The Stock Market is FLIPPING AGAIN...

In the next 10 minutes, we will share with you all of your big news today in the stock market, including AMD that is now building server racks to compete with Dell and Iron that raised their guidance to $4 billion of AI revenue this year. This is having a big impact on AI stocks. Also in the news today, Iran is willing to come back to the table to negotiate a deal and to end this war. You can also see on screen the markets don't look great from a technical perspective. You actually got rejected at the start of the bull flag pattern today. This uptrending trend line clean rejection on the NASDAQ. What does that mean? What does that signal? We will talk about it in today's episode. We do also have big catalysts coming later this week like Google and Intel earnings which are absolutely critical for AI stocks and the broader markets. And we also have economic data. First things first, before we begin, hit that like button for the YouTube algorithm. And the only goal on this channel is to provide to you guys every day hedge fund institutional like research on this market and commentary to help you beat the markets. and not just beat the markets. I want you guys to 5x the S&P. So, hit that subscribe button if that's something you are interested in. So, first things first, if we take a look at the broader markets today, there is definitely an influx into AI stocks and tech names. Russell 2000 is down 0.2%, NASDAQ 100 up around a half of 1%, NASDAQ up 0.3%, S&P's up a tenth of 1%, and the Dow is down a third of 1%. I'm not super surprised by this because the NASDAQ has been underperforming for the last couple of weeks. The NASDAQ 100 is down 6 and 12% from highs right now, while the S&P is only down about 2% from highs. So, the NASDAQ has 3x underperformed the S&P. Again, we have big earnings this week. We'll talk about in just a moment. And there's people that are like, "Okay, maybe it's time to buy a tech stock now." Which makes sense from a short-term perspective. Now, whether or not it is actually time to own AI stocks again, that's a whole another question that we will get into in just a few minutes. But you can see that oil today is down a third of 1%. So, it's actually moving lower. That is because Iran says that US talks could be pursued based on their national interest. Yes, this was said by Iran's foreign ministry spokesman Esmail Begali said negotiations with the US could be pursued. This comes as a third US service member has been killed from this new wave of attacks. Also in the news early this morning, it says from a senior Iranian source that mediators have proposed a 10-day cessation of strikes to find ways to revive the Iran US interim deal. But then shortly after, Iran directly rejects a USbacked cutter's new proposal of a 10-day ceasefire that would halt US strikes on Iran in exchange for Iran opening two Hormuse shipping lanes with Iran senior negotiating member Mirandi saying, "Don't even think about it." This follows Iran's formalou exit two days ago and Iran deputy foreign minister uh Garabad Badby stating that Iran will never start negotiations with the US under any circumstances and unfortunately it looks like this is turning into another forever war. I think at this point we have to be prepared for that. But honestly, I think the oil price impact has been felt already and I don't expect oil is going to march back to new all-time highs or new recent highs that we've seen this year. I think oil is probably just stuck in a range between 70 and $90 and we're just kind of going to bob and weave in this range. Also in the news today, Iran's interior minister travels to Pakistan. We will see if there's any news that comes out of that that can move the markets later on. But even though oil is not moving higher today, 10-year Treasury yields are 10-year Treasury yields are up about 4 and a.5 basis points, sitting at 4.584%. And we really need to be watching for a move that accelerates in 10-year Treasury yields. If you start to see the velocity of the move go higher towards 5%, that's where the markets are going to start coming under pressure directly from bond yields. Two-year Treasury yield again up four basis points today. Definitely on an upwards trajectory, but it's all about the velocity, not necessarily about where the yield is. So velocity in the bond market breaks things. If we take a look at the heat map today, there is clearly a rotation back into AI stocks, back into some of your hyperscalers like Google and Amazon. I think part of the reason that Google is moving higher today is because they have again sold off alongside other hyperscalers, but they report earnings on Wednesday. So, there are some people that are looking to trade the Google earnings and well, it makes sense why Google would be up on that narrative today. You can see that cyclicals today, healthc care industrials, AI industrials, war industrials, all of them kind of selling off today. Financials also selling off. Apple's down 2%. Software is down today. Again, AI stocks, Nvidia, Broadcom, Micron, AMD Intel Marll SanDisk uh Seate Western Digital, all moving higher today. Dell down 2 and a.5%. Also in the news today, partially why Google is moving higher as Google plans a new chip that will run AI models more efficiently. Now, also in the news today, AMD launches Helios, its first rack AI system to rival Nvidia, adding