The Unbearable Bull Market

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Update no.2 on October 17th 2025

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During our last update on Sunday, I mentioned that despite Friday’s brutal price action, the underlying market data still looked too bullish for a straight elevator drop. I expected instead a relatively volatile tug-of-war between bulls and bears — likely sideways movement or even a rebound toward all-time highs. That’s exactly what we got: a series of alternating green and red candles throughout the week, reacting to each new headline, which helped QQQ recover roughly two-thirds of Friday’s losses. We now sit just 1.3% below its all-time high (and 1.35% below SPY’s ATH) — a strong position to close the week.

That said, if you’ve been following the market closely, you probably noticed an interesting dynamic: on several occasions when markets opened sharply in the red, they recovered significantly by the close — while strong bullish openings often lost steam during the day. Bears couldn’t push the market lower, but bulls also struggled to sustain momentum. This tug-of-war gradually introduced some bearishness in a few underlying indicators.

Indeed, while all our option-related metrics remained extremely bullish right after last Friday’s drop, they’ve now started to show signs of softening. It’s important to acknowledge this shift, as it changes the conclusion from my previous update: the bullishness in the underlying data may no longer be strong enough to prevent a deeper correction. We are now nearing the point where the long-awaited market pullback could finally take shape.

From bullish to less bullish

Before the market dropped 3% five days ago, only one of our option-related metrics wasn’t in euphoric mode: our implied correlation model. That wasn’t particularly surprising, since this rally has been heavily concentrated in the Big 7 — the largest companies in the index — which naturally limits how euphoric this model can get. That said, it wasn’t bearish either. Yesterday, however, that picture changed: the signal flipped and climbed above its threshold.

This move pushed our Risk Index up to a level of 2. As you know, historical backtesting shows that the odds of a market drop increase significantly once the Risk Index reaches 4. We’re not there yet, but we’re getting close — and our Option Model, which was almost euphorically bullish last week, is now nearing its bearish threshold — a move that would push our Risk Index to level 4.

Today, that indicator bounced modestly, which could prevent it from flipping bearish if it continues rising next week. Still, we have to acknowledge how close it is — signaling that investors are increasingly seeking market protection, and that this shift in option activity is now acting as resistance to further upside momentum.

This rush for protection is also visible in the SKEW, which rose by 10 points this week — a non-negligible rise.

The best-case scenario would have been to see this indicator continue falling, suggesting that bears were capitulating. Instead, its rise indicates the opposite: bulls are starting to feel nervous.

Once this phase passes, we’ll likely see the SKEW drop back near 135, and we should also expect a sharp downside spike in our Option Impulse indicator.

That said, the market isn’t entirely bearish. Our NYSE and Nasdaq derivative volume indicators still show a solidly bullish tilt. Although the spread between bullish and bearish bets (blue line) narrowed slightly, it remains elevated and still strongly favors bullish calls.

Meanwhile, the VIX ribbon — which inverted yesterday — flipped back today (I’m writing this around 3:05 p.m., before market close).

While the VIX itself can cool down temporarily during a correction, it’s rare to see the entire ribbon oscillate between inversion and de-inversion. If it closes uninverted today, odds are it won’t flip back immediately.

Risk index VS Hedge

WU started around a simple but powerful idea: using data analytics to build a hedge signal that highlights when the statistical odds suggest it’s better to step aside from the market.

I first used this system to buy the dip during the October 2021 pullback. However, after the adjustments we made in early 2022 — when we began collaborating with the IO Fund — the hedge evolved to ignore small, regular drops. That fall 2021 decline became, in fact, the prototype for what is the strongest pullback we should learn to ignore. And it proved to be the most effective way to protect against market risk.

Indeed, from everything I’ve tested and observed, I firmly believe it’s impossible to hedge against every market fluctuation. When we start reacting to small drops, it quickly becomes counterproductive — re-entry points often end up higher than the exits. I still keep the original, more sensitive 2021 version of the code, and backtests consistently show that the 2022 update outperforms it.

