The Dot-AI Bubble
Updated
Speculative bubbles excite traders and investors alike.
NVDA is the absolute winner of the AI craze.
Craze is the sentiment of the market cycle peak.
After craze and euphoria, fear and denial will inevitably flood our minds.
It is nothing more than the never-ending cycle of the economy.
A simple line drawn on a chart spells the ultimate demise for speculation.
NVDA is making all-time-highs. Its performance/momentum however is showing alarming signs of weakness.
Beware. Not all is as it seems.
The very nature of a Bubble is that it defies all measurable mathematics.
NVDA wants more. It wants everything. Just like any other corporation would.
For capitalism, more equals more.
NVDA aims to swallow the entire money supply. Improbable as it may seem, physics theoretically allows that.
Divergence is one of the most misunderstood concepts in analysis. Divergence is not describing a future weakness. It describes the current weakness.
NVDA is moving so fast, that its bear market is itself growing exponentially.
If NVDA is now moving slower now than it was in 2015-2018, how fast is it trying to go?
NVDA remembers the explosiveness of that period, and is trying everything to repeat it.
Prices and investors have memory. Both however forget the well-known saying.
Past performance does not guarantee future performance.
This is the Achilles' heel of prices. They promise what they cannot deliver.
Price will reach as high as possible, for as long as there is a willing buyer to take the bait.
For capitalism, more is better, at all costs. The ultimate cost will certainly be paid.
The last buyer will be the last NVDA bear who will give-in the mania. And that will mark the end.
Tread lightly, for this is hallowed ground.
-Father Grigori
NVDA is the absolute winner of the AI craze.
Craze is the sentiment of the market cycle peak.
After craze and euphoria, fear and denial will inevitably flood our minds.
It is nothing more than the never-ending cycle of the economy.
A simple line drawn on a chart spells the ultimate demise for speculation.
NVDA is making all-time-highs. Its performance/momentum however is showing alarming signs of weakness.
Beware. Not all is as it seems.
The very nature of a Bubble is that it defies all measurable mathematics.
NVDA wants more. It wants everything. Just like any other corporation would.
For capitalism, more equals more.
NVDA aims to swallow the entire money supply. Improbable as it may seem, physics theoretically allows that.
Divergence is one of the most misunderstood concepts in analysis. Divergence is not describing a future weakness. It describes the current weakness.
NVDA is moving so fast, that its bear market is itself growing exponentially.
If NVDA is now moving slower now than it was in 2015-2018, how fast is it trying to go?
NVDA remembers the explosiveness of that period, and is trying everything to repeat it.
Prices and investors have memory. Both however forget the well-known saying.
Past performance does not guarantee future performance.
This is the Achilles' heel of prices. They promise what they cannot deliver.
Price will reach as high as possible, for as long as there is a willing buyer to take the bait.
For capitalism, more is better, at all costs. The ultimate cost will certainly be paid.
The last buyer will be the last NVDA bear who will give-in the mania. And that will mark the end.
Tread lightly, for this is hallowed ground.
-Father Grigori
Note
Market Cap is nothing more than the product of a stock price multiplied by the total amount of stocks in circulation. I am not a professional financial analyst, but theoretically a company could grow as high as it wants.Imagine a scenario however, where a company grows so much that it reaches a point when it cannot guarantee the servicing of a "bank run".
One must look at Market Cap and think: Is this size meaningful or not? Price-to-sales ratio could prove an alternate way to evaluate overbought/oversold conditions. Spoiler alert, NVDA is overbought no matter how you look at it.
Note
In an unforeseen turn of events, Bitcoin, the currency with parabolic growth, is only now just bottoming out. If we attempt to calculate the relative performance of Bitcoin using the following indicator...
...we end up on the chart shown below.
But is this even possible?
As it turns out, Bitcoin is moving abysmally slow, at least compared to its history.
A simplistic chart that follows, proves this statement.
