learn more about our long short fund with the more toppy action in the markets. We did make some changes to the fee structure (lowered the performance fee). If you are interested, use this link to set up a time to call.
Thoughts: BABA is down today but off the lows. KWEB also getting hit due to the PDD messy quarter. I think some funds were short BIDU (up on the day) and long PDD and might be unwinding that trade. CLF and URA are both up nearly 10% since adding as new long ideas and I still like the way they trade on the long side.
Rekor remains a long idea I will stick with as the company is doing things behind the scenes that will help them land business in a sector with some obvious cyber and overall security concerns. They are leading the industry in creating standards. This should give states and other municipalities the confidence to go with Rekor. It’s taking longer than expected, and considering the company is moving forward on these developments, it should help the process. The SOC 2 Type II audit, a rigorous auditing standard developed by the American Institute of Certified Public Accountants (AICPA), was conducted by KPMG, one of the world’s leading professional services firms. The audit measures Rekor’s internal controls, policies, and procedures against stringent security and operational standards defined by the SOC 2 framework. This certification is a critical affirmation of the suitability of Rekor’s systems’ design and its controls’ operating effectiveness relevant to SOC 2 security criteria.
US Market Indexes and Sentiment
Here is a primer on how we use Daily Sentiment Index charts. Bond, currency, and commodity sentiment are posted on the website.
S&P bullish sentiment and Nasdaq bullish sentiment bounced on Friday but did not recapture what was lost on Thursday.

S&P and Nasdaq bullish sentiment both remain in the upper end of the elevated zone


Here is a primer on the DeMark Setup and Sequential indicators.
S&P futures 60-minute tactical time frame stalling and reversing after recent DeMark Sequential and Combo 13’s. Watch the TDST Setup Trend support lines (green dotted lines)

S&P futures 240-minute tactical time frame also have recent DeMark sell Countdown 13’s

S&P 500 Index daily isn’t that far from the previous highs and the lower high wave 2 of 5 is barely holding on. A new closing high will cancel the downside wave pattern and revert this back to an extended wave 5 of 5.

RSP S&P equal weight made a new high today and qualified the anticipated DeMark Sequential sell Countdown 13. When there is a 13 the rule of thumb is a price reversal is due within the next 12 days.

Nasdaq 100 futures 60-minute tactical time frame with overnight Sequential and Combo 13’s testing the most recent TDST support line. Price broke below Thursday’s low and gave back all of the Powell gains.

Nasdaq 100 futures 240-minute tactical time frame similar pattern with several sell Countdown 13’s in play

Nasdaq 100 Index daily is testing the 50 day (red line) after recent lower high wave 2 of 5 and sell Setup 9.

QQQE Nasdaq 100 equal weight with lower high wave 2 of 5 with recent DeMark sell Setup 9. Above the 50 day at 88.21 which will be important to watch for reversal lower.

GS most shorted basket and Russell 2000
The Goldman Sachs most shorted basket tends to be a very good market risk indicator. Today it has a new Sequential sell Countdown 13.

Russell 2000 IWM ETF tends to correlate with the GS most shorted basket. Although the DeMark counts are different this one is on day 8 of 9 with Sell Setup.

MAG 7 and S&P 493 ex mag 7 update
Mag 7, similar to the Nasdaq 100, has a clear lower high, wave 2 of 5, with sell Setup 9 and a price flip down. If (big IF) this breaks the lows from early this month (wave 1 in yellow), a potential downside wave 3 will qualify with a price objective that is 20% lower than the current price. Breaking the recent lows will be a challenge and far from easy.

Mag 7 weekly with a recent DeMark Sequential sell Countdown 13 with a lower high.

The broader 493 ex Mag 7 looks similar to RSP with new Sequential sell Countdown 13 in upside wave 5 not far from the wave 5 price objective ~165.

Trade Ideas Sheet

BABA is down today due to the messy PDD quarter. I recently trimmed BABA and let everyone know Sequential 13 was qualified. I believe BABA is the best Chinese tech company buying back tons of stock and will continue to hold the current reduced-size position. The one positive today is that is is well off the earlier lows.

KWEB is down today with the PDD mess and failed to clear the 50 day again. With several Setup 9’s and lack of upside continuation there is another Sequential on day 10 of 13 now in downside wave 5. I will examine when the 13 triggers if I want to add more to this long position.

CLF Cliff’s is a recent new long idea that is higher today on stories of China cutting back on iron ore production. Cutting production is a positive. Continue to hold this long.

The SMH Semiconductor ETF peaked in early July and has a defined corrective lower high, wave 2 of 5. It’s also below the 50-day moving average.

All eyes will be on NVDA Wednesday afternoon when they report. I will have a more detailed earnings preview out soon. There is a lower high wave 2 of 5 still in play and if this closes at a new closing high the downside wave pattern will cancel an it will revert back to an extended wave 5 of 5. The 50 day is flat at 120 and a break of that level might be the concern level for bullls. The implied move is calling for a move of 9.36% which is the highest in many quarters.