In short, the hedge is designed to ignore normal pullbacks. We even have an internal filter that measures the energy of every correction to ensure the hedge behaves as intended. The idea is that it should only react to movements strong enough to “leave a mark” on the spectrogram below. If the energy in the price action isn’t sufficient, the chart stays dark blue — quiet background noise.

When a correction is strong enough to justify hedging, it produces a colored bar on the image. So far, our hedge has always reacted precisely when it should have. You’ll still notice, though, that there are periods where the market showed short-term bearish behavior without triggering a mark. Those are exactly the kinds of moves we intentionally chose not to hedge.

That’s at the index level. In reality, sometimes a mild pullback in the index hides sharp corrections among riskier stocks. A perfect example is the first two weeks of January 2024, when the market went mostly sideways — yet many speculative names dropped 30–40%. That’s why we developed the Option Model and then the Risk Index: to detect when conditions become increasingly risky for high-beta assets.

I personally relied on the Option Model to derisk my portfolio on December 28, 2023, when I sold my ROKU and Affirm shares. Both had rallied strongly but quickly melted down the following month.

I’m mentioning all this because we regularly have new members, and some might still be unsure about the difference between these two tools. At the moment, our Risk Index is approaching level 4 — the threshold where backtesting shows a 72% probability of some market downturn — but our Hedge Signal remains far from triggering.

There are around eight independent conditions that can activate our hedge signal. The most frequent one, and also the most correlated with significant drawdowns, is our Market Breadth indicator. The good news: despite softening slightly, it remains well above its bearish threshold.

If I were holding a leveraged position like TQQQ, I’d probably close it if the Risk Index flips to 4. I’ll also likely derisk my own portfolio at that level. But since we’re currently positioned with low beta — anticipating possible turbulence — there’s no reason to change anything until the hedge actually triggers.

If the bulls regain control — the SKEW drops, the Option Impulse spikes, the VIX remains uninverted, and the Risk Index falls back to 1 or 0 — we could then consider rotating part of our QQQ exposure into a leveraged position like TQQQ.

We’re not there yet. The market remains in a phase of indecision and could break in either direction. And that’s really the key takeaway from today’s update — the fact that market underlyings are no longer as bullish as they were five days ago, despite what looks like a relatively good week on the surface. We’ll continue to monitor closely and keep you informed.

Bitcoin

We remain unconcerned about Bitcoin’s pullback. Like everyone, we prefer seeing new ATHs — but what’s happening now remains consistent, and even mild, compared to typical late-bull-cycle behavior. The good news: in this kind of environment, corrections rarely last months, unlike the long sideways stretches of 2023 and 2024.

We believe Bitcoin is nearing the end of a classic A-B-C correction, and current macro conditions might actually work in its favor. If you’ve followed the recent headlines, signs of renewed stress are appearing in the regional banking system. Equity markets around the world reacted to that yesterday — but this is precisely the kind of backdrop in which Bitcoin tends to shine.

In the original Satoshi Nakamoto white paper, this was the exact motivation for Bitcoin’s creation. And the market clearly remembered it in February 2023, when SVB collapsed: after an initial drop, Bitcoin soared.

We also think gold is nearing a breather, which could free up liquidity for risk-on assets. Historically, Bitcoin has struggled when gold is rising. A short-term pause in gold’s uptrend would therefore be positive for crypto.

On-chain data also remains constructive. The number of newly created addresses with non-zero balances remains elevated and steady, and hodlers — aside from a brief bout of selling two days ago — are doing what they do best: not selling.

Unless that changes, this pullback should remain within the normal 20–25% range for Bitcoin — and should be short-lived.

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End of Update no.2

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Update no.1 on October 12th 2025

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We had mentioned that, even though we believe the AI bubble could keep inflating, a pullback was likely somewhere not too far down the road. In our view, though, certain conditions — especially in the options market — would probably need to shift before that happened.

Well, the market didn’t wait. Last Friday delivered a sharp reversal, accompanied by a hefty 25% spike in the VIX, triggered by news of a 100% tariff on China — a headline that instantly reminded investors of the painful U.S.–China trade war escalation back in April.

