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Added: 2026-05-17

[00:00:00]Hey everyone, me Kevin here. Let's get right into it. The market is preparing for a violent rotation and you need to be aware of why we are preparing for this rotation. What history tends to say about the short and long term about this market issue we're facing right now, including the NASDAQ Titanic syndrome, which we're going to break down in this video. Uh, and ultimately one way to consider positioning for the future.

[00:00:26]Now, at the moment, the NASDAQ has just lost a 700. Uh, which remarkably this morning in our alpha report, we pointed out the $700 line as a realistic line we could be retracing down to. 700 was a fantastic breakout. We broke that 700 price target, but there's a particular reason why we are failing the test to get higher to higher future price targets. And it all has to do with market breath. No, that's not stinky meat breath. Although I did have a burger this morning, double slider that the kids didn't finish. I will say the market's breath is not good. And this is what triggers the NASDAQ Titanic syndrome. It's basically when you have very few big winners that are consolidating because of artificial intelligence hardware wins and you have a lot of losers. See, right now the underlying economic data overall in the economy indicates there's no need to rush for rate cuts. ADP jobs are sitting at 33,000 just this morning on a weekly basis ending April 25th, which comes out to a monthly basis of over 130,000 jobs.

[00:01:42]This helps us have a little bit of confidence that even some of those buried skeletons inside of the official labor reports aren't that bad. In other words, even the red flags we're seeing in that BLS report were kind of like ah, but the private payrolls are still holding up. And this is important because typically the consumer holds up as long as they have a job. The issue is the tenure is quite high, but it hasn't broken through our ceiling yet. See, over the past about 3 to four years, we've seen the 10-year Treasury run to a high of about 4.57% multiple times, but we are right below that. And we tend to respect that ceiling. And even though we got an inflation sort of not surprised this morning, month overmonth inflation at 6%, core coming in at 4% which annualizes out to 4.8% not good. uh he you know these things would tend to push treasuries up as they are uh treasury yield. What we're finding is we're still not breaking through that ceiling. And so there are still good things in this economy. It's just the structure on the foundation of the stock market that is creating a large warning sign that we're likely walking into a violent rotation.

[00:03:01]It's also worth remembering that the markets are having to unpric pretty much all rate cuts at the moment. Now, this should be expected, but even Kevin Hasset per Nick T last December said that if inflation goes from 2 and 12% to 4%, you have to do the right thing and you can't cut interest rates. And so, it should be no surprise that right now we only have a 2.8% chance of seeing rate cuts. Instead, we actually face a 34.5% chance of a rate hike in 2026. Now, I personally don't think that we're going to see a rate hike this year, but there are definitely red flags that are going to put more pressure on this potential violent rotation in the stock market.

[00:03:47]See, if you look very closely at the inflation numbers, you'll find that core services x- housing. So, basically ignoring goods inflation from uh you know, tariffs, ignoring energy inflation, you know, all the things we actually spend a lot of money on. Let's just ignore those for a moment. And ignoring housing. If we ignore all of those, we get to core services.

[00:04:07]We shouldn't see a lot of inflation there because we really don't expect it to be affected immediately or directly by oil prices or tariffs. The problem is even core services x housing rose. 045% on the month. That is the third highest read that we've had since January of 2025. And if we multiply that out by 12, we actually annualize out to an inflation rate of 5.4%.

[00:04:34]Which is really high and bad. It's not good. uh and it could contribute to some of this violent rotation which we'll explain in just a moment. Some of uh what we're seeing in yields though in oil prices and pain in the market is of course also because Iran had a counter proposal this weekend requesting a gradual reopening of the Hormuz uh straight of Hormuz and ending the Trump blockade which Donald Trump of course called totally acceptable. Then he says that the ceasefire is currently on life support basically implying he's ready to attack Iran again. Now Donald Trump is on his way to meet Xiinping. Although I personally think and I think this analogy is quite relevant. I think that even though Donald Trump is physically and literally going to China to meet Xiinping, Donald Trump is a bull in a china shop. He's kind of the guy who causes a lot of damage and never fully cleans it up. Now, artificial intelligence and the boom around artificial artificial intelligence spending and capex has helped us absorb some of this bull and China shop damage.

[00:05:39]But consider this. Donald Trump has only finalized economic trade deals, as in tariff trade deals with three countries.

[00:05:48]That's it.

[00:05:51]That means we still don't have finality on tariffs from, you know, basically a year and a bit ago, a year and a month ago.

[00:05:59]uh and we were supposed to have 90 deals signed in 90 days.

[00:06:04]Point is now we have the same thing with Iran bowl and china shop. We cause a lot of damage and we actually end up worse off than where we were before. Now again artificial intelligence is helping absorb that economic pain. But of course the question is how long can we hope that artificial intelligence absorbs that economic pain? For now the answer is probably still a good amount of time.

[00:06:27]But that's not potentially going to stop this violent rotation that we anticipate. Now, I hope the stock market maintains a bounce exactly at $700 today on the NASDAQ 100. Now, I like to use QQQ. If you invest long-term, by the way, you want to consider QQQM. It's nearly the same thing, but it's the one that they don't market. And because they don't market it, the fees are lower. So, just a little bit of free, not personalized, financial advice. Uh but this morning in our alpha report, we literally wrote, I expect a bleed to $700 on QQQ is possible today. However, $700 itself might be a playable bounce in the short term. We did also address the reasons why we'd potentially bleed down today, and a lot of it had to do with a lack of Brett. So, let's understand this. The headline indices, the NASDAQ 100 and the S&P 500 are implying a super strong economy that we're in boom time. But market breath disagrees. We actually have relatively weak foundations. We are literally seeing days where there are 3.14 yes like pi decliners. So three stocks declining for every one stock advancing.

