📊 Score Drops to 5.04: Sitting at the Danger Line
The Edge Of Markets score ticked down to 5.04, now sitting at the very top of the High Risk range (4.95-5.04), which normally signals 50% SQQQ / 50% Cash.
But QQQ closed Friday at $609.74, still above its 70-day EMA of $598.84. When price is in an uptrend (above the EMA) and the score is defensive, backtesting shows staying long beats going defensive.
Final Recommendation: 100% QQQ (EMA Override active)
The score is at the danger line—one tick away from Extreme Risk-Off (100% SQQQ). But the trend filter says the uptrend is technically intact. The gap between price ($609.74) and EMA ($598.84) is narrow though. This is high-wire territory.
📉 Friday's Close: Mixed After Violent Intraday Swings
Friday was a rollercoaster after Thursday's brutal selloff (Dow -398 pts, S&P -1.12%, Nasdaq -1.9%). Here's how indices closed:
- Dow Jones: Up 74.80 points (+0.16%) to 46,987.10
- S&P 500: Gained 0.13% to 6,728.80
- Nasdaq Composite: Fell 0.21% to 23,004.54
But Friday's close doesn't tell the story. At their lows of the day, the Nasdaq was down 2.1%, the S&P down 1.3%, and the Dow down 400+ points. Stocks then reversed sharply in the final hour after Senate Minority Leader Chuck Schumer proposed a plan to end the 38-day government shutdown.
Volatility is back. These aren't normal market conditions.
📊 The Weekly Carnage: Nasdaq's Worst Week Since April
Despite Friday's late recovery, the week was an absolute bloodbath:
- Nasdaq: Down 3.2% for the week—worst weekly performance since April 4, 2025
- S&P 500: Lost 1.8% for the week
- Dow: Down 1.4% for the week
What drove the selloff?
AI stocks—the engine that's powered the 2025 rally—got absolutely crushed on valuation fears:
- Oracle: Down 9% for the week
- AMD: Down 9%
- Broadcom: Down 5%
- Nvidia, Microsoft, Meta, Google: All down sharply
Investors are finally questioning whether AI stocks' stratospheric valuations are justified. The answer, at least this week, was a resounding "no."
🏛️ Government Shutdown: 38 Days and Counting
The U.S. government shutdown has now hit 38 days—the longest in the nation's history. And it's not just a political sideshow. It's having real economic consequences.
1. Economic Data Blackout
Key government agencies aren't publishing critical economic reports. We're flying blind on jobless claims, nonfarm payrolls, GDP, housing starts, and trade data. The Fed relies on this data to make policy decisions. Without it, they're hesitant to act.
2. Consumer Sentiment Collapsing
The shutdown is crushing consumer confidence. When people don't trust the government to function, they stop spending. And consumer spending is 70% of U.S. GDP.
3. Schumer's Friday Proposal
Late Friday, Chuck Schumer offered a new plan to Republicans that could end the shutdown. Markets rallied on the news (hence the intraday recovery). But Republicans haven't agreed yet. If this drags into next week, the economic damage compounds.
⚠️ Jamie Dimon's Warning
JPMorgan CEO Jamie Dimon added fuel to the fire this week, warning that a significant stock market correction could happen within the next six months to two years.
Dimon cited overstretched valuations—particularly in AI and tech—as a major risk. When the most powerful banker on Wall Street says stocks are overvalued, people listen.
His timing couldn't be worse (or better, depending on your perspective). Markets were already reeling from the AI selloff. His comments poured gasoline on the fire.
🎯 My Take: The Trend Is Barely Holding
Let's be blunt: The score at 5.04 is screaming danger. It's at the top of the High Risk range, one tick away from Extreme Risk-Off (100% SQQQ). The fundamentals are deteriorating fast:
- AI stocks crushed on valuation concerns
- Nasdaq down 3.2% for the week (worst since April)
- Government shutdown at 38 days (longest ever)
- Consumer sentiment collapsing
- Jamie Dimon warning about potential correction
If I were looking at fundamentals alone, I'd be fully defensive. But the EMA override is still active because QQQ is above its 70-day EMA ($609.74 vs $598.84). That $10.90 gap is all that's keeping us long.
Here's what I'm watching:
- The 70-day EMA at $598.84: If QQQ breaks below, the override turns off → shift to 50% SQQQ / 50% Cash
- Score movement: If it drops below 4.95 → 100% SQQQ regardless of price
- Government shutdown news: If Schumer's proposal fails, expect more downside
- AI stocks: If Nvidia, MSFT, GOOGL continue to fall, the broader market breaks
The trend is barely holding. When it breaks, it's going to break violently.
⚠️ Bottom Line: Stay Long, But Don't Blink
The score is at 5.04 (High Risk), sitting one tick from Extreme Risk-Off. The trend is technically intact (QQQ above EMA 70), so the final recommendation is 100% QQQ. But the margin for error is razor-thin.
If you're following the model:
- Stay 100% long in QQQ as long as price remains above the 70-day EMA ($598.84)
- Watch that level obsessively. If it breaks, shift to 50% SQQQ / 50% Cash immediately
- If the score drops below 4.95, go 100% SQQQ regardless of price action
This week's Nasdaq selloff (-3.2%, worst since April) is a warning shot. Jamie Dimon's correction warning is a warning shot. The score at 5.04 is a warning shot.
Friday's intraday 2% swings show volatility is back. The calm, steady grind higher that characterized most of 2025 is over.
Stay long for now, but keep your finger on the sell button. This market can flip in seconds.