Currently, the market is experiencing a persistent, low-volatility upward grind, with the Nasdaq noticeably outpacing both the S&P 500 and the Dow Jones. While mainstream analysis attributes this entirely to AI enthusiasm and earnings growth, looking closely at modern market plumbing reveals a structural mechanic at play: valuation overlap.

Due to a combination of regulatory reporting thresholds and modern index construction, the Nasdaq is experiencing a partial circularity in its valuation. Here is a breakdown of the mechanics driving this divergence, the algorithmic feedback loop amplifying it, and how we are positioning for it.

The last couple of weeks have been brutal for the market, especially for AI-related stocks. The Nasdaq Composite closed at 20,948.36 on March 27, 2026, down over 2% that day alone, extending a painful correction.

In my previous video I warned we might see a significant correction or even bearish pressure. Today I want to share my updated thoughts on where we stand and what I expect going forward.