The market rolled over Friday after a sharp gap open higher resulting in almost all equity picks closing lower than their open. However, top pick long QQQ, chosen on the Morning Show, exploded out of the gate - nearly hitting our target before fading. But the real winner was our hedge idea to short IWM which paid dividends for many community members as IWM collapsed towards our $287 target before a modest rebound.

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The bottom may be in for AI infrastructure stocks.

Today will be the third trading day after the Leopold fund blowup, and it’s increasingly looking like the resolution of that event marked the bottom for the sector. While the turmoil for QQQ may not be fully over, several key AI leaders bounced off the 200 DMA last week, including NBIS and AAOI.

Even if QQQ gets rejected at the 20 DMA around $700, it would in our opinion take a major shock for AI stocks to breach their recent lows.

Regarding QQQ and the major indices, President Trump saved the day by backing out of a threatened major escalation against Iran over the weekend. The bond market was imploding on Friday post-FOMC and in reaction to continued conflict with Iran, but all indices along with the bond market are being bid up this morning after Trump said a deal with Iran may be imminent.

We believe Trump’s pronouncement may be without merit but even if the war resumes in the near future, this pause may be enough to lift stocks meaningfully higher until then. SPY is not far from all-time highs, IWM is a hair away from breaking back above the 20 DMA, and QQQ is not far from the key 20 DMA level either - and all are at oversold RSI levels. The key to what happens next is the hands of TLT which was diving to new lows on Friday but is up 0.37% this morning. If TLT stabilizes, it could be enough to send each of the indices back into bull channels above key moving averages.

However, even if this doesn’t happen, AI stocks may have hit bottom - and with it, space stocks and drone stocks.

The biggest risk to the market now is what happens with the Iran war and its impact on TLT. If this was not a concern, we would be comfortable saying the market is ready for its next bull run. As it’s impossible to predict exactly when the Iran war will flare up again, we believe it eventually will; but it could take weeks for that to happen, and in the meantime, stocks could behave constructively.

We are therefore upgrading to a green signal, particularly with many exciting earnings reports this week by quality small and mid-cap companies now trading at attractive prices due to the recent drawdown.

However, we will continue to recommend a short hedge against longs due to the risk of the Iran war. Short IWM over a longer swing period, perhaps with TZA, could be the appropriate hedge in these market conditions as IWM will quickly be in a very vulnerable spot if oil spikes again on Iran news.

Today’s Signal: 🟢 (but maintain hedge)

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