The Most Important Charts in the Market, and Where One Top Technician Is Seeing Buying Opportunities 9/27/23

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast money. Here's what's on tap tonight. There are two charts and two parts of the markets our traders can't look away from. Yields in energy will break down why the surge in the 10-year and the crude climb continue to dominate the conversation. Plus, shoe dogs, shares of Nike, keep crumbling. The stock now down almost 25 percent in just the last six months. Will earnings tomorrow stop the slide? What the options action is saying tonight and later, a landmark day for the marijuana industry. A Senate subcommittee approving a bill to give weed companies legal access to banking services.

0:34The reaction from key players ahead this hour. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Steve Grasso, Guy Dami, Julie Beal, and our guest trader tonight, Katie Stockton of Fair Leads Strategies. And we start off with the newest milestone for interest rates, yields on 10 years, surging past the 4.6 percent mark, getting closer to breaking above their October 2007 highs. The benchmark rate is now up nearly 1.4 percentage points from its April low. Massive move. The rapid rise in rates taking a particular toll on a few sectors, real estate, utilities, industrials among the hardest hit over the past month.

1:10And while stocks closed off their lows of the session, even the attempted rally late in the day lost some of its steam. So how worried should stock investors be about these rate moves? We like to play a game. Oh, I love games. Where I would say, imagine if yesterday I told you this would happen, And what would the markets do? If I said to you, Guy Dami. I love games. That 10-year yields would go above 4.6%. What would the markets do? What would your answer be? S &P's down 80 handles. NASDAQ's getting obliterated, probably underperforming the broader market. Russell's small caps are getting whacked.

1:43And what happens? VIX is north of 20. None of those things. And the opposite when it comes to small caps. Which is a good sign. Steve has pointed out this level. Tim, as well. 41.90-ish. We've been talking about the S &P. I think it got down to 42, 30-something today and bounced 40 handles. So maybe close enough for government work. The market was oversold. Doug Katz has been writing about that. I'm sure Katie has views on this as well. So in the short term, all very good things, definitely. With that said, the fact that the TLT really didn't bounce at all, you would have thought yields would have backed up.

2:13They didn't do it. And I've said this for a while. Yields going higher is not a good thing. Yields will continue to go higher until they don't. And if yields start to go lower, it's because something probably broke in the equity market. And so I can come up with a scenario where if yields go down, it's probably been bad for the market. If yields continue to go higher, I don't think it's particularly good either. What was your take on the action today, Katie? Well, I mean, I think there's something to the trajectory of yields. When they accelerate like this, you'd expect a much bigger impact on market sentiment.

2:41So sentiment has gotten to the place where it is bearish, right? After today, maybe more so. We look at metrics like the VIX, like the fear and greed index, and they are showing bearishness, but maybe not quite at the extreme point that we need for the equity market to finally bottom. Guy and I are looking at some of the same levels to this 41, sort of 80 to 41.95 area is support. It's not that far away anymore. And Treasury yields, they are poised to confirm a breakout this Friday. So the level that was cleared last week, it feels like ancient history. Now it's 434. And assuming that breakout is confirmed, the next resistance is five and a quarter.

3:22I've been saying this for a long time, and it seemed really crazy when I first introduced that level. But at 4.6, it doesn't seem quite as crazy. So if you look at it, so we talked about the seasonality of this, the buy the Roshan, help me. Buy Roshan, sell Yankapur. We've talked about it. I feel as if I might be getting drawn in here because I'm starting to get negative. So when you start to get negative, you have to look at the seasonality again. So if I feel like I'm getting drawn in, what does the retail community feel like? They're getting drawn in, too. And when you look at the last four Septembers, those are down.

4:00When you look at the last four Octobers, those are up. I'm holding on to stocks. I sold a bunch of CRAP stocks. That's not an acronym. You owned CRAP stocks? I did. I did. I felt like I didn't buy them knowing that I owned them. But I definitely, over the years, have figured out that they were not going to perform well in this market. Right, you got rid of those. But if you look at the large cap tech names, if there's going to be a rally in the overall market, those names have to rally. So I stayed long some stuff. They held up very well today, considering what was going on with rates. And what held up really, really well, Julie, small caps.

