📊 Score at 5.04: EMA Override Keeps Us Long
The Edge Of Markets score sits at 5.04, unchanged from Wednesday and firmly in the 4.95-5.04 range (High Risk). That normally signals 50% SQQQ / 50% Cash—defensive positioning.
But QQQ closed Friday at $608.86, above its 70-day EMA of $602.00. The $6.86 cushion is thin—down from last week's $19 buffer—but it's enough to keep the EMA override active.
Final Recommendation: 100% QQQ (EMA Override active)
The score is warning caution, but the trend filter says stay invested. This week proved why the override exists: QQQ fell 2.5% Thursday, but recovered Friday to close the week flat. Fighting that trend would've cost us.
📅 Week in Review: Tech's Rollercoaster
What a week. Let's break down the chaos:
- Monday (Nov 11): Government shutdown ends after 43 days. Dow +1.18%, Nasdaq mixed. Score at 5.0. Rotation out of tech begins.
- Tuesday (Nov 12): Dow breaks 48,000 for the first time ever (+0.68%). Nasdaq falls 0.26%. AMD surges 6% on growth targets. Tech sector down 0.9%.
- Wednesday (Nov 13): Markets collapse. Dow -619 points (-1.3%), Nasdaq -2.5%. Score hits 5.04. META down 11% on $70B capex guidance.
- Thursday (Nov 14): Economic data blackout continues (October CPI/jobs reports delayed). Markets digest AI spending concerns. QQQ stabilizes.
- Friday (Nov 15): Tech rebounds +0.5% as buyers step in. QQQ recovers to $608.86. Week ends basically flat for tech.
The headline: tech survived, but just barely. QQQ started the week around $621, fell to $597 Thursday, and closed Friday at $609. That's a round trip to nowhere—but it felt like a lot more pain than that.
The score stayed locked in High Risk mode (5.04) the entire week. It wasn't wrong—markets were volatile, tech leadership was questioned, and the EMA override was the only thing keeping us long.
💸 The $80 Billion Question: Will AI Pay Off?
Here's what spooked markets Wednesday: Microsoft, Meta, and Alphabet collectively spent $80 billion on AI infrastructure in the most recent quarter. That's not annual spending—that's one quarter.
META was the worst offender, raising its 2025 capex guidance to $70 billion, up from $66 billion. The stock fell 11% in response. Investors are starting to ask the uncomfortable question: When does this investment actually generate returns?
The bull case for AI has always been:
- Build the infrastructure now (GPUs, data centers, power)
- Train massive models (GPT, Llama, Gemini)
- Monetize through subscriptions, ads, productivity gains
- Profit margins expand as AI scales
The problem? We're still stuck on step 1. Companies are spending tens of billions, but the revenue models are murky. ChatGPT Plus is $20/month. Meta AI is free. Google is experimenting with Gemini Advanced at $19.99/month. These aren't massive profit centers—yet.
So when do we see ROI? That's the $80 billion question. And this week, investors decided they don't have a good answer. Hence the selloff.
🏦 Fed Rate Cut Odds Are Fading
Another headwind for tech: December rate cut odds fell to 55%, down from 65% earlier in the week. That's a significant shift. Markets are now pricing in a 45% chance the Fed holds rates steady in December.
Why the change?
- Data blackout: The government shutdown delayed October CPI and jobs reports. The Fed might not have enough fresh data to justify a cut.
- Inflation risks: Without October data, the Fed is flying blind. If inflation resurges (we won't know until November data drops), they can't cut.
- Powell's messaging: In late October, Powell signaled "no rush" to cut rates. Markets are finally listening.
When rate cut expectations drop, growth stocks get hit hardest—especially expensive tech. Lower rates make future earnings more valuable (discounted cash flow). Higher-for-longer rates mean those future AI profits are worth less today.
This is a double whammy for tech: AI spending concerns + fading rate cut hopes = sell first, ask questions later.
🔄 The Great Rotation Continues
While tech struggled, the Dow Jones had a banner week. The index broke 48,000 for the first time in history on Tuesday, driven by healthcare, consumer staples, and industrials.
This is a classic sector rotation:
- Money leaving: High-valuation tech (QQQ down ~2% mid-week)
- Money entering: Defensive value plays (Dow up +0.68% Tuesday)
- Why: Investors want predictable earnings (Procter & Gamble, Johnson & Johnson) over speculative AI bets (Meta, Alphabet)
The score picked this up. At 5.04, it's signaling caution—which aligns perfectly with investors questioning tech leadership. The EMA override kept us in QQQ, but the underlying fundamentals are shaky.
If this rotation accelerates, we could see QQQ break below the $602 EMA. That would flip the recommendation to 50% SQQQ / 50% Cash immediately. For now, the trend is holding—barely.
🎯 My Take: The Override Saved Us This Week
Let's be honest: the score was right to be cautious. At 5.04 (High Risk), it was screaming "50% SQQQ / 50% Cash." If we had followed that, we would've avoided Thursday's 2.5% Nasdaq dump.
But we didn't. We stayed 100% QQQ because of the EMA override. And that decision worked out—barely. QQQ ended the week essentially flat, recovering Friday after Thursday's bloodbath.
Here's the lesson: the score measures fundamentals, the EMA measures trend. Sometimes they conflict, and when they do, backtesting shows respecting the trend wins more often.
But this isn't a free pass to ignore the score. It's sitting at 5.04—one tick from Extreme Risk-Off (< 4.95). The fundamentals are deteriorating:
- AI spending concerns (META -11%, $80B quarterly capex)
- Rate cut odds fading (55% December cut, down from 65%)
- Sector rotation out of tech (Dow breaks records, Nasdaq struggles)
- Economic data blackout (October CPI/jobs reports delayed)
The EMA override is a trend filter, not a guarantee. If QQQ breaks $602, we're flipping to defensive immediately. Don't get complacent.
⚠️ Week Ahead: Watch These Levels
Tech survived this week, but the battle isn't over. Here's what to watch as we head into the new week:
Critical Levels:
- QQQ $602: The 70 EMA. If we break below, override ends and we flip to 50% SQQQ / 50% Cash.
- Score 4.95: If the score drops below this, we're in Extreme Risk-Off territory (100% SQQQ recommended).
- Fed speakers: Watch for commentary on rate cuts. If December cut odds drop further, tech gets hit.
- Economic data: The government is back open. If November CPI/jobs data comes in hot, markets will reassess.
Key Themes:
- AI ROI question: Are companies spending $80B/quarter on AI infrastructure without a clear path to profits? This narrative isn't going away.
- Sector rotation: Will money keep flowing from tech to value? The Dow breaking 48,000 suggests yes.
- Rate cut expectations: If December cut odds fade to 50% or lower, growth stocks are in trouble.
If you're following our strategy: Stay 100% QQQ (EMA override active), but have your exit plan ready. The score is at 5.04, the EMA cushion is $6.86, and the fundamentals are weakening. This is not the time to be complacent. The market gave you advance warning this week—respect it.