Friday was an ugly day in the risk-on markets. While it wasn’t quite the baby out with the bathwater, there was widespread selling and even a touch of panic. Given that it was the last day of the month with lots of mutual fund activity, I am speculating that some of the late selling was artificial.
The Nasdaq 100, which is dominated by the AI and mega-cap tech stocks, hit one of my key downside targets from Q3. It’s the spot where shorts should be covered, even if there is another bout lower.
Folks have asked me if this is the decline I have been discussing for Q1 2027. It’s too early to tell, and the S&P 500 is only 250 points from all-time highs. That index remains constructive.
The Russell 2000 not only did not make a new low on Friday, but it has been leading of late. The question is whether this is a fake-out or the beginning of the year-end rally. We should know soon.
Let me close with gold. Funny how all those gold and silver bugs who were chirping so loudly in January are super silent now. The chart below most resembles the Dotcom Bubble, although all of these fun analogs eventually break. Gold just met my initial downside target for a meaningful bottom. That does not mean the low is in. It just says that the metal is in the zone, and I do think we see a major gold bottom in the next three months.
On Friday, we bought KD, more QLD, and more MQQQ. We sold XHB, some KRE, and some XBI.
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