Markets At A Crossroads

The market bounced this week. The semiconductors never delivered the rip your face off rally a real bottom needs.

That leaves us at a crossroads heading into the back half of the week.

On the surface, the SPDRs look fine. A couple days of selling barely dented SPY, and it sits right back near its all time high.

The Nasdaq tells a different story. The QQQ dropped hard over the last two weeks, with strong selling last Friday.

Today the Nasdaq climbed 300 and some odd points. That bounce landed right on the upper edge of the expected move.

Underneath, the tape looks broken. The advance decline line keeps swinging between 60/40 and 50/50.

We’re still in a negative beta regime. When the S&P 500 rises, a pile of stocks trade the opposite direction.

JPMorgan (JPM), Netflix (NFLX), Walmart (WMT), and Target (TGT) all sat lower today. The Nasdaq is dragging the rest of the market higher kicking and screaming.

The semiconductors got us here. SMH is up 50% on the year.

Its bounce also hit the upper edge of the expected move. To me, it looks like it’s hanging on by a thread.

After big selling, I want to see a rip your face off rally. The semis haven’t given us one.

Every bid back lately has been sold into. SMH couldn’t hold Monday’s bounce, and today it’s only holding to an extent.

The companies building AI haven’t bounced either. Google (GOOGL), Microsoft (MSFT), and Meta all look weak on the chart.

In tonight’s video, I walk through the warning signs I’m watching:

• The QQQ bounce landed right on the upper edge of its expected move after two weeks of heavy selling.

• The South Korean ETF EWY crashed more than 20% and has barely caught a bid.

• CoreWeave (CRWV) shows no bid back at all. Intel (INTC), AMD (AMD), and Micron (MU) show no bounce either.

• November and December volatility futures sit about 30 cents apart after inverting by 35 cents into the weekend.

• The SPX carries a $165 expected move this week. We’re only about halfway to the upper edge.

Meta and Tesla (TSLA) report tonight. I don’t think either one drives this market, because the semiconductors do.

Bonds back that up. They shot higher when traders dumped AI names, and they haven’t sold off since.

Bond traders and volatility traders are both still on guard. I’m not ruling out a move higher.

Markets rarely tank from their highs. They tank from lows that are already under pressure.

Balance your risk for the rest of this week.