Desperation for Dollars and Liquidity
The Nasdaq 100 has gone nowhere for 4 months. Trillions in market cap is simply treading water. The price weighted Dow Jones Industrial Average has been declining for 2 months. Its two largest components are GS and CAT at $900 and $800 respectively. Both topped out over two months ago. The next largest component, MSFT, is a $500 stock, and it put in a 52 week high almost a year ago with a double top completed in Oct, 2025. While the SPX and NDX are near highs, the number of stocks making new 52 week highs is sinking lower with every rally in the averages. The number of new 52 week lows is expanding with every impulse higher in the averages. This is an unhealthy market. Insiders in many of the stocks I follow have been selling their shares all year while they use shareholder equity to do share buy backs of the very same shares they themselves are selling out of their personal holdings. The insiders know what their stocks are worth, and they are voting with their own money. Valuations of stocks in every single sector are far in excess of the average earnings power an owner of those shares can expect to receive over 15 or more years. This is an expensive market. It’s the banking sector that is most troubling from a valuation perspective. As the rate on the 10yr US Treasury Bond rises, the assets that sit on the regional banks’ balance sheets deteriorate in value. In the depths of the SVB crisis in 3Q 2023, regional banks were holding unrealized losses of $675B on their books vs $2T of equity capital. Rates are now higher than they were then. We changed accounting rules for “held to maturity” assets then so we could pretend our banking sector was solvent, and we must continue to pretend now even though their assets are presumably worth even less than during the SVB crisis. We’ll have to wait another month to get the total unrealized losses sitting on regional banks’ balance sheets after this most recent rise in rates. The potential exists that one third of our banking system’s equity is impaired in long duration assets they can’t sell from their books. This is exactly what happened in the S&L crisis in the 1980’s. The savings & loans went bust, and the banking system created the collateralized debt obligation security market to package up all the low interest rate loans no one wanted to buy in a high rate environment. We later realized this was in part the origin of the 2008 GFC, as the CDO market went into overdrive by the early 2000’s. This time however, the impaired assets aren’t held by a niche corner of the banking system. The impaired assets make up a major portion of all regional banks’ balance sheets. The stock market seems to be in a state of suspended animation. The SPX and NDX seem like they want to breakout higher. The DJIA, DJT, DJU, and RUT aren’t in a mood to follow. The market needs a catalyst to move in either direction. I think there’s only one bullish catalyst that could propel the market higher: an end to the Iran situation and a resumption of trade relations with China. There are rumors leaking out now that indicate we could see that, but even if that news does come out soon, the market should look right past that to post midterms when the conflict is almost sure to resume. Any rally on Iran or China news should bring the DJIA back up to the $53K level I’ve been watching to short. In fact, I’m counting on a rally in the next couple weeks to test out my theory on an October crash. A failure for the DJIA to trade above $53,700 before Halloween makes a crash a high probability event by my analysis. While there’s plenty to dislike in this market, there’s three interrelated forces I see driving the current environment. The stock market is being ruled by a triumvirate of higher rates, a higher dollar, and lower liquidity. Rates are going higher across the developed world. Only China is not seeing rate increases. The most common explanation for the higher rates is that global growth is picking up, but I can’t see any indication of that accelerating growth in the stocks that should be benefiting from growth. The growth explanation to rising rates floats like a lead balloon. The real reason rates are going higher is simple: asset holders are selling their bonds to raise the much needed dollars to keep up with rising borrowing costs. As the DXY rises above $101, we are witnessing the scarcity of dollars in real time. Every penny above $101 is another tranche of demand pull away from financial assets. A plethora of dollars means lots of potential demand for financial assets that can go into stocks and support prices. A scarcity of dollars implies the opposite. Without the willingness to freely supply dollars, liquidity in the financial system is drained, and asset prices are vulnerable. No asset is more vulnerable than an absurdly expensive stock market that has to compete with short term US debt for income. Long term holders of stocks are sitting on massive gains. They’re eyeing the real rates they can get by switching into bonds now. Real rates are over 2% now and increasing. Due to these higher real rates, bonds are acting as competition for increasingly scarce dollars that need a home. Gold is sinking as real rates rise. Gold is showing us the future path for stocks unless policy makers respond with liquidity creation soon. I’ve always followed the gold signal, and right now, gold is telling me there is a deflationary event on the horizon. It’s been my view for some time that the deflationary event is the end of the current business cycle. The business cycle is obviously entering into the contraction phase, but Warsh
Continue Reading -->AI Earnings Boom: Never-Ending Story?
