📊 Score Holds Momentum at 5.37 While the Market Burns
The score hasn't budged from 5.37 (Momentum: 60% QQQ / 40% TQQQ) since early Tuesday morning. Meanwhile, everything got sold today. Dow -669, S&P -1.57%, Nasdaq -2.03%, gold -3%, bitcoin -3.3%. QQQ cratered to $600.64, down $12.47 on the day.
That puts QQQ $17.85 below the 70-day EMA at $618.49—a gap that's been widening all week. No EMA override here. We follow the score directly, and the score says stay in Momentum.
Final Recommendation: 60% QQQ / 40% TQQQ
I won't sugarcoat it: the score's Momentum signal has been getting punched in the face for two straight sessions. More on that below.
💥 Cisco: When AI Costs More Than It Makes You
Today's market carnage has a name: Cisco Systems. The stock plunged 12% despite beating on revenue ($15.35B vs $15.11B expected) and EPS ($1.04 vs $1.02). How do you beat estimates and lose 12%? Easy—your margins get eaten alive.
The culprit: DDR5 and High-Bandwidth Memory costs spiked 400% year-over-year. Non-GAAP gross margin slipped to 67.5%, missing the 68.14% target. CEO Chuck Robbins bragged about $2.1 billion in AI infrastructure orders and raised full-year AI order guidance to $5 billion. Great. But when the components to fill those orders cost four times what they did last year, revenue growth doesn't mean profit growth.
This is the AI paradox in real time: demand is through the roof, but the supply chain is extracting every cent of margin. Cisco is selling AI infrastructure like hotcakes and somehow making less money doing it. If you're long the AI buildout, this is the warning shot. Revenue isn't profit.
🏠 Housing Just Fell Off a Cliff
Existing home sales plunged 8.4% in January to a seasonally adjusted annualized rate of 3.91 million—the slowest pace since December 2023 and the biggest monthly drop since February 2022. Economists expected a 4.6% decline. They got nearly double that.
NAR's chief economist Lawrence Yun is calling it "a new housing crisis." And he's not being dramatic:
- Sales fell across all regions, worst in the South and West
- Median price hit $396,800 — highest January price on record
- 30-year mortgage at 6.09%, barely budging despite Fed cuts
- Sales down 4.4% year-over-year
Here's the sick irony: affordability is technically improving (wages outpacing home price growth, rates lower than a year ago), and sales still cratered. That tells you something deeper is broken—consumer confidence is shot, and people aren't buying regardless of whether they technically can.
🔥 The "Sell Everything" Trade
You know it's a bad day when stocks, gold, AND bitcoin all go down together. That's not rotation—that's capitulation ahead of a catalyst.
- Dow: -669 points (-1.34%) to 49,452
- S&P 500: -1.57% to 6,833
- Nasdaq: -2.03% to 22,597
- Gold: -3.1% to ~$4,941
- Bitcoin: -3.3% to ~$65,590
- 10Y yield: Down 8bp to 4.098%
The only green on the board? Equinix +10.4% on AI data center demand (data centers are the new oil), and treasuries rallied as money fled to safety.
Yields dropping while stocks dump tells a clear story: the market is starting to worry about growth, not inflation. The housing data reinforced that. And tomorrow's CPI report is the next verdict.
🎯 My Take: The Score Is Getting Tested
Let's be honest. The score has been sitting at Momentum (5.35-5.37) since last Thursday, and since then QQQ has gone from $609 to $600. That's a 1.5% loss while holding a leveraged-long signal. With the 40% TQQQ allocation, the actual pain is worse.
Is the score wrong? It depends on your timeframe. The economic data actually supports the reading—130K jobs, unemployment at 4.3%, wages growing 0.4% monthly. The economy is fine. The market doesn't care because it's obsessed with rate cuts that aren't coming, AI margin compression it didn't expect, and a housing market that just face-planted.
The score reads economic fundamentals. Right now, fundamentals say "the economy is healthy." The market is saying "we priced in more rate cuts than we're getting, AI costs are higher than we thought, and we're nervous about CPI tomorrow." Those are two different conversations.
I won't pretend today was a win. It wasn't. But I'd rather be positioned for economic reality than chasing fear-driven selling the day before a CPI report that could easily come in soft and trigger a massive relief rally. Being early and being wrong feel identical today. Tomorrow might clarify which one this is.
📅 Tomorrow: CPI Is the Whole Game
January CPI drops at 8:30 AM ET Friday. This is the single most important data point of the month. Here's why:
- Hot CPI → Rate cuts pushed even further out, yields spike, stocks dump harder
- Cool CPI → Relief rally, yields drop, potentially violent reversal to the upside
- In-line CPI → Probably a muted reaction, market stays in wait-and-see mode
December showed CPI at 2.7% annually with core at 2.6%. If January comes in below those numbers, every single seller from this week will scramble to cover. If it comes in hot, buckle up—because the "higher for longer" narrative just got more ammo and this selloff has legs.
The CME FedWatch tool has a March cut at 37% and an April cut at 47%. A cool CPI could flip those odds dramatically. A hot one buries them.
⚠️ Bottom Line: Storm Before the Verdict
Today was ugly. No other way to put it. The score's Momentum signal took a beating as QQQ dropped 2% and everything from gold to bitcoin to mega-cap tech got torched.
But this is a pre-CPI selloff, not a fundamental breakdown. Traders are de-risking ahead of tomorrow's 8:30 AM number. If CPI comes in soft, today's sellers become tomorrow's buyers. If it comes in hot, the score's divergence from price action becomes a bigger problem.
Key levels to watch:
- QQQ $595: Next support level — if we break below, the selloff has more room to run
- QQQ $618.49: The 70 EMA — reclaiming this flips the trend filter back to bullish
- 10Y at 4.0%: If yields break below, it signals growth fears are real
- CPI consensus: Any reading below 2.7% annual is market-friendly
Score says Momentum. Market says panic. Tomorrow's CPI breaks the tie.