Monday, November 3rd. First trading day of the month. And the AI trade is alive and kicking.
Amazon announced a $38 billion deal with OpenAI to provide hundreds of thousands of Nvidia GPUs through AWS. The stock surged +4% to a fresh record. Tech rallied. The Nasdaq gained +0.46%. The S&P inched up +0.17%. The Dow fell -0.48%.
Translation: This is a very narrow rally driven by a handful of AI stocks. And that's a problem.
📊 Score Unchanged: 5.04, EMA Override Still Active
The Edge Of Markets score remains at 5.04, in the High Risk range (4.95-5.04). Normally this signals 50% SQQQ / 50% Cash—a very defensive positioning.
But QQQ closed today at $632.08, well above its 70-day EMA of $596.38. When price is in a strong uptrend (above the EMA) and the score is defensive, our backtesting shows staying long outperforms going short or sitting in cash.
Final Recommendation: 100% QQQ (EMA Override)
The conflict continues: the economic score warns of high risk, but the trend says stay invested. The score has been frozen at 5.04 since October 30th—no new economic data to move the needle. This matters because if the score drops below 4.95, we enter Extreme Risk-Off territory (100% SQQQ). Watch closely.
🤖 The $38 Billion AI Bet: Amazon + OpenAI
Here's the headline that moved markets today:
Amazon Web Services (AWS) struck a seven-year, $38 billion deal with OpenAI to provide access to hundreds of thousands of Nvidia GB300 GPUs. This marks OpenAI's first major cloud partnership outside of Microsoft.
Why this matters:
- Validates the AI infrastructure buildout: OpenAI needs massive compute power to train and run its AI models. AWS is now a critical partner alongside Microsoft.
- Nvidia wins again: NVDA shares rose +2% today. Loop Capital raised its price target on Nvidia to $350, a new Wall Street high. The GPU arms race continues.
- Confirms cloud dominance: AWS remains the backbone of AI infrastructure. Amazon's cloud revenue grew +20% last quarter (from Friday's earnings), and deals like this lock in future growth.
Amazon shares closed at an all-time high, adding to Friday's +9.6% post-earnings surge.
The AI trade is real. The infrastructure buildout is real. But the question is: how much of this is priced in?
⚠️ The Breadth Problem: 80% of Stocks Are Falling
Here's the uncomfortable truth about today's rally:
The S&P 500 closed at 6,851.97, up +0.17%. But 80% of stocks in the index are trading below their 200-day moving averages.
Let that sink in. The index hits new highs, but four out of five stocks are in downtrends.
What's driving this?
- Mega-cap concentration: Amazon, Nvidia, Microsoft, Apple—the biggest names are doing all the heavy lifting.
- Dow down, Nasdaq up: The Dow fell -0.48% today while the Nasdaq rose +0.46%. That's a 94-basis-point divergence in a single session.
- Sector rotation out of cyclicals: Energy, industrials, financials are lagging. Investors are hiding in big tech because it's the only safe haven.
This is classic late-cycle market behavior: narrow leadership, weak breadth, concentration risk.
When 80% of stocks are falling but the index is rising, that's not a healthy market. That's a fragile market propped up by five names.
📈 Other Notable Moves: Semis, Data Centers, Earnings
Beyond Amazon and Nvidia, here's what moved today:
- Micron Technology (MU): Up nearly +5% on chipmaker optimism tied to AI demand.
- Iren (IREN): Surged +22% in premarket after announcing a $9.7 billion deal with Microsoft to provide Nvidia GB300 GPUs over five years. The AI infrastructure buildout is creating huge opportunities for data center operators.
- ON Semiconductor (ON): Rose +3% after Q3 earnings beat. Adjusted EPS of $0.63 on revenue of $1.55 billion, both above analyst estimates.
- Palantir (PLTR): Up +1.7% ahead of earnings after the close. Stock has been on a tear lately due to AI/defense exposure.
The theme is clear: AI infrastructure, semiconductors, and cloud computing are the only games in town. Everything else is struggling.
🎯 My Take: Enjoy the Rally, But Don't Ignore the Warnings
Let's be clear: the AI trade is working. Amazon, Nvidia, Microsoft—these stocks are hitting new highs and the fundamentals back it up. The $38 billion OpenAI-AWS deal is real. Cloud revenue growth is accelerating. AI demand is surging.
But here's the problem:
- The rally is paper-thin: 80% of stocks falling while indices hit new highs is unsustainable.
- The score warns of risk: At 5.04 (High Risk), our model is one tick away from Extreme Risk-Off (4.95). The EMA override keeps us long, but we're navigating on the edge.
- Powell's hawkish shift lingers: Friday's Amazon rally temporarily distracted from the Fed's messaging, but the reality is rates are staying higher for longer. The 10-year Treasury yield is back above 4.0%.
- Concentration risk is massive: When five stocks carry the entire market, one bad earnings report or one negative headline can trigger a sharp reversal.
This is a trader's market, not an investor's market. If you're following the EMA override and staying 100% QQQ, that's fine—but don't get complacent. The trend is your friend until it isn't.
If the score drops below 4.95, the EMA override won't save you. At that point, the signal is clear: Extreme Risk-Off (100% SQQQ). We're not there yet, but we're close.
💡 Bottom Line: Ride the Wave, But Keep One Hand on the Exit
AI fever is driving this market. Amazon's $38B OpenAI deal proves the infrastructure buildout is real. Nvidia, Amazon, Microsoft are winning. The trend is intact.
But beneath the surface, this market is fragile. Breadth is terrible. The Dow is falling while the Nasdaq rises. 80% of stocks are below their 200-day moving averages. Powell's hawkish pivot hasn't gone away. Treasury yields are rising.
The score at 5.04 says: tread carefully. The EMA override says: stay long. The market says: it's complicated.
For those following our strategy: Maintain 100% QQQ (EMA override active). But if the score drops to 4.94 or lower, that's your signal to flip defensive. Don't fight the tape, but don't ignore the warnings.
November just started. Let's see if this narrow AI rally can broaden out—or if it collapses under its own weight.