Monster Week: Why Markets Keep Surging and How to Spot the Next Top

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Monster Week: Why Markets Keep Surging and How to Spot the Next Top
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      Global equities just delivered their strongest weekly surge of 2025, led by a confluence of AI, robotics, crypto, quantum and rare-earth themes. The S&P 500, Nasdaq 100 and Russell 2000 all printed fresh highs, while Bitcoin flirted with $120,000. Below is a distilled playbook for Australian investors who want to ride the momentum yet remain alert to the inevitable unwind.

      • Market breadth is broadening: Small-caps (Russell 2000) broke out to all-time highs, energy and financials are perking up, and international bourses—especially Japan—are outperforming. This rotation lowers single-theme risk.
      • A dozen secular trends are firing at once: Unlike the late-1990s internet-only boom, today’s rally is underpinned by AI infrastructure, space, battery tech, fintech, nuclear and rare-earths simultaneously. Liquidity is rising in tandem with global easing cycles.
      • Crypto as a liquidity barometer: Bitcoin’s push toward record highs mirrors 2020–21 risk-on phases and typically peaks 3–6 months before equities roll over. Watch for a parabolic weekly close above $125,000 as an early warning.
      • Valuation guardrails: The DSI (Dynamic Swing Index) hit 25 at the 2000 Nasdaq top; today it reads 16.8. While stretched, history suggests another 20–30 % melt-up is possible before exhaustion.
      • Technical exit triggers: A monthly close below the 10-month moving average or a two-month low in the Nasdaq 100 has marked every major top since 2000. Trailing stops at 8 % beneath the 20-day low offer a pragmatic overlay.
      • Earnings inflection ahead: Q3 reporting begins mid-October. Consensus expects double-digit growth; any disappointment could spark the first 5–7 % pullback. Use weakness to add high-conviction AI enablers (NVDA, TSM, ASML) on 10 % dips.
      • Risk management for retirees: Limit single-stock exposure to 3 % of portfolio value; deploy 25 % trailing stops on non-profitable tech; and keep 10 % cash to exploit volatility spikes.
      • Australian angle: Rare-earth ETF REMX and lithium names (PLS, AKE) are leveraged to US policy tailwinds. A weaker AUD further boosts unhedged global ETF returns.

      Bottom line: Momentum can carry well into 2026, but complacency is extreme. Maintain exposure, tighten risk controls and watch the technical tripwires above. The next 10 % move may be higher; the move after that could be swift in the opposite direction.

      “If you invest and don’t diversify, you’re literally throwing out money. People don’t realize that diversification is beneficial even if it reduces your return. Why? Because it reduces your risk even more. Therefore, if you diversify and then use margin to increase your leverage to a risk level equivalent to that of a nondiversified position, your return will probably be greater.” – Jeff Yass

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