Technical Pivot Or Fundamental Colapse?
In last week’s blog post, I suggested that the market might be attempting to establish a bottom but noted that a meaningful decline in the VIX would be needed for confirmation. It now appears that we may finally be seeing the VIX retreat. In the chart below, I have compared the S&P 500 to the VIX over a one-year period, highlighting recent VIX spikes and their corresponding S&P 500 lows. I use this relationship, alongside my AI-derived model, to identify potential market pivot windows. Historically, when these indicators align, they have provided a high-probability bullish entry signal over a 14- to 28-day period (or longer).
That said, I am not a proponent of blindly "catching a falling knife" when it comes to investing. While there are technical signals suggesting a potential entry opportunity, I remain mindful of broader fundamental factors impacting the market. Recent consumer confidence readings have been lower than ideal, and many public companies have adjusted their forward guidance due to signs of consumer weakness. Credit card debt remains elevated, and elected officials have signaled the likelihood of economic challenges as they restructure global economic relationships. Additionally, after two consecutive years of strong market gains, it is reasonable to ask: how long can this momentum continue?
With these factors in mind, I plan to approach any leveraged-long positions with caution. I am looking for further confirmation of a market pivot on Monday before committing.
By implementing a good defensive portfolio strategy, I’ve substantially avoided the market pullback thus far in 2025. I’ll continue to use the AI model and my overall risk mitigation strategies as we move through the rest of this year.
Based on the AI Quant model, the probabilities of a positive return are as follows:
7-day horizon: DIA (86%), SPY (71%), QQQ (57%)
14-day horizon: DIA (71%), SPY (57%), QQQ (57%)
Disclaimer: The information provided here is for educational and informational purposes only and should not be interpreted as financial advice. I am not a licensed financial advisor, and my portfolio strategies may not align with your financial goals or risk tolerance. All investments carry inherent risks, including the potential loss of principal. Historical data and model-based projections are not guarantees of future performance. Please consult with a licensed financial professional before making any investment decisions.
