Video summary
Larry Pessavento is hosting today's market recap for TFNN, stepping in to address listener questions regarding Apple's recent weakness and the broader bifurcated nature of the current market environment. He explains that while Apple has experienced a significant retracement from its 330 level, subsequent rallies have been minor and failed to sustain momentum, with the stock already breaking down further after an early morning attempt. This divergence is highlighted by the Philadelphia Semiconductor Index, which appears incredibly strong compared to other sectors that are underperforming expectations, illustrating the split between different market components that Basil Chapman often discusses.
The analysis then shifts to the Dow Jones Transportation Average, a sector historically considered vital but currently leading the market lower despite recent minor rallies. Pessavento references Richard Russell's Dow Theory, noting the disconnect between transportation and the broader market, and points out that after a major 61% retracement from previous highs, the sector's performance serves as a negative indicator for the overall trend. He emphasizes that while other indices have seen decent gains, the transportation index's struggle following such a deep correction suggests continued downward pressure, reinforcing the idea that these sectors are not moving in unison as traditional theory might suggest.
Gold is identified as another critical asset to watch, having recently completed a significant correction in an ABCD pattern format after making a massive high earlier in the year. The speaker notes that gold has been declining sharply since a 50% retracement off its previous peak, and historical patterns suggest a high probability of further downside movement. By analyzing daily charts, he projects that after a brief two-day rally following seven days of declines, gold is expected to drop to support levels around 4100, representing a potential decline of roughly 170 points from current prices. This repetitive behavior in the gold market serves as a cautionary tale for traders looking at long-term trends.
Finally, the discussion covers the Hong Kong index and crude oil, both of which display clear bearish structures that align with technical patterns like the 1-3-5 decline and head-and-shoulders formations. The Hong Kong index is shown to be in a steady downtrend with lower tops, reinforcing the strategy of trading with the trend rather than attempting to pick market tops. Similarly, crude oil is flagged as being in a topping area after a strong run over several weeks, having recently made a new high near 93.58 before likely reversing. These examples collectively underscore the importance of identifying and following established technical patterns to navigate a market that frequently favors downward trends in specific sectors.
Read the full video transcript
O'Brien.
>> [music]
[clears throat]
>> Okay, folks.
Larry Pessavento
Larry Pessavento sitting in for Tom
O'Brien today, folks. We'll start out
with Apple. We had a question from one
of our listeners here at TBNN why Apple
is so weak. I don't know the answer to
those questions. I can show you the
charts, but you can see here that we did
have a retracement up here up around
that 330 level. If we looked at this on
a simple hourly chart, you'll see that
it's been in a very negative mode right
ever since 330, and we've been coming
down quite sharply. The only thing that
we do know that each of the rallies has
been quite minor. In fact, the one that
we had today was almost a perfect
retracement as you can see here early
this morning. We had this 383
retracement 320, and it's already broken
down $5. As you most of you know that
are watching the markets, we have a
bifurcated market that Basil Chapman
always talks about, and that is some of
the markets are looking stronger than
others. We look at Philadelphia
Semiconductor Index, and it looks
incredibly strong, but if you look at
some of the others,
it's not doing nearly as well as one
would expect. Okay, so those are the
things that we're going to try to cover
here as we go through and look at some
of these things we're watching today.
Now, let's take a look at the Dow Jones
Transportation. I know most of you folks
don't remember
>> [clears throat]
>> Excuse me, folks.
Give me 1 second. The transportation
used to be used to be very, very
important, but we're going to take a
look at it, and you can see here that
the transportation has been leading the
market down here for quite some time.
Okay, if you remember Richard Russell
from the Dow Jones theory, he said that
they have to go together, and they're
certainly not. You see, we talked back
here on July the 12th. Okay, and here's
where we are now. We've just completed a
a
pattern right here, and there should be
really strong support here. But, if we
look at this closely, now this is the
Dow Jones Transportation. That's only 20
stocks, but you can see here we've had a
1 2 3 4-day rally, and the market hasn't
done very much at all. All these other
ones have had pretty good rallies, but
from coming off of this major 61%
retracement here, that I I assume that
would be a very negative indicator of
looking at that. Now, I know that gold
was one of Tom's favorite thing to look
at, and what we're going to do now is
take a look at the gold market, because
it's one of the things that
just pays your bills all the time. Let's
get all the time Well, most of the time,
let's put it that way.
