My last post on concentration made a lot of bulls angry here. they argued that spy's job is to ride winners, and big tech wins.

if that's the bull thesis, you better love this chart from j.p. morgan.

right now, 49% of the s&p 500 index is tied directly to "AI-Related Stocks". J.P. Morgan defines this as the 'Magnificent 7' plus another 34 stocks directy linked to the AI buildout.

We have officially surpassed the peak dot-com TMT concentration (41%) and are approaching levels unseen since the 1880s railroad mania.

this implies that if just that one narrative stumbles, the entire market unravells with zero breadth to catch the fall. the bulls keep saying there is "no reason to worry." if this chart doesn't give you pause, what metric would? are you betting against 200 years of history that this time, it really is different?

If you missed yesterday's second post about the hotter-than-expected CPI report - headline inflation was broadly in line with our expectations at 3.7% YoY, but the call for softer core inflation was wrong, with core coming in at 2.6%. Not an encouraging report, and the October Fed decision certainly won't be easy, but I still don't think it fundamentally changes the macro outlook. The market also appears to be coming around to the interpretation we discussed yesterday, with October rate hike odds now back below 30%.

The important distinction is that CPI doesn't translate directly into PCE, which is what the Fed actually targets and much of yesterday's core surprise came from shelter and used cars, and neither carries through to PCE in quite the same way.

Shelter has a much smaller weight in PCE, while the inflation it measures also tends to lag actual changes in market rents. There is also the broader issue that higher rates increase financing costs for developers and can worsen the housing supply constraints contributing to inflation in the first place so hiking is unlikely to solve this.

Today's PPI release will be important, mainly the medical services components that feed into PCE. I do remain cautious, especially around energy, as gasoline also feeds into PPI and represents a share of final demand. Still, a hotter CPI reading doesn't automatically mean we'll get an equally hot PCE print.

Another thing i wanted to share is that the diffusion of CPI inflation, calculated using an approach similar to Kevin Warsh's preferred PCE diffusion measure, continues to decline.

Basically, inflationary pressure is becoming less widespread, even if some individual components remain elevated.

The bond market is also starting to support our view that the initial reaction was overdone, with the 2-year Treasury yield already moving back below its pre-CPI levels. That doesn't mean inflation is no longer a concern, but it does suggest the market is reconsidering how much yesterday's report really changes the Fed's near-term path.

Moving to equities, I remain constructive going into Q4, and so far the market is behaving more or less in line with seasonal tendencies. We discussed on Monday that some choppiness was likely, particularly with the macro uncertainty and earnings season getting underway, and that's broadly what we've seen.

This is important given the sell-off across AI and semiconductor name as between ASML yesterday and TSMC today, we're seeing little evidence of a slowdown in underlying demand. So, to me, the recent weakness looks much more like a cost-of-capital and valuation adjustment than a deterioration in the AI investment cycle itself.

We also got the Anthropic financials I mentioned yesterday, and I'd describe them as good, although perhaps not good enough to completely change sentiment on their own. The company reportedly grew Q3 revenue by around 45% to $16.8 billion and told potential investors it was cash-flow positive for the quarter. Given the roughly $500 billion in long-term compute commitments this is v important and provides better visibility into the demand in AVGO, GOOGL and AMZN.

What I also find encouraging is that despite everything going on, from macro uncertainty to geopolitical headlines, investors appear to be rotating between winners and losers rather than indiscriminately reducing equity exposure. With this said earnings will ultimately be the real test.

And there's another interesting divergence here. Since the end of June, forward earnings expectations have continued to move higher, particularly across semiconductors, memory and AI infrastructure, while valuation multiples have actually compressed.

Basically, we're seeing earnings expectations improve while investors are paying less for those earnings. This meansthat part of the correction has been driven by multiple compression and not deteriorating fundamentals.

Corporate guidance also remains strong, which is arguably more important than backward-looking earnings beats at this stage. As long as companies continue to deliver and maintain their forward outlooks, I see little reason to abandon the constructive Q4 thesis. That doesn't mean we won't get further volatility, but I continue to view the weakness as an opportunity

Bullish options flow is becoming increasingly noticeable across semiconductors and high-beta stocks, which is encouraging. Keep in mind that tomorrow is OPEX, and we often see trend reversals as positioning gets cleared. The key market maker exposure level is currently around 770 on SPY, which could act as a magnet for price. However, today's PPI is the more immediate catalyst, with options pricing in a move of roughly 6 points, so expect some volatility around the release.

