The Gilmo Report

November 23, 2022

November 23, 2022 6:59 pm ET

Once upon a time there were five stocks that I dubbed the S&P Five back in 2020-2021. Back then, these five names, Apple (AAPL), (AMZN), Alphabet (GOOG), Meta Platforms (META), formerly Facebook (FB), and Microsoft (MSFT) comprised a huge chunk of the S&P 500 and were responsible for much of its performance heading into year-end 2021.

Later, after META topped and dropped out of the group, the remaining four names, along with their NASDAQ cohorts Nvidia (NVDA) and Tesla (TSLA) became known as the NASDAQ Six. At that time those six stocks comprised 49%, not quite half, of the total weighting of the NASDAQ 100 Index.

I also referred to them and the former S&P Five as alt-currency stocks since they essentially functioned as alternative currencies where truckloads of QE liquidity were dumped. While most of these have finally rallied off lows in November, they were stilling off even as the Dow had bottomed in mid-October.



In late 2022 those names have been decidedly out of favor as money has come out of these higher-PE names and into the Dow 30. These are your new alt-currency stocks amid hopes of an imminent Fed pivot. Their status as relatively safer, established, long-time business concerns is their main attraction; fundamentals are of secondary concern, at best.

Of the 30 Dow names, eight have O’Neil EPS ratings of 80 or better, but in the most recently reported quarter only four of them have posted earnings growth higher than 15%. Nine of these 30 stocks posted earnings growth that was in the single-digits in the most recent reported quarter, while 13 reported negative earnings growth. The worst quarter-over-quarter earnings declines were seen in Dow, Inc. (DOW) at -60%, Intel (INTC) at -59%, and Goldman Sachs (GS) at -45%.

One name in the group chart, Boeing (BA) reported a loss of -$6.18. It is expected to lose $7.83 this year but to make $3.61 in 2023. That means BA is trading at 48 times 2023 earnings estimates, a decent PE-expansion. Trying to make a fundamental argument for buying Dow stocks like this is moot; it is all about money coming out of high-PE names looking for a home, and underplayed Dow stocks are the ticket.



When money aggressively rotates into Dow stocks either as alternative currencies or a safer, underplayed haven, then the Dow Jones Industrials becomes your leading index. This is old news as far as we’re concerned given the extent of the current Dow rally off the October lows, but it does give one a strong idea of what the current market rally is really all about.

Today’s release of the most recent Fed minutes sent the Dow to within 19.29 points of its mid-August bear market rally peak at 34,281.36. It fell short by the close, printing 34,195.11 at the bell in a much less volatile version of what we see after an actual Fed policy announcement.



As the Dow tests its mid-summer double-top highs the NASDAQ Composite lags considerably. While the index has recovered above its 50-dma it remains far behind and well below its own 200-day moving average. Overall, it remains in a well-defined downtrend channel extending back to December 2021.

You can see three obvious major waves down, but so far, the current rebound from this latest third wave down has not exceeded the rebounds seen after the prior two. The current rebound is still developing, however, and as far as I can see is not wholly resolved yet.



The dollar continues to fall in line with the Fed pivot theory as its proxy, the Invesco US Dollar Index Bullish (UUP) ETF breaks to the downside again. As I noted over the weekend, a test of the 200-day moving average looks to be in the cards but for now it remains in a short bear flag, above last week’s lows.



The 10-Year Treasury Yield ($TNX) is also pulling back to last week’s lows. It remains below the 50-day moving average but far above the 200-day line, ending today at 3.706%, over 60 bips below its 4.333% peak in October. For now, as with the dollar, the near-term trend falls in line with the aforementioned Fed pivot theory.



As interest rates and the dollar remain in short bear flags on their daily chart, precious metals are building small bull flags. The Sprott Physical Gold Trust (PHYS) pulled in for most of last week before bottoming on Monday and heading back up towards the 10-dma in what I see as an undefined chart position.

