Hi YXI friends,
We just endured another brutal day in crypto. The big question on everyone’s mind is: “has the market bottomed”?
In today’s article, I have attached latest chart analysis for Bitcoin and Ether to answer that question. You may not like what I write, but I try to be as objective as I can in preparing for the risk scenarios.
Separately, I have gone through a detailed analysis of PLTR’s fundamentals and technicals. We are building a suite of institutional-grade analytics for stocks and crypto in this service that you won't find in the public domain.
Oh, and today’s article is free. Let’s dive in!
Table of Contents
DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
Please check out our glossary for explaining the acronyms, financial terminology, and economic data.
1. YXI Dashboard
Dashboard
Tuesday was a disasterous day for crypto. Bitcoin (IBIT) was down 5.5%, a near-2-standard-deviation move to the downside. Ether (ETHA) did worse, down 10% on the day, over 2 standard deviations from its average volatility.
The stock indices and Mag-7s were not spared either.
SPY and QQQ were down 1% and 2% respectively, while NVDA and TSLA traded down 4-5%.
GLD fell at the same time, something that didn’t usually happen last month, as investors tended to flee to gold as safe-haven bets upon market declines. This suggests to me a liquidity-driven crash rather than rotation.
Previous Day Price Action
ETHA and IBIT were sold off aggressively in the New York session, despite the initial bounce.
TSLA, NVDA, and AMZN led the decline among Mag-7s
2. Spotlight: PLTR
PLTR Quarter Revenue
PLTR’s business results delivered another blowout quarter this week, with quarterly revenue growing by an impressive 63% YoY. I’ve not seen that growth rate in other mega caps yet.
Here is a visual heatmap of PLTR’s revenue growth each quarter. PLTR’s revenue started accelerating, first slowly, then aggressively, from mid-2023. The stock was trading at the $15-20 range at that time. Even if you bought only based on actual revenue acceleration (not projected etc), you would still have 10x from that point.
The point is not to be a hindsight guru, but to understand what propelled PLTR’s stock forward. Now we have the analytical tools to discover other amazing names in the future.
PLTR’s gross margin is at a very high 82%, improving from a year ago. Its operating and EBITDA margins are also at their highest levels ever. The 42% free cashflow margin is simply a money printer.
Here is a visualisation of how PLTR’s stock price began to move higher as its EBITDA margin improved over time (in orange). The TTM Revenue (blue line) is slower-moving than quarterly revenue growth, but when it began moving, PLTR broke above the low $20s.
PLTR Revenue, Profit, and Valuation Summary
PLTR Monthly Returns
A lot of the best monthly returns occured in November, but December tends to be much more bearish.
If you think the stock is now going down, it may still be worthwhile to wait for a more seasonal period, like December, before going short.
PLTR trades with a moderately positive correlation with SPY and a modestly negative correlation with TLT.
PLTR Forward Performance After 5 Consecutive Up Days.
I'm posting this because PLTR had a 5-day winning streak last week (October 29). This has happened 18 times in its history.
The average 1-month forward returns were 9%, 25%, and 56% after 1, 3, and 6 months, respectively.
The above are all the previous instances of PLTR closing 5 days in a row higher.
PLTR 5-minute intraday returns, past 20 sessions
In the past 20 market sessions, the market sold PLTR aggressively at the open, only to bid it back up after 9:40.
This means for buyers, they could wait at least 5 minutes after the open to pick up shares. For sellers, they could either sell premarket or wait until 10:15 am, when the initial buying wave is over.
Price Technicals
My read is that PLTR is now in a wave 5 run, pushing aggressively against the potential upper bound of the price channel.
There are signs of potential exhaustion, notably an 8% decline in the price after another big earnings result.
I would not short the stock, but I am not going to chase the name on the long side either. We have the daily ML signals for clues of risk-off.
3. S&P 500 and Nasdaq (SPY & QQQ)
SPY
In my opinion, it is “good” for the flush to occur at the beginning of this month to set up a new high going into year-end.
SPY will have the initial support at 50-day MA and a large volume profile around $660. To fully complete wave 4, it could test down to $640 - the 0.236 retrace of wave 3, but I don’t see a significant break below that level.
QQQ
QQQ has significant support in the $600-605 region, with the confluence of the 50-day MA and volume profile.
4. FOMC Projections, Treasury Yields, TLT, USO
FOMC Projections
We utilise the Fed Funds futures market to gauge market expectations for future FOMC interest rate decisions.
US Treasury Yield Curve
US 30Y Yield
The 30-year yield is testing the 50-day MA. There is a chance it could get to 4.73%, but the upside is limited from here. My read for the next major leg is to move lower into the 4.30% zone.
TLT
TLT is likely to test the 50-day MA before headed higher in wave circle-v. Wave circle-v (not shown yet on the chart) could reach the mid-$90s.
USO
USO’s near-term momentum is likely to the downside towards the mid-$60s.
5. Crypto
BTC
This is the most important chart you will see today.
Bitcoin sold off to the 1.61 extension of wave circle-a. This was a near-identical move to the December-February selloff.
In February, after Bitcoin reached the same extension to the downside, it rebounded aggressively to $95k, before capitulating into a lower low of $74k in April.
Today, a similar path could suggest a near-term bounce to $110k (everyone breathing a sigh of relief), before flushing a lower low to $93k.
It is up to the individual, of course, on how aggressively they want to play the bounce, if at all.
ETH
ETH could well be in a 5-wave decline pattern for wave (c). This means a near-term bounce towards $3500, but it could get aggressively sold off into the final wave v. The final wave v can test $2600 (which sounds incredibly cheap), where there is significant volume support.
(Btw, I hope I am wrong.)
6. Gold
GLD
Gold likely tests the 50-day MA before ending the pullback.
7. Large Cap Equities & ETFs
Apple: AAPL
AAPL has been relatively bid in the recent selloff. I expect the near-term move to be higher towards $290 next.
Amazon: AMZN
AMZN is in a fairly standard wave iv retrace that can test the low $240s before moving onto a new all-time-high.
Alphabet: GOOGL
GOOGL is likely in a wave iv retrace (like AMZN) which can end in the high $260s.
Meta: META
META’s decline has slowed in the past three days. I think a near-term bounce is on the cards for the gap-fill. However, that could be a b-wave, with a lower low to come.
Microsoft: MSFT
MSFT has managed to hold at the 50-day MA. I read the next leg to be higher in wave c of (iii), inside an ending diagonal structure.
Nvidia: NVDA
I have marked all 5 waves complete for NVDA, but it is still too early to conclude that a major top is in. We watch how it behaves in the run-up to earnings before projecting the downside.
Tesla: TSLA
Going into the shareholder vote on Elon Musk’s pay package, I do think the nearterm setup is for the upside.
I do not see any issue with Musk’s ambitious compensation plan. The milestones associated with the stock reward are ridiculously hard to meet. The shareholders should celebrate if TSLA could meet these targets in the long term, whether that means Musks becoming a trillionaire or not.
Semiconductor: SOXX
SOXX could be dropping in wave iv, with the 50-day MA (in blue) as the first support.
8. Notable ETF Flows From the Previous Day
Recent Notable Flows (% of AUM)
The flows are expressed as a percentage of the AUM prior to the flow.
Ticker | AUM ($M) | Flow % AUM | Flow % AUM | Flow % AUM |
|---|---|---|---|---|
UPRO | 4875 | -3.86% | 5.71% | -0.65% |
KOLD | 146 | 15.57% | 23.09% | -12.47% |
BOIL | 563 | -8.82% | -14.61% | -6.18% |
Please help me improve the service with your immediate feedback. Thank you.