I posted BTC earlier but wanted to explain the potential for the Sell Setup. It’s on day 8 of 9 but remember day 9 has to close above the 5th green bar close which is 64,085. If this does not close above the Setup count will disappear and a price flip down will show up (green 1).

XHB Home builders has been very strong and I’ve been wrong so far but there are new sell Countdown 13’s developing and is overbought again. Many of the homebuilders have 13’s developing as well. An increasing unemployment rate isn’t favorable for homebuilders if history repeats.

checking in with Tesla
Tesla also made a lower high in wave 2 of 5, a corrective lower high bounce with a new Sequential sell, Countdown 13. Breaking the 200 day and the big round number 200 could see this make a lower low into wave 3 on the downside.

Tesla’s weekly chart has made lower highs since the peak in December 2021. A recent sequential sell Countdown 13 at the most recent peak.

Troy Teslike is out with another update on Tesla deliveries with a month to go in the quarter. Troy is an independent research analyst on X and publishes his work on Patreon, which I suggest subscribing to if you are interested. Troy does excellent work, far better than sell-side analysts who will cut their delivery number in the last week, usually after Troy posts his last update. Troy has spotted some interesting trends this quarter, and I have just a few of the many things Troy posts. Notably, China’s sales are strong due to government subsidies and 0% interest deals from Tesla, which will hurt margins. (Breaking today, Canada will impose tariffs on imported Chinese cars – Tesla is the only Chinese-made car currently imported to Canada.) Secondly, Model Y, the best-selling Tesla in the US, has seen sales drop 21% vs the previous quarter. Third, Model S/X sales are plummeting as those cars are very stale in design despite deep price cuts. Fourth, Model 3 sales should be a touch stronger as they qualify now for the $7500 tax credit. Lastly, the Cybertruck is only available in the highest-priced spec versions and isn’t selling as fast as hoped by the Tesla faithful after the talk of 1 million reservations. Other than deliveries, the Robo Taxi event, likely in October, will be another attempt to keep the faithful hoping that one day, the FSD full self-driving will eventually work. The pivot to Robo Taxi (again) and AI/Robots will not bear fruit anytime soon.

Delivery estimates from the sell side at the start of the year were above 2.2 million on average and now below the total deliveries from 2023.

Low demand with Model Y is a huge red flag with a QoQ decrease with no excuses such as retooling or other reasons.

Troy believes Elon is not helping Tesla sales with his Trump endorsement and political activism.

Model S and X sales have fallen off a cliff and have been the highest-margin cars sold.

European sales are in a downtrend. The German factory that only produces Model Y has been running at 50% capacity. Model 3’s are imported from China and have a new tariff of nearly 10%, which is less than other China imported EVs; however, it’s still going to sting.

According to Troy, China sales are great, but they come with a price. 0% financing over 5 years carries a risk to margins, which are also at the lowest levels since China-delivered cars are already priced super low to try and compete with the many Chinese EVs, such as BYD and Xiaomi, whose deliveries are exploding to the upside. As Troy says, this would be a terrible quarter if China’s deliveries were not up.

Hedge Fund Telemetry ETF Percentage Price Oscillator Monitor
The PPO monitor (percentage price oscillator) force ranks ETFs by percentage above/below the 50-day moving average. For information on this monitor, please refer to this primer. This monitor and others are offered to Hedge Fund Telemetry subscribers on Bloomberg. Nearly all ETFs are under today’s VWAP levels. Some defensive ETFs are up although below today’s VWAP. When under today’s VWAP levels sellers are in control.

Index ETF and select factor performance
This monitor with various markets and factors ranks today’s performance with 5-day, 1-month, and 1-year rolling performance YTD. A more defensive move today. Mag 7 down the most today and down on a 5 day rolling period now.

This is a similar monitor with major ETFs shows a more defensive move today

Goldman Sachs Most Shorted baskets
This monitor has the S&P indexes and the Goldman Sachs most shorted baskets. After recent short squeezing the GS most shorted basket is up moderately today. Several defensive sectors are seeing some squeezing including materials, energy, healthcare, REITs, staples, and utilities. Tech is flat.

DeMark Observations
Within the S&P 500, the DeMark Sequential and Combo Countdown 13s and 12/13s on daily and weekly periods. Green = buy Setups/Countdowns, Red = sell Setups/Countdowns. Price flips are helpful to see reversals up (green) and down (red) for idea generation. The extra letters at the end of the symbols are just a Bloomberg thing. Worth noting: The number of sell Countdown 13’s on both daily and weekly time frames is very high and when this high the risk to the markets has increased over the short and intermediate time frame.

Major ETFs among a 160+ ETF universe. Similar high number of sell Countdown 13’s developing.

If you have any questions or comments, please email us. Data sources: Bloomberg, DeMark Analytics, Goldman Sachs, Street Account, Vital Knowledge, Daily Sentiment Index, and Erlanger Research