Here is a brief analysis of the weekly MNQZ26 chart by video.

As the video discusses, we may have found support around 26,484 for MNQZ26. We may not be done with the selling of QQQ stocks, but at least through Friday we did not close at the low of the day, and prices recovered slightly on Friday.

Are we still in a bearish situation? It is still hard to tell.

If you believe Steve Eisman, the entire private credit funding of AI is a real risk to both AI itself and the economy generally. If you look at NVidia, the company deeply involved in the entire sales and financing of chips for data centers, the CEO Jensen Huang apparently was involved in an affair with a Chinese spy.

Does that news matter to the stock market? Maybe, maybe not. There is uncertainty on every front.

Are we at a market top? If you believe veteran technician Tom McClellan, new lows are rising on the NASDAQ 100, but they’re not nearly at peaks of other bubbles. You read my most recent posts about volatility being muted compared to events like the dot com bubble. The top on the price momentum side is likely still not at its peak if you look at this comparison.

With regard to private credit, you could listen to an often profanity-laced commentary from George Nobel, former Fidelity fund manager, about how out of control private credit is, and how it can affect your 401K in other ways that AI malinvestment may not. The less profanity-laced discussion of this issue can be found here.

You also must realize that both the PRC and the USA are coming up with open-source AI models that do not require such data-center buildouts. That fact makes the idea that the hyperscalers can ever capture trillions of dollars of revenue to pay off the massive debt they’ve taken on in private credit increasingly unlikely as time passes. That same issue applies to insurance companies looking for yields they can’t find in U.S. Treasury bonds. That private credit ends up in your annuities and your 401K. It’s just another day on Wall Street, like in 2006 and 2007, right?

Everything is truly up in the air at this point, and it is changing seemingly at the speed of light.

At this hour, late as it is as I write this, we are sitting on key price support in MNQZ26. We will simply have to see how the news unravels to find where any true bottom is.

I am flexible because I can shift from long to short when my models give me that indication. For the long investor with a long time horizon, I would begin to build shopping lists as any correction unfolds and study them carefully before committing, knowing things could get crazy in the short run. Consult of CFP or other qualified investment professional to see how it fits your investment goals.

If I had a short-time horizon like retirement, I would consult a CFP or other qualified investment professional to hedge and spread risks, as there is a lot going on under the hood of the stock market, the commodities market, and even the private investment and private credit markets. You cannot go in blindly and expect investment to perfectly land on its feet.

This week’s video about trade expectancy will hit this evening. We hit a glitch while rendering the video as the AI suddenly revolted against things it did easily over the last three weeks! Thank you for supporting the Buffalo Trader’s Writing Desk! We appreciate all new subscribers. If you like our content, consider becoming a paid subscriber to help us increase and improve the content.

Have a great week everyone!

Remember this chart from the November 1 post? We did blow out 27,502 to the downside. Selling volume looked sufficient according to my model and I shorted MNQ26 for one measured move this morning, and left the building at that point. The chart below shows where support is on the daily chart for now (we have not closed the day as yet).

We are very nearly at “top-bottom” support, based on previous trading action, at 26,731.50. Should that level be breached with force of selling volume, we could see a new low around 26,350.75. If there is even more pressure, a 25-handle might not be out of the question, and the deep VWAP control point low of 22894 might come into play in the coming weeks. Do I know this as an absolute certainty. OF COURSE NOT. All I am saying is that you should be prepared to hedge or whatever else you have to do to tech names showing this kind of weakness and be prepared if something goes awry.

No one knows what will happen next, but the charts and their associated data components leave clues.

That is all I have for now. This selling will pass, but we need to see how the AI components of this market hold up against their financials and future debt accumulation and future revenue projects as they hit, or miss!

Have a great rest of your week! Thanks for supporting the Buffalo Trader’s Writing Desk.

With regard to risk:

“This great emphasis on volatility in corporate finance we regard as nonsense. Let me put it this way; as long as the odds are in our favor and we’re not risking the whole company on one throw of the dice or anything close to it, we don’t mind volatility in results. What we want are favorable odds.” - Charlie Munger (From collections of Munger’s remarks, often linked to Berkshire or related discussions.)

“When any person [or guy] offers you a chance to earn lots of money without risk, don’t listen to the rest of their sentence. Follow this and you’ll save yourself a lot of misery.” - Charlie Munger (Commonly cited in Munger quote collections.)

With regard to practice:

“Obviously if you want to get good at something which is competitive, you have to think about it a lot, learn it a lot and practice it a lot. In this world you have to keep learning all the time because the world keeps changing and your competitors will be learning all the time. So you just have to get up each morning and aim to go to bed knowing more than when you got up. If you keep doing that for a while you will accumulate some experience good and bad, people who do that almost never fail utterly. You may rise slowly, but you are sure to rise.”
(2010 Berkshire Hathaway Annual Meeting; also compiled in David Clark’s The Tao of Charlie Munger)

I got pretty “Munger-y” with that last bunch of quotes, but I think it expresses best the nature of the topic I will write about today.

This is the subject matter of the next two installments, including this one.

Watch this video when it premieres at 19:00 EST!

Next week, I will get deeper into the numbers, but a couple of things must be noted. Trading is like golf. You need to journal your successes and mistakes, and understand what it costs when you do make mistakes. Those calculations are discussed in this video!

1. Before you trade with any real money, you should trade with a trade simulator. It may take you three to six months before you are comfortable with it, but you need a trading plan you have back-tested first, and then implement it by trading with simulator money! It could take you a month to over a year perhaps to get used to the process, but it it essential to your growth into being a profitable trader.

2. When you do that, you must journal the trades as well. Follow the rules as stated here and then continue to take notes about your successful steps and your failures, and then review them so that you can improve. I will go into more detail in coming weeks!

Check the description in the video for sources of the data provided in this video.

Thanks for supporting the Buffalo Trader’s Writing Desk! More helpful content is coming. If you want more, consider becoming a paid subscriber!

It is the end of October, so I decided to take a look at the monthly and weekly MNQZ26 charts. In this video beloe, I cover what may or may not happen beginning perhaps next week, depending on how this eventful week unfolds.

The accompanying chart analysis:

Is AI Going to Kill the 2009 to 2026 Bull Market in the QQQs (and MNQ)?

There seem to be lingering issues of AI indebtedness and basic overspending on AI data centers. Many of these AI spenders (Meta, Amazon, Oracle, OpenAI, Anthropic, SpaceX, and others) are moving forward without considering the risks that future revenues won’t cover the debt.

Chamath Palihapitiya, successful tech investor and minority owner of the Golden State Warriors expresses the situation best in this tweet. His complete comments are found in this “All-In Podcast” episode.

What has happened just this week that concerned me?

Alphabet lost $500 billion in market cap after it reported a deep drop in search volume and advertising revenue. In other words, AI has finally cut into Google’s revenues and Google simultaneously is burning capital like hay in a raging barn fire. Amazon had soft e-commerce revenues this past quarter and also had an insanely negative cash flow.

From The Motley Fool’s analysis:

Both companies are making capital expenditures over 100% of their operating cash flows. Amazon’s free cash flow is –$42.4 billion over the trailing 12 months, and Google’s head is just above water. Their capex guidance is even more insane for all of 2026. If you believe free cash flow is necessary for sustained profitability, you might be quite concernedabout both companies, particularly if AI revenues do not show up.

If you want to see a graphic expression of potential future despair for AI token prices, all you need to do is look here for historical comparison and here for a three-year comparison by user tier is to look here for historical comparison, and here for last-three-years comparison by user tiers.

If If you think the above news is crazy, see what Anthropic’s S-1 IPO filing looks like! From the article:

Computing power is Anthropic’s largest expense item, with more than $100 billion in spending commitments with six partners over roughly a decade. Many of those contracts are non-cancelable or require payment regardless of how much capacity it uses. Its commitments involving high-profile partners include at least $110 billion with Amazon, about $114.5 billion with Google and $44.9 billion with Microsoft over seven to 10 years.

Chamath Palihapitiya, who discusses the impact of AI borrowing in the podcast linked above, thinks that as much as 30% of the Treasury market will be crowded out by private AI borrowing. That could drive up U.S. Treasury bond yields at the very time that spending restraints will have to kick in for federal government entitlement programs like Medicare and Social Security to prevent their insolvency. There is a link summary that quotes 65 sources that you can tap into for a more in-depth explanation.

To cut to the chase, the hyperscaler private debt accumulation will likely be an impediment to earnings for years to come. Consulting firm Gartner estimates that revenue shortfalls will be nearly 5 trillion dollars by 2030 (the end of the decade).

