 Good afternoon and welcome back to Trader's Edge. For a while, we've now heard the Fed throw the message that they are going to keep higher interest rates for longer, geopolitical tensions in the Middle East, and even a weakening economy is usually not great for stocks. We saw that being reflected before corporate earnings, Q3 corporate earnings on Friday, but Monday we saw a comeback, especially after banks started to perform very well. So, what next for the markets? Joining me now, Jake Wajastlik, who's the founder of Jake Research. Jake, it's great to have you on the show, my man. Hey, thank you so much for having me. Awesome. I want to start with a few things, starting with the bond market. You know, lately we've seen a lot of volatility in that asset class, particularly with the messages thrown by the Fed. Some of them, the two-year, 10-year, long-year bonds going rallying and then dropping back down. There's a lot of uncertainty and choppiness in that market. What do you see and what do you think is next in the short term? Yeah. So, you know, I think in general, there's a lot going on. You've got Middle East terminal oil that's kind of, you know, that was letting bonds catch a bid there for a second, at least on the 20-year. Now, on TLT, I'll actually go to the chart here real quick and just focus on TLT for a second. You know, there's a lot of things to consider when looking at TLT. I think a lot of people would agree that the bond market's a little broken right now. We're just in such an environment that the Fed has really not put us in for a very long time. But, you know, from the 20-year bond, just prices of bonds, I mean, we're back to where we were back in 2005, 2007. As you can see, simply by just this horizontal line or zone on the chart down to anywhere from around right about $80 up to around 85. That's your threshold for where we were back in the early 2000s up to around 2007, 2008. So, you know, from a longer term perspective over the last two decades, pretty much, you know, we're getting to historical lows here. So it's going to be very interesting to see if we can hold this area. On the shorter term chart, I think that there is some, definitely some reason to think that we've potentially bottomed here. One thing that I like to use a lot is simply just looking at a mix of lower indicators. Main thing that I use is the RSI, the Williams percent range and the MACD. And generally what I'm looking for is just a confluence of all of these indicators aligning. So on the Williams percent range, the Williams percent range is essentially a highly sensitive RSI. It's generally meant to print divergence before the RSI. So the way that I like to use it is essentially the RSI becomes oversold. And really it depends on what you're looking at, right? If we're looking at TLT right here, oversold conditions, like meaningful oversold conditions didn't even occur on TLT until around 10 or 15. Your general oversold conditions for most assets is 25 to 30. When you're getting 25 to 30 on the RSI, you're getting pretty oversold. You can see here, we didn't really bottom back in March of 21 or in October of 2022. And when I say bottom, I mean even a short term bottom for a few weeks, maybe a couple months, until we got in the 10 to 15 range. So you actually have to change the parameters on the RSI just to get a better signal of when this becomes extremely oversold. Now the thing that I look for is the combo of the RSI being oversold, the Williams percent range printing divergence, essentially when you have higher lows on the Williams percent range, shown by this upward sloping pink line. And pretty much every time we had those short term bottoms in the 20 year TLT, the bond price, you can see here that you did have this divergence forming. And then you had the RSI confirming the over, overbought, oversold, in this case, oversold. You can use the same exact combo overbought as well. In this case, we're looking for higher lows on the percent range and extreme oversold conditions on the RSI. The MACD is the last part of this, but the MACD is always a lagging indicator. So generally, you're not going to see the MACD really start curling up until you've got at least a little bit of a bottom established. For now, we do have a higher low put in place from last week. So these are all still kind of signaling that we're probably going to get some type of reversal on the weekly candle. And so excuse me, two weeks ago, so we're on the weekly candle right now. So to me, it seems like we've probably, we're either very close to a bottom or at least a short term bottom. And the main upside level that I would first look at, generally I'm not, anytime I'm looking at the market, I'm looking at increments, right? So I'm not really looking at a target that's 20% above. If I've got an upside target that initially we'd have to get through it, maybe five or 10% above. So gaps are a big part of how I look at the markets. Uh, there is a gap on TLT right now and I'll zoom in here. And that's kind of the main thing I'm watching on the weekly chart here is this gap. And you'll see here that we, uh, we would technically fill that gap up here right at 90 67. So right now we're 85 and that would give us maybe a little bit over a 5% move