AI Crisis – Dad, Is It Time To Buy?

AI is the negative story of the day with pre-market showing 1%+ losses in the NASDAQ 100. The other indices are down less. My astute youngest son texted me this morning to ask if there was enough worry and panic to start buying again. He offered that he heard his friends all talking about the end of AI.

The AI story isn’t over. The AI investment isn’t over. The short-term AI trade is getting closer to offering more reward than risk. This is exactly what happens with newer and evolving technology. I am old enough to recall the whole Dotcom craze in the 1990s. Lots of booms and busts before the ultimate peak in March 2000. This time ain’t different.

For 10+ months I have targeted Q3 for a correction and strong buying opportunity. I have written about it over and over. Patience is required. The next 2-4 weeks remain my target. My shopping list is large and long. Breaching last week’s lows on a daily closing basis in the major indices will confirm the next move lower and likely faster is here.

Some folks who usually only chirp about the end of the world tell me I am wrong. They think the bull market is over and stocks are heading for worse than 2008. Perhaps, but that would be a precedent setter.

Let’s look at a few indicators that say otherwise. Below is simply the high risk stocks versus the low ones. High beta versus low volatility. At the end of bull markets low volatility stocks usually lead for at least a few months. That’s not the case over the past month or so.

Below is one of my favs, the New York Stock Exchange Advance/Decline Line which simply measures participation. At the last stock market peak in August, the NYSE A/D also scored a new high. That typically does not happen at the end of bull markets. We usually see fewer and fewer stocks participating as the S&P 500 goes higher and higher. Sorry bears.

Finally, as you know, I have been negative or neutral on Bitcoin for almost a year calling for a 50-75% collapse. Bitcoin is now behaving constructively and I am bullish on any and all pullbacks until proven otherwise.

And don’t forget that the FOMC is meeting this week. Markets expect a 1/4% hike in the Fed Funds Rate on Wednesday. I will send out an update in two days.

On Friday we bought more SNOW. We sold SSO and some BUG.