4:40You're a resident expert there. What did you make of that solid performance today? One percent on the small cap 600 index. Well, you know, I think it's kind of a case right now where if you look at valuations, you know, across market cap, across sectors, you know, the place where people are finding value are still in small caps. And if things are not quite as bad as we had feared at the beginning of the year, these guys should probably be OK. The real question is kind of what is in what is on balance sheets? How much risk do some of these businesses have? And so, like I always say, you have to be really choosy when you start playing around with small cap.

5:17But I agree. You know, I think until we get less of this bear steepening, it's really, really hard to get enthusiastic about equities. But, you know, for us, we're still looking at quality and it seems to be the best place to be in this September. That's for sure. Yeah. What happens what happens if oil comes in a little bit? What happens if the dollar comes in a little bit? What happens if the UAW strike ends? I know this could be a wish list. Like all of these things combined? Or some of these things start to trickle and you start to get that momentum. It doesn't take a whole heck of a lot to have the market rally from where we are now.

5:54Do you think oil is going to come in, given Saudis want to keep the company? I think$100 is probably the nice, fat, round number. I think the dollar – just think about this. if Jerome Powell sees that maybe the market is taking it on the chin, maybe he backs up a little bit. Maybe it's not one more. He's never going to say it, but the market will start to interpret maybe there isn't one more rate hike. And what happens if they think that? They start running into equities again. Okay. But the problem is that it may not be one more or maybe one more, but maybe markets are not really like thoroughly factoring in the idea that rates could stay where they are right now for a very long time.

6:35And maybe that's what we're running. Yeah. So I understand what Steve's saying. The pushback would be I think that the Fed's a sideshow now in terms of one more, no more, doesn't matter. They're staying where they're staying, I think. And the move in crude oil and the reacceleration of inflation suggests they should. And quite frankly, the rhetoric, they've been pretty steadfast in their rhetoric. So it's not them that's to blame. The market has chosen not to listen until recently. I say the damage has been done because I don't think we felt the effect at all in terms of 525 points of heikening.

7:04We're starting to feel it now. That will factor its way into the market. And yields going higher historically should be a good thing. It's not a good thing now because, as we've talked about, it's got nothing to do with the economy. It's got everything to do with supply and demand. And the fact that the market is demanding higher yields to buy our debt, rightfully so, by the way, when you look at some of the problems we have here. All right. Well, our next guest said back in August that he thought rates would quickly move to 4.5, half, maybe beyond. Let's bring in Damp Spring advisor, CEO Andy Kahnsten.

7:33Andy, great to have you back. That was a great call by you, and that was on the news that the Treasury was going to, you know, have a much bigger than expected issuance. So the issuance hasn't actually happened. A lot of the move has happened. And so how do you expect this to play out at this point? Right. Thanks for having me back, Melissa. Yeah. So since the government announced a significant increase in the amount of long-term Treasury bonds they plan on issuing, shifting from bills to bonds. You know, the S &P is down 7 percent. Nasdaq's down seven and a half. Russell's down 11. The two year note, which I agree with with Guy, is, you know, basically fixed, but is up 26 basis points.

8:11But really, the big action has been in the 10 year and the 30 year, which are up 65 basis points and 71 basis points. And as you said, the supply hasn't really come to market yet, but the supply announcement clearly mattered. So what we're having is a bit of front running of that where markets price in this additional supply. And so I think about 75 to possibly 100 percent of that pricing in for the supply has happened in the bond market. And it's possible that when the supply actually does come this quarter that you could push yields a little bit higher. But I'm thinking that most of this run has moved, has occurred, and you've got 10, maybe 15 basis points more of higher yields in the near future.

9:00So you've covered a lot of your shorts in this position, Andy, and that's simply because the risk reward is not there anymore. I mean, you're saying that yields will probably go higher, but at this point, it's not worth shorting bonds for that move. Right, right, exactly. I mean, you can choose to be long, short, or flat if you're a speculative investor or a hedge fund investor. And, you know, the choice right now is to have no position because, you know, I do see a possible, you know, I do think a likely 9 to 15 basis point increase in yields. But it's come a long, long way. And so a bounce on weak data or any sort of weakness even in equities would, you know, support bonds briefly, though I think the supply means that going long bonds speculatively doesn't make sense because you're just going to run into that wall of supply.