up. That would be the first level I'm watching. And then from there we'd, we'd see if we can get any more upside, but as long as we hold a higher low here on TLT, I think, I think we've probably bottomed on bonds for now. Now TNX is also something that I'm watching. This is the 10 year note. This is kind of obviously your benchmark for a lot of this. And one thing I'd put here on, uh, the monthly chart is that we're getting close to a pretty big resistance zone that we saw back in 2007 and 2000, the beginning, or the middle of 2007 and then all the way back actually until, uh, 2006 that ranges from around 5. Uh, around 506 to 530. Uh, so, you know, that technically is still about 10 to 15% higher than the, for rates that we could possibly get to. But I think there's a lot of, there's a lot of variables in play that are really just driving this, but at the end of the day, that's why technicals are great. You know, technicals just keep you honest. You don't have to think about what if this, what if that, you really just go with what the chart is showing you versus just, uh, just worrying about every single variable out there. Because if you do that, you're never going to be able to make a decision or come up with any type of thesis. Got it. Yeah, but absolutely the correlation that we see between the bond market, the strength of the dollar and then the weakness of the equity market, we'll go into that in a bit, but I just want to take a step back and go back into corporate earnings, that very positive outlook that we saw from the banks. And then people are analysts are saying, we expect this to continue given the circumstances as well. Uh, big, two big names this week is Netflix and Tesla. Let's look into them. I mean, Tesla looks a little bit of like, uh, with potential higher highs, higher lows, uh, while Netflix has a bit of a dangerous price action. Is that what you see or what do you predict next? Yeah. So I would say for Tesla, I mean, we're really in just a very kind of coiled symmetrical triangle here. So, you know, symmetrical triangles are generally pretty neutral until you get to move. And of course we're right at the apex of the symmetrical triangle, uh, as we go into earnings on, on Wednesday after the market closes. So, you know, I, this is really, for me, the way that I'm looking at it is, yes, we've got higher lows, we've got higher highs, at least over the last, you know, year, you've got definitely lower highs here over the last, uh, four or five months. But for the, for the time being, we still have these higher lows in place, symmetrical triangles forming. I think there's actually kind of a bit of bad news already priced into Tesla. A lot of people are talking about deliveries and all of that. And, and so the more that the market's anticipating, you know, that could help price in any bad news that we, we're already having. So for, for Tesla, I would definitely say that, you know, the chart is relatively neutral right now. I think it would be a little premature to say, do we go up? Do we go down? Uh, if the market can continue to get some strength here as it, as it seems like it is, I think Tesla would do well in a, in a market that, uh, continues to move higher because it's just a high beta name. Uh, it's extremely liquid and people like to play it. And so if we can get a move up in the broad markets, I think Tesla would, uh, would perform pretty well here, especially if there's any bad news already baked into the price. It's always hard though to consider what is baked in, what's not. Uh, the way that sometimes I consider what's baked in and what's not is how often I hear it on social media. You know, if I hear a lot of people commenting on some of my posts about, you know, oh, Tesla's going to have bad numbers coming out. You know, that generally tells me that a lot of people are anticipating bad news. And, you know, if a lot of people are already anticipating it, if the markets are truly efficient, then you would expect that news already kind of baked into the price. Now, Netflix is definitely one that I think is a little harder to gauge here, something that I was focused on over the last couple of days. Uh, one is just the fact that we did break down last week on Friday through this, this SR flip zone. So, uh, SR flip is essentially just an area where previous resistance flips to support. Uh, this area did flip to support over the last couple of weeks. And then last week we finally broke through it. Uh, now this is where I really use the anchored view apps and that type of thing to get a general idea of where I think we could go. The June, 2022 pivot here is kind of my main VWAP, my original VWAP here. And this is something that Brian Shannon teaches, uh, really using something called a handoff view app. So essentially creating another VWAP from the last candle to test that original view app. So the handoff is essentially the last candle to test the original view app. You can see here that candle is from, uh, October of 2022. And if we were to continue down after this breakdown, this area ranges anywhere from around 335 up to around 342. Interestingly enough, if you look at the daily candle and we go to Netflix, you'll see here that, you know, we do have a quite a wide range of