According to the Kobeissi Letter, “42 AI stocks have accounted for 58% of the S&P 500's earnings growth and 81% of CapEx and R&D growth since the start of 2024”, based on the latest data that I found today, According to the NASDAQ, up to 66% of NASDAQ-100 stock revenues come from AI related businesses. Shortfalls are likely to negatively affect earnings in the short and intermediate term (if you are considering 2030 the intermediate term). That will be a challenge for these markets going forward. A link summary of this data can be found here.

Conclusion

As the video shows, there are gaps between VWAP control points that could be filled if selling escalates. The key levels to watch on MNQZ26 are 27,502 and 26,350.75. If those levels are easily broken, then we could see a bit more selling.

We have seen this movie before, once during what I call the “Covidiocy” in 2020, and once again in 2022 and 2023 culminating with the Silicon Valley Bank crisis. The key concern here is how long and how deeply earnings will be hurt by capex. If it is deep, that is a big problem for retirees’ savings in 401(k)s, IRAs, and pensions. The U.S. midterm elections. and the U.S. 2028 elections could create another problem: a ruling elite that wants to nationalize all of these companies. Imagine AI run by people who run your U.S. Postal Service. Are you excited yet? I didn’t think so.

I cannot forecast the future; I can only glean clues from the charts as best I know how. Your investment time horizon and your ability to generate income when you need it are the important factors. You will need to work those out with a certified financial planner and other trusted financial advisors to work out for yourself. These markets are overdue for some kind of correction, which could begin Monday, or the markets could run a few more years higher. You need to figure out what works for you, keep your eyes open, and carefully manage your risks. Perhaps another time, I can discuss the topic of sequence-of-returns-risk. It was an issue from 2000 to 2009, and it could become an issue again.

That is it for this edition of the Buffalo Trader’s Writing Desk! We appreciate all the new subscribers who have joined us over the past few weeks. If you like what you read, give us a like and consider becoming a paid subscriber. If I earn more, I can do more!

Have a great week, everyone!

It’s Halloween as this article is being written, and there might be nothing scarier than the “King of the Hermit Kingdom”, Kim Jung Un, smashing and grabbing $6.3 billion worth of Bitcoin in a Binance hacking incident this week, and yet it happened! What does that mean for Bitcoin in the immediate and longer-term? I will discuss this later in the article. First, watch the video I created for volume profile chart analysis.

Here is the chart that puts numbers on the volume-weighted average price control points (VWAP control points). The magenta dot-dashed lines are constructed from weekly VWAP control points, and the solid red lines are monthly VWAP control points. The green dashed line is a price resistance line.

So What Is Going On With Bitcoin Anyway?

Obviously, the North Korean Binance hack did not exactly send waves of joy through the Bitcoin universe. The other thing that likely becomes a larger issue are the effects of selling on the Bitcoin price, as now there are larger external factors that can smack Bitcoin price around in large ways.

• Apparently roughly half of that theft involved unfreezable Bitcoin assets. That can send other nasty ripples in Bitcoin trading.

• Once prices begin to fall rapidly, now that institutions own a lot of Bitcoin, highly leveraged Bitcoin holders have to liquidate their holdings to meet margin calls, and there is a cascading effect that can create mini-panics as those sales increase.

• This incident re-emphasizes the whole the “not your keys, not your coins idea”. It is NOT a good idea to leave your Bitcoin on large public exchanges. Instead, keep them in your own cold wallet.

• Will this lead to further government regulation of cryptocurrency in terms of transfers? I saw a meme last night that for some reason I lost the link to with the person commenting “wouldn’t a 3-day delay in transfers stop this?” I think that idea could gain traction now that large institutions trade Bitcoin with leverage. Your grandad’s Bitcoin is no more.

The entire AI private credit issue is causing pressure on the U.S. Treasury bond markets, forcing bond yields to rise order to compete for borrowing. You can watch this video to get an idea of the severity of this issue. The bottom line for this incident is that Bitcoin’s protocol was in no way affected by this heist. The outside economic ripples, however, could get a little crazy if the debt crisis turns catastrophic at the fringes and the AI “boom” possibly begins to turn into a bust.

The soundest thing you can do is to keep your Bitcoin in a cold wallet and to be cognizant that it could bounce like a basketball between support and resistance until these crises, economic and political, shake themselves out.

That is all I have today for Bitcoin futures. If you liked what you read, give this post a like and consider joining us as a paid subscriber. If I can get paid subscribers to 1000, I can once again turn up the research muscle and create daily and weekly lists of stocks and ETFs to investigate further. It might be just like the old days again.

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I had not read a non-fiction or biography in quite a while. As I am “Johnny Numbuhs” and someone who reads technical, history, and economics books, I figured I would take a break and read something that discussed someone’s struggle to achieve a goal. Stallone’s interview with New York Times writer Lulu Garcia-Navarro is interesting, but I wanted to really get a picture from Sylvester Stallone himself in written form both to get all his own words and to, in a way, judge his writing skills. I came away impressed with his book, The Steps, A Memoir The story is compelling and at times brutal, and his writing style is pretty crisp and down-to-earth. The book tells Stallone’s life story from birth up until the Academy Awards ceremony in 1977, 49 plus years ago.

What I intend to do with this article is to compare what you see in this video below (factors in becoming a successful trader) to the things that Sylvester Stallone did to become a successful actor and screenwriter. The parallels are quite close and quite daunting. If you really want to do something in your life, you have to follow a path that gets you to that particular goal. The video is below:

The key points of this video are designed to make you focus on what you need to do to succeed at trading. The examples are clear here. Trading is “easy” in relative terms, but learning how to do it profitably is difficult and needs to be a lifelong journey, as markets change.

Sylvester Stallone made his lifelong journey when he literally ended up with his back against the wall, and his only alternative for living was to pursue his dream and desire to be a successful actor/screenwriter. Did he have university-honed skills? NO. Did he have academic credentials? NO. He dropped out of the University of Miami a few credits short of a degree. Did he have money? HELL, NO! He was broke and pretty much destitute. He did have desire to succeed, and that sustained him. He followed many of the same principles discussed in that video for traders. I will outline them below and give you examples.

Stallone’s Steps

Own Every Result

In the video, the key to improving your trade profitability and your ability to stay in and grow the business is to own every order fill, every profit, and every loss you take. Blaming the market, the trading platform, the internet connection, and anything else wastes your time and emotion and teaches nothing. You have to work and to hone a trading plan that manages all of those outcomes effectively.

In Stallone’s case, he made several terrible gaffes early on that delayed his ability to be noticed and taken seriously. Before his success with Rocky, Stallone sold the rights to his script for Paradise Alley to Bob Chartoff and Irwin Winkler for $100. He sold it to the same two producers who would later make Rocky because he was desperate for money. He knew he had lost his nerve. He didn’t blame the producers or the business. He knew he had inner resolve, as he survived being put in jail and forced into a stint in a juvenile psychiatric ward (Chapter 24, Surviving the Snake Pit). He was not going to cave on the Rocky script until he got the film produced and with himself as the lead character, Rocky Balboa. In Chapter 27, “Do or Die, Sly”, he provides a deep analysis of his never-ending drive to get things done his way, knowing all of the pieces of his plan were in place.

Get Ready to Lose — Defense First

The trading rule is that losses are the cost of doing business! Job 1 is to protect your trading capital, THEN profits as they come in. You must define your stop loss point before you enter the trade! Skip anything and everything that doesn’t match your edge.

What is the parallel of the trader to Sylvester Stallone in this case? Stallone’s early New York years were a nearly continuous string of tiny losses, which he managed through a bit of cunning and survival mentality. He slept on pizza boxes, on buses and in flophouses (Chapter 27). Sly took a job cleaning the lion cages at the Central Park Zoo (Chapter 4) and took rejection after rejection. He nearly came to harm with his first acting audition. To keep his goal alive, he would usher at the Baronet and Coronet theaters to watch and to study movies, cinematography, and scriptwriting, while auditioning in his time off and writing at night. (Chapter 8). He continued to handle the losses (rejections for auditions), but earned enough on side jobs to keep moving forward with his goals.

By 1975 he reportedly had $106 in the bank and a pregnant wife. He sold his bull mastiff, Butkus. outside a liquor store in an act of desperation, because he couldn’t feed him. His defensive move was that he kept those losses small enough to survive. Odd jobs covered rent while the real position, writing and acting, stayed open. He and his wife, Sasha, moved to California to get exposure to the entire movie industry and to movie production with his meager assets.

