Video summary
On this pivotal Tuesday, marking the first trading day of September, market analyst Basil Chapman opens with a sobering assessment of a difficult session characterized by significant declines across major indices. The primary focus of his analysis is crude oil, which surged dramatically to close at 90.37, representing a massive 5.36% gain. Chapman attributes this unexpected strength to a specific technical pattern he has developed over decades known as the Chapman wave overlapping wave. According to his methodology, while a standard buy signal requires four higher peaks through peak D, a more powerful move can occur when a secondary leg C forms below the previous one and subsequently breaks out with immense force. He anticipates that this momentum will propel crude oil prices well above 92.74, noting that despite missing the entry point by just eight cents in his recent trade, the underlying technical setup remains highly favorable for long positions.
The broader market context is defined by what Chapman calls "dark news patina," a concept illustrating how financial markets often ignore bad news until it begins to visibly impact price action. Currently, uncertainty surrounding global events involving Canada and Iran, combined with rising bond yields, has created a volatile environment where investors are rotating capital away from traditional leaders. While the Magnificent Seven stocks and the healthcare sector have shown some resilience, other areas like the Russell 2000 index have suffered sharp percentage drops, testing critical support levels. Chapman emphasizes that while daily charts may show sell modes, the weekly and monthly perspectives for major indices like the Dow and S&P 500 remain structurally strong, suggesting that the current downturn is part of a natural process of weeding out weaker performers rather than a fundamental collapse of the entire market structure.
Looking ahead, Chapman directs attention to the volatility index (VIX), which has found support near 16.80 after a slight bounce, indicating that extreme panic selling may be subsiding. He highlights the importance of specific technical zones, such as the "inside track repulsion zone," in predicting short-term rebounds and potential breakouts. Although the first few days of September have been challenging with stocks failing to hold key moving averages on daily charts, Chapman maintains a cautiously optimistic outlook for the rest of the month. He warns that while the immediate landscape is fraught with uncertainty and negative sentiment, the long-term technical integrity of major indices suggests that significant opportunities will emerge once the market clears out the current losers and stabilizes around these critical support levels.
Read the full video transcript
Hi folks, Basil Chapman for Tom O'Brien.
This is the Tom O'Brien show on this
Tuesday, very first trading day of
September. Not a very pleasant uh day,
is it? All right, I need to go straight
to this because it's so important. Crude
oil continuous contract. Um it is up
$4.64
at 90.37,
a 5.36%.
Now, one of the techniques that I
discussed and I showed my subscribers to
my opening call, spent a little time on
it uh in this past uh uh Friday
afternoon when I did my overview uh
video. It's about an hour, hour and a
half. It's like a webinar. This one was
because I I discussed so many
techniques.
I mentioned that there's a technique I
developed just years and years, decades
ago. It's called a Chapman wave
overlapping wave and it goes it says
overlapping wave to leg D. And then test
the left side lip. So, when in the
Chapman wave methodology, we're always
looking for at least four higher peaks
through a peak D to confirm a buy signal
has gone through a buy mode.
But, once in a while you get a peak C
and it pulls back
and then under it you get another AB and
then what happens there's a C and it's
under the previous C.
When that second C is taken out,
usually, not always, but usually the
move is so powerful
that not only does it go to leg D based
on that C
and that's all based on the initial
starting point right here, the governing
uh low right there, that trough E back
in late July, early August.
It goes through the the very uh
the peak C that initiated the whole down
move.
So, I'm anticipating that crude oil will
go over 92.74
in this leg.
Unbelievable.
Uh and uh, I will have to mention just
uh, a little hubris here. I discussed
this, did everything right, and then
what I did is uh, I did not get my
subscribers in. We missed it by 8 cents
the other day. This two times long crude
oil crude oil two times long. Uh, right
there. We just missed it in the U C O.
Uh, and then it gapped up yesterday and
it gapped up today. This is only in leg
C.
So, this is going to be very interesting
because what I talk about very often is
the
dark news patina. And that's this chart
right here. I showed
I showed very very often to my
subscribers and here I hear
uh, to TFN viewers.
I base this on this the yellow
background chart. I base this on just
the Dow. I call it the channel with dark
news cloud cover / patina. I like to
call it the patina because it's based on
finding bad news that the market either
ignores or the market starts to treat
as, oh, really, [clears throat] that is
bad news. Most of the time it's like
water off a duck's back.
