Wednesday: Powell kills the rally with a hawkish surprise. Thursday: Score drops to 5.04. Friday: Amazon saves the week.
That's the story in three beats. Let's break it down.
📊 Score Status: Still at 5.04, EMA Override Active
The Edge Of Markets score sits at 5.04, at the top of the High Risk range (4.95-5.04). Normally, that signals 50% SQQQ / 50% Cash—a very defensive posture.
But QQQ closed Friday at $629.07, well above its 70-day EMA of $594.25. When price is trending above the EMA and the score suggests going defensive, backtesting shows staying long outperforms shorts or cash.
Final Recommendation: 100% QQQ (EMA Override)
This is the conflict we're navigating: the economic score warns of high risk, but the trend says stay invested. If the score drops below 4.95, we'd enter Extreme Risk-Off territory (100% SQQQ without the override). Watch this closely into next week.
📈 Friday Wrap: Amazon Leads Tech Higher
Markets closed October strong, led by Amazon's blowout earnings report released after Thursday's close:
- Nasdaq Composite: +0.61% to 23,724.96
- S&P 500: +0.26% to 6,840.20
- Dow Jones: +0.09% to 47,562.87 (basically flat)
Amazon (AMZN): Surged +9.6% after reporting Q3 cloud computing revenue growth of +20%, crushing Wall Street estimates. AWS (Amazon Web Services) continues to dominate the cloud infrastructure market, and AI workloads are driving accelerating demand.
The rally was narrow—tech did the heavy lifting while the Dow barely budged. This is classic late-cycle market behavior: a handful of mega-cap growth stocks carrying the indices while breadth weakens.
Translation: The rally isn't broad-based. It's concentrated in big tech, which makes it fragile.
🎯 The Powell Problem: Hawkish Pivot Still Looming
Amazon's earnings provided a welcome distraction, but the bigger story this week was Powell's hawkish surprise on Wednesday.
Recap: The Fed cut rates by 0.25% as expected, but Powell said December's cut is "far from a foregone conclusion." Markets that were pricing in nearly 100% odds of another December cut now see only 67% probability.
Why does this matter? Two reasons:
- Higher Treasury yields: The 10-year yield is back above 4.0%, and the 2-year is above 3.6%. Higher yields = higher discount rates = lower stock valuations, especially for growth stocks.
- Fed credibility: Powell signaled the Fed's data-dependent approach is shifting to a "wait-and-see" stance. Translation: The easy money era is over. Rate cuts will be slower, smaller, and conditional.
Friday's Amazon rally temporarily masked this issue, but it's still there. The Fed is tightening financial conditions even as it cuts rates—Powell's messaging is doing the heavy lifting.
Bottom line: One earnings beat doesn't erase the structural headwind of tighter Fed policy.
🗣️ Fed Dissent: Dallas Fed's Logan Opposed This Week's Cut
Adding to the hawkish narrative: Dallas Fed President Lorie Logan said Friday she would have voted against this week's rate cut if she had a vote (regional Fed presidents rotate voting rights).
Her reasoning:
- Labor market "cooling slowly": Unemployment remains low, job growth is slowing but not collapsing
- Inflation "too high": Still above the Fed's 2% target, putting pressure on household and business budgets
- Economic outlook doesn't justify cuts: She believes conditions aren't weak enough to warrant easing
This is significant because it shows dissent within the Fed. Powell's hawkish pivot on Wednesday wasn't a one-off comment—it reflects a real internal debate about whether the Fed is cutting too fast.
If more Fed officials echo Logan's concerns, December's rate cut becomes even less certain. Markets aren't fully pricing this risk yet.
📊 October Recap: Strong Month Caps Strong Year
October ended on a high note despite Powell's hawkish shift. Here's where the major indices stand year-to-date:
- Nasdaq Composite: +22% YTD (tech dominance continues)
- S&P 500: +16% YTD (solid gains, but tech-heavy)
- Dow Jones: +12% YTD (lagging as old economy struggles)
Notable: Nvidia just became a $5 trillion company this week, underscoring the AI-driven mega-cap rally that's carrying these indices.
November outlook: Historically November is the best month for the S&P 500, averaging a +1.8% gain since 1950 (per Stock Trader's Almanac). But historical averages don't account for Fed policy uncertainty and narrow market breadth.
Strong year so far, but the setup heading into November is precarious. Don't confuse year-to-date momentum with forward-looking safety.
🎯 My Take: This Is a Tug-of-War, and the Score Is Warning About the Rope
Here's the tension:
- Bullish case: Amazon crushes earnings, tech leadership is strong, QQQ is above its EMA, November is historically bullish
- Bearish case: Score at 5.04 (High Risk), Powell hawkish pivot, Fed dissent growing, narrow breadth, yields rising
The EMA override keeps us 100% long because the trend is intact. But make no mistake: the score at 5.04 is a warning signal. We're already in High Risk territory (Short 50% without the override), and a drop below 4.95 would take us to Extreme Risk-Off (Short 100%).
What would change the picture?
- Bullish catalyst: Score moves back above 5.05 (exits High Risk range), Fed softens tone, economic data strengthens
- Bearish catalyst: Score drops below 4.95 (Extreme Risk-Off), QQQ breaks below 70 EMA ($594.25), yields spike further on Fed hawkishness
Right now, the trend is your friend. But the score is telling you to watch your friend closely—they might not be as reliable as they seem.
⚠️ Bottom Line: Amazon Bought Us Time, But November Starts on Shaky Ground
Amazon's cloud growth saved the week and gave bulls a reason to stay optimistic. Friday's rally capped a strong October and a stellar year for equities.
But beneath the surface, the score at 5.04 is flashing warning signs. Powell's hawkish pivot, Fed dissent, rising yields, and narrow breadth all point to a market that's more fragile than the index levels suggest.
What to watch next week:
- Economic data: Jobs report, ISM manufacturing, any Fed speeches
- Score movement: Does it hold at 5.04, drop further, or recover?
- QQQ vs. EMA: If QQQ breaks below $594.25, the EMA override ends and we follow the defensive score
- Breadth: Does the rally broaden beyond mega-cap tech, or does it narrow further?
Final stance: Stay long (100% QQQ) as long as the trend holds, but tighten your stops and respect the score's warning. This isn't the time to get complacent just because Amazon had a good quarter.