Stallone treated survival jobs as his “stop-loss.” They capped the damage so he could still be in the game when the best set-up (a key audition or a key contact) arrived. A trader who protects capital through a drawdown is still at the table when the trade with the perfect edge set-up appears.

Master Your Emotions

Drawdowns are part of the “trading marathon.” The market doesn’t know you’re in a trade. The market doesn’t know you exist. Attempts to trade outside of the trades that fit your edge to earn trading losses back lead to revenge trading. That leads to even larger losses.

How does emotional control fit in Stallone’s situation on the road to success? Stallone took the hard line with respect to being paid for the script and for getting the lead role. The thing he did not want to was to become angry and lash out at the two producers. That kind of behavior had gotten him kicked out of school and, in one instance, sent to a psychiatric facility. He understood his edge and was unwilling to accept anything less than what he wanted.

Chartoff and Winkler offered up to $360,000 for the Rocky script, but the studio wanted an established star such as Robert Redford, Burt Reynolds, Ryan O’Neal or James Caan in the lead (Chapter 26). Stallone was broke and still refused to sell unless he played Rocky. That’s emotional discipline under maximum pressure. The desperate move and the most emotional move was to take the money. Even after United Artists agreed, he told the AP he feared every day on set might be his last (Chapter 34). He felt the fear and took the calculated risk, following his edge. He rigidly, doggedly, and purposefully followed his plan to the letter.

What he did, in trader-speak, was to avoid the emotional exit. The $360,000 offer was that “emotional exit.” He would have abandoned the plan, taken the money, and run. This is starting to sound like a Tony Robbins seminar promo, but you get the idea. He would have avoided the pain and gotten the immediate dopamine hit from a cash sum. Stallone sat through the pressure, determined to get what he planned on getting instead. Put yourself in Sly’s position and ask the video’s question. Each higher script bid would make you want to cave. Could you turn down five or six rising offers and still stay in position for the ultimate prize? This is particularly true if you are a scalper. When you know that it is the target or breakeven stop, do you hold out until you hit the target, knowing that it is the target or nothing? If the situation is a free move, then you are likely better to hold out than to fold. In real life in this case, Stallone had a pregnant wife who really wanted the security of cash flow. Could you hold out during those rejections on script fees and demands that other actors play Rocky (Chapter 26)? Sly held firm because he knew he had a strong hand.

Your Edge Has to Fit You

This is the trading rule that defines how you can trade with the most comfort for you. A defined, testable edge (including the trade win rate and reward-to-risk ratio) is required and you must be able to easily follow it, given your individual skill. (We will get into mechanical models much later, but for now, we are talking about you being at the controls of the trading platform.) As Van Tharp states in his most famous book, the so-called “holy grail” is a system that fits your beliefs and personality. To add an even more three-dimensional concept to Tharp’s concepts, Brett Steenbarger, from his own trade coaching book, suggests that traders should build on their strengths.

How does this trading rule fit the guy who invented the “Italian Stallion”?

Stallone’s “system” was built around what others called his weaknesses. Those very “weaknesses” combined with his strengths, a clear literary flair and a determination to put them into words, because Sylvester Stallone’s greatest strengths. A forceps injury at birth partly paralyzed his face, leading to his slurring of words and drooping features that seemed to rule out leading-man roles, which he discusses in great detail in Chapter 15. Rather than chase roles written for someone else, he wrote a character that fit him and his life perfectly. He wrote from the perspective of who he really was, a working class underdog from Philadelphia. He would often go to the library to read classic writers like Edgar Allan Poe, and lean upon the despair of their musings, only to turn the stories into the hope for redemption as Stallone wrote in Chapter 12, His true strength was telling hopeful stories cast within the street life in Philadelphia. When acting doors stayed shut, he leaned on the writing, then wrote himself into the lead. He built “an edge” only he could execute.

A trader, just like an actor or a screenwriter, running someone else’s system fights himself every day. Rocky was Stallone’s “perfect edge” set-up because it fit his personality and his situation like a glove. In Chapters 12 and 13, he goes through many iterations of this process with various screenplays (and he tested them all with producers), but Rocky was the pièce de résistance of all of his efforts.

The Five Self-Assessment Factors

The video’s five honesty questions line up with choices that Stallone made about how to pursue his career. Here they are below:

In terms of how Stallone models a trader’s formulation of trading assessment like an actor/screenwriter might have, In his own way, Stallone answered all five questions honestly before he made his “big bet." Most failed actors, like most failed traders, never ask the questions. If there is one thing that Sylvester Stallone did during those years between Miami and Los Angeles, it was that he persisted in learning his craft, writing and even acting, while flat-broke, and learning from every mistake he made. The Steps are a chronical of every mistake and roadblock he faced as he pursued his goal.

Test Before You Trust

This rule establishes the beginning of trading with real capital. Paper trade a real sample of your trading plan, journal your rules and your feelings (and that can take weeks to maybe even six months), then go live with a small capital position, one that will not damage you much if you lose. The demo will test the effectiveness of your strategy. The capital trade with real money will test YOU.

What was the analogy for this rule for Sylvester Stallone on his quest to get Rocky produced and distributed?

Stallone’s “paper trading” was six years of small parts and low-stakes reps, including The Lords of Flatbush in 1974. He earned 25 free T-shirts for that role, but he did it to improve his visibility. How is that for an “acting simulator”?

Each role tested whether he could execute on screen before anything big was on the line. When he finally went “live,” he went live small. Rocky was a low-budget film, roughly $1 million, and he took $35,000 to keep the lead. Of course, the points he was paid for revenues paid much more than that, but he wanted to be sure he could secure those points by getting the picture made. He kept the initial stake small to secure the larger payout later. It was, however, an all-out bet on his acting career, which I will discuss later.

Stallone didn’t bet his potential future as an actor an untested system. He built on every small success, – from his stage work in Switzerland and his softcore film work to The Lords of Flatbush, and his connections with producers in New York and in California. He made Rocky his first real “money trade,” knowing it would not end him if he failed. He tested himself, and learned the key lessons he needed to finally succeed.

Warning Signs a Style Doesn’t Fit

This is the rule that considers how well you have chosen your trading plan and trading method. Watch for breaking rules under stress, feeling drained, trading from boredom, or a plan that takes constant willpower. Treat them as a signal to adjust your trading plan and not as proof that you cannot trade.

How does that apply to Sly?

Stallone’s Paradise Alley screenplay sale was his warning sign. Because he was under financial stress, he broke his rule of staying with his initial price. He blew his first rule and gave in to the first solid dollar figure he could get. That happened to be $100.

He read that failure as a signal to change his approach, not a reason to quit. The next time, with the Rocky screenplay, he set the rule in advance. There would be NO deal if he didn’t star in the film, period.

One rule break under pressure isn’t the end of a career or an account. Repeating it again and again without correction is. Stallone adjusted after one costly lesson. He had lived with being called a failure since he was a kid. Sly was not about to give up on his best chance at winning.

Now Let’s Have A Conversation About How This Analogy Breaks Down

Survivorship Bias

There are certainly some differences between the video's trading rules and what what Sylvester Stallone did to bring his goals across the finish line.

For every successful actor like Sylvester Stallone, there are thousands of actors who held out and never got the deal. Others, like Patricia Arquette, granddaughter of comedian Cliff Arquette, started with family connections. Stallone had no connections other than the ones he created over time. He considers himself fortunate:

“It would be so disingenuous to say you’re an underdog, ‘as he said from his penthouse,’ Stallone said during a recent interview with the Associated Press, on a high floor of a luxury Manhattan hotel. “Yeah. Come on. I am a lucky dog.”

In real-time trading, brokers’ disclosures show the same pattern for short-term traders. The few who survive could be called fortunate, I guess, but if you have statistics from sizable numbers of trades in a variety of market environments, luck is where opportunity meets preparation. This is where position sizing comes in, and that is another area where Sylvester Stallone doesn’t fit a trader’s circumstances exactly.

Stallone’s holdout was a all-in bet with his career as an actor likely on the line, though is prospects as a writer might not have been. The video’s rule is 0.5%–1% of account risk per trade. The thing you should borrow from Sly is his discipline, not his position size. That is why survivorship bias is so brutal in trading. Could Stallone have taken a smaller trade than he did? Probably not, because you cannot risk 0.5% of a movie. The minimum account size for that trade was $1 million, though that money was United Artist’s and other investors, so you might infer that his trade was highly leveraged by the partners in the film. That is why so many entrepreneurs (and movie producers and private LLCs) go bankrupt making movies.