ATTN: Sami Abusaad and James Rich Young are hosting an Open House next week. Sign up now for 5 full days of day and swing trades, plus in-depth training. 100% free. September was a slopfest and rate hikes may be farther away than we thought. Meanwhile, the AI earnings boom just got more ridiculous. So let’s dig in to the biggest and baddest stories in the market. Skip Ahead! September Was RoughMicron & the Ridiculous AI Earnings Boom Sentiment Is Still Not BullishNo Rate Hikes?Next Week Is About RestREMINDER: Join the Open house September Was RoughSPY was down 0.3% in September, while the QQQs were up 3.3%. Not so bad. But things were way uglier below the surface. Just look at all the red in this table showing September ETF performance:Just 113 of S&P 500/SPY stocks were up for the month, and the average name was down 4.6%. And by the end of the month, the average stock was 21.1% off its 52-week high. Essentially, you had to be overweight the right tech names (mostly semiconductors) to have had a decent month.Micron & the Ridiculous AI Earnings Boom Memory maker Micron (MU) dropped another amazing earnings report after the close, and AI is the driver. This chart showing Micron’s quarterly earnings per share over the past 10 years illustrates just how transformative AI has been:Micron earned $33.42 per share last quarter, more than 10X the $2.59 it earned in its last quarterly earnings peak in 2022. By the way, JR Romero expects Micron to hit $1,434. See why here:And the AI earnings boom seems to get more ridiculous by the week. FactSet reports that analysts now expect S&P 500 earnings growth of 29.1% in Q3, which would be the third straight quarter of 25%+ growth. And AI monsters like Nvidia (NVDA), Dell (DELL), and Super Micro (SMCI) are leading the charge. Estimates are going up so fast that analysts expect 63.5% earnings growth in the Information Technology sector. That is wild. It’s not like this is the first year of a bull market where we’re working off easy year-over-year comparisons. We are almost 4 years into the AI cycle and it shows zero sign of slowing! Starting to feel like a never-ending story.Sentiment Is Still Not BullishThe latest AAII Sentiment Survey shows that just 34.6% of investors are bullish.This is the third straight week of below-average bullishness. Meanwhile, bearishness remains high at 46.5%. Plus, CNN’s Fear & Greed Index is at just 32/100, indicating moderate fear.So there remains little enthusiasm for the market as a whole.No Rate Hikes?Friday’s weaker-than-expected Nonfarm Payrolls report came in the wake of the Fed’s Williams saying there is no urgency for rate hikes. So now the market is pricing in a mere 20.5% chance of a rate hike at the October 28 meeting:That’s down from 64.2% last week. However, traders are still pricing in an 81.9% chance of at least one rate hike by year-end.Next Week Is About RestThis week had some key events like the Micron (MU) earnings report and the Nonfarm Payrolls report. Next week, we get to take a break. There are no market-moving earnings reports or major economic data. But remember, we could get news on Iran so keep an eye out.REMINDER: Join the Open house Sami Abusaad and James Rich Young’s Open House begins Monday. Jump in now! Want to get to know them? Watch this webinar:
Continue Reading -->2 Huge Catalysts on My Radar
Yes, it’s time to talk politics. Because it can make you money. JR Romero believes the mid-term elections could be a bullish catalyst. If the Democrats take the House and/or Senate, government gridlock could drive a rally. He explains: Democrats Win = $SPY Skyrockets? JR Romero argues that the Democrats succeeding in the mid-term elections would be bullish for the stock market. If Democrats win control of the House or both chambers of Congress, it could mean less aggressive executive actions by President… pic.twitter.com/Jp8UAdv775 — T3 Live (@t3live) October 2, 2026 But that’s not all. If we get a positive resolution on Iran, JR believes Caterpillar (CAT) has potential to put in a big rally: $CAT Bull Case If we get a US-Iran peace deal that sends crude oil lower, Caterpillar is the way to play it. JR Romero believes the stock could get to $922 to $960. See the technical breakdown in this video: pic.twitter.com/qvI6hsU6k2 — T3 Live (@t3live) October 2, 2026
Continue Reading -->Micron Is Going to $1,434
The bears are wrong about Micron (MU). The company delivered a monster earnings report, and JR Romero says the stock is going to $1,434 by late December to early January. JR breaks down everything you need to know about Micron after its latest earnings beat, including: Fundamental Growth: Breakdown of $87% gross margins, $32B in financial commitments, and sold-out HBM capacity. The numbers point to accelerating AI demand, not a slowdown or anything close to it. Plus, Micron’s valuation remains incredibly cheap. Wall Street vs. Reality: Debunking recent analyst downgrades and bear arguments. Tape Reading & Overhead Supply: How $MU is absorbing 20–25M shares of resistance around key levels. Wyckoff Re-Accumulation: Identifying the post-earnings shakeout inside the major demand zone. Price Target Projections: The exact measured moves indicating how $MU can get to $1,434. So if you were disappointed by Micron’s sideways initial reaction to earnings, you should watch this video and get re-educated.