The Sprott Physical Silver Trust (PSLV) continues to lead, albeit only slightly, as it rebounded off 20-dema support on Monday and again cleared the 10-dma on higher volume. The 200-day moving average looms as overhead resistance, so if the Fed pivot theory holds up then I would look for this to eventually clear the 200-day line.



Gold miners AngloGold Ashanti (AU) and Gold Fields (GFI) give me the opportunity to explain the differences in the moving averages compared to other charting services like MarketSmith and HGS Investor Software. calculates their moving averages by also adjusting for ex-dividend periods, stock-splits, etc., which results in different values for their moving averages.

However, if one inserts an underscore (_) before the symbol the chart will show the standard moving average calculation. I personally like the different viewpoint given by the moving averages since it may tell me something I’m not getting on other charts. Comparing the differences in the AU and GFI charts shows how this can work.

On the top I show the two charts using the adjusted moving average. It shows them both to be holding support at the 200-dma last Friday. On the bottom I show charts using the standard calculation for the moving averages and this shows both stocks trading below their 200-day moving averages.

In the final analysis, the version was showing me what turned out to be valid 200-dma support as both stocks pushed off the line yesterday. AU did so with much more force as it traded a big-volume pocket pivot off the 200-dma on the top chart and a big-volume pocket pivot through the 200-dma on the bottom standard calculation chart.

We can see that AU pulled right into the 10-day moving averages this morning, which could have been used as an add point to anything bought yesterday on the pocket pivot. At the same time, it also posted a second pocket pivot off the 10-day line today and is now extended.
GFI is edging further above its 200-dma, but volume remains light, so I would watch for this to potentially consolidated along the line. Constructive pullbacks to the line would offer the best entries using the 200-dma as a selling guide.



Pan-American Silver (PAAS) was obviously offended by my decision to not include its chart in my last report. The stock came back to life yesterday as it posted a five-day pocket pivot at its 10-dma and through its 20-dema. It then cleared the 50-day moving average today on lighter volume, so we can watch to see if any buyable pullbacks come into play along the 50-day line.

First Majestic Silver (AG) and MAG Silver (MAG) were both buyable at their 20-demas on Monday, while Compania Minas Buenaventura (BVN) was buyable at its 200-day moving average yesterday. In my view these are all near-term extended with 200-dma support in play for AG and BVN and 20-dema the more opportunistic support level for MAG on any pullbacks from here.



As I’ve written many times before, I am advocate focusing on a smaller, select group of stocks from which one can choose daily targets that can get then go on daily watch lists. My reports provide a foundation for what I believe is a reasonable group of candidates from which to choose in the current market environment, long or short.

Proceeding in that spirit, we see that cyber-security names CrowdStrike (CRWD), CyberArk Software (CYBR) and Fortinet (FTNT) and Palo Alto Networks (PANW) all look like possible shorts as they push into moving average resistance on light volume.

CRWD is pushing into potential moving average resistance at its 20-dema while CYBR is doing the same thing at its 10-day moving average. Volume is light on the rallies. If they can get past that then CRWD is looking at moving average resistance next at the 50-day line and CYBR at its prior double-top highs in the $160 area.

FTNT is holding support at its 50-dma but has now rallied into possible resistance at its 10-dma. PANW has stalled along the 200-dma where it has been shortable. In each case the referenced moving average would also serve as a covering guide.



Semiconductors in my small list of names on the group chart below have all been rallying as of late. Applied Materials (AMAT), Advanced Micro Devices (AMD), Intel (INTC), KLA Corp. (KLAC), Microchip Technology (MCHP), Qualcomm (QCOM), Qorvo (QRVO), Skyworks Solutions (SWKS), and Texas Instruments (TXN) are all forming little double-top type patterns with only AVGO being a clear short at the 200-day line today.

As I noted in yesterday’s video report, the patterns looked like they wanted to move higher at that time, and that it what we saw today. The question is whether these start to become potential short-sale targets as they into higher moving average or price resistance.