where we could go with earnings. I think the main thresholds that you'd want to focus on here are the pivot VWAP from the, uh, the September 11th pivot. So essentially I'm just creating this VWAP and I'm creating a zone, right? So the original VWAP is at the actual VWAP is at 386.88. However, you can see here that there's a few times here that price did not get exactly to the VWAP, but it did bounce right below it. So I usually like to add, uh, an offset. So in this case, I'm just creating another VWAP. In this case, this is a 1% offset and that offset is really just a function of these wicks that didn't get exactly to the, get exactly to the anchored VWAP, but it did, it did reverse kind of right within that 1% area. So if I were to just identify some boundaries where I think price could probably go after earnings, I would say one, uh, this VWAP zone above ranging anywhere from around 384 to 386, 387. And then on the downside, you do have a gap below that fills at 341.38. And that's actually right in line with what we just went over here with this VWAP zone from the October 2022 pivot. So downside, I would say 335 to 342. If we do get a surprise move to the upside, I think that, that pivot VWAP from the, the September 11th reversal, uh, from 384 to 387 would definitely be an area to watch to the upside. And if you're playing options, you know, that's, you can always use these as kind of a thresholds for any type of spread you want to do or, or anything like that. So it is good to know, you know, what is the potential upside? What's the potential downside? One thing I'll mention here, even on the daily chart is you do have a little bit of a bear flag forming here over the last three days from Friday, Monday and Tuesday, where we're doing this on the 18th of, uh, sorry, 17th of October. But when you're going into earnings, you know, you can have a perfect technical setup that gets blown out of the water. So right now we do have a bear flag on Netflix, but you know, that it can't be taken as strongly as if we weren't going into such a binary event like, like we are this week. Absolutely. I like what you said. You can set up yourself technically and something comes that comes out of the blue. And we know the impact of these stocks and their weightings on a major indices. Let's move into that one. I want to start with the SMP, or specifically even the Nasdaq and Dow Jones. On Friday, we saw a lot of weakness just right before corporate earnings. That came in positive. We just spoke about that one. And today, and even yesterday, we saw like the markets is trying to sort itself out and almost continue that current uptrend across all the major indices, but starting with the S&P 500, do you see it rally up to the 40, 400, even 40, 600 in the next few days? Or what's next? Yep. So on, I'll go over spy real quick. And then I'll go to SPX quickly after pretty much the same thing on both. You do have gaps above. Interestingly enough, the September 14th pivot zone has acted as a really nice area of support over the last several days. That's also paired with this previous support zone that we saw way back in the original pivot was in August. And then the other pivot here that creates this zone was in June. So you can see here that these two areas, these two support zones, one, the pivot from June being the lower part of this zone, and then the pivot, the very bottom of this candle from August creates this zone from around 431, 25 to 433. So until we break below the 431, 25 on the daily chart, so I generally am looking at the markets and more of a daily, weekly, monthly timeframe. So unless we actually get a daily closed below 431, 25 intraday to me, it doesn't matter. And as you can see on Friday, it didn't matter either. We actually broke below, but we still closed above both the VWAP zone and this horizontal zone. 431, 25 is definitely the line in the sand for a daily close for me. If we break down below that, I think we could definitely see lower, maybe the retest of the 425, 426 area. But the main upside level I'm watching is 438, 43 on spy. That's where your gap fills. If we go to SPX, pretty similar here. The main thing that I would mention is this VWAP from the September 1st pivot has been resistance for the last week. And we're finally starting to break above it today. However, the day is not over. That's something you definitely have to consider is when you are looking at these daily candle validations or invalidations or confirmations, intraday is great. You can get an idea of if we're potentially going to break above this area, but overall, until we close above this area, possibly today, then it's not going to trigger for me this gap that fills at 440221 until we get a daily close. Now, sometimes you can just get an absolute huge move to the upside and just break through all these levels and hit them before the daily candle closes. And then sometimes you'll miss an opportunity if you are waiting for that daily candle to close. But a lot of the time you can get so whipsawed, especially in this type of market, it is sometimes better to wait until the last 30 minutes of the day to see, okay, are we likely going to break above or close above this level? And then, you know, going into the last 30 minutes of