📊 Score at 5.11: No Override, Follow the Caution
The Edge Of Markets score ticked up to 5.11 from last week's 5.04, sitting in the 5.05-5.14 range (Cautious). That signals 40% SQQQ / 60% Cash—defensive positioning.
Here's the critical difference from last week: QQQ closed at $599.87, below its 70-day EMA of $601.38. When price breaks below the EMA, the override that kept us 100% long last week is gone. The trend has shifted.
Final Recommendation: 40% SQQQ / 60% Cash (No EMA Override)
Last week we stayed bullish despite a 5.04 score because QQQ was above the EMA. This week, both the score (5.11) and the trend (below EMA) are saying the same thing: be defensive. When both signals align, you listen.
🔄 Update: The $80B AI Question Gets Answered
Three days ago we covered the market's brutal selloff driven by AI spending concerns. Meta, Microsoft, and Alphabet collectively spent $80 billion on AI infrastructure in one quarter, and investors panicked. The question was: When does this actually pay off?
Tonight, Nvidia provided at least a partial answer. The company reported Q3 FY2026 earnings that crushed expectations:
- EPS: $1.30 vs $1.25 expected
- Revenue: $57.01 billion vs $54.92 billion expected
- Q4 Guidance: ~$65 billion vs $61.66 billion expected
The stock surged ~2.8% before the close and jumped further in after-hours trading. Investors got what they wanted: proof that at least one company in the AI infrastructure chain is printing money. But does that fix the broader problem? Not quite.
📈 Markets Finally Catch a Break
After four straight days of losses, U.S. stocks snapped the losing streak with modest gains:
- S&P 500: +0.38% to 6,642.16
- Nasdaq Composite: +0.59% to 22,564.23
- Dow Jones: +0.1% (47 points) to 46,138.77
The Nasdaq and S&P both ended their four-session slides, led by tech stocks rallying into the Nvidia earnings release. The setup was perfect: investors were nervous, the stock had been beaten down by AI spending fears, and everyone was waiting to see if the hype was justified.
When Nvidia delivered, relief flooded the market. But here's the thing: this wasn't a broad rally. It was a Nvidia-driven bounce after a brutal week. The Dow barely moved (+0.1%), and the breadth of the rally was weak. Most stocks didn't participate.
💥 Bitcoin Crashes Below $90,000
While tech caught a bid, Bitcoin got destroyed. The largest cryptocurrency fell below $90,000 for the first time since April, hitting a low of $89,420. That's a 30% drop from its November peak of $126,250 just six weeks ago.
Why the collapse?
- Risk-off sentiment: Bitcoin and AI stocks attract the same speculative capital. When AI stocks fall, Bitcoin follows.
- Rate cut doubts: Fading hopes for fast Fed rate cuts hurt speculative assets. Bitcoin thrives in low-rate environments.
- ETF outflows: Steady outflows from crypto ETFs signal institutional investors are bailing.
- Correlation to tech: BigTech stocks and Bitcoin are linked trades. When Nasdaq struggled this week, Bitcoin cratered.
One analyst quoted in the Euronews article summed it up: "Bitcoin has now turned negative for 2025. Fears of an AI bubble and concerns about the market's heavy dependence on a handful of tech giants have caused investors to dial back their exposure to speculative assets such as Bitcoin."
The broader crypto market lost about $1.2 trillion in value over six weeks. That's not noise—that's a structural breakdown in speculative appetite.
🏦 Fed Minutes: The Split Deepens
At 2 PM ET, the Fed released minutes from its latest meeting, and the message was clear: the committee is deeply divided on future rate cuts.
The key takeaways:
- Majority still sees cuts ahead: Most Fed policymakers believe there's room for more rate cuts.
- But many want to pause: Several officials argued it would be appropriate to leave rates unchanged for the rest of the year.
- No consensus on December: There's no clear agreement on whether to deliver a third cut in December.
- Data dependency: With October jobs and CPI data delayed by the government shutdown, each new economic release between now and mid-December will matter more than usual.
Translation: The Fed is flying blind. They don't have October data, and they're not sure if the economy is strong enough to skip cuts or weak enough to require them. This uncertainty is toxic for growth stocks, which need lower rates to justify their valuations.
Markets are now pricing in a 55% chance of a December cut, down from 65% earlier this month. That's a massive shift in sentiment.
🎯 My Take: Nvidia Won the Battle, Not the War
Let's be clear: Nvidia's earnings were excellent. Revenue beat by $2 billion, guidance came in $3+ billion above estimates, and the company proved AI infrastructure spending is generating real returns—for them.
But does that fix the broader market's problems? No.
- Only Nvidia is winning: Meta, Microsoft, and Alphabet are spending $80B/quarter on AI, but their revenue models are still unclear. Nvidia sells them the shovels. Who's actually mining the gold?
- Fed uncertainty remains: Rate cut odds are fading. Growth stocks need lower rates to justify valuations. Higher-for-longer kills the AI trade.
- Speculative assets are bleeding: Bitcoin down 30% from peak. Crypto market lost $1.2 trillion. This is risk-off behavior.
- Breadth is weak: Dow barely moved today (+0.1%). The rally was driven by tech hope, not broad conviction.
And here's the signal that matters most: QQQ broke below the 70 EMA. Last week, that EMA at $602 was the lifeline keeping us bullish despite a 5.04 score. Now QQQ is at $599.87, and the trend has flipped.
The score (5.11) and the trend (below EMA) are now aligned: be defensive. This is not the time to chase the Nvidia rally. The fundamentals are deteriorating, and one good earnings report doesn't change that.
⚠️ Bottom Line: One Rally Doesn't Fix Structural Cracks
Today felt good for bulls. Markets snapped a four-day losing streak, Nvidia crushed earnings, and sentiment improved. But zoom out, and the picture is still concerning.
Why Stay Defensive:
- Score at 5.11 (Cautious): 40% SQQQ / 60% Cash range. The model is signaling weakness.
- QQQ below EMA 70: $599.87 vs $601.38. The trend filter says respect the downtrend. No override.
- Bitcoin crashed 30%: Speculative appetite is gone. When Bitcoin dumps $36K in six weeks, risk-off is real.
- Fed is divided: No consensus on December cuts. Data blackout from shutdown makes decisions harder.
- AI spending still unclear: Nvidia wins, but where's the ROI for Meta/MSFT/GOOGL spending $80B/quarter?
What to Watch:
- QQQ $601.38: If price reclaims the 70 EMA, the override could flip us back to 100% QQQ. For now, stay defensive.
- Score movement: If it drops below 5.05, we move to 50% SQQQ / 50% Cash (High Risk). Watch for deterioration.
- Economic data: November CPI and jobs reports coming soon. With October data lost to the shutdown, these prints will matter more.
- Fed speakers: Watch for commentary on December cuts. If odds drop to 50% or lower, growth stocks get hit.
If you're following our strategy: Move to 40% SQQQ / 60% Cash (Cautious range: 5.05-5.14). Last week the EMA override kept us bullish. This week, QQQ broke the trend and the score is confirming caution. Don't fight both signals. Nvidia's beat is nice, but it doesn't fix the Fed problem, the AI ROI question, or the collapse in Bitcoin. Protect capital until the trend confirms a reversal.