9:52And it was great to have you on when you originally did. It's great to follow up now. Well done. So there's what I think could potentially happen. If yields were to go lower, markedly lower from here, it's probably because something broke and broke, meaning the equity market. And you'd have this sort of perceived flight to quality in the form of the bond market. I don't think that's particularly healthy, but that's a scenario. Does that make sense to you? Sure. But I think what and that that is how things have played out year over year for 40 years when things get bad, bonds rallies. But it usually happens after stocks fall.

10:26And I think the the recent rally in bond yields, the rise in bond yields, the sell off in bond has not been felt yet by the equity multiple. So I think the next step before we get to the step you're talking about is for equity multiples to contract a little bit. You know, my sense is the same sort of move in equities that we have had. When you add on the move to bonds, equities need to catch up a little bit to the downside. My guess is around five percent. You're short equities. I am short equities. Yes. OK, Andy, great to have you. Thank you so much. Pleasure, Melissa. Awesome. Andy Constant, Dam Spring.

11:05Julie, you agree with Andy? Yeah, I mean, for the most part, I think that it makes sense logically. But the one place that I kind of wonder about is, you know, we talk about the wall of worry, but there's also this, you know, wall in that's sitting in cash earning 5%. And I just I worry a little bit on being too bearish, because I do think there's the potential for people who've been really happy earning 5 % and looking at returns in the market that are much better than that and starting to wonder, hey, maybe I need to get back involved, particularly if there's kind of a nice little correction.

11:37I think brave people may start stepping in. So I'm not sure it'll be quite as connected as that. And I do think that it's going to probably hit, if it's going to hit anywhere, it's going to be on lower quality for sure. Katie, do you think equities need to go down to sort of match that move higher in yields? I mean, we're still recommending being short, being hedged, And yet we think that the market is potentially even within a couple of weeks of a tradable low. We are starting to see signs of downside exhaustion. We talked about in market sentiment gauges, market breadth readings have gotten very deeply oversold.

12:12So these are all creating a backdrop that is more favorable for equities. Then we also have the support coming into play. There are some countertrend signals from our DeMarc indicators in both yields and equities. We're supposed to get a signal countering the down move in the S &P 500 in the next couple of days. So we're bracing for what we think will be a nice entry point. And yet we want to see those momentum gauges shift before we feel confident in covering the hedges and getting more long. And it doesn't have to happen when you say October is usually a positive month for the markets. It doesn't have to happen as of October 1st.

12:51So this could be a two week event to Katie's point or could be a weak event. So I think if you go into October, November, December, those are good months for the overall market. So I wouldn't get too bearish. Yeah, the seasonals are very strong in October, November, especially. I think people get ahead of the Santa Claus rally. December hasn't quite held that same positive seasonality that it used to. And, you know, that's a good two to three month move potentially that we could position for. The question is, is that going to be it or is it going to yield a lower high and keep us range bound? Ho, ho, ho, guy.

13:26Yeah, ho, ho, ho to you as well. You know, yeah. It's funny. There's some things that really, yeah. Turkey. Turkey day. But that's all good. Happy hump day. Love that. Listen, I understand what everybody's saying here. I totally get you. We might be within a couple weeks of a tradable low. The question is, you know, what does that look like, that move to the downside? Is it a flush? Do we get a VIX north of 25, which we haven't seen in quite some time? I mean, all those things are in play. I think today's action was really encouraging. The fact that we traded down the levels that we've been talking about for a while seemingly bounce on the face of yields going higher is a good thing.

14:00We'll see how long that lasts. And we haven't even talked about these geniuses, you know, a couple hundred miles south of us that could potentially shut down the government. I don't even think that's priced into this market. And that's something to be concerned about as well. Here's a would you rather. Oh, I like this. I will pose it to Steve Grasso. Oh, I love this game. Did you know? Yeah. Go ahead. Would you rather money right now yielding 5 % in bonds or entering a new position in the stock market, SPY, from here to your end? Entering a new position, SPY, without question. Because it's almost like buying for a dividend, right?

