Notes from Chart Guys video: Bubble or BTFD?
Summary of Dan’s (The Charting Man) market evaluation. All credit goes to The Chart Guys for the original analysis and insights.
Main Thesis: BTFD (Buy The Dip)
Yes, sellers created notable damage by breaking below key daily demand and creating overhead supply near all-time highs.
But the technical damage is not as severe as it appears.
Why? We’re seeing sector rotation rather than broad-based selling, and extreme fear readings typically signal buying opportunities, not major tops.
Key Sentiment Indicators
Fear & Greed Index: Extreme Fear
After the recent selling, we’re now in extreme fear.
Here’s the critical point: Major tops are typically set during greed/extreme greed, NOT fear.
What this means:
- Extreme fear historically presents BTFD opportunities
- Current fear levels suggest this is not a major market top
- When everyone’s scared, that’s usually when you should be buying
Sector Rotation: The Critical Differentiator
This is not “run for the doors” selling. Here’s why:
Tech (XLK): Dragging markets down (-3% decline, biggest since March)
Healthcare (XLV): Posted gains, affirming breakout over 2022 highs
Financials (XLF): Holding near highs
Analysis: When tech, healthcare, and financials (which make up ~50% of S&P) aren’t all moving down together, it’s not true panic selling.
This is rotation, not capitulation.
If all sectors were crashing together, that would be a different story. But we’re seeing money rotate out of tech into healthcare and financials holding steady.
Major Indices Analysis
SPY (S&P 500)
Current situation: Broke below prior all-time high demand structure, but from weekly timeframe this is just balance over point of control
Critical support: 573.95 (point of control) - Need to get back over to reaffirm breakout
Resistance levels:
- First: 679.24
- Then: 683.36 (to affirm all-time high supply as demand for new highs)
Outlook: Constructive if buyers can reclaim 573.95
QQQ (Nasdaq-100)
Damage assessment: 3% decline (biggest since March), but didn’t even touch point of control of larger structure
Critical levels:
- 613.18 - need to reclaim to confirm breakout
- 624.03 - negate breakdown
- 631.88 - affirm as demand
- 609.47 (value area high) - support
Outlook: Don’t expect V-shaped recovery. Any balance over 613.18 would be fine. Even holding value area high (609.47) is constructive as it means value is still building higher.
IWM (Russell 2000)
Pattern: Another “drop and pop” at the lows of prior all-time high structure (240.88)
Resistance: 244.98 (prior all-time high)
Assessment: All the chop is still constructive
Outlook: Holding over 240.88 point of control affirms demand and keeps buyers positioned well for new highs.
Daily Charts Summary
Technically bearish with lower highs and lower lows, BUT so far all that’s happened is a back-test of value area highs.
From a weekly perspective, damage is not that bad.
NVDA (Nvidia): The AI Bubble Question
Despite AI bubble concerns, this is different from dot-com. Here’s why:
Dot-com had: Companies with no revenues, pure speculation, “eyeballs” as a metric
Today we have:
- Actual revenues from companies like NVDA and hyperscalers
- War chests of cash hoarded overseas (to avoid taxation)
- Ability to deploy capital over long periods to develop tech
- Market awareness - everyone watching for a bubble
Key point: When everybody and their mom is looking out for a bubble, it’s probably not the top.
Technical levels:
- Back-testing big block of demand
- Conservative zone preferred (lower, more established)
- Aggressive zone active now
- Breakdown level: Under 2011.41 affirms breakdown
- Tons of space for lower high
Expectation: Likely a major retracement coming, but not an immediate catastrophic bubble pop.
