All three major US equity indices sank yesterday from renewed fears that valuations of mega cap tech stocks have detached from reality and fundamentals. The sharp selloff on Wall Street was more prominent in Nasdaq Composite which tumbled 1.9% at the close, the S&P dripped 1.12% and Dow Jones by 0.84%.

AI hyped plays such as NVIDIA saw a steep loss of -3.7%, Palantir by -6.8% and AMD by -7.3%. Michael Burry, the notorious investor who predicted and capitalized on the 2008 sub-prime mortgage crisis recently placed massive, short bets on the former two due to their excessive valuations, adding to the aggravation of negative sentiment.

Softer economic data on the employment front has also contributed further to the deterioration of riskier assets aiding to the creation of recessionary worries.

Amidst the longest-running US shutdown period that left investors without economic updates, Challenger, Gray & Christmas, a private institution, reported that US-based employers slashed more than 150k in the month of October and marked the biggest jobs reduction in more than 20 years. The Challenger jobs report attributed this large loss of employment to mass layoffs from conglomerates for cost cutting reasons and freezing of hiring, but also due to the adoption of AI-driven changes, that make obsolete the need of humans.

Earnings results have been scattered all over the place this season, with some flamboyantly striking new performance highs whereas others disappointing investors, leaving them perplexed. Market breadth continues to be exceptionally weak, as a handful of large-cap tech and AI companies are doing the heavy lifting whereas the rest are casually chilling or struggling to survive.

Investors’ attention is now fixated upon the upcoming University of Michigan’s leading indicators on the consumer expectations, consumer sentiment and inflation expectation fronts later on today, but also the superbly critical earnings report from the world’s largest company, NVIDIA, on the 19th of November.

Technical Analysis

NASDAQ Chart Tech stocks on track to end the first week of November with losses, starting the cycle with the wrong foot

Resistance: 25600 (R1), 26200 (R2), 26700 3450 (R3)
Support: 24750 (S1), 23950 (S2), 23100 (S3)