My Take on a Two-Speed Market Ahead of a Risky Friday

Yesterday, Wall Street literally split in two. On one side, you have the Dow Jones hitting a historic record, and on the other, the Nasdaq falling for the fourth consecutive time, weighed down by tech giants. It's a rather confusing situation that deserves a closer look. In this article, I'll break down this strange dynamic for you, talk about the artificial intelligence bill coming due for Apple, and most importantly, explain why today's trading session, a Friday, looks particularly dangerous.

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A Schizophrenic Market: Dow Jones at the Top, Nasdaq Suffering

Honestly, the situation is incredible. The Dow Jones pushed to its maximum, breaking its all-time record, while the Nasdaq just keeps falling. We're seeing the tech giants start to slide, especially Apple. To sum up the week in tech: they try to rally, they get knocked back down. They try to rally, they get knocked back down again. Three times, I think you get the picture.

In Europe, indices remained cautious, around +0.50%, as if they were waiting to see what would happen. But this morning, the futures are mostly in the red. Clearly, the market doesn't know which way to turn.

Apple and the Hefty Price of Artificial Intelligence

One of the big topics right now is the high US inflation, sitting at 4.1%. It's not a disaster yet, but it shouldn't go any higher, or the Fed might raise rates to cool things down. Fortunately, oil prices are collapsing, which could help get back under 4% in the coming months. Fingers crossed.

But this situation has real consequences. Yesterday, Apple shook the markets by raising its prices. Why? Because artificial intelligence is devouring memory chip stocks in insane quantities. As a result, suppliers like Micron sell to AI players first, and if there's any left, they sell it to Apple... but for twice the price. The balance of power has shifted, and we, the customers, are the ones footing the bill. The entry-level MacBook went up by $100. It might seem symbolic, but it's a signal.

Analysts are divided. Some, very optimistic, think that "premium customers" will absorb the increase without a problem. What's a premium customer? Basically, it's an enthusiast, a bit like me, who is dependent on Apple. I am living proof that it can go up by $100, and I'll keep buying. I must admit it's my work tool, and well, I also love the orange color of my latest iPhone… to the point of having two.

Is the Market Rally Healthy? The Concept of Breadth

To know if a rally is solid, we look at the "market breadth." Basically, we want to know how many stocks are actually rising, to make sure one tree isn't hiding the forest. On the S&P 500, which is a very broad index with 500 stocks, things are rather positive: 62% of stocks, or more than 6 out of 10, are above their 50-day moving average. Technically, this means a majority of the market is bullish.

What we're observing is a rotation. Capital is moving away from the "generals" (the tech giants) to be spread among the "soldiers," the smaller-cap stocks. It's a way of spreading risk. But be careful, it's a dangerous game. It's these same tech giants that, through the desire they create, attract a lot of money to the markets. If they start to disappoint in the long run, the entire market could eventually run out of steam. This is known as the halo effect. 😇

Technical Analysis: Why This Friday Is Extremely Dangerous

Let's be clear: today is extremely dangerous. It's a Friday, the market is all over the place, there's a bearish bias... In short, anything can happen, especially in the last hour. The Nasdaq, for example, has bounced several times off a key technical support level (the Monthly Middle S1 Pivot Point), but each bounce is weaker than the last. It smells of fragility.

Personally, I don't like it at all when it stagnates like this. It often sets up a violent breakdown. My advice is simple: if you had a great week from Monday to Thursday, don't trade on Friday. Protect your profits and your morale. It's hard when you're passionate, but this is a marathon. It's better to start Monday fresh than to spend the weekend dwelling on a stupid loss.

A trader is honest enough to say they don't predict the future. They identify danger zones. And right now, we're right in the middle of one. Anyone who tells you where the CAC 40 will be in a month isn't a trader; they're an analyst with their head in the clouds. Let's stay in the present. 😉

One Last History Lesson for the Road

In the 1980s, Intel was threatened by Japanese competitors who were slashing prices on RAM. The CEO at the time, Andy Grove, made a radical decision: to abandon RAM and focus 100% on the microprocessor. This bet built the giant we know today. The lesson here is to know when to pivot when you feel your market is losing steam.

It's the difference between a 180-degree turn (a real change of direction) and a 360-degree turn (which brings you back to where you started, as some journalists humorously put it). Knowing how to make a clean break with the past to focus your strength on what can work is an essential skill, in business as in trading.

Conclusion

To sum up, we're facing a divided market where the apparent health of the Dow Jones masks the weakness in tech. Inflation is a burden, as shown by the Apple case, and a capital rotation is underway. But the most important thing to remember is the extreme caution required for this Friday. The risk is at its maximum. Sometimes, the best trading decision is not to trade at all. As for me, at 7 PM, I'm shutting down the computer, and I advise you to do the same. Have an excellent weekend!

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