Editor’s Note: According to Jeff Brown and Marc Chaikin, something is quietly going wrong with some of America’s favorite AI companies… and most people have no idea.
That’s why these industry legends are sitting down on Wednesday to discuss what they are calling the “Dark Chip” crisis.
It’s a looming breakdown tied to a structural flaw embedded in the AI buildout. And it could leave millions of AI chips rotting in warehouses while the companies that depend on them run into a brick wall.
But this dark prediction has a silver lining with the potential to 12X early investors’ money… for those who know what’s coming and are prepared.
Jeff and Marc are getting into all the details on April 29 at 8 p.m. ET. If you want to learn more about the Dark Chip crisis and how they are positioning to handle it, you can go here to automatically add your name to their guest list.
It seems nothing can hold back the rally in stocks.
A fragile ceasefire between the U.S. and Iran has delivered no breakthrough in peace talks.
Both sides continue fighting for control over the Strait of Hormuz, where – up until Iran closed it in late February – 20% of the world’s oil and petroleum products flowed every day.
Oil prices remain near their highest levels since the conflict broke out. Brent crude, which is a popular global oil benchmark, is trading at $105 per barrel.
And then there’s the pending change of control at the Federal Reserve. Fed chair nominee Kevin Warsh is navigating his confirmation hearing on Capitol Hill.
The pending change in leadership is throwing uncertainty into the most important economic institution in the world.
But despite all the headwinds, the stock market is jumping to new record highs. By some measures, the recent move has been historic.
Let’s find out if this rally is the real deal or if investors chasing the rally are setting themselves up for disappointment.
On March 30, the S&P 500 was down 9% from its January high. Since then, the index has jumped by 12%.
That includes a 10-day stretch into mid-April that saw the S&P up nearly 10%. That ranks as one of the strongest 10-day returns since 1950.
At the same time, the S&P has gone from being oversold to overbought at the second-fastest pace in history. Here’s the S&P chart below…
You can see in the bottom panel that the index went from oversold – based on a Relative Strength Index (RSI) reading below 30 – to overbought above 70 in just 11 days. There’s only one other instance in history where the index had a quicker move from oversold to overbought… a sharp rally during the summer of 1982.
Given the quick jump to new record highs, fear of missing out – FOMO – has investors scrambling to get in.
One measure of stock market exposure among active professional investors is already back near the highest levels of the year. A survey of retail investors showed a jump in bullish views to the highest level since January.
But while it may appear that calm is quickly returning to the market, one key indicator is refusing to sound the “all clear.”
While the S&P 500 is rallying like there’s nothing to worry about and investors are becoming more bullish, we haven’t seen the same type of response from Wall Street’s “fear gauge.”
That’s the term given to the CBOE Volatility Index (VIX) that tracks implied volatility on the S&P 500. It tends to rise when stocks are selling off, which is when price swings usually pick up.
Here’s the VIX chart below.
While the VIX is pulling back from the highs seen in March, it has only fallen back to the 19 level, which is near the long-term average (dashed line). It also remains well above the levels seen the last time the S&P was trading at a record in January.
That shows concerns remain about the risks facing the market even though the S&P is pushing to record highs with ease.
It’s worth paying attention whenever this type of diverging action happens between the S&P and measures of volatility.
That’s not to say that VIX can’t resume drifting lower. But given it’s refusing to budge as the S&P holds near-record highs, be careful giving in to FOMO.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