Summary

The most important factor in Stallone’s success wasn’t the script, the studio or that Hollywood had produced over 300 boxing movies before Stallone showed up (Chapter 27). It was Sylvester Stallone himself. He owned his results, survived the drawdowns, and mastered his emotions, which were at times tumultuous. He built an edge that fit him and tested it before he bet on it.

As a trader, that is what you have to do. I may be alone in saying this, but I will say it anyway. If you are an investor of any kind, you are a trader. If you have no idea no idea when to enter and exit, you will one day get burned. I will discuss that issue in a upcoming post for this Substack!

Thank you for supporting the Buffalo Trader’s Writing Desk! If you like what you read, consider becoming a paid subscriber. If I can get to 1,000 paid subscribers, I can really transform this Substack into the publication that the old The Buffalo Trader blog was from 2008–2014, and, before that, a critical part of what was once the most-read trader’s website on the planet from 2002 to 2008. It might never happen, but you never know!

Have a great week everyone!

All the gossip and craziness becomes a kind of sustained narrative which, in turn, can become history. It's scary. — Barbara Kruger

Today’s article will discuss MNQZ26 in reference to last week’s post and how quick shifts in sentiment could in fact create potential selloffs. That could happen even if the charts themselves remain somewhat bullish in a longer timeframe.

There is a also a short video post about Bitcoin futures (BTC) that involve a minimal bullish price objective, despite the fact that volume has been languishing,

The rest of the post will be devoted to the subject of the editorial drawing, AI created, of course, but still relevant to why our markets remain wacky and somewhat unresolved.

Bitcoin Has A Price Objective?

Read more

With the mid-terms 24 days away, it does seem that the U.S. economy is picking up strength in terms of GDP growth, with what appears to be decent prospects for new employment. The current BLS data can be found here. Unemployment is stable this far in 2026 while government employment drops to it lowest levels since 1966. at the dawn of the Great Society programs.

Read more

This one again is free, but the paywall goes back up again after this. Consider joining the Buffalo Trader’s Writing Desk as a paid subscriber.

We are either up against a ceiling, perhaps, or maybe bearing the weight of negative breadth on MNQZ26? Is it one, or the other, or both?

This video runs 13:16, but is timestamped below. To give you a quick perspective on the charts, watch this video:

Timestamp:

0:00 Monthly Chart Analysis

6:50 Weekly Chart Analysis

8:53 Daily Chart Analysis

This is the bullish target analysis based on the monthly chart:

We do seem destined to battle 31397.75 for a potential bullish breakout, and we could see it as early as Monday, depending upon how traders line up. If you watch the video, things seem to remain bullish, but certain parts of volume momentum analysis still questions how eager buyers are to push this index above that resistance level.

Bad (Negative) Breadth in the QQQs?

If you’ve tracked activity in the $SPX recently, one can see that market breadth has been rather shallow in terms of participation, as only the largest cap participants have been doing well, while the the other 75% of stocks in that index languish.

What about the QQQ?

QQQ (NASDAQ 100) breadth is negative on the 50-day measure, but clearly stronger in relative terms than the S&P 500.

Current readings (Oct 2 close)

I pulled this chart from Grok, but you can find links to this data below the chart:

The bottom line is that even as breadth has deteriorated in the QQQs, it is more of a 50-50 proposition than for the $SPX. The $SPX which holds most of its growth in tech, has seen the other industry sectors in that index fall into bearish territory over this past year. If you want the full link to this data, you can find it here. There is also a discussion of the McClellan Oscillator and the Summation Index, which are also negative.

This source lines up closely with these services, listed below:

• MacroMicro: Nasdaq-100 stocks above 50- and 200-day averages and series page Nasdaq-100 above 50-day.

• Stock Market Watch QQQ internals: QQQ market breadth.

• Barchart percentage-above-MA table: Page: Stock market and sector performance.

• breadth.app (delayed Oct 2 close): Page: Nasdaq-100 market breadth.

The important thing to understand is that there has been a deterioration in full-blown bullish price action in the NASDAQ 100 (and thus MNQ) in the last three months. Summer often causes a slowdown in trading action. The long fight of traders over interest rate policy and perhaps debates about data center expansion and energy requirements for AI expansion have lead to the sloppy price discovery path. Retests of previous resistance at or near 31397.75 have gone on all summer.

But what about earnings growth? Will massive debt be covered by the earnings of the hyperscalers as they continue the data center build-out?

That is a great and very pivotal question.

I do not subscribe to Real Investment Advice, nor do I promote any product this outfit sells, but this presenter’s logic is sound, up to a point. Listen to this video.

Right now, earnings seem to be great for some if not all the hyperscalers (with the possible exception of Oracle Systems (ORCL). ORCL is not really as impactful to the QQQ as it is the $SPX. The earnings for companies like META and AMZN (Amazon), look pretty solid, as long as the LLMs follow the same path for which token prices stabilize that the the buildout of data centers follow the feverish pace they are today.

What did I just mean by “up to a point”? Two factors come into play:

Debt: These companies are taking on a horrendous amount of debt to complete these buildouts. What is not yet known is whether some if perhaps not a majority of these companies cannot cover the cost of the debt to scale. If earnings growth rates are strong, it could happen, but not immediately. The one hyperscaler that is in hock (in debt) up to his big fat grin is Larry Ellison of ORCL. He is the most exposed to debt and in come ways has borrowed the entire enterprise, assuming success.

Open-source models: There are literally (using my best redneck technical terms from my glossary) crap-tons of opens-source models that can be installed on small servers and even PCs that don’t really need data centers to run. Alibaba, Kimi (Moonshot AI),Tencent (among other Chinese models) are among them. Meta, OpenAI, Thinking Machines, Nvidia, among many others, reside in the USA. These could limit the need for ubiquitous data center expansion, but it likely will not eliminate the large demand for compute. I won’t go farther in my personal commentary here, but any government-created monopoly by the large scalers might prevent the expansion of open source, and that would be destructive to human ingenuity and progress. It’s those fringe areas where new ideas come from. My political leanings are closest to conservative leave-me-the (word that rhymes with truck)-alone-ian-ism. I think letting free markets expand gives the greatest possibility for innovation. Serfdom under some corporatist or authoritarian regime will only stagnate over time, in my view.

I am working on one open-source project right now. I won’t comment on it yet as I have no idea if it will work, but if it does, I will let you know about it.

If you want to read the discussion I had with Grok about this, read it here, and expand it on your own if you like. If you want to hear the discussion with the MIT professor who thinks the data center mania is not necessary, listen to this podcast.

Summary

It looks to me that the QQQs, and thus MNQZ26 could be at a crossroad. Anything from interest rates, failure of tech earnings projections for AI expansion (which makes up the balance of what keeps this index close to all-time highs) will likely be deciding factors as we head into Q4 2026 and into 2027. Mid-term elections could also affect things too. Regardless of that, if we break through price resistances and earnings do not fail, the QQQs and MNQZ26 can forge higher, even with all the crazy Federal fiscal and monetary conditions. If Treasury bond rates get extreme and M2 is forced to expand even more than today, then we have bigger problems ahead. Don’t get me started on what President Trump said about inflating the debt away. I will deal with that at another time. Monday will give us some indication of what is ahead.

Thank you for supporting the Buffalo Trader’s Writing Desk. More is coming, and if you like what you are reading, try a paid subscription. It is still my goal to find 1000 paid subscribers. If you have questions about anything I write, leave them in the comments and I will answer them! Have a great week and an incredible October 2026!

For those who have not read it, here is a copy of Satoshi Nakamoto’s 9-page document titled "Bitcoin: A Peer-to-Peer Electronic Cash System" . Many of you have never read it, so here is your chance.

Read more

Any change is resisted because bureaucrats have a vested interest in the chaos in which they exist. - Richard M. Nixon

Human sacrifice, dogs and cats living together… mass hysteria! - Bill Murray as Dr. Peter Venkman in “Ghostbusters” (1984)

I had a busy day yesterday that was part of a busy week. when I saw this image of a burning Moscow refinery, the result of another effective Ukrainian drone attack. My first concern was of hypersonic nuclear missiles flying over the EU and even in the USA, as we have armed NATO countries to perform this insanity. Then I saw this post on X, regarding the complete lack of usable crude oil from J.P. Morgan. This of course is fear porn from May, but when combined with strikes on Russian refineries and Saudi processing facilities, it gives the brokerage firms the change to rattle retail and institutional traders who might be sitting on the sidelines. The crisis in diesel fuel is much more critical, as you can see from this research, and that is detailed in this recent OilPrice article.

