Yo Pit Crazies! 

Yesterday, most traders were worried about NVIDIA (NVDA) earnings. 

Wrong focus, Pit Crazies.

The reality is stocks are rotating. While everyone sweats today’s after-bell numbers, smart money is already moving to the next wave. 

Here’s what rotation actually means: companies that are worth a lot of money and stocks that have gone up and up and up see profit-taking, especially stocks with very high valuations and very high multiples.

But here’s the kicker:the technology those companies create starts generating efficiencies for other companies and sectors. Then those companies start growing and improving earnings over time, and the market moves to them.

We’ve Seen This Movie Before

Perfect example: after the Dot-Com boom. Three years – 2000 to 2003 – technology stocks were in the ashcan, and all the money rotated to value. Berkshire Hathaway and Warren Buffett cleaned up.

Funny enough, this time Buffett owns a pile of technology stocks, although his second-biggest holding just behind Apple is now American Express (AXP) – the credit card for people with money. Even the Oracle of Omaha is playing both sides of this rotation.

What My Students Are Seeing

Today in RIPzone, my class where we deal with VIX and volatility, I asked if anyone thought VIX would hit Zone 1 before year-end. That’s the lowest quartile of volatility: the 13 handle or below.

Dead silence. Then head shaking. Nobody believed it.

I have to say I can’t disagree with them. This is the first year I can remember where we didn’t even have two weeks with VIX trading in the 13 handle or less. The year started volatile with DOGE possibilities, then DeepSeek threats, then tariffs, and nothing’s been straight since. The market’s climbing, but it’s a volatile climb.

The NVDA Reality Check

Don’t get me wrong – NVIDIA will likely crush earnings Wednesday after the bell. Even with their massive market cap (over 5% of the S&P 500), they’re still a money-printing machine driving AI growth to all-time highs.

But here’s what’s spooking the markets: that news from China creating cheaper AI products is causing fits with the big capex bulls. It shows NVDA’s power to make money, but also hints at the efficiency gains flowing to other sectors.

Fed Adding Fuel to Rotation Fire

The second catalyst? The Fed doesn’t want to lower rates again. The chairman loves dropping bombs, and he dropped this one: “Yeah, maybe we don’t need to lower rates in December.”

That caused the bleak selloff after the shutdown ended. Traders are hunting for clues in Wednesday’s 2:00 PM FOMC minutes, but the damage is done. High-multiple stocks are getting hit while value plays catch bids.

Where VIX Lands Next Week

I don’t see anything altering this volatile environment. I still think we hit all-time highs because the economic picture looks good with rates declining eventually. But VIX getting back to Zone 1? My students called it right – unlikely.

However, we could see the bottom of Zone 2 after this week’s economic data, NVIDIA earnings, and payroll numbers. That means VIX around 17 by middle of next week.

1 Yr VIX chart, No Zone 1 & rarely at the bottom of Zone 2

The Play

Stop obsessing over whether NVDA saves us. The rotation is already happening. While everyone watches Wednesday’s earnings, watch where the smart money flows when the dust settles.

Check into live classes this week for a surprise.

To Your Trading Success,

AG