FOMO MARKET

Issue #15. All the way is up, but not really.

Access the last Breakout issue here — (removed from paywall).

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TRUMP 2.0 MARKET

Manic-Depressive Donald is causing a manic-depressive market. From the depths of the tariff tantrum to the current highs of AI euphoria and “Big Tech Quality”. But when the environment is slippery and volatile — why are we extrapolating the present?

Well, I personally am not — but the market is.

FOMO, positioning, narrative dominance — call it what you want.

But I doubt that those who are buying the market here are also buying the market’s narrative.

They don’t buy the market’s narrative but they are buying the market. Seems odd prima facie — but market fundamentalism has been increasing its sway and influence on markets for years.

The paradigm went from buying something at a good price to buying anything that is going up. They are now simply buying the market’s narrative.

From Crypto to AI to hot new IPOs with no actual businesses to back them. The phenomenon is definitely not new, but it is changing with the times.

“We must continue dancing until the music stops…”

—Chuck Prince, Citigroup CEO, 2007

And this is what is happening now too.

Hyperscalers, Big Tech in general, AI companies, governments and individuals. They are all sucked in by the black hole of the market. They need to continue playing the game or they risk falling behind.

All these investments, strategic partnerships, acquisitions and acquihires are feeding the market’s narrative in a reflexive way. 🔄🔄🔄

This simply means that the market is changing the fundamentals that it is supposed to reflect. The market is meant to be a passive reflection of its fundamentals, but in “far-from-equilibrium” conditions it becomes active in influencing those fundamentals.

If you want to know more about this, read George Soros - The Basics.

Issue #15

Everyone I speak to asks me the same question — basically it is in the manner of:

“Are you buying any AI stocks right now? What can I buy to ride the trend?”

The market seems to be taking for granted that AI AI AI is a megacycle that will continue not only in the real economy — but also be reflected in markets and valuation, with the same pace.

But you learn from decades of experience in markets that the devil is in the details.

Breakout by Philo is a Philoinvestor newsletter that gives readers an unbiased and unemotional look into what markets are doing in the current moment. Only after the technical part is complete do we then layer context around each market.

That could be AI Stocks, Crypto, Big Tech or any macro market like FX and Bonds.

Let’s begin.

Nasdaq 100

A 42% bounce from the lows of the Tariff Tantrum to current prices… This isn’t normal — yet this is what happened. Overstretched valuations, an AI-hyped market and an overextended technical move. Not the place I would want to move all my chips in.

Russel 2000

A respectable ~35% move but 10% away from its last highs. Free from major AI and Big Tech influences, the Russell 2000 reflects valuations of the “real economy” much better. While the major equity indices have been rallying seemingly non stop, the R2K has been going sideways since post-Covid reopening.

GOLD

Blue arrows indicate where we previously called upside breakout setups on Gold right here on Breakout by Philo. Prices are now hovering below the last top and setting up for another upside breakout — yes, really!

Gold is the new reserve currency as the Dollar is being dumped all over the place. Really dumped or just dumped in the hearts and minds of those who need to park billions in reserves does not matter — the effect will be the same over time!

GOLD to USD: “I’m the new reserve currency now!”

New Age Gold (Bitcoin)

The market’s thesis is still bullish Bitcoin. The tariff tantrum caused it to crash to $70K and then it just bounced together with markets. Not as uncorrelated as we think, right?!

Microstrategy/Michael Saylor is still borrowing fiat to buy BTC, the Administration is still pumping Crypto with grand proclamations, Crypto weeks and what have you.

But for crying out loud, if you want to trade this — look for a good technical support before you do.

Ethereum (the enfant terrible of Crypto)

Ethereum did not take part in this cycle! The narrative changed from NFTs and ICOs and De-Fi to the narrative of BTC is an inflation hedge and a reserve asset.

Basically, in early 2025 ETH was where it was several years ago — with major moves in between. This is why I say Crypto is a trading sardine and not an asset that you can HODL — in my personal opinion.

Something changed a few months ago with ETH staging a sharp rally and going back to a key level of resistance.

That yellow level there is the level we indicated as a key level of resistance in previous Breakout issues — sure enough that’s where ETH failed, moving from $4k to $1.4k..

Fundamentally speaking, this network is on CPR with some trying to resuscitate it. Best of luck all around.

AI STOCK LEADERS

Nvidia and Palantir are just unstoppable, technically speaking. AI visions are fuelling the rally, with 31% of the S&P’s weight being the Mag7.

