The Stock Market is FREAKING OUT.. (BIG NEWS)

The stock market is experiencing a violent rotation today and we will get into why and all of your big news here on the day today. First and foremost, we have to talk about the decline in AI stocks. It is bloody out there. Micron down 8 and a half. Look at Dell down 12% today. SanDisk down 13%. across the board deep red there is a rotation into hyperscalers look at Microsoft up 3% Apple's up three Google's up three meta's up three Amazon's up three cyclicals financials healthcare other areas why are AI stocks selling off today there's a couple of different reasons so the first thing that I will point to is ASML earnings overnight so ASML actually had really good earnings they raised their fullear sales outlook as AI is driving chip demand. But ASML actually manufactures the the machines that then make the chips. So the buyers of ASML chips are going to be like the Tesla Terraab, Intel, Samsung, you know, Micron that that does make some of their own chips. Um, you know, TSM and some of these kind of companies. It's not a clear indicator of AI demand in the near term. It's a very good sign that companies are buying more of these machines for two to five years from now in terms of a supply, but it doesn't tell us a whole lot about the current state of the AI trade. And lately with earnings around AI stocks, whether you know, look at Samsung. Samsung just a couple of weeks ago had phenomenal earnings. The stock was down like 15% and it brought the entire AI trade lower. That is a part of what is happening today. Jim Kramer last night when he was asked about super micro computer said quote I prefer either Dell or even HPE. So there is that you know theme where if Kramer says something positive about a company, people tend to go out and sell it. And even institutional investors are behind this one. You guys can see here from the actual capital flows. Institutional players are completely abandoning their previous upside conviction. Wales aggressively slam the bid to dump over $18 million in bearish call selling premium, triggering a massive shift towards a sell the RIP mentality. And you guys can see here even some of these longdated options like June of 2027 and December of 2028, these 450 to 550 calls, Wall Street's going out and selling these. So that's adding a lot of pressure on the stock from market makers. So these are two big things that we can point to that are causing AI stocks to roll over. Well, what's causing this rotation is likely some good news that we got today and good news from yesterday. So, Trump said this morning Iran called a a while ago. They want to make a deal. You guys have to understand that AI stocks look really attractive if oil goes to $100 a barrel or if we have an inflation problem or if the Fed is going to be hiking rates. AI stocks today look a lot less attractive if the war with Iran ends. If inflation continues to come down, if the Fed's not hiking rates, there's not as strong of a reason to be all-in AI stocks, especially after a lot of them have, you know, went up 10x in the last 12 months. A lot of Wall Street starting to say, "Hey, how sustainable is this?" and uh how much upside is left in these stocks. I also think this rotation is interesting because we are going to have TSM earnings tomorrow morning. That's going to give us a lot better of an insight to what nearterm like right now demand looks like for AI. And the fact that people are rotating out of AI stocks and directly buying the companies that are spending all of the money is a little bit of a red flag that maybe capex could underwhelm. one day of this, you wouldn't want to draw any crazy crazy conclusions, but Wall Street tends to know things before they actually come out. We will be getting your big hyperscaler earnings, at least the start of them, coming next week and that's going to drive the big move for the entire AI complex. And this is kind of the playbook from, you know, 1999 through 2000. the companies that were buying all of the Cisco products, their stocks began to sell off as Wall Street began to revolt against the spending in early 1999. What inevitably happened is Wall Street will pressure companies to slow down the spending. And maybe that's happening right now, or at least it has started. We can say that definitively. And once Wall Street begins to punish overinvestment into anything, the clock is ticking before Wall Street and executives pay attention and listen to Wall Street. So I think there are some real how sustainable kind of questions that are out there on Wall Street right now and kind of bridge this with my broader thesis that yes, we are going to need a lot of compute for robotics and enterprise AI adoption. But what a lot of Wall Street doesn't understand and even retail investors, enterprises, they don't move quickly. There's a lot of bottlenecks right now. Companies cannot just go out and adopt AI agents next week if they wanted to. There's a lot they have to do between now and then. Well, companies are spending like this mass enterprise adoption is coming next month. And the fact of the matter is that's not coming until 2028. 