trading, you can start making some moves into the day ahead. But yeah, I think the gap at 440221 on SPX is definitely what you want to keep an eye on. A lot of the time, I look at these gaps as one targets, but two potential levels of resistance. So if we do break above the top of this gap at 440221, I think we could definitely retest the kind of pivot here from early September, which ranges from around 4430 all the way up to around 4445. So that would be my next target above if we close above the top of that gap at 440221. For NASDAQ, I do have just the cues as a proxy here. I didn't write up a chart on the NASDAQ, but you can definitely use this as a proxy to get an idea of, you know, overall what the index looks like as well. Right now, we're kind of at this pretty strong level of confluence. You have this previous pivot that we saw from September 7th. Interestingly enough, the cues are definitely front-running this market because we just talked about SPY and SPX getting up to this pivot if we get above the gap. Well, the cues have already tested this area and they're already pulling back from this zone, which is active as resistance. But you can see here as well, this diagonal zone is also acting as resistance. So you have a confluence of multiple areas acting as resistance. When you have a confluence zone, that's important because you have multiple different market participants all seeing something similar. You have horizontal traders looking at horizontal zones that are potential resistance here. You have diagonal zone traders who are also seeing potential resistance here above. And so until we can really break above the top of this diagonal resistance zone currently, and remember anytime you're looking at a diagonal trend line, diagonal zone, it's a function of the slope, right? So like each day, going into tomorrow, the top of this zone is currently right around 373.50. Now, if it takes a week or two to test this zone, then that trend zone, the top of that trend zone is going to be around 372.75. So, you know, you have to consider that these trend zones are, depending on the slope, these levels above do change. That's why I think a lot of people do prefer horizontal levels because they're static. They're not changing over time like a trend zone or a trend line. But if you're familiar with how the slope works, you can just go day by day or candle by candle and just get a general idea and just move your mouse to the top of the screen to see if we're near the top of that zone. And as I mentioned, it's going to change every day. Going into tomorrow, that would be right around 373.75. And then that continues to incrementally slowly go lower over the next several candles as the downsloping trend zone is. Now, same with Dow Jones, I'm mainly focusing on XLI. That's kind of the main thing I focus on here for industrials. And one thing I'd mentioned here for industrials is same thing, right? This is a great case study on what I was just discussing. You did have a gap fill last week at this gap from the 20th to the 21st, this gap down. And you can see this area is active resistance multiple times here. So, if we can get above this gap and close above it at 103.78, it's already filled, but it still acts as an important zone. Then that's something to consider for a potentially bigger move to the upside. Now, one thing as well, if you look at the pivot VWAP here from early September, we are back above this VWAP. So, the problem that I have sometimes with VWAPs, and this is why I like to use these offsets, if you get a 20, 30 cent close below VWAP and it technically invalidates, you could potentially reverse the next day. So, giving yourself some flexibility around these VWAP areas is really important because a lot of the time price is never going to respect an exact price level perfectly. That's just not how the markets work. And if something is tagged perfectly and reverses after, it's generally just a coincidence. Now, if we look at the weekly chart, this is where things look a lot better for XLI. We're simply just bouncing off this September 22 reversal. And this is an area where I do have that VWAP zone here. So, you can see here, you had a pretty solid setup, not only with price respecting this VWAP zone with the hammer here, but if you look here, you also had the Williams percent range signaling oversold conditions, which was a really a crucial reversal signal in the past. So, if you look here, anytime you see an orange box pretty much connected with the orange box related to price, you'll see here that anytime that the Williams percent range got below this threshold of negative 70, sorry, negative 80, then that was when you really wanted to get an idea. Now, indicators are a lot more helpful when you have some type of important price level to match it with, right? Just having an oversold Williams percent range can give you false signals all the time. But when you have an oversold Williams percent range at an important reversal point like we saw back in March and May and July and June of 2023, this is a very important area. The market's been made multiple times at this VWAP zone. So, right here with this VWAP zone being tested, a nice hammer candle forming and then the Williams percent range, this was a