Perhaps the daily chart of the VanEck Semiconductor ETF (SMH) provides a clue here. Today we saw the ETF stall and reverse at its 200-day moving average where it could have been treated as a potential short-sale entry. If one chose to test it on the short side, then the Direxion Daily Semiconductor Bear 3X (SOXS) offers a very useful vehicle for the trade, going long the SOXS as the SMH reversed at moving average resistance.



The Direxion Daily Semiconductor Bear 3X (SOXS) five-minute 620-chart below shows that a bearish MACD cross occurred in this ETF at the same time that the VanEck Semiconductor ETF (SMH), above, reversed at its 200-day moving average. At that point one could have taken a long entry in the SOXS.

This is a typical way that I will the 620-chart as a tool to time an entry in the SOXS while monitoring what is going on with the daily chart of the SMH. We can therefore see how the sell signal on the SOXS 620-chart lined up very nicely with 200-dma resistance on the SMY daily chart.



Lam Research (LRCX) offered a single-stock semiconductor short-sale entry at its 200-day moving average. That set-up was discussed in the weekend report after the stock had reversed along the 200-dma last Friday. Today LRCX gave shorts another shot at the line as it reversed right at the 10-dma for the first short entry and just above the 200-day before heading lower to trigger a short-sale entry at the 200-dma.



Wolfspeed (WOLF) is another single-stock semiconductor and one of our POD pals that worked out beautifully when it blew apart after earnings in late October. As I noted over the weekend the stock has been rallying since bottoming in early November and has made it as far as the 200-day moving average.

This could play out as shortable resistance here using the 200-day line as a tight covering guide. That said, WOLF is also building a short bull flag, so that must be respected as it holds near-term support along the 20-dema. If it can clear the 200-day line, then that could trigger a long entry using the line as a selling guide and potential flip-point back short if it should fail.



Meanwhile, here come the clouds, (BILL), (CRM), CrowdStrike (CRWD), DataDog (DDOG), DocuSign (DOCU), Cloudflare (NET), Okta (OKTA), Snowflake (SNOW), and Workday (WDAY). These were all shorts last week before bottoming on Monday and yesterday. Now they are mostly bouncing up into potential near-term moving average resistance where they could become short-sale targets again.
BILL has pushed just past its 20-dema so can be watched for reversals at the line. CRM has rallied just past its 50-dma but ran into resistance at the 10-dma today. Watch this for any reversal back below the 50-day line as a possible short-sale entry trigger.

CRWD was discussed above as a possible short-sale entry on the rally into the 20-dema. DDOG is still heading up towards its 10-dma and 20-dema while DOCU has pushed into potentially shortable resistance at its 20-dema. NET remains well below moving average resistance at its 10-dma and 20-dema.

OKTA closed today just below its 20-dema so is in a short-sale entry position using the 20-dema as a covering guide. SNOW still needs to rally up to at least its 10-day line before we can look to short this two-day rally. WDAY rounds out the group with a shortable rally into its 50-dma today using the line as a covering guide.



Industrials metals names that I’m focused on, aluminum producer Alcoa (AA), copper producer Freeport McMoRan (FCX) and steel producers Nucor Corp. (NUE) and Steel Dynamics (STLD) all offered opportunistic long entries at near-term moving average support on Monday. AA and FCX were buyable along their 20-demas on Monday while NUE and STLD were buyable along their 10-day lines at the same times.

All four has since rallied slightly with AA and FCX just moving back up to the highs of last week. NUE and STLA, however, and broken out to new highs, so technical both are within buying range of the breakouts. I personally do not favor this as both were much more efficiently bought at 10-dma support on Monday, which is something we have been watching per my recent reports.



Uranium producers Cameco (CCJ) and Energy Fuels (UUUU), which is also partially a rare earth metals play, are lumbering around the lows of their current patterns. CCJ is back above its 10-dma and 20-dema, but volume is light and therefore nondescript.

CCJ’s smaller cousin UUUU is a little more interesting as it pulls into its 50-day moving average with volume declining today to -49.8% below average. That creates some contrarian voodoo action where UUUU may be buyable using the 50-day line as a tight selling guide if it fails to hold support at the moving average.