We didn’t mind the price action in the stock market — it didn’t affect us much since we’ve been unleveraged after exiting in August, when risk levels became clearly excessive. Still, the move itself was meaningful and worth noting, as it could mark a shift in tone. The move in Bitcoin, however, gave us quite a ride. Not that it was exceptional — historically, during our “Bitcoin Blue” environment, corrections of around 25% are fairly common, even if they tend to be short-lived. But Bitcoin had spoiled us with abnormally low realized volatility for months, making the drop feel sharper than it really was.

Some of the damage has already been recovered (and did you see ETH’s candle today?!). The real question now is what happens next — both for the stock market tomorrow and through the rest of the week.

Bullish

In the original version of this blog, I noted how bullish most of our metrics were. I also mentioned that bullishness can eventually reach a level where it becomes a reversal point — but that we usually see some of those indicators turning before the actual shift occurs.

One thing that stands out is that, despite the brutal session on Friday, none of our key indicators really turned ugly. You might say that it takes more than one bad day to push them into bearish territory — but for those who were with us last December, you might remember that the reversal triggered by Jerome Powell’s press conference was enough to completely flip most of them within a single hour.

That wasn’t the case this time. Here’s our automated assessment of the main metrics we track:

Except for the VIX, none are showing a truly bearish profile. And although the VIX ribbon spiked sharply across all durations, it didn’t invert.

This is quite unusual given the magnitude of the VIX move. Our Option Model also barely ticked down, indicating that the option market hasn’t meaningfully changed its bullish stance.

This stands in strong contrast to what we typically observe at the start of a correction. In nearly all previous cases, this indicator begins to curve down one to three days before a reversal — and it usually accelerates lot lower on the first major red day.

Perhaps one reason why our Option Model didn’t move much can be seen in our NYSE and Nasdaq Derivative Volume indicator. Despite behaving as expected during strong downside moves — by spiking sharply — what stands out this time is that the spread between bullish calls and bearish puts (the blue line) remained almost unchanged from prior days.

Given that the spread was already very bullish, this means that while overall market volume increased — with more traders positioning for downside — the increase was even larger among those treating the drop as a “buy-the-dip” opportunity.

Our final options-related metric, derived from implied correlation data, did move closer to its bearish threshold — but the change was modest considering how strong the move was in the index.

Echoing that restrained reaction, our market breadth indicator — essentially the equity market’s counterpart to the implied correlation signal in the options world — rose only moderately and remains well above the hedging signal threshold.

Too fast, too quick?

While most of our metrics didn’t shift much into bearish territory, the price action itself was brutal. Just look at how our Phase Angle — which measures market momentum — sharply curved down.

If that trend continues tomorrow, it could very well trigger the hedge strategy on its own. Still, it’s worth noting that the current level isn’t far from the maximum reached during several of the regular dips we’ve seen throughout this bull market. If this indicator doesn’t move significantly lower from here, it doesn’t necessarily mean prices will shoot straight back up. A sideways or slightly downward zigzag pattern could keep it hovering around this level without breaking materially lower.

Another sign that the market may have moved a bit too fast, too quick, is the RSI. In just one session, it plunged from an overbought reading of 70 down to 41.

That’s a drop of roughly three standard deviations — from +1.8σ to around –1.3σ — a very sharp move by any measure.

The last data point I wanted to highlight here could just as easily fit into the bullish section of this update — but it also illustrates how quickly the market dropped. It’s the SKEW.

Coming into Friday, the SKEW — which measures how “skewed” the option curve is (in simpler terms, how much traders are holding deep out-of-the-money downside protection) — wasn’t particularly elevated by recent historical standards. A large move down in the market typically pushes SKEW lower, mechanically, because of how the current SPY price influences its calculation. However, during sharp selloffs with high volatility, investors usually rush for protection, and the initial phase of a correction often sees SKEW rising.

This time, it didn’t. On Friday, SKEW actually fell sharply — down 6.5 points to 138.

That’s already a relatively low reading by recent standards. It could mark the near-term bottom, or we might still see a full reset lower. The deeper it drops, the more bullish the signal becomes. A move to 132 could mark a probable low, and if it were to fall toward 128 — assuming our Hedge Signal hasn’t triggered — I’d likely consider shifting back toward a leveraged stance.

