Stock Sell-Off Continues
US Stocks remain under pressure as we head into the weekend with the S&P slipping over 1% yesterday and the ANSDAQ more than 2% as AI-linked selling intensified. Market leader NVIDIA saw a fresh wipeout with the stock plunging by almost 6% yesterday, now down 12% from YTD highs, as traders continue to balk at lofty valuations and bubble fears. News that fund manager Michael Bury (made famous for shorting the US housing market before the 2008 crash, featured in the film ‘The Big Short’) has made a $1 billion options bet against NVIDIA and Palantir is also feeding into bearish sentiment here.
AI Bubble to Pop?
Bury’s view on AI looks to be that the current market is matching up with the tech bubble of 1999-2000 while cloud demand at companies is slowing, suggesting a cliff edge ahead. With NVIDIA recently becoming the first publicly traded company to surpass $5 trillion in valuation, the timing of this bet is a worrying omen for broader markets with growing fears over a potential stock market collapse to come if the AI bubble does burst.
Fed Shift & USD Strength
A less dovish outlook from the Fed at last week’s FOMC is also creating headwinds for stock prices. The rise in USD on the back of that meeting has thrown a spanner in the works for equities bulls with a December rate cut no longer looking certain. Powell highlighted division and uncertainty among policymakers amidst a lack of public sector data. If this uncertainty persists and easing expectations fall furtehr, this should increased downside pressure on stock prices near-term.
Technical Views
NASDAQ
The sell off in the NASDAQ has seen the market reversing back under the 25,428.75 level, now testing the bull trend line from YTD lows (rising wedge lows). With momentum studies bearish, risks are skewed towards a deeper move lower, turning focus to the 24,076.50 level as next support.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.