The Primary Driver of Today's Sharp Market Reversal !
Initial Rally to Intraday Lows of -2.4% Nasdaq / -1.6% S&P
Markets opened strongly on Nvidia’s blowout earnings and guidance (initial +4-5% pop in NVDA), fueling AI optimism and pre-market futures gains of ~1%. However, the rally completely evaporated by mid-session and turned into a brutal selloff. Key triggers for the reversal:
Renewed AI bubble concerns: Nvidia’s record results and $65B+ pipeline were dismissed as “not enough” amid fears of overvaluation, potential China export curbs, and scrutiny over massive deals with OpenAI/Anthropic.
Crypto rout spillover: Bitcoin plunged below $87K (daily routine “10am slam” pattern intensified), dragging risk assets lower as correlated flows unwound.
Hawkish Fed repricing: September payroll revisions showed stronger-than-expected job growth alongside rising unemployment (4.4%), reducing December cut odds from ~60% pre-data to as low as 23-34% intraday; speakers (Goolsbee cautious on cuts, Paulson highlighting inflation risks) reinforced “higher for longer.”
Technical factors: Thin liquidity ahead of $3.1T options expiry, gamma hedging amplification, and hedge fund/Treasury basis trade unwinds created a vacuum on the downside.
Broader risk-off: Fading Ukraine peace optimism lifted oil temporarily but couldn’t offset tech unwind.
Actionable: This was a classic “sell the news” event on NVDA combined with macro repricing. Fade extreme oversold levels (Nasdaq RSI <30 intraday) with tight stops; buy QQQ dips below 500 targeting 520 if NVDA holds $140. Risk level: High (volatility spike, potential for continued unwind into OPEX tomorrow).
US Equities & Tech/AI Sector
Nvidia gains fully erased despite stellar print; broader semis (SMH -3%+) and Mag7 dragged indices red.
Asia follow-through weak: Nikkei -2%+, Korean chips (SK Hynix -9%, Samsung -5%) on AI fears. Actionable: Reduce AI exposure (short NVDA below $135, target $120) or rotate to defensives/value (long XLV/XLU on yield backup). Risk level: High (bubble narrative dominant, potential for further derating).
Rates & Fed Expectations
December cut probability collapsed intraday on hot payroll revisions and cautious Fed commentary (Goolsbee: inflation “stalled/moving up”; Paulson: more worried about labor but tariffs contained).
10Y yields spiked ~10bps, dollar strengthened. Actionable: Short TLT above $94 targeting $90; favor financials (XLF) over growth if yields hold >4.3%. December “no cut” now base case at several desks (MS, others). Risk level: Medium (data-dependent, but momentum hawkish).
Crypto
Bitcoin smashed lower in familiar pattern, dragging altcoins and risk assets. Actionable: Buy BTC extreme oversold dips <$85K for bounce to $92K; avoid leverage until post-OPEX clarity. Risk level: Very High (correlated to equities, ongoing liquidation risk).
Geopolitics & Commodities
Zelenskiy openness to US peace plan (territorial concessions, military caps) weighed on oil (potential Russia sanctions relief = more supply). Actionable: Short crude below $70 targeting $65 if talks progress; monitor for de-escalation headlines as sell trigger. Risk level: Medium (oversupplied market already).
Other Notable
Verizon slashing 13K+ jobs pre-Thanksgiving signals corporate caution.
Morgan Stanley drops December cut call entirely. Actionable: Position for softer consumer (short XLY below $190). Risk level: Medium.
Overall market tone shifted aggressively risk-off into close; watch OPEX tomorrow for potential volatility washout or continuation lower. Favor cash/hedges overnight.