Speculation aside, the key takeaway is that SKEW is already sitting near levels that, historically, have represented a market with very limited downside fuel left in the tank.

What’s next?

Well, I’ve mostly talked data — but maybe the strongest part of my bullish thesis comes down to something much simpler:

If you remember earlier this year, the U.S. President’s tweets often acted as some of the best reversal signals in the market — and this time might be no exception. Crypto certainly seems to like it, and something tells me that after Friday’s drop, investors will be eager to buy the dip on that dose of presidential reassurance and enthusiasm.

That said, I don’t think this alone will be enough to spark an immediate V-shaped recovery. Volatility tends to come in clusters. This setup reminds me of what we saw last year around Christmas — when the market tried to drop fast but, in a broadly bullish environment, proved too resilient. Bears made three solid attempts to push it lower, but eventually had to forfeit.

A similar pattern also played out in November 2022, when the market began moving up and down at higher velocity — oscillating before making a new high, and only later entering a year-long correction.

Markets that oscillate like this, with strong underlying bullish conditions, are not uncommon. It wouldn’t be unreasonable to expect something similar this time: a tug-of-war between bulls and bears that could last one to three weeks before the broader uptrend resumes.

Of course, this is just speculation — the market could flip for real. After six months of nearly uninterrupted gains, it would be a well-deserved breather. Still, given how elevated bullishness remains, it seems unlikely that we’ll see a straight-line decline. If a correction is indeed unfolding, it’s more likely to be a choppy, volatile one — a proper fight between bulls and bears.

We’ll be watching the underlying data closely over the next few days and will keep you updated. If our Hedge Signal triggers, we’ll gladly step aside until the storm passes. And when that time comes, I’m confident our Downtrend Exhaustion Dashboard (formerly known as our Buy-the-Dip indicator) will once again help us take full advantage of the rebound — just like it did in April.

Bitcoin

For Bitcoin, I was convinced that because BTC ETF investors are now the main driving force in the ecosystem, Bitcoin couldn’t possibly thrive against the stock market — that when one would fall, the other would follow. And indeed, after a brutal day, Bitcoin’s overnight drop on Friday was epic — coinciding perfectly with ETF rebalancing, which typically takes place within 24 hours after the close.

But one Bitcoin chart really struck me:

The amount of coins that haven’t moved in over a year increased by 1% in just three days. That’s enormous ! It means that none of the long-term holders panicked during Bitcoin’s bad day. I know 1% doesn’t sound impressive, but it represents the equivalent of 467 days of mining at the current rate and roughly what miners sold over the past two and a half months of solid uptrend.

It’s tempting to think that hodlers are cold-blooded investors who never sell, but that’s far from true. They’re often the ones who stabilize long corrections by refusing to capitulate — yet even they tend to flinch a little on panic days. Not this time. On Friday, everyone apparently decided to just do something else instead of selling.

Another notable datapoint: the number of new on-chain addresses with a non-zero balance didn’t fall either, staying relatively high compared to recent months.

With both metrics showing that kind of resilience, I wasn’t at all surprised by the massive rebound we saw today (Sunday). Personally, I didn’t even bother opening my crypto account on Saturday morning at the bottom — it felt like unnecessary stress. Hopefully, you did the same… and that the next time you log in, your portfolio doesn’t look quite so ugly.

You should hear from us again soon.

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End of Update no.1

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Dear Folks,

I regret to inform you that this bull market should continue for a little while longer. In fact, so little has changed in terms of overall bullishness across our metrics since our last update ten days ago that I could almost have reposted it verbatim — and it would still be accurate. That said, we continue to hold the view that, on the other hand, valuations across the index (and many of its components) remain downright filthy.