2028 through 2030 is when you have mass enterprise adoption. There could be a little bit of an air pocket in demand in compute demand from now until you know maybe 2027 at some point. Now robotics and mass enterprise you know AI adoption these are going to be big drivers of compute demand but you are seeing this experimental wave of AI you know experimenting that is slowing down. You can actually see this on Google Trends. If you look up token cost, I mean, this peaked out the first week of June. You're back down to where you were in October, November of 2025. This is a clear sign of what I just said. We did have some good commentary today from New York Fed President Williams. He says inflation has peaked and rates are well positioned. So, finally, somebody at the Fed sounds like a dove. Wall Street loves that. He said, quote, "There are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters. I expect overall inflation to decline to around 3.25% by year end, then continue on a glide path towards our 2% goal in 2027 and land on target in 2028." He says specifically, there shouldn't be significant additional impulse from tariffs as expiring duties are merely replaced by old ones. At the same time, the oil spike has largely peaked or likely peaked and will come down closer to levels seen before the fighting. Fed Williams says in regards to artificial intelligence investments, he said quote imbalances should recede over time as more supply comes online. So this could be part of why AI stocks are also selling off today. You know, anyone in high power saying, "Look, prices are going to come down for AI, you know, even if it's the Fed and it's one guy's opinion, that could be playing a role to this rotation today. 10-year Treasury yields are down about three and a half basis points today. 2-year Treasury yields are down about five basis points today to 4.145%. And this is something I've been talking about on the channel for a while now. I think the markets are dramatically overestimating how hawkish the Fed the Fed is going to be. We are overpricing the probability of getting rate hikes this year. And for the first time in a long time, there is a greater probability now for September that we don't have a hike. The current probability of a pause in September is 49%. Yesterday it was 39%. Last week it was 30%. So you've went from 30% last Friday like handful a couple of days ago to 50 basically 50% today. There's a lot of volatility here in what the markets are re-evaluating for the Fed. Now you're still pricing in a hike in October. But, you know, you're starting to become more dovish on what the Fed's going to do. You can see last Friday the probability of a pause, so nothing happening by the Fed by December 9th, was 13.8%. Yesterday, it was 19.6% and today it's 26.5%. So you've doubled the probability of a pause throughout this year in the last 3 or 4 days. And again, when it looks like the Fed is not going to be hiking rates and inflation's not going to be a problem and the war with Iran ends, there's less of a reason to own AI stocks that are kind of independent from all of that. Like capex, none of that matters for the capex trade. But part of this today is because of the PPI data. So we did get PPI month overmonth that came in at0.3%. The forecast was positive0.1%. PPI is producer price index. CPI is consumer price index. So producer price index, you would think that would go up first and then it feeds into CPI. So if PPI is not going up, then you shouldn't see that much inflationary pressure going forward in CPI. Now, core PPI month-over-month came in at 0.2% month- over-month. The forecast was 0.2%. Last month was revised lower big time from 0.4% down to 0.1%. So, mix the number today with the downside revision from last month and you have some really good inflation numbers this morning. We also have this article coming out today. It says ASML plans price increases for chipmaking equipment despite TSMC's resistance. Now, it is behind a payw wall of course. So, I did what anyone else would do is put it into Grock. So, I get the details. Well, it says here ASML intends to increase prices on its equipment, particularly its cutting edge high NA EUV. This is these are the machines that make the most advanced AI and logic chips. TSMC is pushing back strongly. The foundry views the machines as too expensive for profitable mass production right now and has no current plans to adopt high NA EUV for production until 2029. Originally eyed for 2028. So, it [snorts] looks like some of these machines and TSMC's uh, you know, capability to produce even more, you know, high-end or better and better chips is being pushed out. That's likely on top of everything else weighing on AI stocks today. also a part of it. It does say Intel and Samsung have been more willing to adopt the new tech earlier, but again TSMC produces like over 70% of the advanced AI chips. So if TSMC is slowing down, just you're going to have less capability of producing higherend chips going