Big-stock fertilizers suddenly jacked yesterday after working out well as short-sale targets last week. They hate ‘em one week, love ‘em the next. The current rallies may have brought these into shortable resistance but there is also actionable support to be found in at least two of these.

For example, CF Industries (CF) slashed back above the 50-dma on Monday and continued right into potential price resistance yesterday before backing down and finding support at the 10-dma/20-dema confluence today. Volume decline, so my initial reaction would be to view that pullback as buyable using the two moving averages as selling guides.

Mosaic (MOS) is quite a bit different as its simply runs into potentially shortable resistance at the confluence of its 10-dma, 20-dema, and 50-dma One then uses the moving averages as covering guides.

Nutrien (NTR) cleared its 10-dma and 20-dema yesterday on a five-day pocket pivot. Today it backed down as volume declined and held support at the two moving averages. Therefore, it was a long entry at the moving averages which now serve as a covering guide.

The trick here is that the fertilizers will tend to move together very closely, not unlike many other groups in this market. You will notice that while their price movement this week more or less correlates closely, their chart positions and set-ups do not. Perhaps if we see CF break out to higher highs and MOS and NTR clear their 50-day lines something more substantial will develop on the upside for this group in any continuing Fed pivot rally.



Lithiums were also nice short-sale trades last week as they broke down hard, and so far, this week are all engaged in tepid bounces.
After breakout failures in Albemarle (ALB) and Piedmont Lithium (PLL) both are running into potential moving average resistance. ALB still holds above the 50-dma but stalled today at its 20-dema where it was shortable with the idea that it will soon trigger another short-sale entry on any reversal back below the 50-day line.

PLL has rallied into its 10-dma and 20-dema and is also sitting just above the 50-day line. It can therefore be treated in the exact same manner as ALB.

Lithium Americas (LAC) is running into resistance at tits 200-dma which can be used as short-sale entry position using the 200-day line as a covering guide. Note that there is also support along the lower 20-dema and 50-dma, so I would want to see these support levels quickly broken from here.

Livent Corp. (LTHM) posted an undercut & rally (U&R) cover ping last Thursday after triggering short-sale entries along the 10-dma, 20-dema and 50-dma two Tuesdays ago. The rally is now stalling short of the 20-dema, which is what I would look for as an optimal short-sale entry point if the stock can keep rallying.



The former leader, Sigma Lithium (SGML) triggered a late-stage failed-base (LSFB) short-sale set-up when it broke the 20-dema last week. That eventually sent the stock through the 50-day line. Today it regained the 50-day line in a move that is a bit like a slow-motion moving average U&R (MAU&R) and could be played that way using the 50-dma as a tight selling guide.

At the same time, SGML is running into its slightly higher 10-dma and 20-dema which could present near-term moving average resistance. In that case, I would look for any reversal back below the 50-day line as a possible short-sale entry trigger unless I were feeling lucky enough to short it here and then use the 10-dma/20-dema as covering guides.



With the NASDAQ Composite lagging badly as the Dow makes higher highs and tests the mid-August bear market rally peak, I wonder whether money could rotate back into the big-stock NASDAQ names Apple (AAPL), (AMZN), Alphabet (GOOG) and Microsoft (MSFT). These were all hit hard in late October as the Dow rallied sharply off its own mid-October lows but have since played a small game of catch-up in November.

So far, what I can say is that AAPL has proven to be buyable along 50-day moving average support, as has MSFT. AMZN remains below its 10-dma after working as a short at the 20-dema last week. GOOG shook out at its 20-dema yesterday for an MAU&R long entry at the 20-dema and then the 50-dma today.

AAPL, GOOG, and MSFT are also pushing up towards price highs from last week where they could encounter price resistance. If they can decisively push to higher highs, then the argument for a rotation back into big-tech as Dow names take a break gains some credence and so can be watched for.



Netflix (NFLX) and Tesla (TSLA) are rallying with the market after both worked as short-sale targets last week. NFLX did so as a double-top along the prior late October high at 305.63 last Wednesday and TSLA at its 10-dma last Tuesday.

