From Mega Caps to Small Caps

Over the years I've collected a number of contacts in markets.

Fellow traders at big prop firms, hedge funds, sell side analysts, family offices and individual traders. 

Whether they are lurking in the shadows of the Trading Lab, text or DM'ing on Twitter, we chat regularly. 

And ever since $NVDA came out last week and made a mockery of their forward earnings expectations, everyone of them has been talking about two things.

1. Is this the beginning of the next mega bull market, similar to 1998 when the Dot Com explosion started or a blow off top?
2. Is $AVGO going to report similar information to $NVDA on Wednesdays earnings?

Now, before any of you who I've talked to about this offline, get ants in your pants about me revealing any secret discussions, this is the same discussion I've been having with everyone. 

I heard it so often that I even sent out a survey to get random people's thoughts about it on Twitter.

A lot of people seem to think that this is just a blow off top and the AI opportunity has ran it's course.

But if you look at $AVGO stock chart, a lot of money went after it.

We'll learn more tomorrow after the close when Broadcom ($AVGO) reports their earnings. 

Days before $NVDA earnings announcement, Apple announced a deal multi billion dollar deal with Broadcom to buy chips made in the US.

Broadcom is definitely part of the GPU and AI discussion, the thing that cause $NVDA to roof last Thursday.

Just as $MRVL did on it's earnings announcement last week as well.

So all eyes on $AVGO Thursday after the bell to see if they are seeing similar trends as $NVDA.

In other news, the indices are heavily entrenched in a two way battle of boring.

The following charts reference the March 2020 lows (Covid lows) and all of the volume that has traded since then. This was a major change in economics, with a swift 30% selloff that shut the world down (the pandemic not the sell off) and brought trillions of dollars in to the economy. 

To say that everything changed in March 2020 is fair. 

With that as our reference point, let's look at the indices, starting with the leader, Nasdaq 100 ($NQ).

With the Volume Profile anchored to the March 2020 low you can see the value area (where 70% of the volume has traded) and $NQ is touching the top of that range.

Let's look at the same chart with S&P 500 ($ES Futures). What's different here is that it's not near the top of the value area, and instead had stalled out the point of control (the yellow line) which represents the level of the highest volume price level since March 2020. But now recently seems to looking to make a run higher $NQ had stalled there a month ago before taking off to the top of the range. Will $ES do the same?

And finally the Russell 2000 Small Cap Index ($RTY Futures). By far the worst performing of the three indices. Keep in mind, a lot of regional banks are part of this index. 

I'm not going to make any predictions on this, rather this is what I'm watching. 

With $NQ, $ES and $RTY stalling here it has made for some good mean reversion trading opportunities for us in the Trading Lab. 

Today we bought $ES and $RTY off the low's and sold them in to the close making a little over +3.5R.

This environment is perfect for trading 0DTE options on $SPY or $SPX

We also bought 418 Calls (expiring today) for $0.41 and sold them for $0.95 per contract, well over 100% gain. 

Continuing the saga of waiting for the first 90+ minutes before starting to trade. 

Here's the $ES trade.

Here's the $RTY trade.

And here we double dipped with 0DTE options for +120% profits.

It was a boring day!

We waited, got in the trade, and just sat back and let it drift higher all day long. 

Meanwhile I took an ice bath, hit the gym, made some lunch and did some reading. 

Believe it or not, trading doesn't require your eyebrows to be on fire, and second by second entertainment.