In terms of positioning, we're definitely not out of the woods yet, but volumes have shifted toward neutral, and I suspect we'll remain in this environment until PPI provides some clarity on the next direction.

On the Qs, the key level to watch is $720, where market maker positioning could help support a bounce. A break below that level, however, could see price action deteriorate further, potentially opening the door for a move toward $700. where the market stablises.

On SOXX, market positioning is similarly bearish to what we saw a couple of months ago when the ETF tested $480. Premarket, we're approaching a test of the $500 level, but needs to be noted is that volumes are starting to pick up around $480. Below that, market maker exposure drops off considerably, increasing the risk of further downside. So, similarly to the Qs, we could see SOXX stabilise around these levels

saw this research note from goldman's christian mueller-glissmann in FT and it’s pretty wild.

almost 45% of s&p 500 stocks now have a negative beta. basically half the index is actively moving in the complete opposite direction of spy while headline numbers keep hitting aths.

the last time we saw a spike like this was literally at the peak of the dot-com bubble in 2000.

everyone is watching spy green days thinking the whole market is fine, but under the hood top 10 big tech are basically disguised as the entire economy while 200+ companies are slowly bleeding out.

feels like this divergence can’t go on forever. curious if anyone else is rebalancing into cash/equal-weight or just riding nvidia till it snaps?

First placed $600mln during their IPO, then Abel added $330mln today.

Ok, these are rookie numbers for BRK but why??

It's against all Buffett stood for...high capital costs, high leverage, small moat, huge uncertainty regarding future CFs, questionable accouting practices.

I mean BSP is basically a PE-tech focused firm with no exit strategy, buying hugely discounted firms that lost of their edge due to AI killing SAAS. Its portfolio includes "giants" like AOL, AirTable, WeTransfer, Vimeo....WHO STILL USES THESE COMPANIES??

The WSJ published a nice article regarding BSP faulty accounting practices https://www.wsj.com/finance/investing/at-bending-spoons-the-numbers-are-the-real-mind-bender-43f10bee pretty frightening picture.

I'm a bit confused by the direction of BRK under Abel to be honest, but anyway Buffett chose him so there must be valid reasons....

Tracing a price rise back to its source is the most useful exercise I know, so here's the chain for phones, with who said what.

1. Memory chips got more expensive. Counterpoint Research says memory chip prices shot up.

2. Phone makers passed it on. Phone prices are up about 20% this year.

3. People bought fewer phones. Global smartphone shipments fell 20% in the third quarter from a year ago, the weakest 3rd quarter since 2012.

4. Forecasters are going the other way on memory itself. Bloomberg Intel now expects the market for the memory used in AI chips (called HBM) to reach $641B by 2030, up from a previous forecast of $260B. It expects HBM3E and HBM4 prices to jump 30% to 45% in 2027, and the average HBM price to rise from $15.46 in 2026 to $34.94 in 2030. I saw this via a research account on X, not the original report.

5. This week's wobble. Memory stocks sold off hard after a Chinese chipmaker, CXMT, said it found a way to fit more memory on a chip. CXMT hasn't released performance numbers yet.

Which link in this chain do you think keeps its pricing power longest?

Jamie Dimon had a pointed question for corporate America.

Speaking to Bloomberg on Oct. 6 on the sidelines of a JPMorgan event in London, the bank's CEO asked whether companies, leveraged or not, are prepared for higher credit spreads when they have to refinance or borrow money.

Households would do well to ask themselves the same thing. Higher borrowing costs for companies tend to travel down the line to mortgages, car loans, and credit cards. Companies under pressure may also cut jobs or slow hiring to protect profits.

Let's start with the strong earnings from ASML, which I think are particularly important given the sell-off in AI and semi stocks.

The company reported €11.7 billion in revenue, €5 billion in net income and raised its full-year revenue outlook to €44 to 45 billion. One of the most important parts was management's commentary on demand and that’s that customers are already expressing interest in placing orders for its semiconductor manufacturing equipment for 2029 and even 2030.

In addition to this, ASML now expects demand to exceed its currently planned production capacity in both 2027 and 2028, despite plans to increase capacity.

Basically customers are planning capacity years in advance, which continues to support the longer-term investment cycle and thatt the underlying demand remains strong.