If you read my post “AI Bubble? What the Dot-Com Era Can Teach Us” from last year, you’ll remember that one of my conclusion back then was that we were not there yet. My reasoning was that the “AI reward” remained largely concentrated among the companies building the backbone of the revolution — the ones actually seeing real revenue acceleration. I compared it to Cisco in the early internet days (1995): before we truly figured out how to make money from the newly public internet, Cisco was already benefiting from the trend. Whatever the outcome, everyone was going to need their hardware. The real bubble didn’t start until a few years later (around 1998), when every small company aligning itself with the “.com” theme saw valuations explode.

In 2024, we were far from euphoria. Market breadth wasn’t great. Capital was concentrated in the Mag7. Sure, a few younger stocks like AppLovin had their moments, but overall, we were miles away from the frenzy of the Dot-Com era or even the COVID-era SPAC and stay-at-home mania. I also pointed out that it wasn’t a particularly friendly environment for unprofitable, high-risk stocks — risk capital was still somewhat cautious after the 2022 monetary shift.

Things have changed. How many stocks do you know that have gained 20% in a single day lately? In my own portfolio, Figma climbed roughly 45% in the last five days. UiPath — one of the few stocks I held through the tariff feud — also jumped 45% over the last five trading sessions, including 18.9% just today. MARA had a 15% candle last week. Even AMD, despite its massive market cap, didn’t mind popping 25% in a day, nearly 45% in five. All of this — and we’re not even in earnings season!

When did I last see that? In 2021, when SPACs were doing 20–25% daily moves. And honestly, that’s not only the last time — it’s the only time I’ve seen this kind of action outside of a post-correction bounce, and I’ve been investing since 2007–2008. Sure, there have been smaller bubbles — 3D printing in 2013, cannabis stocks in 2018 — but watching several of my holdings jump 20%+ per day? That’s rare.

Yesterday, SoftBank bought ABB’s robotics division for $5.4 billion. ABB is one of the four “old guard” industrial robotics giants. They’re solid — I know the field well — but traditional industrial robotics isn’t exactly a hyper-growth arena (growth forecasted at 10% YoY through 2034, per Global Market Insights). Yet, after cleverly branding the acquisition as “Physical AI,” SoftBank’s stock jumped 13% in a single day. At SoftBank’s market cap, that means they spent $5 billion and instantly gained roughly five times that in market value — simply by calling it AI. If that’s not a sign of a frothy market that’s lost touch with fundamentals, I don’t know what is.

I’m not complaining — I love seeing my account balloon like everyone else. And if you remember, I partially own one of the leading companies in robotics… sorry, Physical AI. So I can’t pretend I’m immune to the market’s enthusiasm. Still, seeing the market enter this kind of mode again feels like the right moment to start thinking about a plan. My point here isn’t to spread fear or predict an imminent collapse — but rather to take this opportunity to share a few thoughts (and yes, this post also includes a short market update).

We are now in a bubble.

Back in the summer of 2024, I was honestly a bit irritated by all the people calling the AI trend a bubble about to burst. It was obvious to me that we weren’t there yet — and that’s what pushed me to write (and spend far too much time researching) the piece I mentioned earlier.

But my view has changed. We’re finally seeing exactly what I expected when true bubble dynamics would take hold. Things are getting wild in the VC world. Investors are making easy wins with little regard for fundamentals. A good story tied to the dominant investment theme is all it takes for a stock to explode.

Oklo Inc. (OKLO), an advanced nuclear technology company developing compact fast fission reactors, has yet to generate a single dollar of revenue — and yet, its share price doubled in about a week earlier in September, driven almost entirely by the “AI energy demand” narrative.

The market’s excitement wasn’t about current fundamentals, but rather the idea that small, modular nuclear reactors could become a key power source for the coming wave of AI data centers.

You may have also seen this graph circulating on social media.

It shows how Oracle’s debt-to-equity ratio has reached extreme levels. Yet that didn’t stop the stock from gapping 36% higher on September 10, following reports of a strong acceleration in cloud demand and a $300 billion, five-year deal with OpenAI to supply computing power for AI systems.

These are just two examples, and I’m sure you’ve seen recently plenty of other exuberant stock moves that are difficult to justify from a fundamental standpoint.

Market breadth has also reached levels seen only a handful of times over the past four years — a sign that the rally is spreading to an increasing number of stocks.