But I keep this with internal highs and
residual highs. I won't go into that.
I'll go probably tomorrow morning my
show 10:00 the tiger technicians hour
I'll do that. But I identify that peak D
in the Dow as an internal high. And I
said if it pulls back we're going to
have to watch it sharply. We were long
that whole move to the upside. Then we
got out and we've been now we're short.
And we're looking at this Dow which has
just made this H pattern. So, this dark
news patina, that's really the whole
thing about the markets. Markets don't
care about news unless you start to see
um, it reacting to the to the news as if
it's bad news. Same news yesterday could
come up today. Market ignores it. You
never know it's how the market deals
with it. So, crude oil is very
important. Bonds, TBT, look at this.
Yes, they're moving higher. I don't
think they're in the critical area yet,
but let me tell you a three 3.84%.
It goes over 4.
Uh I'd say 4.
05 all of a sudden the market is not
going to like that at all. Right now,
it's just adding to the stock news plus
you've got a lot of uncertainty. You've
got Canada and now you've got Iran
you've had there's just a lot of things
going on. All right, let's go to the
market. Here we go.
The SPX No, let's go start with the Dow.
INDU, the Dow is
in a sell mode in the daily.
Uh as I say we are short. This is The
weekly chart is still good even with
this move. Look at the distance between
the nine-period moving average and the
14-period moving average and since the
April uh
April low um
look how nicely the 914 has held up
except there is an up channel and we
went under it today with I this week so
far.
But look at that monthly chart still
very strong. Okay, let's go to the S&P.
I've got to watch my time here because
there's a lot going on and I don't want
to run out time before I go through a
bunch of things and I do want to get to
the VIX index. So here's the S&P.
Not that ugly but it is a sell mode in
the daily. The weekly chart still looks
great. The monthly chart lengthy, you
remember these were other things can
happen.
But so far it's holding really well but
the first day of um
first day of
the month doesn't look too great but
we've still got many days to go before
the end of September arrives and then
we'll talk about that over the next week
or two. Let's go to the QQQ. This is a
different chart altogether. Look, this
chart
has failed from the June 3rd high
right here of 748. uh
65
on the 3rd of June, it's just been
making lower lows, sorry, lower highs
and much lower lows. And then it had a
bounce, but it couldn't get out of this
inside track. You have an inside track
repellence zone. Just talking about the
inside this inside track. Look at this.
I mentioned this to subscribe to to I
showed this in the den. I showed a chart
of this and I said, "If this 10-minute
E-mini chart
um ha- it has takes out this 10-minute
inside track
propellence zone and goes under it, it
has two bars in which to get above it.
Well, look, one bar down and now it's
one, two, three bars above it. So, that
was really important. So, some of the
technical indicators are still working
quite well regardless of the strength of
the selling, but what's interesting is
if it was the usual
very, very intense selling, all of these
would be down 1%, 1 and 1/2%, or more.
So, this is part of a process that's
going on.
It's just weeding out winners and losers
and etc. But, what's really happened is
let me I don't know if I can do it right
now. I wasn't preparing to do it, but I
might as well do it. MAGA Is this the
mag? Yeah, this is the two social. No, I
want m a g s. Is that what it is?
Uh yeah, Magnificent Seven. You see, if
you look at the monthly chart, they're
still holding quite well overall, but
some of them have really pulled back
quite sharply. Um so, I just want to
show you the rotation that's going on
this morning. Look at this healthcare.
IYH starting to pull back, but it's it's
been one of the leaders, healthcare. All
right, I need to need to just cover a
bunch of things here. IWM, the Russell
2000, sharp percentage move
today. It is down 3.20 at 219.75.
I'm anticipating that it does test this
left side low. We've got the break
coming up. I wanted to show you the
volatility index. Remember that inside
track
propeller and repellent line that I was
talking [crying] about? Well, there it
is. And I spoke about this during the
week. I've been saying for a few days
now watch that actually more than a week
that we should be bouncing from here.
There's a little bit of a bounce of 1.26
in the VIX at 16.80. I'll be back in a
moment. Basil Chapman for Tom O'Brien.