NFLX would need to retest the 305.63 high to come back into short-sale range while TSLA is potentially a short here just below the 10-day moving average which then serves as a tight covering guide. Given how extended it became on the downside and today’s buying volume I might step back a bit and look for a more opportunistic short entry at the higher 20-dema, at least, however.



In noted in yesterday’s video report that both Sunrun (RUN) and SunPower (SPWR) looked buyable as they hung tight along their 10-day moving averages. That worked for more upside today, but these are now a bit extended for my tastes, at least on the long side. I would prefer to see more opportunistic pullbacks to the 20-demas which are now pushing above the 50-day moving averages.

Volume has been light on these short rallies, giving the patterns a wedging look which I would tend to think needs to be corrected with a nice pullback. Whether I would want to buy that pullback or use it as a short-sale entry trigger depends on what it looks like when it happens, so I’ll be ready to play them as they lie.



Solar power storage cousins Enphase (ENPH) and SolarEdge (SEDG) were pushing to new or higher highs yesterday but reversed today. While SEDG is extended and above its 10-dma ENPH keeps reversing along the highs of its current base.

There are actually three highs here that could be used as double-top or price-resistance types of short-sale entries. You have the 316.87 high of November 1st, the 319.49 high of November 11th, and the 322.65 high of last Friday. ENPH closed today at 315.78, below all three, so one could have treated this as double-top type of short-sale entry using any of those three prior highs as covering guides.



First Solar (FSLR) is again at fresh 52-week highs as it also posts 11-year highs. As the stock continues to trudge higher volume continues to dry up. Thus, I would expect this wedging rally to have to correct at some point sooner than later and I would view the 20-dema as potential maximum downside support from here.



With interest rates and the dollar down, major market indexes are rallying during this short Thanksgiving Holiday trading week as the market pushes the Fed pivot theme. So far, the most concrete way to play it from my perspective has been via the precious metals space, but that is now getting extended.

Meanwhile, beaten-down techs have raised their heads, particularly among cyber-security and cloud names, along with last week’s short-sale targets in groups like the lithiums, and it is possible that some of these are pushing into potentially shortable moving average resistance. This brings us back to the basic idea that a 360-degree approach is still relevant here as the market remains somewhat multifurcated on a day-to-day basis. Take it from there.

Happy Thanksgiving!

Gil Morales
CEO and Principal, Gil Morales & Company, LLC
Managing Director and Principal, MoKa Investors, LLC
Managing Director and Principal, Virtue of Selfish Investing, LLC


Explanatory Notes
Note #1 – Moving Averages: When I use the term “20-day moving average,” “20-day line,” or “20-dema” I am referring to the 20-day exponential moving average. I use four primary moving averages on my daily charts: a 10-day simple (the magenta line), 20-day exponential (the green line), 50-day simple (the blue line) and 200-day simple moving average (the red line). On rare occasions, I will also employ a 65-day exponential moving average (black line). In all cases I will mostly use the shorthand version of “10-dma,” “50-dma,” etc.

Note #2 – U&R Set-ups: A U&R, or undercut & rally, is a long entry signal that occurs when a stock undercuts (moves below) a prior meaningful low in its chart pattern and rallies back above that low. The precise entry occurs at the prior low, which then becomes your selling guide. There are no other unique requirements for a U&R other than the price action. It is like Wyckoff’s Spring. A MAU&R, or a moving average undercut & rally, is simply a shakeout at a moving average where your entry point occurs at the moving average as the stock is coming up through the line. This then becomes your selling guide. You can run things tight by using the actual price levels as stops or allow for 1-3% of further downside (otherwise known as downside porosity) before being stopped out.

Note #3: The “620-Chart” is a five-minute intraday chart with an orange six-period exponential moving average and a blue 20-period exponential moving average. The MACD settings are (6,20,9,C,false,true) on eSignal. Consult your own data provider for details on how to create a five-minute intraday chart with these settings.