And I wouldn’t be surprised if it continues into territory we haven’t yet seen in the bull market that began in 2023.

All of these are clear signs of an exuberant market, and to me, there’s no doubt anymore: AI is now a bubble.

History Has Never Given Us Any Other Ending to a Bubble

History has never offered a soft landing to a bubble, and this one should be no exception. Every major speculative phase — from the South Sea Bubble to the Dot-Com era and the COVID-era SPAC frenzy — has ended the same way: with a sharp repricing that reminds everyone that narratives don’t replace fundamentals forever.

Bubbles are not just about overvaluation; they’re about psychology. They feed on a feedback loop of optimism, liquidity, and FOMO until the system runs out of fresh money or imagination. Once that happens, the reversal is not gradual — it’s sudden and brutal.

The current setup fits that script disturbingly well. Valuations are stretched far beyond earnings growth, Big Tech are incestuously investing in one another in a circular loop, venture capital is once again flooding the system with easy money, and nearly every company — regardless of its actual business model — is now branded as an “AI play.” We’ve seen this movie before. In 1999, it was the “Internet revolution.” In 2021, it was “the future of everything.” Today, it’s AI and “Physical AI.” The label changes, but the behavior never does.

Does this mean the market will crash tomorrow? Not necessarily. Bubbles can inflate far longer than logic allows — that’s part of their nature. But what history tells us with certainty is that they always end the same way. The timing may be uncertain, but the outcome never is.

The Ending Is Inevitable — But the Timing Isn’t

Although we more or less know how this story ends, predicting when it will happen remains one of the most uncertain sciences in investing. Nobody truly knows. Most valuation metrics are already screaming overextension, and anyone exiting the market now would almost certainly see lower prices eventually. But the key word is eventually.

Bubbles have a way of defying gravity for longer than reason suggests. Think of those who exited in 1998 and missed the euphoric 1999 run. History doesn’t just punish greed — it also punishes impatience.

If I had to guess, we may soon — though perhaps not too soon (see my market update below) — get a non-negligible correction to reset sentiment. But the broader speculative phase could easily extend much higher afterward. The Fed has only just begun cutting rates, economic data releases are on hold due to the U.S. government shutdown — meaning no bad news to digest — and corporate tax incentives are about to take effect. Together, these factors create the perfect setup for a prolonged honeymoon phase.

Yes, the S&P 500’s P/E ratio is now flirting with levels only seen during the Dot-Com bubble, but why couldn’t it go even further? In 2000, the mania was mostly in emerging tech stocks outside the main index. This time, the concentration is inside the S&P 500 itself — the very heart of the market. Since 2023, the “Mag 7” have driven an unprecedented share of the index’s performance. When the bubble lives in the core rather than the fringe, the spectacle can grow even larger before it finally bursts.

You Can’t Time a Bubble — But You Can Navigate It

Now, considering that (1) we are clearly in a bubble, (2) bubbles have never ended well, and (3) nobody truly knows when this one will, this is probably the moment to have a solid strategy in place.

Some will call for an immediate exit. Others will argue this can last forever. The truth, as usual, lies somewhere in between. The key is not guessing the top, but navigating the trend intelligently.

The Dot-Com bubble destroyed an incredible amount of wealth, but it also created some of the biggest fortunes in modern history. Mark Cuban is the perfect example — he made his fortune by riding the euphoria, but more importantly, by exiting at the right time.

The Hedge Signal is one of our tools designed to highlight when market risk reaches levels where, historically, it has been wiser to step aside. The Risk Index, on the other hand, is more sensitive — it flags when conditions make the market vulnerable to short-term downside moves. But, It’s important to remember that not all stocks move in lockstep with the market. In 2000, the crash hit nearly everything at once. But in 2021, the air began leaking out much earlier — as soon as February. By the time our Hedge Signal triggered at the end of November, investors who had remained in the riskiest growth stocks had already watched most of their 2020 gains vanish.

Therefore, having an exit strategy for exuberant stocks — the ones that could crash on their own after flying too close to the sun — is essential.

