[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] You probably understand correlation in the markets – assets moving together in some kind of relationship, even if that happens to be inverse. It usually makes intuitive sense. If stocks drop, safe-haven assets like gold or bonds move higher as the crowd looks for safety. That makes sense, right? The dispersion trade, on the other hand, doesn’t quite jump out at you the same way, even though it’s really what’s running the show right now. This trade is when folks try and take advantage of the expected volatility in index options versus the expected volatility in components of that index. In this case, the index is the NASDAQ-100… and the stock in question is, you guessed it, Nvidia. Right now traders are crazy for it. They can’t get enough. Now that Google and Apple have lost their luster and are

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] The markets can be the ultimate bandwagon sometimes, and that’s got a tendency to be dangerous. It doesn’t take long for one big, definitive sell order… to be followed by tens of millions of others. At the moment, it’s working the other way; the crowd is into just one or two stocks (which we’ve talked about extensively) and those are the glue holding the markets together. And this puppy needs a lot of glue. The S&P 500 has a market cap of around $43 trillion-with-a-T. Just five companies make up around 25% of that market cap. Let that sink in. That glue starts to get worn out and… We’ll talk about that, but there’s a lot more. Not to pile on great news, but I’m watching the oil and energy sectors – they’re catching a bid right now, and that

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] So, it seems “bad news is good news” again – we’ve seen this cycle a few times in recent years… Investors have had the chance to digest not-exactly-great economic data several times this week – including today, when the PCE numbers hit the street. None of that data was positive; we haven’t had a single piece of good economic news all week. So why aren’t investors headed for the hills? Why aren’t they hunkering down. This is a sign the economy is fading, right? Well, that is the good news – for stocks at least. Investors are weighing the odds a weakening economy will prompt the Fed to cut rates sooner, rather than later, in 2024, and that’s usually rocket fuel for equities. Sure, the American consumer and the broader economy will get the short end of the stick, but

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] These stocks have been leading the markets higher and lower for months now, to the exclusion of practically everything else – including hard economic data! (Including PCE, which drops tomorrow.) FOMO-stricken investors and traders are bidding them up to (literally) insane levels. There’s really not much else left to buy… and if there was it’d be too expensive anyway. Bargains have gone the way of the dodo. These stocks, particularly Nvidia, are all that matter right now. I hate it, and if you’ve been with me for a while, you know I hate it. But that’s the reality we have to deal with. And it looks like very soon we’ll be dealing with a whole lot of ugly. That’s because a few of the Magnificent 7 stocks are hitting critical, make-or-break technical levels right now. And if the “break” possibility

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] If you’ve gotten the sense lately that something is building, you’re not wrong. We’ve seen hyper-concentration in the biggest stocks, to the point where plenty of us are focused on just one. People are chasing crowded stocks and trades, bidding up stocks to nosebleed levels. And yet, tech is still strong. We can tell from a bullish crypto market and lows in the bond market, that, despite how far we’ve come, there’s still plenty of appetite for risk out there. Let’s look at some of my charts, and see what’s probably coming around the corner. It could be explosive…

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] “When YOLO, you’re all about FOMO.” The Magnificent 7 tech mega-caps and AI are the quintessential “fear of mission out” plays – it often seems there are more bettors there than bona fide traders. But another “leg” has been kicked out from under these stocks” Google. Tune out the noise and we find…the stock is now dead flat for the year. Not a good sign. So, the FOMO crowd is moving on to smaller, soon to be crowded pastures. Other AI stocks of varying quality, and cryptocurrency. We’re going to look at just what the heck’s going on here and run down the tickers in play right now…

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] I can think of 499 stocks that might as well hang it up… Welcome to the S&P 1, where you can buy any stock you want… so long as it’s Nvidia. Buyers only, though – no sellers allowed. I’m only half-joking. Diversification on the S&P 500 is now severely compromised; it’s more concentrated than it’s ever been. The combined weight of the Top 10 stocks is now north of 32%, having blown way, way past its Dotcom Bubble-era peak of 25%. And it goes almost without saying that diversification as an investment strategy is dead, too. But, like they say in Texas, “ya gotta dance with the girl that brung ya” and the only way out is through. Its Nvidia’s world and we have to trade in it. The S&P 1, excuse me, S&P 500 largely shrugged off the Fed’s

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] Now, there’s no doubt artificial intelligence (AI) will eventually change the world. That’s already starting, but the full impact is probably a ways down the road. Right now, investors’ perception and imagination of AI is what’s really driving the bus. Hopes and fears are what we have to contend with right now. That’s powerful stuff. In fact, those hopes and fears are so powerful that Nvidia is now around $100 billion larger by market cap than the entire Energy Select Sector SPDR. That’s why worries about its earnings drove massive tech selling this week. And it’s why Palo Alto, which had decent earnings, got crushed. We’re going to look at why this happened and what it means for AI stocks from here out.

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] Stocks got a little shot in the arm in the last hour of trading on the expectation that Jensen Huang and the Nvidia board would have good news for them. And that’s what they got – big beats, particularly in the revenue column, which saw a 265% year-on-year increase. It’s tough to exaggerate how important these earnings are. Barron’s called them a “referendum on the future of AI.” – as good a way as any to put it. AI (or at least the anticipation of the profit potential in AI), has been a huge bull catalyst over the past year. It might as well be a referendum on the stock market. NVDA has a market cap north of $1.6 trillion and makes up a huge chunk of the S&P 500 by weight. It’s one of the most important (and some

[video_player type=”embed” style=”1″ dimensions=”640×360″ width=”640″ height=”360″ align=”center” margin_top=”0″ margin_bottom=”20″ ipad_color=”black”][/video_player] If you’ve been able to make my daily trading room sessions, the selling of the past few days hasn’t been a surprise at all. The warning signs have been building and we’ve caught every single one. In fact, I’ve been doing everything short of pounding the table that we should expect downward pressure in the markets. As we’ve talked about, that selling pressure is now coming from investors bailing on tech and the chipmakers. But it’s not all red ink. I’ve been looking at the precious metals space and some of the defensive consumer staples – those had a particularly good day today. That’s where I think we’re likely to find winners right now…