This is where index/passive investing deviates from its stated objectives — as the passive trade tends increasingly to betting on Tech and AI continuing to rally.. psyche! 😂

We recently published a two-part series on the AI Tech Stack and investing in it, across all layers here: Part 1 and Part 2.

Nvidia

Crashed with the tariff tantrum and bounced hard as Trump 2.0 went back to pumping the names that would benefit a continued stock market rally. NVDA rallied 100% from those lows — as if creating $2trln in value is that easy!

Not much to say on the technical picture besides that it’s an overextended move.

Palantir

A 150% recovery since the lows of the tantrum means PLTR is selling for increasingly crazy valuations. Reminds me of the post-Covid reopening working-from-home stock rally.

When that happens — narrative follows price creating not only a divergence but a cyclical relationship between the stock market and the perceived fundamentals.

…Rather than the stock market being a passive reflector of the fundamentals. We mentioned this dynamic in the introduction of this post.

$350bln in market cap for a guided $4bln in Sales for the year, must be nice!

The Macro Stuff

The Dollar Index

The red lines indicate the 7% range that the DXY has been keeping and flirting with for years. Trump 2.0 and the way the Dollar was getting dumped resulted in this sharp move down.

The EMA10 (blue line) is notable as prices are respecting it by finding resistance on it and moving back down. Currency cycles tend to go for years, and if this is indeed one the Dollar will continue to be dumped for a long time.

That being said — don’t take trades on the weekly and monthly but manage them on the daily and hourly! Things can retreat from the trend by a lot before moving back to the trend and breaking ranges either up or down.

On the fundamental side I find the setup very interesting. On the one, US stocks are still the best and the real interest rate differential is still very much for the Americans.

Remember that the DXY is 40% EUR/USD so what happens in that market matters greatly for the chart you see below.

For a longer-term reversal I want to see prices move back into the range sustainably.

Dollar / Yen

Uncertainty around tariffs is what’s driving FX volatility these days… You can see how prices bounced off that triple support area (which we traded), but the bounce was not sharp.

In trading, it’s path > direction! The pair hovered around that area as you can see the wicks all over the place before spiking to 149ish. News of the tariff deal between the US and Japan (and even before the deal) caused the USD to selloff.

A move above 149 would be bullish for the buck while a spike down to 142ish would cause me to look for areas to go long. Forex is probably the “last leader” in trading so do not tread this area if you aren’t a professional!

I bought this pair at 148.80, which was exactly below that resistance level for two reasons: 1) prices were consolidating below that level and 2) my bias was that the USD would move back up against the JPY mostly due to the real rate differential staying put and that the narrative around the BOJ hiking would fade further.

It seems the captain now are ideas around tariffs causing me to be down 1.45% on this trade. Thankfully I only bought half a position but the point is trading greatness comes from…

DOING LESS OF WHAT DOESN’T WORK and

DOING MORE OF WHAT DOES WORK.

And this is why I founded the Co-trader 3000 — a trading co-pilot currently in development!

Sign up to the waitlist at cotraderapp.com to try it for free when it launches.

So anyway, I am still long the USD/JPY because 1) the USD could rebound if the picture gets better and 2) if it crashes further I could double my position and average down or 3) if my thesis doesn’t hold I can just sell for a loss on a half position!

Euro/USD

Also respecting the EMA10 Weekly (the blue line) as you can see from the chart. The Euro started to rebound when Trump was elected, when rumours of a Ukrainian ceasefire started to emerge and the Europeans started to take their own defence in their own hands..

In my view, this is just a bounce from a spike low in sentiment and governance in the EU, with the narrative (and prices) simply mean reverting. I see no technical setup and have no fundamental view that is tradable so I am not touching it.

US 10-Year Yield

Surprised that this is holding here.. This is what I had to say about the macro setup in the US in Issue #13. Excerpt below.

Point is, with inflation moving down, or rather not spiking up — this market has no reason to spike up. The powers that be are managing it to stay where it is.

If things break above our level (yellow area) then probably a serious event took place and we will have to re-assess the setup. For now, nothing to see here.

JAPAAAAAN!

In September of 2022 I wrote this thread on Japanese macro and I laid my case on the Japanese Govt Bond peg breaking (i.e. Yield-Curve Control being abandoned).

A few weeks later you can see from the charts how yields spiked up, and have been moving up since then — the Japanese 10-Year now sits at 1.6%…

Not bad when you move up from near zero! This move up in yields is probably what’s supporting the Yen from crashing lower.

Let’s see how much the Japanese economy can endure. I see no setups here.

Philo 🦉

P.S. Don’t forget to check out Philo’s Academy here. I break down the course curriculum in the landing page.