In today's episode, Kip takes us through a tough day in the financial markets, with tech stocks experiencing significant pressure. He also explains that the fundamentals and other market areas remain stable, with banks and the broader markets holding firm. As Kip outlines his analysis and expectations, he reflects on historical precedents and emphasizes the potential for upcoming buying opportunities, particularly within the burgeoning innovation revolution.

Well, look back. The market is closed. Good. What’s this today? Good. Thursday afternoon, everyone. Kip Herriage here with the daily VRA Investing podcast. It has been one of those days. Today it’s been tech heavy, tech heavy selling here.

Rest of the markets really held up just fine today. Again, the smart money hour was bad again today. That makes three out of, as Tyler just told me, reminded me that’s three out of four days this week that we’ve seen selling pressure in the smart Money hour. Just the opposite of what you want to see. Again, semis leading lower now. SMH a semi ETF down 29% from its highs of last year. Nasdaq down 8%. Getting close to correction territory as Nasdaq 100 down 7%.

[00:00:42]:
The MAG 7 stocks of course have been hit the hardest. Bank stocks actually finished up on the day. So the internals were fine today. So there wasn’t broad destruction here. We had 67% down volume on NYSE 70, 70% down volume on NASDAQ. Again, no significant damage here based on the internals at all. This is all tech related. And so let me tell you what that means typically based on how we see the markets and how I’ve learned to interpret them over the 40 years.

First of all, when you see a move like this in tech, because tech does lead, it’s telling you one or two things. It’s a broader economic story, meaning maybe the US is going into a recession. I don’t believe that. I don’t know many people that I respect that do, but that’s, that’s where you go first. Second of all, you say that there’s a problem with the AI story. We saw it today. Nvidia again came out with fine numbers. Again beat, you know, beat bottom, a bottom line and top line, not by a lot, but did beat estimates had good guidance going forward.

Margins are coming in a little bit, but still Nvidia margins are 73%. Yeah, they’re down from 76% over year over year. It’s only a loss of 3% in your margins. You know, with the company making this much money, producing this many jets, that is, that is not, that is not a sharp decline. But again, the concern is, okay, have we seen at least a short term peak in the AI in AI trade? Which of course filters throughout the world of tech. Again, as a reminder, we’ve had more than $2 trillion committed to CapEx that’s going to be reinvested into companies over the next three years. So is there a problem with that story? Again, the Market’s a discounting mechanism. It’s clearly telling us something’s going on here.

[00:02:23]:
There’s a couple of the options, but there’s another. And this actually, if I’m being candid with you, this happens to be my favorite. And if you saw the news, you know what’s coming out. The Epstein files are being released. There are a lot of people that don’t want to see those released. The Mossad being one of them. All right. Israel being one of them, because so many, again, I think everybody that, that, that I respect believes that that Epstein was a Israeli asset, was an asset of Assad and intelligence asset.

Also today, the news broke about an hour and a half for the close, just as the market started to 15 cartel members from Mexico are being transferred from, from Mexican prisons to the US to stand trial. Again, if you, if you know the history of the cartels, you know they control a lot of the stock market. We learned this by the way, interestingly enough, Matt Taibbi did a piece on this after the financial crisis when it was disclosed after a lot of, you know, again, no sources named. But Matt Taibbi backed this up, multiple sources and said if it wasn’t for drug money, cartel money, that the financial crisis would have been a global, likely a global disaster. Already was a global disaster, wasn’t it? But it would have been even worse. In other words, probably depression era bad because again, the cartels had so much cash, they actually built out the financial system with the cash they had. Story has not been told a lot, but again, it was reported from Matt Taibbi. I think that it was the best investigative journalist of our time, at least my favorite.

And so look, is this a get Trump? Is this okay? Is this the intelligence, global intelligence community saying, all right, you know what, you want to rid the country of the deep state. You want to really clean up. This is it. You’re really going to go there with all of these things. Even beyond Jeffrey Epstein talking the criminality inside our Justice Department and FBI. Are you really going to go there? So you’re really going to do this? This is what we can do to you. And of course the issue there is that the deep state, one of the their most powerful member, not a close second. Central banks, you can’t find.

[00:04:46]:
There are seven cartels on the planet. And the banking system led by the central banks, of course is the most powerful cartel on the planet, more so than military. So, you know, this is where your mind, when you can’t find specific answers to what’s going on this is where your mind starts to wander. And if you’ve noticed, Donald Trump has cared very little about the stock market. Matter of fact, I think he said on more than one occasion, you know what, it may be a little rough getting these things done that need to be done. But early on before we get everything corrected and get America back on the, the straight and narrow path that we want to be back on as a red pilled country, which of course we are completely are now. But again, let’s go through some of the numbers here because I’ll tell you as we go through the VR investing system screen, just tell you how oversold we are. And we talked about this this morning in our letter.