Microsoft as the newest buyer. Microsoft CEO says, quote, "We are expanding the Azure infrastructure portfolio with AMD Helios to give customers the performance, scale, and choice they need to build and run the next generation of AI applications." Now, AMD said today, quote, "We're very focused on providing the best total cost of ownership, the lowest cost per token allin." Data center head Forest Nurad told CNBC about AMD's first generation system and quote, "Our customers are telling us that we are achieving that." And I think this circles back to the capex trade. I think there are going to be winners and losers from here within the AI story. And I I actually like AMD. I think AMD could be a winner here because it's starting at, you know, less than a trillion dollar valuation. in the law of large numbers is not quite hurting AMD yet, but the share of spend is going to shift. I do believe you want to be careful with areas like memory storage that have only done well because of pricing power. Once that pricing power goes away, those stocks could fall a lot more from here. Whereas other companies like Nvidia and AMD and Broadcom and TSM, they're not really raising prices. They're raising supply and demand is meeting that supply. And I even think next year, as I've said before, you're only going to spend about $900 billion on capex for next year. But if that comes via more AMD chips and more GPUs and memory prices fall, you could actually deploy maybe 50% more compute next year, even though you're only raising capex like 25% year-over-year. So you could actually get a lot more compute with not as much of an increase towards capex. Does that make sense? And simply put, some AI stocks are priced for too much good news. We are going to have Google earnings Wednesday and after hours alongside Tesla and Service Now as well as IBM. These are going to be important. Service Now obviously for the software side of things, but Google's going to be important for the entire AI trade alongside Intel, but Google is specifically important for the AI trade for the capex numbers. Google is expected to be the biggest spender next year by far. So if Google indicates that they're going to spend more next year or spend less, that's going to have a big impact on the entire AI trade. You can see the aggregate free cash flows from hyperscalers for this year is going to be negative between 50 and hundred billion dollar. But next year, if current analyst projections are correct, you're going to be 300 to $350 billion of negative free cash flow next year. So you're going to have to finance 300 to $350 billion next year. That's why Google's earnings are going to be so important because if they do indicate that they're going to raise capex, hyperscalers are going to fall across the board because that means they're going to have to sell a lot of stock or a lot of debt. And as I've said before on this channel, it becomes harder and harder to raise capital, especially in the private credit market, which a lot of these hypers scalers are doing, especially Meta, to keep the debt all off of their balance sheet, which is kind of sketchy in and of itself, but that's what they're doing. Private credit begins to dry up the lower the stocks go. And you can also see that the Morgan Stanley Tech Momentum Index, its 17-day rate of change was down 35%, the worst ever recorded in its 27-year history. So, the sentiment went from super bullish on AI to super bearish. Now, as we're getting closer to earning season, really starting, you're getting a little bit of a bounce there, but I would say this is still a red flag for the capex trade and for the AI trade in general. But in good news today, INEN raises their AI cloud revenue target to over $4 billion. It says here, IN raised its year-end AI cloud annualized run rate revenue target to more than 4 billion from 3.7 billion per the company. About 85% of that target is now under contract following new multi-year cloud services deals with AI developers worth 2.8 billion in total contract value. Also in the news today, China's Moonshot AI is finalizing a funding round above a $30 billion valuation. This is the company that just uh released the Kimmy K3 model on Friday. And there are also rumors today that some restrictions on this Chinese model are likely coming in the US. Goldman Sachs said today that the $5.3 trillion in AI spending that Meta, Microsoft, Amazon, and Google will do through 2030 could put pressure on bond market, which is pretty much exactly what I've been saying. As their stocks get sold off for raising more debt and then they try to raise even more debt, it it becomes harder and harder to raise capital and it just means you're probably not going to hit spending estimates. Not because that, you know, Meta, Microsoft, Amazon or Google don't want to spend. I think they all would spend a trillion dollars if they possibly could. The possibly could number is going to get smaller and smaller as their stocks sell off as capital dries up in private markets. If we take a look at what the markets are pricing in for the federal funds rate by July 29th, there is a 13 well there was a 13.3% chance of a rate hike coming July 29th. That is next week. Um you're now sitting at 16.6%. You're not going to get a rate hike next uh next week. For September 16th, you are pricing in a 53% probability of one rate hike and a 9% probability of two rate