Continue Reading -->The Bond Market vs. the Fed
The Bond Market vs. the Fed The bond market is saying something very loud about the Fed and FOMC Chair Kevin Warsh. And it may not be pretty. Because bonds may be calling BS on the Fed’s ability to rein in inflation. JR Romero explains: The flattening 2-10 year Treasury yield curve is a key indicator of market fear, uncertainty, and doubt regarding a impending economic slowdown or recession. Plus, there is an inverted relationship between strong corporate earnings (especially in AI), and what consumers are feeling. You see this in stocks like McDonald’s (MCD), Monster Energy (MNST), and Pepsi (PEP). Yes, companies like Micron (MU), SanDisk (SNDK), and Nvidia (NVDA) are reporting blowout earnings. But that doesn’t mean the general public is feeling good about the state of the economy.
Continue Reading -->This Stock Is Dynamite
JR Romero loves medical technology stock HeartFlow (HTFL). He calls it a “stick of dynamite” that is breaking out of its IPO base: He explains: Why momentum is strong right now Why it can go to $80 The utility stock he loves right now Why Caterpillar (CAT) is a buy, even with rising interest rates The bullish case for DataDog (DDOG), following big moves by Zscaler (ZS) and Crowdstrike (CRWD) And more!
Continue Reading -->Why Bonds Are Going Up
ATTN: Sami Abusaad and James Rich Young’s next Pristine Mentorship is on the calendar for October through December 2026. Spots are running out! IWM has been falling behind SPY and QQQ. But that may be about to change. Sami Abusaad explains why, and also gives the bull case for US Treasury ETFs TLT and IEF: Sami also goes over: What could make real estate stocks rally from here Why bonds might actually be a buy here The bull case for Dell (DELL) and Seagate (STX) The Bitcoin-related names he is watching here Why IBM (IBM) could fail Want to learn how he makes these gamebreaking trades? Consider his Pristine Mentorship, which he co-leads with James Rich Young.