Add this to the combined effects of the Iran/US conflict, and the possibility of mobilization of China for perhaps a run at Taiwan as the year ends based on what I have read about China’s version of NDAA just passed in late August, and you would think the markets would really go nuts. Then when you see the political bilge from the UK hitting your screen, you think the world is about to end. Throw on top of that the noise about “killer AI” and hyper-scaling debt explosion, which I will discuss that later, but not today), you would think the markets would burn down.

But what did we see in NASDAQ volatility?

The CBOE NASDAQ-100 Volatility Index (VXN)—the Nasdaq-100 equivalent of the VIX—closed at 19.29 on Friday, September 18, 2026. It was practically lifeless. One does not get excited about it until it exceeds 30. For that index and its futures, it is just another sunny day at the park. Read this link for a bit of background on VXN.

To save time, watch this video. I will pull key points from it below the video. Things seem bullish on the surface, but beneath it, it could be getting a little shaken.

The time stamps are:

0:00 to 4:11 Monthly Chart of MNQZ26

4:11 to 6:16 Weekly Chart of MNQZ26

6:16 to 6:51 Daily Chart

Monthly Chart 1 (Time symmetry not perfect, but price symmetry held up)

The secondary bullish MNQZ26 secondary target, assuming total price and time symmetry (which doesn’t happen perfectly, but tends to follow the price action over time) looks like this (33323.50):

I will avoid discussing bearish targets today (though you have seen the discussion of it for the most recent contract after this one (MNQU26) in a previous post. I will discuss them when I see a change in the price action.

What bothers me the most is that volume dearth has extended beyond Labor Day, and that even with all the global tumult, things are rather quiet. As long as the free or nearly free money (now a bit less free now that rates at the short end of the Treasury market are rising, as long as the printers at the Treasury are running, markets will accept them and will continue higher, regardless of what earnings look like. Stocks for the individual and institutional investor are still the only game in town.

What About M2 Growth, GDP Growth, and Inflation?

According to the Federal Reserve, the latest official U.S. M2 (seasonally adjusted, M2SL) through July 2026 is $23,218.0 billion. The 12-month growth rate ending July 2026 is 5.41%. Year-to-date 2026 growth (December 2025 to July 2026) is 3.86%, which annualizes to roughly 6.7%. The combined period from mid-2025 through July 2026 shows similar mid-single-digit annualized growth. If you have ever followed me on X, my own personal inflation number is around 7% based on the bills. That seems to be consistent with what we see in M2. (if you want to see the calculations, using the Fed’s own data, look here.)

The operative question is, can the US economy, given its propensity to spend money at insane levels, outgrow this growth in M2 and inflation?

Underneath that question, is the US government spending at Covid-pandemic-era levels? I will quote you Grok’s answer below, but Grok’s answer does not fully explain what is happening in the macro-world of interest rates and Federal government policy:

No. Congress is not spending at COVID-19 pandemic-era levels when measured as a share of the economy or in terms of emergency supplemental appropriations. Nominal dollar totals are now higher than the 2020–2021 peaks, which is expected after several years of inflation, economic growth, population aging, and sharply higher interest costs on the national debt.Key comparisons (fiscal years)Fiscal year runs October 1–September 30.

• FY2020 (peak COVID year): Outlays $6.55 trillion, or 31.3% of GDP. Deficit $3.13 trillion (15% of GDP). Massive one-time emergency spending (CARES Act and related packages) drove the spike.

  home.treasury.gov

• FY2021: Outlays $6.82 trillion, or 30.5% of GDP. Deficit $2.77 trillion. Continued large COVID-related outlays (American Rescue Plan, extended unemployment, stimulus payments, etc.).

  home.treasury.gov

• Pre-COVID baseline (FY2019): Outlays about $4.45 trillion, roughly 21% of GDP.

• FY2025 (most recent completed year): Outlays $7.01 trillion, or 23.1% of GDP. Deficit about $1.78 trillion (5.8% of GDP).

  cbo.gov

• FY2026 (current year, ends September 30, 2026): CBO projected $7.45 trillion in outlays, or 23.3% of GDP, with a deficit around $1.9 trillion. Through August (11 months), outlays already reached $6.81 trillion.

  fiscaldata.treasury.gov

Quarterly NIPA-style measures of federal spending as a percent of GDP peaked even higher during the height of the pandemic (over 40% in mid-2020) before falling. Recent quarterly readings have been in the 23–24% range.

ycharts.com

The 50-year historical average for federal outlays is about 21.2% of GDP. Current levels remain elevated relative to that long-run average and to the pre-2019 period, but they are well below the 30%+ pandemic emergency years. Why nominal spending is higher now:

• Entitlements (Social Security, Medicare, Medicaid) grow automatically with demographics, healthcare costs, and inflation.

• Net interest on the debt has risen sharply and now exceeds $1 trillion per year.

• The economy and price level are larger than in 2020–2021, so the same programs cost more in current dollars.

Emergency-designated discretionary funding related to COVID has largely ended. CBO notes that non-defense emergency funding in recent baselines is far smaller than the hundreds of billions provided in 2020–2021.Bottom line spending has not returned to the extraordinary, temporary COVID-relief scale. It has settled at a structurally higher plateau driven by mandatory programs and interest costs rather than new pandemic-style stimulus. Deficits remain large by historical standards (around 6% of GDP) but are smaller than the 12–15% range of FY2020–2021.

Notice I highlighted that last sentence. That is the problem. We are paying interest ON interest now, and our interest payments are larger than our defense budget! As we continue to spend more, that interest expense will only continue to expand, and in real dollar terms, that figure will explode over time.

In terms of government outlays for 2026, Interest is the number 2 item, larger than the defense budget, and it will swiftly continue to grow as deficit spending continues to run at a 7% to 8% pace. Take a look:

Actual Outlays (Expenses) Through August 2026 by Budget Function:

These are Treasury figures for money actually spent (in millions of dollars). Timing shifts (e.g., some August payments moved to July because August 1 fell on a non-business day) affect monthly comparisons but not the year-to-date totals.

fiscaldata.treasury.gov

• Social Security: $1,525,869

• Net Interest: $1,016,966

• Medicare: $979,300

• Health (includes Medicaid and other): $925,698

• National Defense: $876,163

• Income Security: $645,230

• Veterans Benefits and Services: $395,647

• Transportation: $126,437

• Administration of Justice: $99,369

• Education, Training, Employment, and Social Services: $91,952

• Community and Regional Development: $57,375

• Natural Resources and Environment: $51,891

• Agriculture: $51,013

• International Affairs: $44,857

• General Science, Space, and Technology: $36,244

• General Government: $24,841

• Energy: $18,398

• Commerce and Housing Credit: –$10,490 (net)

• Undistributed Offsetting Receipts: –$145,716

• Total: $6,811,043 million ($6.811 trillion)

Revenues through August were $4.845 trillion, producing a year-to-date deficit of about $1.97 trillion. Major agency-level outlays align with these functions (e.g., HHS, SSA, Defense, Treasury interest, and VA account for the largest shares). Final September data and full-year actuals will be available after the fiscal year ends. For the most current official figures, see the Monthly Treasury Statement and CBO reports.

President Trump IS trying to deliver on growth items, and the poverty level is the lowest since it was first recorded in 1966. Jon Najarian discusses it here.

There is only one problem with this, and I don’t care Scott Bessent says, if you cannot outgrow that level of M2 expansion, your economy will eventually implode, and will result in hyperinflation in the end. I guess he’s a nice guy, but he was one of the gentlemen, along with George Soros and Stanley Druckenmiller who helped to collapse the Bank of England in 1992’s Black Wednesday (16 September 1992) event. The UK had to withdraw from the the pound from the European Exchange Rate Mechanism (ERM). It is a very large portion of his net worth.

How strong is forecast US GDP growth as we move into 2027? If you believe the Fed, it is in the mid-to-high 2% ranges. If you believe Elon Musk, it might be closer to 4%. Even that cannot overcome a 6+ to 8% M2 expansion!

Dream all you want, but the fantasy will die in your wallet thanks to the criminal rabble of both divisions of the Uniparty in Congress and the Senate!

The only way to stop this insanity is to both dramatically reduce spending and back the dollar again with a specie of some kind (gold or some other basket of scare and valuable commodities). The free-floating fiat toilet paper must come to and end, and NOW. Cutting rates to zero, as President Trump has suggested, is one of the most moronic things I have ever heard an American politician say (though you and I could both write a novel the size of Marcel Proust’s “In Search of Lost Time” (a novel of 1.2 million words) about asinine things politicians say. Mine would be much longer than yours because I would color the language with expletives.