I am a big advocate to put a trailing stop loss at 2X the Average True Range (ATR). The ATR (Average True Range) measures how much an asset’s price typically moves over a given period, providing a clear view of its overall volatility. Setting a trailling stop loss at 2X ATR is like saying that we assume that if we see a move down that exceed twice the typical daily volatility of that stock we see it as a change of trend. In stock that trend very hard I usually set the ATR at 2.5X or 3X to give it more room.

For example, using a 2.5×ATR trailing stop on the COVID-era darling Teladoc (TDOC) would have allowed an investor to ride the move from around $78 to $205.

TDOC did go higher afterward, but exiting near $205 would, in hindsight, have looked like a genius move — the stock later deflated to around $6.

Similarly, applying a 3×ATR on Roku (ROKU) during the same period would have let you hold confidently from roughly $100 to $382.

Again, not exactly the top, but an exceptional gain considering the stock later collapsed into the $30 range.

This approach requires a bit of discipline to adjust stops daily, but it can pay off handsomely. For WU Advanced members, you can already track the ATR directly in TradingView using our custom script — and see each stock’s current ATR value in our Stock Health Dashboard.

Another option is to rely on more conventional technical strategies — for example, using a standard MACD setup or the well-known two-EMA crossover approach.

For example, using 27- and 36-period EMAs as the fast and slow averages, respectively, would have provided solid protection during past market downturns.

Again, this kind of configuration tends to hold up well in the market over time.

You can experiment directly in TradingView with different combinations to see which ones would have kept you comfortable during past drawdowns. TuneMap also helps by identifying the historically optimal configurations. For instance, the optimal 2-EMA setup for AMD — 17 and 45 — would have done a solid job capturing most of the uptrend while exiting major downtrends, such as the one around October last year, without missing the current rally. This configuration should remain relatively defensive in the near future.

You can also take a more preventive approach by tracking key valuation metrics and avoiding or trimming positions when they reach extreme levels. This kind of discipline gave me some very solid exits in 2021 and helped me steer clear of several bad investments.

As I started noticing that, in such a frothy market, valuation is about to become a key battleground, Zachary and I began building a Valuation Dashboard for WU Advanced. It will let users clearly visualize where a company’s (and the market’s) current valuation stands across key metrics. This is something I personally had been craving — I couldn’t find any existing tool that presented this data in a meaningful visual way. The visual design turned out really cool — that section alone took about 800 lines of code — and we expect to have it live early next week.

There are many different approaches, and I’m sure everyone has their favorite. But the main point here is simple: when you’re holding stocks that behave like rockets, it’s probably time to have a solid plan in place — so you don’t end up watching all those gains melt away.

Getting (or Not Getting) the AI Hype

During the COVID mania, there was an analyst who became no.1 on TipRanks out of over 40,000 financial analysts — despite being relatively junior. Every stock he mentioned in his posts would then skyrocket. You might think, “That was easy, Vincent, everything was going up back then.” But not quite — not every stock was doing 100% to 500% runs. Yet almost every company he praised did.

His analysis always felt simplistic to me — sometimes even shady — with lines like “according to my secret valuation model, this stock should be worth $500 by 2022.” But regardless of how unconvincing it looked, it was working. That’s how he became number one.

One day, he published a glowing report about a robotics company working on exoskeletons — a field I know inside out, and where I’m often asked by VCs for guidance. Reading it made me realize how utterly wrong it was. The company had barely $300K in annual revenue and no realistic path to success. I knew it was doomed. Sure enough, it went bankrupt by 2022.

Was the analyst wrong? In the long term, yes. But in the short term, not really. The stock soared more than 150% in the year following his report. Anyone who jumped on that move with a solid exit plan would have made money.

That story illustrates that being “right” or “wrong” in markets is rarely binary — it depends on time horizon. In that case, we were both right, each in our own timeframe. It also raises a deeper question: who is really the expert? I was the expert in robotics, but he was the expert in understanding what the market wanted to reward.

