Summary
Highlights
The stock market has seen significant changes in the past week, breaking above the October 10th candle. A preliminary trade deal between Trump and China on rare earths could create opportunities, especially in momentum stocks and rare earth sectors that have recently retraced. Key upcoming events include the potential removal of 100% tariffs, CPI data (which came in line), and an anticipated Fed rate cut and reduction in quantitative tightening. Major tech companies (Meta, Microsoft, Alphabet, Amazon, Apple) are reporting earnings this week. The market's current trajectory suggests a continuation of the 'bubble' into 2026, driven by earnings guidance, Fed policy, and potential China deals.
China and the US reached a consensus on key trade issues, potentially delaying export controls on rare earths for a year. This delay could lead to aggressive US investment in domestic rare earth refinement, creating significant opportunities in stocks like Energy Fuels (UUUU), MP Materials (MP), and METC.
CPI came in line with expectations (3% vs. 3.1% forecasted), which was anticipated given the new BLS chief's desire to avoid a 'hot' CPI before a Fed meeting. This outcome increases the likelihood of Fed rate cuts and a reduction in quantitative tightening next week, moving towards easier monetary policy. The MAG7 companies (Meta, Microsoft, Alphabet, Amazon, Apple) are reporting earnings, and the focus will be on their AI capital expenditure plans, as continued investment in AI infrastructure is crucial for market growth.
The reason for sustained AI investment is the ongoing 'arm race' to build out necessary hardware infrastructure, specifically data centers and compute power. Companies like Oracle are securing massive debt deals ($38 billion) for data center construction. Many former Bitcoin miners are retrofitting their facilities into AI data centers due to cheap electricity and existing hardware, turning a less profitable business into a high-margin one. This significant investment in foundational hardware is expected to propel the 'bubble' for another one to two years, as this base is essential for future AI applications beyond chatbots.
The S&P 500 and NASDAQ have broken above the October 10th candle, and the VIX is crashing below its October 10th low, signaling a more comfortable trading environment. Based on historical data, specifically the ZG breath thrust indicator from April 24th, the market is expected to be green for the next six months. The S&P 500 is projected to hit the $7,000 mark within this period, presenting numerous opportunities.
The playbook for the week focuses on short-term momentum trading in specific sectors, particularly data center stocks like Iron (IREN), Cipher Mining (CIFR), and Nebius (NBIS), as well as Coreweave (CEWE). These companies are poised to benefit from the demand for AI compute. In AI software, Path (PATH), Team Atlassian (TEAM), and Salesforce (CRM) show promising patterns. Additionally, attention is on AI-related power stocks (Bloom Energy, Vertiv) and cryptocurrencies (Bitcoin, Ethereum) for potential breakouts, which could boost related stocks like Bit Mine Immersion (BMNR) and MicroStrategy (MSTR). Nvidia (NVDA) is also expected to reach the $200+ range if the S&P 500 hits $7,000.
Beyond Meat (BYND) is discussed as not being comparable to meme stocks like GameStop or AMC. It lacks the high short interest and days to cover, and a recent debt-to-equity swap significantly diluted shares by 413%. While short-term opportunistic trades might exist, it's not considered a strong long-term investment or a 'squeeze' candidate.