Continue Reading -->Why Apple Is My Favorite AI Stock
What a week! Meta (META) became an AI superstar, bond yields hit new highs, and I found yet another reason to love Apple (AAPL). Let’s dig in! Skip Ahead! September = SlopWe Have Yet Another AI MonsterApple Is My Favorite AI StockSentiment Is Not BullishTraders Fear Higher RatesFed Expectations Point to HikesNext Week Is About Two ThingsREMINDER: The Pristine Mentorship Is Open September = SlopSeptember is historically the worst month of the year for the S&P 500, but we’ve squeezed into the green:However, just 137 of S&P 500/SPY stocks are up for the month, and the average individual name is down 3.1%. And only 2 of 11 S&P sectors are positive: Technology and Communication Services Interestingly, the Communication Sectors sector has a 22% weighting in Meta (META), which is up over 31% this month on the back of its Muse AI launch. It would be in the red if not for Meta. Related: Why META Is Going to $1,000 So while we could theoretically write a headline “SPY Is Up for September,” the underlying data stinks outside of tech. Meanwhile, small caps have been getting destroyed with IWM down over 3% because of higher interest rates. JR Romero explains here: We Have Yet Another AI MonsterEvery week, I learn about another company reporting blockbuster demand because of AI buildouts. Last week, it was power infrastructure name Forgent Power Solutions (FPS). This week, it was data storage play Everpure (P), which used to be called Pure Storage. The stock exploded Thursday after the company announced monster guidance for FY2028, thanks to AI-driven demand.On Friday, Goldman Sachs said it expects the 5 biggest US hyperscalers (Amazon, Alphabet/Google, Microsoft, Oracle, Meta) to spend $1.2 trillion on AI infrastructure next year. That’s up 54% from this year.Apple Is My Favorite AI StockThere is another AI infrastructure boom happening… at home. More and more people and companies are opting for open-source AI models that run on local computers. That’s because if you run locally, you avoid monthly or per-token charges, and you have greater control of your data. This market appears to be dominated by Apple’s (AAPL) Mac Mini and Mac Studio, which get rave reviews because of their warp-speed processing and low power consumption. Apple just released new Mini and Studio models on Tuesday. I spent some time on Apple.com researching different configurations to see how fast they ship. The earliest shipping date I could find for a Mac Mini was October 15-22. And some Mac Studio configurations don’t ship for another 15-17 weeks. The Mac accounted for just 9% of Apple sales last quarter. I suspect that number will go way up. The Information reported in August that Apple itself was surprised by how many enterprises are using Mac hardware for AI. And they also said Apple was considering a return to the server market. If that happens, let’s pray for the shorts. Apple is my largest stock position, so take what I saw with a grain of salt.Sentiment Is Not BullishThe latest AAII Sentiment Survey shows that just 32.7% of investors are bullish.This is up from 28.8% last week, but it’s still below the long-term average of 37.5%. Meanwhile, 48.8% of investors are bearish, which is well above the average of 31.5%. Plus, CNN’s Fear & Greed Index is at just 38/100, indicating modest fear.So there remains little enthusiasm for the market. And it looks like rates are an issue.Traders Fear Higher RatesOn Thursday evening, I asked members of the Alpha Team VTF® if they were worried about higher rates. 65% of members said yes. Plus, many more members manually typed out a “Yes” instead of taking the poll This wasn’t the most scientific survey in the world (sampling one room of active traders after a tricky day in the market), but rates are clearly a worry.Fed Expectations Point to HikesLast week, the FOMC raised rates by 25 bps, with Chair Kevin Warsh saying “The plain fact is that inflation is too high and has been for too long.” The CME’s FedWatch Tool now shows the market is pricing in a 64% chance of a 25 bps rate hike at the October meeting.That’s up from just 10% one month ago. And the market is pricing in a 51% chance of 50 bp in total hikes by year-end.Next Week Is About Two ThingsObviously, the market wants to see US Treasury yields and crude oil down. Plus some kind of deal between the US and Iran to get the Strait of Hormuz fully open. But as far as the official trading calendar goes, two things matter. The first is the Nonfarm Payrolls Report on Friday. And the second is Micron’s (MU) earnings report on Wednesday. I think this is bigger. As noted, demand for AI infrastructure just keeps going up, so in all likelihood, Micron will sing the same old song about being supply-constrained. But on the off chance Micron says anything negative, expect havoc in the market. Because AI is clearly holding the economy and market up. Anyway, if you care, this is what else is coming:REMINDER: The Pristine Mentorship Is Open Sami Abusaad and James Rich Young’s Pristine Mentorship is open and there are just 13 spots left. In this video, they take you through the 4 steps to becoming an elite trader.