The average ROC of Bitcoin is much lower than it was.
SpyMasterTrades has explained:
youtube.com/watch?v=6jfl6LjDIbQ/
This idea of his, seemed crazy for me. Some charts however, like shown above, show that it is a possible scenario.
Note
Oops I did it again.Note
Somebody apparently judged my indicators as "unfitting".Somebody apparently hates statistics.
Note
Never forget the 30 year cycle of the markets.In the following chart that contains legal indicators, we calculate a log-regression of the past 30 years of Money Supply.
The similarity is striking. In 2000 money supply had a significant spike. Years later, money supply saw a significant stagnation. Money supply recessed from the top of the channel (2000) to the bottom (June 2008)
The same is apparently occurring now. A spike in money supply (peak in 2021) is followed by a dwindling money supply. It is unknown when the bottom will come.
Inevitably, such a significant depletion of liquidity will result in a major crisis in the years to come.
Remember: Fast and decisive crashes are a characteristic of an efficient market.
MMT has resulted in investments getting significantly positively correlated. All investors manage to perform "better than average". MMT is a double-edged blade. In good times it gives incredible gains because of positive correlation. In bad times (sell-offs) that inevitably will come, a positive correlation leads to magnificent crashes. Therefore, brace for impact!
Note
Curiously, in the exact past 30 years, this "money supply bull-flag" has taken shape. Currency-in-circulation is on top, and M2SL on the bottom.According to FRED:
- The series (M2SL) equals total balances maintained plus currency in circulation (CURRCIR).
- Total balances maintained are balances that an institution holds in a reserve account directly at a Federal Reserve Bank.
If withdrawn money has taken the shape of a bull flag against total balances, this could mean only one thing. If this bull flag breaks out, it will lead to a MASSIVE withdrawal of banked money into circulated money.
Many questions arise:
Money held by institutions in reserve accounts has not lead to inflation.
If a significant part of that money ends up in circulation, how will that affect inflation?
What will be the cause of a probable "Big Withdrawal" and what will the repercussions be?
Note
Indicators Indicate. They don't Dictate.Moving Averages are the exact opposite of what you think they are.
There are no buy signals, no sell signals. The ultimate signal is your action.
Note
Big Tech has reached a golden retracement against the NYANote
Hardware Out, Software InNote
Trend is an illusion, an invisible "force". A byproduct of supply and demand.Trend cannot be your friend. Trend does not exist.
Stock Market is about prices, nothing more, nothing less.
Note
If momentum existed, then a 6-streak of heads would be as probable as a 5-streak of heads.Note
Apple is suffering from a chronic case of bearish divergenceNote
NVDA is what AAPL was in 2014.10 years have passed, but nothing has changed in how Big Tech works.
This time, it will not be different.
Note
NVDA has just hit a record high in overbought-ness.Even though the week is not over, it is impressive to see such numbers from the "favorite stock of retail and newspapers".
Now there are only good news. The coming ones can be, on average, worse than what they are now. Good news is the ceiling in prices.
NVDA has won a fight...
...but it is losing the marathon. The simplest of tools prove it.
Note
NVDA shows an eerie similarity to the .com bubble peak.Note
Afraid of this week's murder? Don't be.It was just a reaction to the line I drew on the main chart.
The same has happened before...
Humans are, after all, predictable reaction machines.
Remember. NVDA is closing-in to being the No1. It will not stop until it reaches the target. NVDA is the most praised of companies. It MUST reach the top.
Note
Find a log-scaled Kagi chart of the entire history of MSFT.You'll know when the test starts.
-GLaDOS
Note
80%That is how much AAPL, MSFT and NVDA can drop when this bubble pops.
Note
Microsoft is worse than Nvidia.# Change My Mind
Note
Note
An (im)possible scenario.Note
No differenceNote
Big Tech (XLK) vs Broad Market (SPY). Buying or selling?
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