hikes. For September, For October, you're pricing in again a greater probability of a rate hike. December, you're pricing in an even greater probability of a rate hike. There's actually a 41% chance of one rate hike by December 9th and a 31.5% chance of two rate hikes by December 9th. There's only a 17.3% chance of a pause or a hold by December 9th. So there's a 2x greater chance that you're going to have two rate hikes than even a pause by December. If we don't get any rate hikes from the Fed, that turns into a very positive catalyst for the markets. Today we did have the CB leading index month overmonth that came in worse than expected at negative0.2%. Tomorrow we are going to have the ADP employment change. Last week it came in at 19.75,000. From March and April we were running in the 40,000 range per week. We have fallen a lot. So if we fall again that might start to bring up questions that the labor market is weakening. And as far as economic data for this week, we don't really have anything on Wednesday. On Thursday, you're going to have Chicago Fed National Activity Index and initial jobless claims. And then on Friday, you have some smaller data sets, housing permit or building permit, some housing data. You have regional data like the Kansas Fed composite index, Kansas Fed Manufacturing Index, but you do have the S&P global composite PMI, manufacturing PMI, and services PMI. Now, if we take a look at the triple Q's, you can see a series of lower highs. You could see a bull flag pattern that was clearly developing with a sharp break lower last week where the the triple Q's, you know, fell a third of 1% on July 15th. July 16th it fell 1.64% and then on Friday it fell 1 and a.5%. You uh broke below the uptrending trend line of the bull flag pattern. Well, today you tried to test it, right? and you got rejected right at the trend line. It's not a great sign. Although we have a really big wick on the high side, really big wick on the low side. There's a lot of price discovery trying to take place today. And I don't expect much to happen between now and Google earnings because people are trying to figure out how should I position into Google earnings. I don't think minus any crazy new developments, you're going to move a lot between now and Google earnings. Google earnings are going to set the tone for the following week, which is going to be Amazon, Meta, and Microsoft. And what really matters here for the AI environment is what is capex indicated to look like over the next 12 months. You can also see that over the past couple of days as the NASDAQ has sold off, volume has risen every single day. So volume was 29.5 million. Then it jumped to 32.6 million. Then it jumped to 39.4 million. Then on Friday it was 54.2 million. Well, today volume's really really really low. Even at the time of recording this video, it's like 12 million. So you're you're bouncing on low volume. That's not a great sign. And as we are heading into your, you know, midterm elections and we tend to start getting volatility to the downside in late July, August, September. I I wouldn't be shocked if the markets do continue to grind lower here. You can also see on the triple Q's, you are well below your 20-day and your 50-day moving averages. The next stop if we don't find support at 695 is going to be that 100 day moving average at 667. So that would be peak to trough decline on the triple Q's of about 11%. If you didn't find support there for whatever reason then you fall to that 200 day moving average which I do think looks less likely. That would be downside of about 14.5%. Now the S&P does look a lot better. you are in this bull flag pattern. You're at the tip of it right now. So, the next move could be quite large on the S&P, but you're above your 20-day, your 50-day moving averages. I know it's kind of hard to see today, but if you look at the S&P, you actually fell to your 50-day moving average, found support, bounced off of that, and retook the 20-day moving average. That actually looks very good today. And again, the S&P is outperforming the NASDAQ in the last couple of weeks by about 3x. So, you're above all of your major moving averages. You're still holding support at this uptrending trend line here. This does lean towards people are rotating out of AI stocks and heading into other areas of the markets. This is kind of an early indication that the capex numbers that are going to be reported over the next two weeks or so from the hyperscalers could be a little disappointing for AI stocks and I think there are much better opportunities out there personally than AI stocks and we will talk about those in the next video. Do me a quick favor ladies and gentlemen, hit that like button, subscribe to the channel if you guys learned something out of today's video. If you guys want to come trade and invest alongside of us where we are about 4x outperforming the S&P this year, it might be about 3x three and a three and a halfx um following today because today was just not a great day for a lot of areas. Check that link out down below in the description of today's episode to come trade and invest alongside of us. Keep in mind, I am not a financial adviser. I'm not a financial planner. You need to ultimately come to your own conclusions whether or not you buy a stock. But nonetheless, ladies and gentlemen, have a fantastic rest of your day and I will see you in the next