In hindsight, that was the true skill of his success — not deep technical insight, but a perfect grasp of the narrative driving the bubble. He understood that, after COVID, investors were obsessed with anything that looked like a disruptor of the status quo. Cathie Wood became the face of that era, but this guy understood its essence — and rode it flawlessly.

To properly surf a bubble, you need both kinds of experts:

• the one who understands the fundamentals of a company, and

• the one who understands what the market will reward next.

Depending on the kind of investment game you want to play, you may need one more than the other — but both sides are worth hearing.

The COVID bubble had Cathie Wood. The Dot-Com bubble had Garrett Van Wagoner. Both were absolutely right — until the very moment they weren’t.

This duality reminds me of our Retail Momentum Screener. With so much momentum chasing in today’s market, it’s no surprise that the screener is performing relatively well right now. It has, in fact, flagged several stocks that have gone on tremendous runs — names like CRDO, NIO, FIG, PATH, WOLF (+820%!), OKLO, SMR, and IONQ.

But it’s crucial to understand what this tool is — and what it isn’t. The screener is tuned to retail trading data and built to chase momentum, not flawless fundamentals. It’s more like the analyst from my earlier example than a true expert — great at capturing the prevailing mood of the market, but not necessarily its long-term truth.

The market is currently rewarding that behavior handsomely, but that won’t last forever. Phases like this can turn quickly, and when the bubble finally pops, these are exactly the kinds of stocks that could get hit the hardest.

Which brings me back to my earlier point: having an exit plan is not a bad idea.

Conclusion

It’s already conclusion time? But wait — I did promise a market update!

Well, it’s 3:04 a.m., and I have to drive one of my kids to school at 7 a.m. And yes, this post ended up way longer than expected. But here we go.

As I mentioned above, not much has changed since our last post, when most of our metrics were firmly bullish. So, I wasn’t surprised to see the market continue grinding higher. Every attempt at a reversal has been met with a quick bounce — often ending with no more than a minor red candle. The market even shrugged off the U.S. government shutdown, which says a lot about the current level of optimism.

I know this doesn’t match the “overbought” sentiment you hear everywhere, but the reality is that most of our leading metrics remain too bullish to suggest a major drop. That could change quickly, of course, but for now the snapshot looks stable.

Take our Option Model, for example. Historically, it leads most market downturns by about three days on average. The only time outside of a bear market it fell in sync with the market was during the July 2024 pullback — in every other case, it curved down two to six days before the market inflected.

Yet, as of now, the model is trending upward, sitting at a level we’ve rarely seen since 2022. The signal line also remains comfortably far from its bearish threshold.

Same story with our NYSE and Nasdaq Derivative Volume indicator. The spread between bullish and bearish bets — the blue line — shows just how optimistic (or, if you prefer, how not bearish) the options world currently is. It’s now at a level we haven’t seen since the April correction.

Our Implied Correlation indicator tells a similar story. It remains quite wide and could soon start to contract, which would typically add even more bullish pressure on equities.

Still, as some of these metrics approach very elevated levels, it suggests that a reversal is likely on the horizon — sooner rather than later. The key point, however, is that they typically start turning down before any real damage occurs. And right now, that’s not what we’re seeing.

The SKEW Index also remains relatively low, despite the market’s climb. Normally, as the market rises, SKEW should also rise — since higher prices push bearish options further out-of-the-money while making some bullish positions at-the-money. Yet SKEW is holding steady.

In other words: traders are either taking fewer bearish bets or placing their bullish bets farther out of the money. In both cases, this behavior adds to market stability.

Like I just said, before the wind truly turns, I expect to see these metrics start to deteriorate — the Option Model curving down, Derivative Volume thinning out, Implied Correlation tightening and rising, and SKEW pushing upward. Chances are, our Market Breadth Indicator, which I showed earlier, will also shift sharply higher as participation narrows before the next correction.

We’ll continue to monitor these closely and keep you updated on any significant change. In the meantime, you can track all of these metrics yourself on our S&P 500 Dashboard.

Until these metrics start to degrade, it doesn’t mean every candle will be green — but volatility should remain relatively contained. Still, something tells me we’re not done with the AI lotto just yet. The only real question is: who’s going to win tomorrow?