[00:07:38]In other words, if you're looking at your PORTFOLIO GOING, "DAMN IT, WHAT THE HELL? EVERYTHING'S at all time high."

[00:07:44]AND I'M NOT.

[00:07:46]IF that's you, well, you're in the normal bunch. The normal bunch of people are like, "Damn, man. How do we keep hitting alltime highs, but I'm not feeling it? That is actually the sign of a relatively weak in the short-term market that potentially triggers a violent rotation. I'll explain from what to wear in just a moment, but 52% of S&P 500 stocks are over their 50-day moving average. That's not extremely bad breth, but it's not consistent with a widely and broadly expanding market, a broad economy that is widely benefiting from this AI trade. We're not seeing that. If we saw a wide expansion of breath, the market would continue to all-time highs, we'd break through 800 on the NASDAQ 100, uh, you know, QQQ, and and people would be very frustrated by that. But it would really be because we'd see a lot of spread in the stocks that are winning. You wouldn't have Microsoft rejecting 428 and falling. You wouldn't have bank stocks flat to declining. You wouldn't have fintech stocks like SoFi or Robin Hood flat to declining.

[00:08:53]Actually, mostly declining. You know, Robin Hood rejecting 80, SoFi rejecting 20. These are all lines, by the way, we talk about in our course member livereams. We talk about them on the channel a bit, too.

[00:09:04]understand there's something called the excuse meh the references just make me start coughing to the NASDAQ Titanic Syndrome.

[00:09:15]It apparently is known for giving you a cough. That's why you try to antidote it with like a green Luigi mug. But anyway, the NASDAQ Titanic Syndrome has triggered four times in a 5day span.

[00:09:26]Boy, what does that mean?

[00:09:29]All right, so you remember how the Titanic sunk? Uh what happened when it started doing this started becoming really topheavy, right? NASDAQ Titanic syndrome triggers when the market is so topheavy that you have more runners 52- week highs uh being outnumbered by 52- week lows. So basically, if you have, let's say, you know, 10 52- week highs, but 40 52- week lows, that's a Titanic syndrome, and it suggests that the market is on unstable foundations and it might bend over soon. So, typically market breath uh and historically tells us that the next 1 to 3 months, so really the short term, sort of between now and the SpaceX IPO, maybe even right through it a little bit, uh can tend to be a little bit volatile and choppy. Uh it does also provide for weaker longer term returns.

[00:10:22]So, if we have breath that's as wide as 75% on the S&P 500 on a 200 day moving average, so a lot better than where we are today, we would typically expect forward 12-month returns on the stock market of being up 11% on average 85% of the time. So, in other words, if we had more positive breath than we do now, we would still expect to be up double digits 85% of the time. That's great.

[00:10:47]However, historically, when you have bad breath like this, you've got a choppy 1 to 3 months, and on a 3 to six month basis, you're up a little bit, but not a lot. And usually only because a reversal has begun, a violent rotation. Typically what you want to do when breath is weak like this, it's not personalized financial advice, but it is something that I would highly consider at this point and something we've been talking about, excuse me, in our alpha reports is you want to start considering trailing stops on some of the FOMO runners. The FOMO runners are runners that we have been calling out since the beginning of April as likely being really good runners soon. the beginning of April, we called out Nvidia, AMD, SanDisk, and all hardware. We said, "Hardware is about to run." And I got a million comments on YouTube going, "This is insane, Kevin.

[00:11:44]No way, dude. This is ridiculous." And sure enough, we ran like crazy. A lot of people made a lot of money. We hit every single price target that we had on the NASDAQ 100. Our last one was conditional on breath expanding, which has not happened yet. So, we hit every target we had on the NASDAQ 100 and people who have bought call options on it have really made a lot of money. But the point now is because we've gotten so extreme, this divergence has gotten so extreme, we have to be cautious between now and really the next probably 3 months. And so some rotation here is likely, especially coming off the highly concentrated more FOMO stocks, probably into other sectors of the market. So, I actually think it's a good opportunity to start looking at things like if you like bank stocks or maybe you like real estate stocks or maybe you like software, maybe there's some good software plays that you like. I personally think companies like Microsoft could really turn a spigot on their capex and see a whole lot more profit whenever the heck they want. And the SpaceX and anthropic deal really sets the stage for that. That's basically a way of saying that if you can get providers like Iron, Cororeweave, Enbis or SpaceX providing data centers via XAI obviously, then why should Microsoft spend all that money?

[00:12:59]Why can't Microsoft just go back to their 60% margins and milk charging you more for that damn Windows upgrade?

[00:13:07]Damn Windows.

[00:13:09]Anyway, I'm recording this on Windows, so what what can I say? Uh that's what's going on in the market right now. If you found any of this useful, consider subscribing to the channel. I appreciate all those of you who uh support the channel and subscribe and who are course members and otherwise. Good luck out there. Be careful for the Titanic effect and a violent rotation. Highly encourage trailing stops if you've been killing it on some of the runners we've been calling out since the beginning of April. Good luck and goodbye.

[00:13:35]>> Why not advertise these things that you told us here? I feel like nobody else knows about this.

[00:13:39]>> We'll we'll try a little advertising and see how it goes.

[00:13:41]>> Congratulations, man. You have done so much. People love you. People look up to you. Kevin Pafrath there, financial analyst and YouTuber, Meet Kevin. Always great to get your take.