Let's get it up Let's get this Just give
me 1 second here to get the gold Here it
is right now. We've been having a
correction here in the gold market.
There's what we've been doing over the
last few days. As you can see here, we
made a 50% retracement here last night
in the ABCD format, and we started down
sharply, and we've been going down ever
since. If we look at this on the
long-term daily, folks, which we like to
do, you can see there's that 50%
retracement off of this high right back
here, which was an absolute monster.
That was place to get short the gold up
there at that 50 4710, and here's where
we are now. What this is assuming,
folks, and if you watch the gold market,
it repeats over and over again. As you
can see here, these last rallies were
almost exactly alike. Just absolutely
spot-on, and that told you And since you
were sitting at the 78% retracement of
this high and a 61% retracement of the
high back here in January of last year,
that tells you that the market usually
has the probability of going lower. What
we would have set up now, just looking
on the daily, cuz we had a 2-day rally.
See, we came down 7 days, had a 2-day
rally, and that would expect expect us
to take us down to this level right here
in the gold market which would be down
here right around 4100. That's down
about another
170 points, 120 points from where we are
right now. So we want to watch this will
be really key support should we get to
this level and I think we will but we'll
we'll do the one thing at a time and see
that we get that moving right way. Now
we also had a question from one of our
listeners about the Hong Kong index and
I'll get this up here and we'll take a
quick look at it and you'll see this is
the daily chart of the Hong Kong index
which has been quite bearish and as you
can see here we've had a big gap down
here this morning and we'll move it over
here. Uh these 135 pattern folks, I'll
bring this up to you and show you. This
shows you the symmetry the market. There
it is right there. This is this what
this is a declining cops is what it is
folks. It's another name for it.
It's also the head and shoulders pattern
left shoulder head right shoulder and
then we also have the 135 pattern.
Uh just a second so I can mark that up
right here and that's what you're
looking at and that is nothing more than
a down trending market as you can see.
Well what we'll do is we'll
get rid of that and we'll just extend
this over a little bit.
This shows you the ABCD sitting down.
Okay, now what we're looking at I want
to show you this.
You see that's what that is. That's just
extending down. That's all that is
telling you that you have three points.
So look at this. You see you have lower
tops again. This is
Uh
yes, I know that Tim Tim Horton is
coming on. I'm absolutely I'm waiting
for it myself cuz I'm interested in
hearing what he has to say.
Uh just be with us stay with us Tim.
I'll have you on. Anyway, there's
there's that same pattern again. You see
the the 135 here it is again. 135 it
repeats over and over again. Why this is
such a good pattern folks is it forces
you to trade with the trend. You don't
have to try to pick a top. All you're
looking at is trying to to to find a
market that's going down and sell that
market. All right. So, let's keep an eye
on that as we look at this through this
I'm I'm hoping
>> [laughter]
>> Well, Tim is an expert at this and I I
know he'll whether whether he has some
of
looking at the same things or not, I
don't know, but I'm just showing you
what I see and but that's main thing. I
I will I will tell you really honestly
folk and I heard the introduction here
and I heard the Tom O'Brien show. I boy,
I tell you I've been doing this for 19
years for Tom and I've known he and the
whole family all those years and I met
Tom in 2001
at the at the money show after the 9/11
and boy, I tell you that was a that was
a really really scary one.
It was Feb I was in February of '02 is
when it was. They were I don't want to
go into that. That's not necessary. By
the way, I don't know
well well
okay. Okay, hold on. I'll be right back.
I get
All right. Here, let's get back here in
1 second. I'm messing up a little bit
here, but we're going to continue with
some of these things that we're watching
and that's about it and we'll see what's
going on here. So, we've got a 30
seconds to go
for the next break and I wanted to bring
to your attention the crude oil folks
because crude oil's had a very big run
here for the past several weeks and
we've been saying there's very strong
probability that we're in a topping
area. There it is right there. This is
the same pattern that I'm looking at
here. You can see we've made a new high
a little above the area we're trading
right at the number now at 93.58. We'll
be right back.
>> [music]
[music]
>> Woo!