14:35I mean, even though you have that static, the market could be up dramatically from here, and that obliterates that 5%. Okay. I played the game. She would have been great on Let's Make a Deal, like a modern-day Monty Hall. No, because that's— I do host the game show of sorts. You have a paper clip in your pocket. I actually do, for that show, exactly. Bobby pins, all kinds of fun things. Diver. Who's great? The moves in Treasury yields got us thinking. What other charts could tell the true tale of the markets? Let's go around the horn. Guy, you've been looking at banks. KRE is the one that I think— Listen, it was between HYG and KRE.

15:12I'll pick KRE because I've done HYG before. I think small and regional banks are a huge towel. They were getting cratered into the spring for obvious reasons. They all bounced on the back of Silicon Valley Bank, somewhat counterintuitive, but obviously the Fed backstopped everything. Had a huge run, giving a lot of it back, and it feels as though we're going to round turn. So if KRE, if the regional banks start to roll here, it suggests maybe the economy is not as strong as we hope it to be, and maybe there's another fly in the ointment in terms of small and regional banks. So the KRE, to me, is a chart to watch.

15:42Steve. Triple Qs. If everything is about large cap tech, you have to watch the triple Qs. Seems like we're hitting a support level in triple Qs. And if you look at the top holdings, you have Apple, you have Microsoft, you have NVIDIA, you have Meta and Amazon. It's about 40 percent of the triple Qs. If that rallies, then the market's going to be in good shape. Julie. The Fed put out this chart talking about excess savings, right? And everyone says, you know, people have such high levels of excess savings. But what really matters is who's holding the excess savings. And what's really clear is if you're in the top 20 percent, you still have a lot of excess savings that you can draw from.

16:19But if you're kind of below that, you're really starting to dip past where you were before the pandemic started. And so I think looking at things on a real basis, if adjusted for inflation, is important in terms of thinking about consumer spending going into the holiday season. And we save the professional chartist for last. Katie. So we're looking at the fear and greed index, and it is a gauge of market sentiment. It aggregates a lot of different measures into one. And in July, it was extremely overbought, meaning that investors were too greedy. It peaked around, I think, 82 percent. And now it's at 25 percent after today's action.

16:56And 25 percent south is an extreme oversold. And again, it has us looking out for that tradable low. Coming up, Micron on the move. We're all over the after hours action in Micron as results across the wires. The latest numbers from the quarter next. And peddling higher, the deal that's sending shares of Peloton stretching to new heights. After the bell, we'll bring you the details when Fast Money returns.

17:27Welcome back to Fast Money. We've got an earnings alert on Micron. Shares of the chipmaker are down by just about 4 % after hours on mixed guidance. And CNBC's Christina Parts Nevelis got the details. Christina. The call is still going on, but I came upstairs. And Micron's CEO actually started by calling the bottom for memory prices after what he called a very challenging year. I added the very there. But the total addressable market reached a multi-year low, and that's why we saw revenues for Q4 drop 40 % year over year. We can say Q4 earnings were a beat, but the company is still operating at a loss.

17:57Q1 EPS guidance came in, I guess, larger than expected in terms of loss. And then on the call, there were a few things, a few negative points, and that's why we saw the stock drop. First, traditional server demand remains lackluster. It's been the first year-over-year decline since 2016. They are forecasting 2023 PC and smartphone volume to decline this year. They think it's going to normalize for 2024, which is really now. It's confusing, but it's Q1 now. And then what was alarming was that 2024 CapEx, only slightly higher than this year. The China ban continues to impact revenue. And when I say impact, it's about a 13 percent hit to total revenues.

18:37Free cash flow still going to remain negative for the first half of 2024. Of course, they're going to bring up the bright spot, which is AI and their high bandwidth memory chip, which they believe is powerful enough to help with all these infrastructures. And it's going to ramp up next year. But is that enough to offset all of these points that this company is still faced? And they're calling 2024 a year of recovery. So a ramp in 2024 doesn't, I mean, that was it right. Yeah, that is not going to be strong in the first half or whatever. And it's going to gradually grow. But going back to what you said before, which struck me as sort of weird if I heard it correctly, total addressable market hit a multi-year low.