Bitcoin Analysis
Critical breakdown level: 97,948.56 (sellers should try to negate this breakout)
Pattern analysis: Last time monthly made higher high lacking follow-through after major breakout = prolonged chop
Current situation mirrors this:
- Couple higher highs, honestly lacking follow-through
- Wouldn’t be surprised by bigger picture balance (74K-103K range)
- Structurally not bad from bigger picture if chop over recent support
Downside scenario: 74K possible if bigger picture balance develops
Why I was apprehensive on long trade:
- Rejection from value area low
- One big candle negated 6-7 days of pump (not good sign)
Ethereum Trade Update
Sell zone: Active (didn’t make new high like Bitcoin, so better sell vehicle)
Critical supply: 4,017.56 (point of control) - major rejections throughout balance
My trade: Working out well
- Sold the structure rejection
- ~15% gain from lower fill
- Walking stop to over 4,295.57
- Taking profits at current levels
- Looking for continued lower lows
Gold Update
Assessment: Not bad at all - still 500 points away from 3,500 meaningful support
Strategy: Wait for break above current base, then look for back-test play as buyer with stop below base
More of a “wait and see” than immediate action.
AI Bubble Discussion: Why This Isn’t Dot-Com
Five arguments against immediate bubble pop:
1. Revenue Reality Unlike dot-com, current AI leaders (NVDA, hyperscalers) have massive revenues. Not “eyeballs” or “clicks” - actual money.
2. Capital Reserves Companies have hoarded cash overseas to avoid taxation - they can fund AI development long-term without needing new capital.
3. Market Awareness “Everybody and their mom looking out for it” - major tops aren’t set when everyone’s watching and waiting for the crash.
4. Comparisons Flawed None of the comparisons to dot-com have been very good. The fundamentals are completely different.
5. Fear & Greed Doubt that dot-com high was set with fear readings - likely was greed/extreme greed. We’re currently in fear.
What Bulls Need (Near-Term)
Immediate: Defend trade zones and prior demand areas
First goal: Reclaim breakout levels
- SPY: 573.95
- QQQ: 613.18
Second goal: Negate breakdowns
- SPY: 679.24
- QQQ: 624.03
Final goal: Affirm all-time high supply as demand
- SPY: 683.36
- QQQ: 631.88
What Bears Need
For a real breakdown:
- Continued rejection from overhead supply
- Break below trade zones and demand areas
- Follow-through selling with acceptance under key levels
- Tech sector to continue leading weakness
Market Outlook: Bulls vs Bears
Bullish Case (Current Lean)
- Sector rotation, not broad selling
- Extreme fear = buying opportunity historically
- Weekly timeframe damage minimal
- Value still building higher in most names
- Trade zones being defended so far
Bearish Case
- Daily charts technically bearish (lower highs, lower lows)
- Overhead supply created near all-time highs
- Tech weakness (biggest component) concerning
- Lack of follow-through on breakouts
- AI bubble concerns growing
Most Likely Scenario
Buyers step in to play defense at current levels.
How we assess their success: Watch if buyers can reclaim first key levels (573.95 SPY, 613.18 QQQ).
Take it day by day, monitor key levels, and stay technical.
Active Trade Zones
All major indices have trade zones in play:
- SPY: Back-testing prior demand (point of control reference)
- QQQ: Same logic - prior demand back-test
- IWM: Prior all-time high structure
- DIA: Local daily demand
Dollar plays:
- Short setup: Sell failures at point of control, take profit no later than 98.940
- Long setup: Hold positions from lower trade zone, walk stop to 97.805
Ethereum:
- Active short from supply zone
- Walking stops to 4,295.57
- Taking profits at current levels (~15%)
- Looking for continued lower lows
Bottom Line
While technical damage exists, the retracement is not terribly meaningful yet from a weekly perspective.
Three reasons I’m leaning BTFD:
1. Extreme fear readings Major tops made during greed, not fear. Current fear suggests buying opportunity.
2. Sector rotation Tech down, healthcare up, financials holding = rotation, not panic. If all sectors were crashing, different story.
3. Weekly damage minimal Yes, daily charts look bearish. But weekly timeframe shows this is just balance over point of control.
The first test for bulls: Reclaiming breakout levels next week (573.95 SPY, 613.18 QQQ).
Strategy: Looking for defensive plays at current levels. Not chasing, but ready to add exposure if buyers reclaim key levels.
This is more likely a buy-the-dip opportunity than a bubble pop. But as always, price will tell us the truth - we just need to listen.
Note: I’m a member of The Chart Guys private Slack community and highly recommend it for anyone serious about learning technical analysis.
This is my personal analysis for educational purposes only. Not financial advice. Trading and crypto involve significant risk including potential loss of capital.