Fear Green index is now down to an 18 as extreme fear. Now if you’re wondering how low can that go? Well they hit a two in the Christmas from hell brought to us by Jay Powell in December of 2018. Went down to a 2 right now. So it can go lower. But yeah we are extreme fear which is remarkable because in addition to that we got last night learned the AAI investor sentiment survey came out with now 60% of investors bearish up 20 points on the week. Just an unbelievable again extraordinarily unprecedented. It really is unprecedented. When you only as we open this morning, 3% away from all time highs in the S&P 500.

Now as of today we’re down close to 5% from all time highs S 500 which is just last Wednesday by the way. Dow Jones is down just 4%. Again, no real damage done there. This is very tech specific damage being done here. And the issue there, again this is our discipline. So we have to, we have to stay true to it. The discipline here tells you that semis lead tech, tech leads the broad market. So what we need to see, we need to see these levels hold.

[00:06:55]:
We closed today at fairly significant levels. The semis actually broke through their support which was frankly not a lot of support. It’s more short term technical support. But we had seen, we had basically had three bottoms here at this level and the semis closed below that level today. And now in a little bit of no man’s land, however, they are now hitting heavily oversold to extreme oversold levels on a short term minimum oscillators. And again with the kind of move they’ve had, this is when you get a bounce, the question is going to be when we get this deeply oversold bounce again with sentiment and extreme fear. When we get that bounce, what will that bounce tell us if that bounce isn’t strong, then we’re probably going to go lower. Okay, now remember, these are still as we, as we see it clearly, these are counter trend moves.

Okay? Counter trend moves. And here’s why I tell you that the SPF 100 is light years above the 200 day moving average. Okay? A 200 day moving average 6 at 567 and right now we’re at 585. So we’re looking at, you know, a 1600 point move equivalent, if you will, in the Dow Jones for the SPF 100 to break down to his 200 day moving average just below the 250, excuse me, the 100 day. Now Dow Jones just barely below its 100 day moving average and right now see sits a couple thousand points above the 200 day moving average. Okay. So again no real damage is done there. There is, has been more damage done to small caps.

That’s pretty common. Small caps have now dropped below the 200 day moving average. But again small caps as we close today now hitting extreme oversold on steroids, which is our most oversold designation. Same thing with bitcoin which got hit again today, closing down. That’s after hours. Bitcoin today just barely above the 200 day moving average. Been a waterfall sell off of course, but also now it’s hitting extreme oversold on steroids, our most oversold designation. This is when bounces happen and certainly with sentiment this bearish, this felt to me like an afternoon where the shorts had control of the market.

[00:09:15]:
There were very little rallies. The shorts hit this and they were able to close the market at the lows here of the day. Specifically again on Nasdaq which finished down 2.7%, down a big 530 points. This is the worst year, Dave, clearly for some time in Nasdaq the losses again were not severe. Elsewhere, Dow Jones was down four tenths of 1%, down to 1993 points. SB 500 was down one and a half percent. Rust 2000 down 1.5 as well. But again NASDAQ down 2.8% of the day and SMH a semi ETF.

And this is where it’s pretty ugly. Down 5.75% on the day, again breaking support levels here. And again you look at the charts, you go, okay, they’re really oversold. Sentiment is extreme fear territory. What’s behind this? Now we also know the backdrop today. Trump came out and said once again tariffs go into effect on Tuesday. Yeah, I’ll just, I’ll tell you because I tend to Be very honest about things, you know, and just the conversation we’ve been having with on the podcast, Trump’s been all over the place on tariffs, right? Even all over the place on tariffs. And so now he came out today forceful and said, oh no, they’re definitely going on Tuesday.

That did not help. That really started the selling again. Epstein files. Fifteen cartel members being transferred. You just start putting the pieces together and you think, okay, this is not really market related, this is really economic or yeah, economic related. This is specific selling pressure of size coming from and who could that be from? Right? That’s when you start asking those questions. So we’ll have a run our very system screens tonight and have an update to our members either later tonight or probably first thing in the morning. Again, the only damage done here today really was NASDAQ and semis.

[00:11:03]:
Everything else was, you know, was held up much better, didn’t it? Okay, but again, not, not a pretty day and again a very ugly close here. Let’s take a look at the channels today because again, these were not bad readings. Quick refresh, make sure I get this right. As I said a minute ago, a volume was down volume 67% for NYSE, 70% for NASDAQ. That, that’s, that’s almost run of the mill. Okay, as far as advanced decline, NASDAQ 3 to 1 negative. Again, not a big deal. NYSE 2 to 1 negative.

Again, there’s no harm, no foul there. We did have more than 300 stocks hitting a 52 week low. The 52 week high, but again, these aren’t, these weren’t huge numbers. Only 130 stocks on NYSE hit a new 52 week low, 312 on NASDAQ. It doesn’t mean it can’t get worse. But this, this afternoon felt like something, felt like something specific to me. And again, it may have just been Nvidia, you know, closing down 7 or 8% on the day and the tech and semis following. But again, I’m just telling you there was no real damage.

Again, banks today finished positive on the BKX finished positive on the day. Dow Jones only down 4/10 of 1%. As far as elsewhere, the Vix was up 10%. That’s not a huge move on a day like this. Vix is at 2110 year is at 4.28% again broke that key 4.4% level a few days ago, now below 4.3% in the 10 year. So you’re not seeing inflationary concerns here. That’s what the concerns of Trump’s tariff policy. Are no inflation concerns showing up here? Not, certainly not in the 10 year.