Moving to today's CPI, my base case remains for a slightly softer core reading on an annual basis, with headline inflation broadly in line with expectations and much of the increase coming from higher energy prices.

I'm lookin for core CPI at or below 0.23% MoM and potentially 2.4% YoY, against consensus of 0.2% and 2.5%, respectively. Headline inflation is expected at 0.6% MoM and 3.6% YoY, largely reflecting the increase in energy costs.

As usual, the breakdown will be more important than the headline number - I'll be watching shelter, used cars, airfares and wireless services, where some of August's inflationary pressure could reverse.

This would also be consistent with the broader disinflationary signals we've been seeing across developed markets, although the recent increase in energy prices remains a risk to that trend.

We also had some interesting comments yesterday from New York Fed President John Williams, who is Fed core leadership… You might recall that his September 29 speech helped push back expectations for an October hike, and his latest BBG interview has now taken some of the pressure out of expectations for further tightening in 2027.

He reiterated that one additional rate hike may be appropriate this year, but importantly, he currently sees no reason for the Fed to do more beyond that. In other words, the Fed is not necessarily done tightening, but neither does it appear to be preparing for a prolonged hiking cycle.

Risk is a core reading around 0.3% which would likely put some upward pressure on yields, while anything materially above that could bring an October Fed hike back into play and force markets to reprice the path of rates more aggressively.

Looking at the Treasury options market, investors continue to pay a premium for protection against falling bond prices and rising yields, especially at the long end of the curve.However, with bearish positioning already reflected in options pricing, a softer-than-expected CPI print today could trigger a sharp squeeze higher in Treasuries as downside hedges are unwound, pushing yields lower thus provide some relief for equities - mainly tech and long-duration names

I'll also be closely watching Anthropic's Q3 financials being shown to potential investors today (this will leak 100%). Broadcom CEO Hock Tan suggested the company wouldn't be overvalued at a $2T IPO, and given AVGO's exposure to Anthropic, he likely has a better view of the underlying business than most of us. Ofcourse, we should take such comments with a grain of salt, especially given Broadcom's interests, but it does tilt the odds towards a solid performance. With sentiment already this negative, any positive surprise could be enough to trigger a squeeze higher across AI stocks.

As for market positioning, SPY options are pricing a relatively contained move around today's CPI release- 0.68%, with no particularly large surprise being anticipated. Of course, that doesn't mean we can't get one… Given that headline could be higher we could be looking at a scenario of an initial knee jerk reaction followed by a fade if core is lower as per our epxecations.

Support is likely to be between 772 and 770 that scenario comes to fruition. Main resistnace remains 780. Volumes are neutral, so no clues there

The Qs caught a bid at $740 as per yesterday\s analysis, but remains neutral. Do not rely on 740 holding in case of a surprise,

while the broader Treasury options market continues to price in downside risks for bonds, particularly at the long end of the curve, TLT 0DTE options volume is heavily skewed towards calls so short-term traders are positioning for a softer CPI

TL;DR: ASML's strong earnings and commentary on demand extending into 2029–2030 reinforce the view that the underlying AI investment cycle remains intact despite the recent sell-off. For CPI, I'm leaning towards a slightly softer core reading, which could trigger a squeeze in Treasuries, push yields lower and provide some relief for tech stocks. The main risk remains core CPI at 0.3% or above, which would bring further Fed tightening back into focus. Anthropic's Q3 financials could also act as a positive catalyst for AI stocks given how negative sentiment has become. On positioning, SPY support sits at 772–770 with resistance at 780, QQQ needs to hold 740, while SOXX needs a sustained move above 750 for momentum to improve. Overall, I remain constructive, but today's CPI will dictate the near-term direction.

The month has been volatile, the week has been rough, and today has been a bloodbath. But with that, lots of HIGH BETA stocks I thought were too expensive could be presenting a great buying opportunity in the next 2 to 6 weeks in my mind.

What stocks come to mind for you?

I am interested in long term investing. I’ll be increasing positions in VOO and VGT, my largest holdings by far.

I’m also closely watching and considering the following:

1.LEU (I’m okay with this price, but while it’s falling, I’ll let it go further. I already hold a small position that’s slightly down now)

1. BE (I want to see it drop further, not sure how low yet. Would be relatively small position )

2. IonQ (interested in a very small position If it drops below $25)

I’m interested to hear what stocks others are waiting for long term entry points now that prices are dropping significantly