19:14What does that mean? Your total addressable market is your total addressable market. Why would it shrink to a multi-year low this year? This past year, they're going to say that, well, you know, memory chips are commoditized in general. So it follows this supply and demand chain. They believe that perhaps the money has been shifting towards other type of memory products like the high bandwidth. So maybe that means the addressable market specifically for their DRAM and NAND products have been lower for that reason. Perhaps CapEx dollars are going again to the AI build or maybe just decreasing altogether for some companies.

19:50So maybe that's why. But he didn't go into detail as to why specifically. It's a great question. Why Tam is down? Perhaps it's one of the analyst questions going on now. I'm not sure. Yeah, because that would really put the pressure on Micron to actually transition to that product, which is going to ramp up next year, which is maybe by 2024. Meaningfully add to their fiscal. It's a rebuilding year. I don't know. Guy, what do you think of this? It's great to have them, Christina. See, we have this big desk. It's great not having her in that fishbowl and having her here on the desk, number one. Number two, Steve can talk about this, but, you know, NAND, average selling price declined mid-teens.

20:22It was looking for 4.5%. That's 30-ish percent of their business. That's the bad news. Here's the good news. This stock has been making higher highs and higher lows since December of last year. As long as we sort of stay above 64 and a half, we're in good shape. But do you remember, by any chance, May 21st, 2018? Oh, my God, it rained. I remember like it was yesterday. I had a sandwich that day for lunch. Yes. That was also the day. And remember this. Micron is a$50 billion market cap company. Now it's a$10 billion stock buyback. And I said on the show that night, you know what? This is a great sign.

20:56This is showing that they're no longer commoditized. They're not a cyclical company anymore. That was the, can I say the term, balls high for quite some time. So as much as we like to think they've changed, they haven't changed at all. Like tennis balls. Like tennis balls. What do you think of the chart? You know, higher highs, higher lows. Like you said, when you look at the 200-day moving average, it has turned up on both in absolute terms and also relative to the S &P 500. So I'm compelled by that. I generally prefer stocks that are in more established long-term uptrends, but it doesn't look highly risky to me.

21:29Steve Quick. The stock is up 36 % year-to-date. When you compare it to NVIDIA, up 190%, it seems like a failure. But when you look at NAND and DRAM, DRAM is responsible for 75 % of their revenues. NAND is responsible for 25 % of their revenues. If they get into the HBM3, I think that's the chip. 3E. chip, then the sky is the limit for a company that you usually boom bust for them. China gets out of the way. China was thought to be a 20 percent hit. You like this on a possible 2024 ramp of this product that may or may not be strong enough to support AI machines. I do like Micron. I think people are throwing everything out, and I do like Micron here.

22:05Christina, thank you. Thank you for joining us. Thank you for having me. There's a lot more Fast Money to come. Here's what's coming up next. Will Nike swoosh after results tomorrow? The sneaker maker lacing up to deliver those numbers. But can anything turn this stock around? The arch support coming out of the options pits next. Plus, oil pumping up. Crude hitting its highest level in more than a year. But can the commodity keep up its energy? The traders are fueling up on that one ahead. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

22:45Welcome back to Fast Money. Checkout shares of Peloton spinning higher in the after hours. The company announcing a five-year partnership with Lululemon, the athleisure brand becoming Peloton's primary apparel partner. Julie Beal, look at that pop in Peloton. Does that mean it has hope here? It probably has some hope. This is kind of a nice marriage, I think, for both of them, right? Because thank goodness Lululemon realized that their purchase of Mirror isn't really going to pan out the way they had hoped, and no one even wants to buy it. So that really tells you how weak that product is. I think Peloton has a much more compelling collection of content for them.

23:20And I think it makes sense for these two to pair up where they have a lot of weakness. I don't know if that makes Peloton investable per se, but it does give them a lot of interesting distribution through the Lululemon store network and a better brand partner that's probably pretty well aligned with their higher income consumer. So I think it's a pretty good little marriage that they put up together. Guy? I don't even know if I'm allowed to say his name. Remember Jeff Mackey back in the day? Never stopped you. You already said it. I'll tell you this, because in December of 2021, he said Peloton and Lululemon should do something.