I can get into the other extrinsic factors like the reversal of the Japanese Yen carry trade, but then this post would become as long as “In Search of Lost Time”. Our bond market is crippled by bad and perhaps criminal fiscal, spending and monetary policy, and we are going to reap the whirlwind unless it is corrected soon. It may involve revaluing gold prices to erase the losses, but the purchasing power of the dollar would collapse dramatically.

Valuation of QQQ (Nasdaq 100)

You can read the data from barchart.com. Valuations are not excessive but elevated. The scary part is that it is a market weighted index with the top 10 stocks account for roughly 48% of the index:

• NVIDIA (NVDA): 8.5%

• Apple (AAPL): 7.9%

• Microsoft (MSFT): 5.9%

• Micron (MU): 4.9%

• Amazon (AMZN): 4.3%

• AMD: 3.9%

• Alphabet Class A (GOOGL): 3.2%

• Meta (META): 3.2%

• Alphabet Class C (GOOG): 3.0%

• Tesla (TSLA): 2.9%

NVIDIA is deeply involved in the AI hyperscaler chip business, and seems to have some rather questionable accounting methods relative to sales. All of the top 7 have something to do with AI expansion, and if the financing looks impossible to overcome by earnings. That is another risk factor. We will simply have to watch how it all goes.

The bulls currently hold the earnings potential. The bears hold the intrinsic and extrinsic economic, fiscal, monetary, and global chaos potential. Since I trade at the margin, I really don’t have a dog in the fight except that I need volatility to make money. If you are long technology stocks, now might be a good time to review which stocks will serve your short-term and long-term return objectives. Be prepared to cut bait if things get nasty, but also be prepare to fish for the values you find for the longer run when there is blood in the streets.

Other than that, I would simply sit out on the porch and carefully consider your next moves!

Thanks again for supporting the Buffalo Trader’s Writing Desk! This will be the last free one for awhile, but I expanded the length of this edition to give you an idea of what I can cover on an (at least) semi-monthly basis. If this Substack grows, I will expand coverage of other items including stocks, futures, and forex. It likely will never be as data-packed as The Buffalo Trader blog once was, but if I can design ways to generate that kind of data again to some extent, I will include it!

Have a fantastic week!

I was talking to a doctor about three months ago, and he asked me how risky trading was. “Isn’t that gambling, I mean, how much risk are you willing to take?”

I told him that my model adjusted for the current market volatility and that each trade had a measured about or risk backed by a catastrophic stop (which really isn’t catastrophic), and a breakeven stop once a certain profit level is reached. He just shook his head.

What I am going to discuss today is a comparison of a trader’s risk to the risk that other professionals, tradesman, and entrepreneurs take in what they do. It may surprise you, but it shouldn’t.

Let’s start with the trader of options, stocks, futures and forex.

The Trader

It’s official. Trading is an absolutely disastrous business to be in, according to FINRA. 72% of day traders ended the year with financial losses, and among proprietary traders treating it as a professional business, only 16% were profitable. 80% of day traders quit within the first two years, and only 1% maintain consistent profitability over a five-year horizon.

Capital requirements: The latest from FINRA states (for the USA):'

In the United States there is no single “minimum capital to trade.” Requirements depend on the product, account type (cash vs. margin), whether you day-trade or hold overnight, broker house rules, and—for derivatives—exchange or CFTC/NFA margin. Below is the current picture as of September 2026.Important 2026 change for stocks and equity options: The FINRA Pattern Day Trader (PDT) rule and its $25,000 equity floor were eliminated effective June 4, 2026 (FINRA Rule 4210 amendments, Regulatory Notice 26-10). Brokers have until October 20, 2027 to finish implementing the new intraday-margin standard, so some firms may still apply the old PDT rules during the transition. Always check your specific broker. You can begin with a few thousand dollars in micro-mini index futures or options, but you MUST understand risk and have a trade plan in place to make these businesses profitable over time. There WILL be losses, but as you will see in the other examples, there will always be losses everywhere.

Educational Requirements: None. But you MUST seek education, and it can be gleaned from books, other professionals, and your own experience if you study consistently and learn new techniques.

Overhead: A computer, internet connection, a desk, and a chair. You will probably need a trading platform with monthly data service also. Commissions are negligent now, if you find a good broker.

Why am I starting with the trader here? I want to make a comparison to other entrepreneurial businesses that exist in the world. As this series progresses, I will expand on why trading really isn’t as disastrously dangerous if you apply your craft property,

Now let’s consider other professions.

The Restaurant Owner

“The opening of a standalone restaurant is a dream that many young and mature people have as a sign of independence and customer service. That is why so many independent restaurants open in the USA each year. According to restaurantdata.com:

There is no single official government tally of “new independent restaurants opened,” so published figures vary by source, definition (what counts as a restaurant vs. other foodservice), and methodology (legal filings/permits vs. consumer listings). The most detailed, consistent tracking of new openings comes from Restaurantdata.com, which compiles state filings, legal notices, building permits, and similar records.”

According to their multi-year analysis of projected/verified opening records:

• 2020: ~12,300 independent openings

• 2021: ~14,800

• 2022: ~15,900

• 2023: ~16,400

• 2024: ~21,100

• 2025: ~14,500–14,900

On average, about 15,000 to 21,000 new standalone independent (no-franchise) restaurants have started each year since the pandemic era. You can read more about that here.

Capital Requirements - According to restaurantowner.com:

Startup costs vary enormously by concept, location, whether the space is a second-generation restaurant (already fitted with kitchen infrastructure), new construction versus remodel, and city versus smaller market. The most cited primary dataset is a RestaurantOwner.com survey of 350+ independent operators:

• Median total cost to open: $375,500.

• Middle 50% of restaurants: roughly $175,500 to $750,500.

• Full-service median: $475,500.

• New ground-up construction (excluding real estate): median around $650,000.

• Remodel of an existing restaurant space: median around $275,500.

• Typical size in the survey: ~3,070 square feet and 120 seats, or about $113 per square foot / $3,586 per seat.

Typical ranges by format (including equipment, build-out, licenses, initial inventory, and working capital):

• Food truck or ghost kitchen: $50,000–$200,000.

• Café/coffee shop: $80,000–$300,000.

• Fast-casual / limited-service: $150,000–$500,000.

• Casual full-service: $250,000–$750,000+.

• Fine dining: $500,000–$1.5 million+.

I have friends in West Texas who own a casual dining and entertainment venue for families. They grow and source all of the ingredients for their restaurant to save money and improve quality. That next to last number looks to be correct in terms of capital investing.

How is this different or better than trading?

If you have to finance the storefront and other items, you have a but of negative leverage on a very large capital sum. You have to have restaurant licenses, beverage licenses, property and casualty insurance, disability insurance for employees, liability insurance, property taxes, and food equipment, And that is just the beginning.

SBA 7(a) loans and similar financing typically require 10–30% owner equity. Personal guarantees and collateral (often including home equity) are common, so the owner’s personal financial exposure can be significant even if the restaurant is a limited-liability entity. In short, an “average” independent restaurant owner in the U.S. is looking at a mid-six-figure investment with a first-year closure risk in the mid-teens to mid-20s percent range (lower in recent tracking data), roughly even odds of still being open at five years, and persistently thin margins that leave little room for error. Adequate capitalization, a second-generation space, strong location analysis, and tight operations materially improve the odds. Capital reserve for emergency costs can vary from 6 months revenue to 24 months revenue in certain cases.

If you can survive the ramp=up and cashflow requirements, your restaurant can still face a five year failure rate of 30%. Failure rates in a normal independent restaurant are certainly slower than trading, particularly if you don’t have a business plan, but the amount of potential capital destruction is enormous if you do fail. Trading can be accomplished with limited capital, and you can still do it while working a full-time job or business.

The Commission-Only Salesperson

I pulled data out of Grok this particular time, to get a range of “failure rates” and costs of operating that kind of a business. This varies substantially depending on the industry you sell for. I can vouch for my own story.

I was an institutional broker in the early 1990s and I have an incredible client list (and some who would have gone directly into a relationship with my firm). The cost of capital to start up a business like that was over 7-figures when I decided to leave the entrepreneurial firm I worked with, and I could never get it started without literally selling my soul to the investors, which I was not willing to do. The key factor here is that if you start such a business, you should expect to have 6 to 18 months of expenses saved up before you can “cover your nut”. I did (and more, as I had been an investor for sometime prior to working with him) and that angered him, because he couldn’t manipulate me. I passed the exams in two weeks after I entered the firm (as I had studied for them prior to that time).

