🗞 Google It

WHILE YOU POUR THE JOE… ☕️
Are You Not Entertained?

The awaited Apple event 🍎 had basically no impact on anybody’s life, not even Apple shareholders…

The stock was flat and even moved down before the event as if expecting to be disappointed by the integration of AI into the new iOS 🤖.

Look, it’s very cool what they’re trying to do, but Apple is a legacy hardware company; it’s not the software leader it used to be, and that’s okay.

Not being a bear on Apple, I just think that for most of us trying to speed grow our wealth, there are better alternatives on innovation and technological breakthroughs.

Speaking of events that could actually move the market, let’s get on with today’s email 📧…

PUT IT ALL ON RED
CPI (Can’t Predict Inflation)

That’s not true, but in today’s economy and administration, you truly can’t expect much.

Look, prices for the Services PMI last week came in hot, very hot, at 57.3 (anything above 50 is expansion).

While the manufacturing PMI saw less of an aggressive expansion in prices, they still expanded at a rate of 54.0.

Since this makes up the entire economy, I highly doubt that inflation will be down as most people expect, so I’m honestly leaning toward a hotter print.

The consensus for today’s CPI is 2.6%, so anything above or below that number could significantly affect the S&P 500.

Going back to every inflation cycle since 2000, it doesn’t look like we’re too far away from normal; in fact, we could use a little lower inflation.

The problem is that markets have a very short memory, so coming from 5%+ inflation down to 2.6% is a big deal, but in reality, we are only starting to return to normal.

Here’s what could happen, though:

• Hotter CPI: This means the Fed won’t be able to act on its promised interest rate cuts, and the market could throw a tantrum selloff.

• Cooler CPI: Really bad for the economy considering the weak NFP context, but also good for rate cuts, so it depends where the sentiment is at the moment.

Keeping in mind that the market has been reacting within reality to new data, where bad news does not equal good news, I think either way the CPI swings we could see a selloff 📉.

For the $SPY, I’ve marked these levels as an initial swing point. Tomorrow, anywhere from $550 to $545 🎯 is fair game, as we are right in the middle from yesterday’s close.

the big swing potential? I think we break below $540 and move to $533 even, but that will take a few days.

For now, know that the overnight inventory on the S&P is short, so we might see a morning rally to adjust before finding out where the natural direction will be.

Spoiler:

I noticed two very large orders come in yesterday in the second half. Both were above 10 million shares in size and were sell orders.

Here’s the interesting part.

These orders came in below the bid, which to me means that whoever was selling (or shorting) the S&P had an extremely bearish bias 📉 behind the decision and was also in a hurry to get this trade on.

Just to give you an idea, 20 million shares sold at around $548.80 would be roughly $10.9 billion sold.

Now, who in the world could make that trade without knowing what would happen next? 👀

TRADE OF THE WEEK
Google it, Google it All

I don’t know if you’ve noticed, but Google stock is at an undeniably sweet spot right now.

After being slapped with a lawsuit over the typical big tech BS, Google is set to pay a few billion in fines for something they probably didn’t do but the government has to eat anyway.

This negativity and bad headlines drove the stock to such a steep discount that we thought it worth mentioning to you as a potential trade idea.

This is about a 22% selloff 📉 from its recent high price, which is exactly where the mark of a bear market starts, and where bulls tend to fight to regain ground again.

The same thing happened to Meta Platforms stock back in 2022, when it sold down to below $90 before tripling a few quarters later.

Yeah, I’ll never forget that monster rally. Anyway, here’s why I think it might happen to Google stock as well.

First of all, you can notice a big fat tail on the first day of bottoming, as the stock touched just above $147. Tails are made from responsive activity, in this case, responsive buyers.

How do we know it’s not just a lack of sellers? Because volume spiked within this area, to be well above the historical average volume levels.

So, technically, the stock looks ripe for a recovery rally the likes of what Meta delivered to us two years ago.

Take a look at that volatility spike as well 📈. It looks like we’re going into a compression soon, and that is typically accompanied by flattening price channels or higher stock prices.

Now, here’s the rest of the evidence we collected to figure out where the market might deliver a quick turnaround for Google stock:

Amongst the large cap internet and software stocks, Google had one of the worst earnings growth projections (EG2 column) and forward P/E (PE2 column).

When this happens, it means the market is discounting the potential of a stock for a good reason, and these lawsuits seemed to prove that theory right.

But,

Now that the trial is over, and the uncertainty is past Google, it’s clear skies ahead to stage a recovery rally.

The answer everyone is looking for now is: How high and how soon can we expect to see Google stock rally?

Looking into the options chain, there are lots of call option contracts going for the $200 calls for January 2025 🎯, a clear outlier right at the top of the chart.

These calls trade at roughly $0.75 per contract, and have a delta of 7. I am really starting to like this set up now, because there’s a lot of people betting on the obvious, and by obvious I mean what regular traders and investors can’t spot.

Still, that doesn’t mean go jumping all in on this idea, we need to wait for confirmation at the current low volume node of $147.5 to $148.5.

If we get another round of responsive buying here, then I would say it’s green light to position ourselves 🟢 in this trade idea.

Happy trading. 🫰 

NOW GO AND MAKE IT HAPPEN
Technique is Key

The way to understand order flow better is to, well, watch the market and put in hours on hours of tape reading every day.

However, that would be useless if you didn’t know what you were looking for. So, today’s book recommendation 📖 is one to help you create a list of things to watch out for every day you are in the market, hope it helps you as it has helped me.

To your success,

G. 🥃