Continue Reading -->Bull or Bear? Pick a Side and Fight
Have you ever wondered why we refer to the daily battle of buying and selling that takes place on Wall Street as the bulls vs. the bears? I think it has to do with the nature of each beast’s relationship to man. A bull sees its target, puts its head down and horns up, and charges ahead no matter what obstacle is in its way. A bull doesn’t stop until it either kills or is killed by the matador. A bear spends much of its time in hibernation and hiding, and it only makes its presence known at the moment of attack. A bear keeps away until a victim enters its territory. In trading we’ve got to take the same approach as these two beasts. If we do the work and determine that we should be bullish, we’ve got to charge ahead on the long side and disregard obstacles. If you’ve ever been long a stock that was charging higher, you know how great the temptation can be to sell early and lock in profit to make sure it doesn’t slip away. Ignoring the negatives in a real bull trend higher is a difficult skill to attain, and perhaps the best we can do is try to hold on a little longer each time we’re in one. In the same vein, if we do the work and determine the appropriate stance is bearish, we’ve got to wait for the market to come into the area we want, then attack and leave. Bulls charge relentlessly, and bears maul swiftly. This is the proper way we should think about our own trading. Each one of us has to determine for ourselves whether we are bullish or bearish. There’s much work that goes into that conclusion, but once we’ve chosen a side, we must use our capital to fight. As for myself, I’ve determined that the appropriate stance for my irreplaceable capital is on the bear side. I’m in 75% cash and waiting for a spot to short. I’m waiting for price to come into the area I want, about $53,000 on the Dow Jones Industrial Average, and then like a bear, I’ll attack. The market is leaning bullish now with the SPX and NDX breaking higher so the DJIA could get nearer the $53K level in the last weeks of September or by the first couple of weeks in October. I’m looking to short the DJIA ETF, the DIA, at around $530 with a tight stop above $537.75 which is the high for September. Above $540 on the DIA and I’ll flip to bullish and scramble to get long something. I’ve also incorporated a time stop into my trade plan: if stocks haven’t started to decline by Halloween, I’ll abandon the bear side for the rest of the year. I’m not going to hold on to a losing position just because I’ve done a thorough analysis and decided I’m bearish. DIA Trade Plan: But what exactly are the facts that give me a reason to be bearish? Merely being “concerned” about stocks’ advance is not a rigorous analysis. Professional speculation requires real analytical work, especially when trying to pinpoint a bull to bear turn. I’ve done the work that leads me to the conclusion that there’s a near picture perfect analog to the 1929 and 1987 crashes. I’ve kept a checklist of signs to indicate when the turn in the business cycle is approaching, and I’ve been keeping an eye out for the anecdotal evidence I remember from the 2008 crash like constant road construction as municipalities rush to spend the record high tax revenues from a previously booming economy and signs of excess like the Hummer EV, which is a nearly exact replica of the sign of excess of the Hummer H2 I saw in the housing boom leading up to the 2008 crash. But a proper analysis requires more than just anecdotal evidence to be taken seriously. So I’ll present my bear case here for anyone to pick apart. Below is a video showing my analysis of the 1929 and 1987 crashes and how they resemble the current market in 2026. 1929 and 1987 Comparison to 2026 video: In addition to the historical October crash analogs, I see further evidence that we are in the early stage of a bear market when I look outside the popular stocks. Aside from several mega cap technology stocks, the underlying market health has been deteriorating for some time. The transports and utility stocks are not confirming any of the bullish narrative. On the contrary, they are looking more like tops. I’ve never seen a bull market in stocks work out with the transports and utilities in a compromised price structure like they currently exhibit. DJT: DJU: The housing stocks are also showing stress. Housing is a major driver of consumer spending which is 70% of our economy. With Warsh’s latest rate increase, I don’t see how housing will pick up without a major move lower in house prices. Neither higher rates or lower prices are going to be supportive of higher economic activity in the short run. XHB: Warsh’s latest rate hike also reminds me of 1987. Alan Greenspan was selected as the new Fed Chair in August of 1987. He thought that business activity was too hot and consumer prices were about to skyrocket so he took rates from 6.5% in August to 8% by October 1987. The rate hikes proved too difficult for the bull market to charge through. The rate hikes were the banderillas thrust into that bull market’s back to wound it, and Treasury Secretary James Baker’s October 18th remarks that he would tolerate a much weaker dollar in response to the Bundesbank’s rate hike was the estocada, the fatal blow delivered to the bull market. Stocks crashed the next day. So far, Warsh’s tenor as Fed Chair is a great analog to Greenspan’s just before the 1987 crash. Aiding my bearish stance is the fact that we’ve
Continue Reading -->META Is Going To $1000
The entire AI story changed for Meta Platforms (META) this week. And the stock quickly surged to $770+. David Prince discusses what it takes to get this to a $1,000 stock: David also goes over: What the new AI narrative means for META How he and the Inner Circle have traded this stock Expectations for other hot names like DELL How he’s been looking beyond the macro picture The setups he currently likes And more! Work with David inside the Inner Circle VTF®
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