The point of this (and you can look at the link for discussions of basic overhead) is that you would literally have to have cash piled up for some time before you could earn your keep. Trading small in the beginning can allow you to build slowly, and you can still keep a full-time job and “make groceries” as they say in New Orleans and manage your risk while doing that.

The Residential Building Contractor

Building contractors also have a rather aggressive failure rate over a 5 to 10 year period, depending upon how well capitalized they are for true working capital (materials, etc.). A typical start-up would require $75,000 to $100,000 when all equipment is organized to do business. Licensing, errors and omissions insurance, liability insurance, and all the rest pile on rather aggressively. The work can be long and grueling in some cases depending on the territory you cover. The failure rate is, once again, slow, but the capital eaten up in the process can stack up fairly quickly.

What Is the Point of All This Comparison?

It is certainly NOT to denigrate these and other professions. People in all professions deserve credit for taking suitable risk inherent with what they do, because the vast majority of them want to provide excellent service and earn a living for themselves and their families. What is does show, however, is that, on a starting basis, many have far more qualifications and capital hurdles to overcome just to get started.

What I want people to understand is that, if trading is pursued as a second income and then perhaps as a primary income stream, it too can create risk, but over time, with discipline and education, those risks, just like the risks of being a commissioned salesperson, a contractor, or a restaurant owner, those risks are manageable. You have to have both the desire to do them and an extreme desire to learn about how to do them. It is a lifelong process and not one to be taken lightly.

In this series, I will discuss how factors associated with trading can be managed to create an edge for the trader to profit from. It can be done even in the midst of high-frequency trading and all sorts of market action. Since you have the ability to trade more agilely that a multi-billion dollar hedge fund, you can seek out high probability opportunities for profit. It takes work, planning, and discipline to execute, but it can be done. It is a numbers game, after all, and your mastery of simple math combined with a strategy can help you achieve your goals if you stick to them.

We will get into the numbers in the next part of this series! Stay tuned.

Thank you, as always for supporting the Buffalo Trader’s Writing Desk!

That is exactly what my grandfather told my father when working the farm as a young man. The story of that relationship is pretty interesting, to say the least, and I will not discuss it here, but I will throw some labor into the issue of what MNQ is going as August ends. Lets go through the monthly, weekly, and daily charts to see what we can glean from them. I realize that the contract rolls over to MNQZ2026 shortly, but I still think this is a good place to study things, as Septembers often fall into chaotic periods, and who knows what will happen this year, with a debt crisis, a war, elections, an AI boom or bloat, depending on how you look at it, and other real and perceived calamities. Lets get started.

Monthly Charts for MNQU2026

Let’s take a look at a chart that shows all of the VWAP control point lines in white measured from swing highs from 2021 onward. If you click on the screen, you can see it in high detail. This chart is designed to help you see how wide these gaps between control points have become since former Federal Reserve Chairman Jerome Powell raised Fed funds rates:

• March 21, 2018 — raised to 1.50%–1.75%

• June 13, 2018 — raised to 1.75%–2.00%.

• September 26, 2018 — raised to 2.00%–2.25%.

• December 19, 2018 — raised to 2.25%–2.50%

• The subsequent market panic and the protests of President Trump led to 2019 rate cuts:

• July 31 — −25 bp to 2.00–2.25%

• September 18 — −25 bp to 1.75–2.00%

• October 30 — −25 bp to 1.50–1.75%

Started the year at 2.25–2.50%. No other cuts in 2019.

The point of this chart shows that the subsequent infusion of Covid-era stimulus drove the markets straight up after 2020 as that is where most institutional money, now flush with investor cash and their own funds, made these sharp bullish thrusts at each of those swing points.

What else is important to note?

When crazy stuff like the Liberation Day tariff announcement hit in April 2025, the Magnificent 7 all seemed trapped in a supply chain crisis for chip materials, and the MNQ and QQQs all bounced hard. Notice how it stopped along one of the loosely confluent monthly VWAP control points at 17667 (close to 17691 control point).

Could this happen again? Yes, it could, and those gaps in VWAP control points are natural stopping points for deeper corrections. Will it happen? Who knows, but the damage to bullish trends could be severe in the interim. The evidence is seen in the actions of large commercial traders. For now, I will leave a discussion about the “inside month” candle for a later time and the potential for a bear flag. At this point you’d probably be reaching for straws as for now, the printing press at the U.S. Treasury seems well-oiled and ready to pump out the bull market cash. Let us now take a look at the weekly charts.

Weekly Charts for MNQU2026

The key things to note here, using the same techniques to look for weekly VWAP control points for MNQU2026 at swing highs as with the monthly VWAP control points, shows a similar impact. That is, the weekly VWAP control points very closely align with the monthly charts and the money pumping action is drastic even in the shorter timeframes. There are 50 week VWAP control points and not the 50 month VWAP control points of the monthly MNQU charts. The data packets are smaller than monthly packets, but the width of price action (the X axis) is basically the same. The target projection as far as highs and lows on a weekly basis still pretty much hold from the last time I published. Let’s take a look at the daily charts.

Daily Charts for MNQU2026

As you can see from this chart, price action in this contract has been weak pre-Labor Day (as it almost always is at the end of summer). If volume returns and the buyers are ready to push higher based on the continued printing of the USD, then we could end up, based on an AB=CD price projection of 32,194.25 is not an impossibility of the next month.

The very opposite of that, discussed in that previous chart post, could also be a result, depending upon what happens with the actions of the Federal Reserve to buy its own bonds back when no one else will in an attempt to keep interest rates rising, which would make borrowing more difficult here as rates in Japan also skyrocket. The yen carry trade meltdown that might result would sink a lot of margin traders on this side of the Pacific Ocean along with stock and real estate prices potentially. When the USD is worthless fiat currency, you get those kinds of messes. Our Federal and state governments will be forced to spend less also (something that HAS to happen), or the entire entitlement state we live in will itself collapse. We will discuss this in other posts in the future.

A Brief Discussion About Volatility

The boo-birds, scaremongers, bears and others have been shaken by some activity in NQ and in other U.S. Indices lately, but as I mentioned by the look of the daily charts, things got sloppy last week. VIX sort of dried up. What could that mean? Look at this chart:

We are not really in a place of great fear, despite all the many reasons, real or perceived, that are happening as war rages, inflation flares, and AI hype and AI borrowing explodes. VIX, however, closed on Friday and a timid and tepid 14.53, which is a sign of “rabid complacency”, meaning there was an overwhelming need NOT to be concerned about anything.

We know that the QQQs are quite expensive by all measures including things like M2 money supply below.

When things get complacent as they are now, one might consider looking at the portfolio to reduce exposure to stocks that may have run their course from earnings growth perspective or that do not fit your goals specifically. You may want to free up capital for times when the market gives you an opportunity to buy in a moment of panic and capitulation that happens when VIX goes nuts to the upside. Something to consider as we head into September and the fourth quarter of 2026.

How’s My Trading?

Volatility and volume were both absent last week, so only four trades showed up. The data below (adjusted for single units so as not to panic those who think I am a riverboat gambler, which I am not) went like this.

To summarize, it SUCKED EGGS! Volume would simply not allow trades to hold and run to targets as they had literally throughout the month of August 2026.

The real question is, did I follow my trade plan exactly as I had written it? The answer is yes. Did I take unnecessary trades or revenge trade? The answer is no. Monday was a good example of that, as no trade arrived (on August 31, 2026) that merited an entry. I am trying as best I can to follow Paul Tudor Jones’ advice as stated below.

I will begin again tomorrow doing the same thing that made August 2026 a great month. I will follow my trade plan, sit on my hands until the trade setups arrive, and let the trades run to the specified target, get out with green on the screen, and then go about the rest of my business day. The stops don’t move either.

That is all for this installment of the Buffalo Trader’s Writing Desk. The next one will be behind a paywall, but there will be free ones available often and I will do all I can to keep the quality of the content high! Thank you again for supporting this Substack! Have a great September everyone!

This will be the new logo for this Substack, and my avatar will become consistent as well:

Notice the new avatar is a grinning beggar. No one likes supplicancy. People hated it so much that the word was seldom used after the 1780s in Britain or America. No one likes a begging (male dog) when that (male dog) is in your face constantly. It is, or was, traditionally un-American until more than half the country became supplicants under the current American welfare state.

Not exactly my style, but here is what I propose. I will offer you something of my knowledge for something in return (an eight dollar subscription a month).

To fund another project that has a wide potential for revenue generation to rebuild two of four businesses I run, I would like to monetize this Substack. I can offer you two pieces of content each month that looks at monthly, weekly, daily, and even intra-day analysis, if needed, of NQ, and specifically of MNQ, which I currently trade.

