Alexander Tapia @alexddtl1: "📉 A Week of Sudden..."

Peru

📉 A Week of Sudden Movements: What's Really Happening in the Market The last few days have been very intense and marked by unusual volatility. On Thursday, we saw one of the strangest movements of the year: the market opened strongly higher—driven by solid earnings from $NVDA (NVIDIA Corporation) —and yet ended up reversing completely, going from +1% to more than –1% in the same session. Such aggressive reversals are extremely rare. On Friday, the opposite occurred, especially in high-beta stocks: they started falling sharply, hit key technical levels, and then rebounded to close in positive territory. This extreme behavior reveals a market with very little liquidity and positioning that is amplifying movements. 🌪️ The key was not a change in the AI narrative, but a liquidity issue. After analyzing the data with my colleage @BryamDecava we came to the conclusion that Thursday's sell-off was not the result of a deterioration in AI fundamentals. On the contrary, it was mainly due to liquidity and positioning factors: - The market discounted that the Fed will not cut rates on december. - Japanese bond yields rose and yen depreciated towards the level of 160, increasing the risk of intervention due to the depreciation of the yen. - This raised the risk of a carry trade unwinding, which often generates violent movements. - In addition, the crypto market suffered liquidations due to high leverage. All of this together led to the sharp decline and unusual increase in volatility. Paradoxically, this type of dynamic could end up forcing the Fed to cut rates in December, something that was hinted in FEDs Williams' softer speech on Friday. It could also push for an acceleration of QE, which would be positive for the markets. 🤖 The punishment for AI stocks has been widespread, not selective. In recent weeks, AI-related companies have fallen sharply amid fears of a bubble: doubts about CAPEX levels, companies borrowing to grow quickly, and comparisons with the dot-com bubble. However, the data does not show a real deterioration in demand. Recent earnings from NVIDIA and hyperscalers indicate otherwise: - Demand for AI continues to rise. - CAPEX continues to grow. - Hyperscalers are even willing to overinvest to avoid falling behind. - The most amount of CAPEX comes from Hyperscalers, which is backed by solid cash flows, not huge amounts of debt. Even so, the market is punishing the entire sector indiscriminately, creating distortions that could become opportunities later on. Also, a recent Bank of America survey shows that U.S. technology stocks recorded an average of $2.5 billion in weekly outflows over the last four weeks, the highest level since 2008. This clearly reflects panic, not fundamental deterioration. 💼 My strategy in response to this correction Unlike other episodes where I increased exposure during declines, this time I took a more tactical approach due to the magnitude of the panic and liquidity risks: - I reduced my exposure to AI during the correction. - I significantly increased my cash position. - I reallocated part of the portfolio by buying companies in the healthcare sector, where I see a better risk-return profile in this environment. I am maintaining positions in AI, but with less weight than in previous weeks as volatility will remain given the lack of liquidity and there will probably be better entry opportunities. My intention is to re-enter several of these AI companies in the coming days or weeks, depending on how volatility and positioning evolve. My intention is not to change the long-term thesis, but to adapt to an environment where an unwind of the carry trade could generate even more abrupt movements. I want to have sufficient liquidity to take advantage of opportunities if the market deepens its decline. This is a tactical adjustment, not a loss of conviction in AI. The thesis remains intact; I am simply managing short term risk to reduce volatility exposure. $QQQ (Invesco QQQ) $VXX (iPath Series B S&P 500 VIX Short-Term FuturesTM ETN) $BTC $SPY (SPDR S&P 500 ETF) $TLT (iShares 20+ Year Treasury Bond ETF )