very high probability setup for a continuation up. Now, going into the future, we do have this diagonal trend zone that will be pretty important to get through here. And that is currently really right around 105 up to around 106. And as I mentioned, that's just going into the next week. If this takes a couple weeks to continue up, this zone could technically change, but this isn't a very steep sloping line. So, you're not going to have the big differences like you would if you had a much steeper slope. Generally, if you've got a relatively gradual slope of a trend line, these zones are going to, these price levels above as potential resistance aren't going to change that much. And so, in this case, even if we went into the end of October, this area still ranges from around 104.75 all the way up to around 106. And then each week, you probably decrease each one of those by 25 cents. So, you know, next week, or for the example this week, we're right around 106.25 to around 105.25. If we move over to next week, that goes down to around 105 to around 106. So, each week, you probably give yourself about 25 percent, sorry, 25 cents incremental downside compared to the previous week just due to the sloping nature of these lines. Got it. Jake, I know you're a big airline stock guy. So, American Airlines about reporting earnings this week. What do you see there? What do you want to talk about it? Yeah. So, airlines are very interesting. They generally move a lot more than you'd expect on both sides. So, for example, when you're moving up, you generally go higher than what most people expect. But when you're going down, you generally get a bigger move down than what most people expect. And that's exactly what we've seen over the last, really over the last, I'd say, five, six weeks. I mean, this is, yes, last week was the sixth red weekly close that printed. And finally, interestingly enough, this is kind of the ideal setup that I would like to see into earnings. Because when you have such a big move down like this, there's a lot of bad news priced in. And so, what I'm looking at here is essentially, you know, this, this Williams percent range has been oversold for an extremely long amount of time. We're finally starting to get a green candle forming here. It's only Tuesday. So we can't really do too much with that candle yet. But I can tell you one thing as long as earnings aren't just a massive disaster. I really think you're going to see most airlines probably bottomed here. I know I went over a webinar a couple weeks ago and said that airlines probably were likely to bottom within the next week. Of course, of course, the Middle Eastern issues arise and airlines capitulated that Monday after that happened. And so I, you know, I think I could have been a couple of days off, but I do think we're very close to a reversal here in airlines. The main thing I think a lot of people want to see is for oil to start dropping. I mean, oil is a huge expense, a part of airlines in general, a part of their, their expense kind of a structure. So if we can see oil finally start to pull back a little bit, which is hard to think about when you've got the Middle East crisis going on. But if we do get a pullback in oil and if earnings are just nowhere near as bad as what price action's been the last pretty much month and a half. Now I think we're pretty close to a bottom here on United. There is a gap above. That would be my first upside target for United that gap fills, I think right around 44, 50 or so. So in this case, yeah, oh, I'm sorry, 47, 33. The VWAP, the gap down VWAP is around 42, 27 right now. So if we do get a, if we do get to move up, the first thing that we'd want to see is a break in close back above this previous support zone. So notice here that we did close below this $40, $43 to 41, 50 zone. So now we're essentially just retesting that zone after breaking down. So that could be just a simple SR flip support turning to resistance or resistance turning to support. In this case, the previous support would turn into potential resistance up to around 41, 50. But if we did get some type of nice earnings move this afternoon into tomorrow, the first main level that you'd want to watch here is around 42, 45, excuse me, 42, 25, which is essentially just the VWAP from the gap down that we saw on September 13th. And this is, this is something that Brian Shannon taught me. You definitely want to anchor VWAPs from gap downs, important reversals, important earnings events. And so, so yeah, the, the first area that I definitely watch is, and I would just give this a zone, right? I would call it 4, 42, 25 and 42, 50 on potential upside. Now, if we break above that, as I mentioned, you do have a longer term potential target of 47, 33. A lot of the time, markets like to gravitate towards the area of areas of very low liquidity or high liquidity. So generally they're just, they're gravitating towards these discrepancies in liquidity in the market. The gaps are generally an area where you don't have a ton of liquidity because you, you gapped down or you gapped up. So longer term, my target on United Airlines would be 47, 33. That's that gap above. And in the very shorter term, the, the VWAP, the gap down D-WAP from 42, 25 to 42, 50.