Stocks closed sharply lower yesterday, erasing early morning gains after a dramatic reversal.

Wednesday afternoon's impressive sales and earnings by NVIDIA (+60% quarterly EPS and sales growth rate), energized the market at the start, with the tech-heavy Nasdaq and S&P gapping open higher by more than 2% and 1.4% respectively. Shortly thereafter, the Nasdaq climbed as high as 2.58%, with the S&P getting as high as 1.93%.

NVIDIA itself opened higher by more than 5%, which was essentially their intraday high.

But then they started paring those gains. And the indexes followed suit.

After closing their opening gaps, selling intensified. More selling was seen into the close where NVIDIA and all of the indexes finished at or near their lows of the day.

The Nasdaq, after trading up as much as 2.58%, closed lower by -2.16%, for a 4.74% swing. The S&P finished down -1.56%, putting in a 3.49% swing. And NVIDIA, which closed -3.15% lower, saw an 8.23% swing.

In other news, the September Employment Situation report (which should've come out in early October, but was delayed because of the government shutdown) was released yesterday morning. And it came in better than expected with 119,000 new jobs being created (97K in the private sector and 22K in the public) vs. the consensus for 50,000 (60K private and -10K public). The unemployment rate came in at 4.4%.

Revisions to previous months, however, were to the downside with July down -7,000 (from 79,000 to 72,000), and August down -26,000 (from 22,000 to -4,000).

The stronger numbers were a relief, especially after the revised negative print the month prior. But that could also be seen as undercutting the narrative to cut rates further.

The next Employment Situation Report, however, won't come out until 12/16, which is after the next Fed Announcement on 12/10.

AI-bubble worries continue to hang over the market.

Pretty ironic, given NVIDIA's astonishing Q3 numbers. And their just as astonishing outlook for Q4, which they guided above estimates. In fact, CEO Jensen Huang was quoted as saying their Q4 outlook is "crazy good." And he dismissed talk of AI bubble fears. He said, "we're in the beginning of a very long-term buildout of the fundamental infrastructure of humanity, which is computing." "We reinvented computing for the first time in 60-70 years, and so all of the computers that have been installed around the world, is being modernized to accelerated computing and NVIDIA's GPUs and to Artificial Intelligence."

I do not believe AI is in a bubble.

But I do believe in pullbacks. And we were due for one.

Pullbacks are common. And they happen in every bull market.

They are defined as a decline between -5% and -9.99%, and they happen on average of 3-4 times a year. But if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell.

For perspective, from their recent highs, the Dow is off by -5.19%, the S&P is off by -5.11%, and the Nasdaq is off by -7.85%. So, we are in pullback territory.

But for additional perspective, YTD, the Dow is up 7.54%, the S&P is up 11.2%, and the Nasdaq is up 14.3%.

And with Q4 being the best quarter for stocks, not to mention it being a post-election year when November and December have a 72.2% and 77.8% likelihood of closing higher, I'm expecting a lot more upside to go. Especially with the backdrop of a transformational AI tech boom underway.

Best,