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Week of March 3rd

Welcome to March!

The AI-driven rally has really been going into full melt-up mode, and I am starting to get the sense that a big correction is looming. Indexes are printing new headlines daily and the general populous is now downloading apps and buying stock with no regard for risk.

NVDA for example, is now worth more than the entire GDP of Canada.

If you took the 10 largest tech stocks (all are AI stocks) - and created a country out of them - that AI-stock-based country would have the 3rd largest GDP on earth behind the USA and China

Dell for instance, gapped up 30% on Friday March 1st.

None of this is bullish in my eyes - but rather full blown manic.

Due to HOW Market-cap based indexes are constructed - something like 90% of the gains in the past 12 months have come from 10 or so AI stocks.

For all the "bullishness" in these markets- its extremely narrow.

Equal Weight SPX hasn't hit nATH;

Nor as the Equal-Weighted Nasdaq.

Small caps in the Russel 2k are still 20% off ATH

"Markets can remain irrational longer than you can remain solvent" is the old adage - but these types of manias can go on much longer than one saw possible. I am not interested in shorting the market until it shows me a Market Structure Shift, but I am also not interested in holding swing longs up here either. I have been day trading the Nasdaq from the long side and it's worked out so far - but that again is being a futures based trader and having maximum nimbleness.

DXY:  DXY is the same price it was a month ago - we haven't really gone anywhere. Gold and Oil both popped last week and I think this is setting up for a big roll over on oil - but we will have to wait on that one.

Energies: Oil popped last week taking out my 79.6 target and I think it might FINALLY be ready to start its march lower. We respected a monthly FVG and I am now looking for a move from IRL to ERL back down around 68.

Interest Rates:  Looking at the weekly chart of the 10yr - it looks like rates are ready to head lower as the economy weakens and the bond market prices in a recession.

The weekly 10yr chart took IRL on this bounce, and now I am looking for the next stop to be 2024 lows.

This week will be a BIG DEAL for the 10yr - if we can resume the march lower in rates - it will continue to fuel the manic bid for AI stocks. Stocks don't ask WHY rates are dropping, until they have already driven over the cliff.

So here is the setup for this week;

  • Bulls will be supported by a drop in rates

  • Look for dips to buy on NQ

  • Looking for oil to start to roll over being driven by the monthly chart.

Until next week - We'll be watching.

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