Scary!

This is an alarming chart for Meta Platforms. We have a red-line sell signal, a broken trend line, and a breakdown from a top area. Meta Platforms is a bellwether stock and a huge spender on AI and data centres.

The chart for the Nasdaq 100 also looks unhappy. We don’t yet have a declining red line, but the uptrend has broken, and a yellow sell has been signalled. The message is that this is a dangerous market vulnerable to negative shocks.

The Russell 1000 is an index of the 1,000 largest US stocks, considered suitable for institutional investment. The uptrend line has been broken, and a yellow sell signal is a whisker away. The latest month’s price action looks like a breakdown.

I don’t know why the charts are becoming so negative. Rising bond yields and tightening oil supplies are alarming, but I don’t see that war or AI should be such negatives. The danger with alarming charts like these is that, when the fog clears, and we know why stocks are weak, much of the damage will already have been done.

I am worried about my two bellwether stocks.

Palantir and Nvidia chats look increasingly negative. They can bounce from here, but they haven’t done so yet, and as successive rallies run out of steam, investor confidence will drain away

Both shares have glittering fundamentals, but the charts are eroding and have given sell signals on my yellow triangle plus trend line break (TLB) system. Long traders should not hold these shares.

Amazon shares have given a red-line sell signal. There are grounds, at least, for caution. Could this be the beginning of a changing of the guard, with new stocks set to emerge and provide leadership for the next bull market?

The Spotify chart shows what is happening to many stocks.

All the moving averages decline; the shares crash, become oversold, rally strongly, the rally peters out, and the decline resumes. Spotify has the opportunity to use AI to improve its service (I have 9,467 songs on my Spotify list, all carefully curated), but will AI prove to be a double-edged sword? Is AI going to make all the services Spotify provides virtually free? I suspect it may. What do I know, but something is worrying investors.

The problem is that AI has become like a shark circling below the surface. Nobody knows who it will bite next. One thing is clear. The bullish long trade in Spotify is over, at least for now.

Strategy – Cash Is King

When shares are falling and investors are in liquidation mode, the place to be is in cash. Hence, the expression – cash is king. Bear markets end, and when they do, it is a time of exciting opportunities, but this bear market may be just beginning.