[00:12:44]:
No concerns about the Fed hiking rates. You don’t hear that anymore, do you? No. Now it’s about as Tyler covered yesterday, as of today, my guess is we’ll probably be back to up to three rate cuts based on the CME FedWatch tool by the year. And right now it’s just over 2. It’s very close to expecting 3 rate cuts. Remember, it was just last week or a week before that they were back to just either no rate cuts or one rate cut. So we’re back to the point where the Fed is going to be cutting rates. That part of the news story cycle is going to jump back into the markets.

February, this half of February is not seasonally bullish. This is a, this is a fairly weak seasonal time. But guess what tomorrow is. Tomorrow’s the last day of the month. That means fund flows coming into the markets. And again with $7 trillion in money markets, there’s still a lot of money from retail investors and elsewhere institutional as well coming into this market. So tomorrow would be the last trading day of the year. And so I think that, you know, we were looking for a flush.

I wrote this this morning. I really ideally would have loved to see the flush start at the open. That’s what you want to see, not at the close. So, you know, we may get it open tomorrow. That’s a little ugly. That’s not a, that’s not a forecast. But that could be our flush and that could be the bottom, especially with sentiment as bearish as it is right now. All right, let’s take a look elsewhere here.

[00:14:06]:
A sector watch today again, just not, not, not a horrible day. Here we had of our 11 SB 500 sectors, we had four finish higher, seven finished lower. Again, technology leading the way, not what you want to see. Down 3.8% again, the NASDAQ now approaching its 200 day moving average. We expect that to provide support along with the fact it’s reaching heavily to extreme oversold levels on our short term movement oscillators elsewhere. Communication down 1.8% as was consumer discretionary to the upside financials again closing high on the day. Energy up half percent as well and real estate up four tenths of one percent. In our commodity watch today, gold at one point was down.

That’s a low 2879. So at one point gold was down over $50 an ounce. Again, this is, it’s a, it’s a risk off market. This Is this is when people sell what they can and what they have profits in. And that’s what’s really happening in this market right now. Gold finish you down $42 an ounce at 2887 an ounce. But again, just what we just told you. Three, four days ago, gold was at extreme oversold, excuse me, extreme overbought levels, as were the miners.

So this is a needed rest here. And this is where again smart money will continue. Central banks, right, this will be the third, fourth year in a row they’ve bought record amounts of gold. We know the story there for physical deliveries. Pretty, pretty extraordinary story there of people taking receipt of their gold from the London bullion Exchange, bringing it back into the United States, which is a process in and of itself. Gold today again down 42 at 2087. Silver today down 2% at the 3156 an ounce. Copper today higher on the day just a bit, but it was higher to 459A pound.

[00:16:00]:
Crude oil again up on the day at the 2, up A$51 a barrel at $70 and 13 cents. And finally bitcoin again. Bitcoin today hit a low of refresh here, refresh. Here we go. All right, bitcoin today, Last trade now 83,920 hit a low yesterday below 82,000. Right now it’s 83,800 low on the day 82, 134. All right folks, again this is the tech story and we have to find out what that means. The AI trade, just our opinion, our view continues to be as it has been for two and a half years.

We are early in the innovation revolution. I will tell you, during the dot com melt up, that 1995-2000 melt up, which I was very active in the markets as a financial advisor, venture capitalist, investment banker. Then during that time frame we had five corrections of between 10 and 20% in the SP 500. Right. During the biggest bull market run ever. So corrections are common, they’re needed, they flush the system out. Of course we never really hit extreme overbought levels that would tell you what we needed to have that flush. But we also had a bear market that lasted three months in NASDAQ.

A 32% feels kind of like what we’re seeing. Matter of fact, it feels exactly like what we’re seeing in the semis right now. The semis have been had, been consolidating for five months now. We’re breaking down to new lows here. But again this is how bottoms are formed. They’re messy, they’re ugly. And this is again if we’re right and you know, we’re very confident in this call, it’s a high confidence call that we are in the very early innings, possibly the first inning. The innovation revolution, which is much more than just AI if we’re right about this, this is an extraordinary buying opportunity in the semis.

[00:17:59]:
Again down 29% from the highs. But we need them to turn and lead not lower but higher. Maybe today was the beginning of that flush giving us a really true bottom in the semis so we can wash out all the short term sellers and then place a serious bid. But need to semis for the next move to fresh all time highs because we’re going to get back there again. This bull market is going to be more powerful, longer lasting and broader than.com was. So again we look at this as a shakeout. We think that with fear where it is, extreme fear pretty much everywhere you look. Again we’re getting all the necessary pieces in place for at least a short term bottom.

We’ll see what happens in futures tonight and first thing in the morning. Again, join us anytime@v letter.com again v letter.com all right folks, appreciate you listening. Hope you had a good day. Even better night. We’ll be back with you again tomorrow after the close.