I have in the past not wanted to have a subscription, because I think it is better to offer education in ways that don’t require subscription. In the past, I have written for websites and blogs for pay. Even when I did that, I did nationally-broadcast stock and index analysis for free for over 5 years for a now defunct radio network. The podcast from that program hit #2 on iTunes at one point, right at the time the network imploded over a business dispute. Sometimes that happens.

I think some of this analysis, particularly for futures traders could be valuable to you. I will also reveal more of the trading strategy I am using to rebuild an account I used to fund other start-ups.

The next post will be free. The others will go up against a paywall. If you decide to sign on, I would appreciate it. If not, I have no problem with it. You can, of course, unsubscribe at anytime. There will be free posts that will come along, and I think you will benefit from those also. These posts will not come precisely biweekly. They will come when I think there is something important to glean from them. In that way, you will know that if I am writing about it, you may want to take notice.

Let’s see what happens! Thank you to the loyal 20 and to the rest of you who support the Buffalo Trader’s Writing Desk! Have a fantastic Labor Day!

The 11 minute 45 second video covers the main points about the large gaps that line up with volume weighted average prices at each control point. That has not changed in months, and that should cause people who are unhedged in very uncertain conditions to be aware of the risks in the QQQs and NQ.

The bullish target is 35447.25, as I measure it:

The potential bearish target is 26439.25:

Both of these estimates assume time and price symmetry, and that can often be skewed by the action in the QQQs.

If you have any questions, ask away and I will answer them as best I can.

Thank you as always for supporting the Buffalo Trader’s Writing Desk!

I hammered this video out on one take, so grammatical errors and generally redneck attitudes must be accepted. It has been some time since I have done this, but since the market has been doing the “Falcon 9” thing for the last several months until now. All you needed was a Fibonacci scale and a ruler to figure out the next stop. Writing about that is boring. Now there is a pause in that, so I figured I would give some guidance as to what MIGHT happen. As I say always, NO ONE KNOWS WHAT WILL HAPPEN NEXT, but markets leave clues. This looks like a good trail of bread crumbs to analyze for the potential damages and potential longer-term gains on this index futures contract.

If you have questions, leave them in the comments and I will answer them as soon as I can.

Thank you, as always, for supporting the Buffalo Trader’s Writing Desk!

"Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” -Warren Buffett

"Throughout my trading career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you". - Larry Hite from “The Rule”. He further explains that even a poor trading system can be profitable with proper money management, highlighting the importance of controlling risk over chasing returns.

"I believe in defining my risk. I don’t believe in defining my reward." Tom Hougaard from “Best Loser Wins.”

Even Warren Buffett knows that everyone WILL lose money at some point in investing and trading. Regardless of what the investing moralists claim, trading and investing are both the same. The only difference in them is the amount of time you intend to hold the trade. To this day, based on a conversation I had with one of Buffett’s options traders in the 1990s, I still believe that Charlie Munger was the true brains of Berkshire-Hathaway. Why? Because he helped Mr. Buffett extend his level of risk through hedging, which is what the gentleman, who was an options trader for Berkshire-Hathaway I met in Atlanta. told me. Munger knew more than anyone (and if you have understood his life story, you would see this) that every move investment or anything in life has a downside, and you must ALWAYS protect yourself from the downside, no matter what.

As time progresses I will show you how all the factors of my trade plan work together. What I first want traders (particularly new ones) to understand is this. Everyone can dream of their fantasy life where everything works and the money flows like an endless river of stress-free wealth. That is absolutely NOT going to happen. You have to manage risk and loss at the beginning before you can ever make money in trading or investing.

Let’s look at how this model performed showing only winners with the newly evolved model, using only 1 contract. Remember, this is primarily a “breakout model” but it has an extension as long as one can scale the model over time. Assume I took off those days shown in black, being the perfected trader that I am (NOT). The month of October 2025 looked like this:

On a micro-NQ contract (MNQZ25), I would have netted $175.80 after commissions. On a normal mini-contract, that would have been $1758.00. Not bad actually for about an average of 90 minutes of work in the morning.

Now let’s show you what the model really did, before any adjustments were made to the model, but including every error and every loss (there were actually both in this model).

The total gains were $64.50. Several things went wrong:

1. Stops were hit, which if they’re hit twice, ends my trading day, even if not in sequence.

2. I did not allow the trades to run fully, as I set a target that the market took out (something I will discuss later in volume profile analysis and in other ways).

3. I entered several trades (three to be exact) too early, something I have worked out to a large degree with the re-engineered ratio indicator (for volume imbalance).

What this demonstrates is:

1. The ABSOLUTE necessity to keep a trade journal.

2. The ABSOLUTE need to keep charts with your trade journal so you can fully understand when where how and why you want wrong, and to help you to study where proper stop losses need to be place. I will discuss this in greater detail later.

3. A way to fully review what you are doing wrong so that you can quantify the errors and minimize them as you trade more. You do not learn anything from successful trades all that much. You learn EVERYTHING from the losers, as it helps you not to make the same mistakes again.

I am still working up spreadsheets, and as I finish another project this afternoon, I will go back to this project, including updating the re-engineered ratio indicator to the most current data I have.

If you are not doing this process for yourself as a trader, you could just be wasting your time trading. You should contently assess your process and make adjustments.

More will be coming soon. Thank for your supporting The Buffalo Trader’s Writing Desk. Happy New Year!

The main aspects of this model require:

1. A price chart with a volume profile analysis for use in targeting. This one has a 50 period (in this case, 50 15-minute bars) analysis: Anything in purple is essentially 1 to 2 standard deviations from the yellow volume weighted average price control point (VWAP control point). Once price crosses over into the orange/red area, there are many commercial traders buying and selling in those areas, and they represent support or resistance (in this case, resistance).

2. The price oscillator which is a mixture of price change and price acceleration: I will very soon also reverse engineer once I get the volume imbalance indicators to more cleanly represent price reversals at turning points).

3. The volume imbalance indicator (which I reverse engineered and modified again to represent where the true volume imbalance points are): This replaced that previously used ratio analysis. I used neural nets inside of an AI agent to break down what the components were, and it allowed me to see where imbalance was occurring. I was really surprised at how well that software worked to factor how much influence up volume and down volume had in providing direction of major price shifts. As I mentioned in the video, it is NOT perfect (and nothing ever is). It is highly effective however in doing that in its current form.

4. The volume binary indicator looks at a mathematical analysis of total up volume and down volume to provide and indication of how much strength buyers and sellers have over the course of trading in the timeframe used to trade: In this case, this is a 15 minute chart.

As time moves forward, I will discuss now this model can be applied to things like the “Inner Circle Trading” model. That model has its own serious flaws because the terms have been bastardized by people claiming they created the model. Most of us who have been trading for a while know that all trading indicators in public domain are derivative at best. Most of them are nearly worthless, and they are totally worthless if one does not backtest the indicators in context to the total trading plan.

I will stop here for now. I will be working on the last three months of trades as I make tweaks to the trade plan. As I build it out, I will show you how I go about the analysis.

Thanks as always for supporting the Buffalo Trader’s Writing Desk! More will come soon.

Until 2007, I was primarily an investor who would swing trade stocks ONLY from the bullish side. The reason I did that is that I hated margin rates and I truly detested borrowing stock, which sometimes could be difficult to do.

In 2007, I began to find that liquidity in stocks began to get weirdly inconsistent, so much so that I had to widen stops on the swing models I created with NeuroShell Trader Professional. In that same year, I decided to devote some of my time to trading index futures and cash forex.

When my gig doing radio commentary (and via podcast) ended in 2010, I continued for two more years to run the now defunct “The Buffalo Trader” blog with my daily screening of 8000 stocks by sector and pattern, but I used most of my trading energy on futures. I also got deeply involved in tech start-ups that I understood well, mostly service or couponing operations. It seemed to offer the better payoffs, though in the end, disagreement between partners killed three of the four off. The other, a direct investment in a very successful technology, is being litigated currently as the company I invested in has had its licensing agreements violated severely. I will not address here why I did not expand the screening service I did into a paid-full-service screening research company. That may come at another time, but not here.

Though the items in Steve Burns’ post are primarily about items 3 and 4, I will also discuss why 1 and 2 can be optimized even more when items 3 and 4 are dealt with. Most traders and even investors do not deal with item 4, when it may be the most important aspect of everything they do to make money.

The next post, which I will hopefully have completely outlined by Wednesday, will show you how successful Friday’s trades were, but even MORE importantly, why not holding onto it (something evident in the volume profile) was a big mistake because of all that I left on the table. Stay tuned.