ahead and that could put a pressure on pricing. Now, despite Trump's comments earlier today that Iran is called to talk, Iran says, quote, "They have no plans for US talks. Focus is on defense." Also in the news today, Apple is hunting for AI chip acquisitions. Apple is hunting for AI chip acquisitions per the information. The report says Apple's in-house M2 ultra chips have not proven sufficient for running advanced AI workloads, forcing a reliance on Nvidia. A future version of Apple's AI server chip code named Baltra was originally supposed to ship this year but has been delayed per the report. So again, add this to everything else going on for the AI trade today and yeah, it's it's probably a contributor. Kevin War says that corporate profits appear to be expanding across sectors. Kevin W says a surge in AI investment and AI company valuations is notable. Funny enough, Kevin Walsh just a couple of months ago before he was nominated to be the Fed chair was basically allin private capital, you know, venture funds around AI stocks. This guy is an AI bull. He is uh he's not the guy a lot of Wall Street think he is. Kevin War says if AI firms disappoint investors, capital would dry up. Anthropic is reportedly planning an IPO investor meeting in the coming days. Kevin War says, quote, "My view is that there is no limit to how fast the economy can grow." He says, "The labor market looks like it's broadly in balance." And he says, "I'm not happy with any of the inflation measures." Kevin War says, "Today, one-time changes in prices isn't necessarily inflationary." Kevin War says, "We see AI impact on demand more quickly than on supply." Kevin War says, "My view is that these inflation data points are imperfect measures." I think this headline is quite notable because with some of these task forces, um, you could actually change the way that inflation is calculated and, uh, that could get you a lot closer to the 2% target. Fed Williams says the move up in medium-term inflation expectations in the New York Fed survey is not flashing a warning sign. Trump said this morning that Russia is ready to make a deal with Ukraine soon. And this is potentially a big catalyst that could be coming by the end of this year or next year that could push a lot of supply onto the markets and be one of those sleeper tailwind catalyst to continue this broad rotation into next year. I mean just imagine if the Russia Ukraine war ended, the Iran war ended as well. You're going to see oil in the 50s. You're going to see gas literally at like $2 a gallon. Again, that's going to be very stimulative for the economy and a good thing for the inflation quote unquote problem that we have. From a technical perspective, if you take a look at the markets right now, you do see a bit of a bull flag pattern. Um, especially if you look at the NASDAQ. Now, it doesn't look great. It's not perfect. You are below your 50-day moving average right now, but every time you've fallen below the 50-day moving average recently, you snap back pretty quickly above that. TSM earnings tomorrow morning are going to be a very important catalyst. If that goes poorly, if there is bad news, you're going to get a break lower. You're going to see a a move lower. You technically don't want to get bearish on the markets until the NASDAQ breaks below about 705 or so. If the triple Q's break below 705, you're at least going down to 695 or down to 660 or so where this 100 day moving average is. Now, if you break out above this downtrending trend line right here, which is roughly about 7:30, things look really good for a break to new highs to 750 or higher. On the triple Q's, you have a similar pattern here for the S&P. The S&P looks a lot better. Um, you had this bull flag pattern for a while. You're above all of your major moving averages. 20-day, 50-day, 100 day, 200 day. You're above all of them. You're actually above the bull flag uh downtrending trend line here. Kind of working up, kind of consolidating at the same time. But the S&P looks a lot better, which is kind of weird right now. The S&P looks good technically on a technical basis, but the NASDAQ looks pretty bad on a technical basis. I think that black and white speaking here is probably a bad sign for AI stocks and a good sign for the rest of the markets as we head into earning season. just simply technically speaking watching the S&P move higher that has more of a waiting towards hyperscalers and the rest of the markets and less about AI stocks specifically outperforming looking better on the charts is probably a you know more positive sign than the NASDAQ which is more semiconductor and tech heavy declining it's just abstractly a positive sign for the rotation and the broadening trade. So, let me know your thoughts on all of this down below in the comment section. Hit that like button, subscribe to the channel if you guys have not done so already. That is it. If you guys want to come trade and invest alongside of us, that link is down below in the description of today's episode. 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