SPX collapsed completely to the downside today, a rare occurrence in general but especially for a Friday. For the week, it was a -1.6 standard deviation move – one of the larger ones we have seen in recent months.

SPX erased nearly the entire month’s gains just this week and things are only just beginning to look bearish. It is amusing how fast sentiment and the news cycle has shifted in no time. 10 days ago, SPX was at new all-time highs and the AI trade could do no wrong. SPX 8000 was trending all over the media.

Today, there are talks about the AI bubble popping, hyper-scalers going bankrupt and other doom and gloom around the AI trade. I don’t think there is any denying the absolute madness in some of the valuations we are seeing, there is obviously a bubble but is this really the end of it? We’ve been fooled by random, large spikes to the downside many times.

The question now is that is this another fake out or is the real deal?

Surprisingly, the daily chart actually doesn’t look that bad. I suppose the candle from yesterday is doing some heavy lifting. Overall, we are just where we were a few weeks ago but the sentiment is completely different from the last time we were here.

7616 is the low from October 1st, and will be the first big test for SPX next week. We nearly got there today, but there was a small little bump into the close.

7670 was marked as the downside key level heading into today, and it broke with a lot of momentum and SPX closed below it. For the time being, this is the first immediate key level to the upside.

Similar to Wednesday, SPX was down over 100 points at the lows today and closed down over 1%, and yet the advance/decline ratio is an even split.

It’s no secret that this sell off is concentrated almost entirely in tech, specifically anything related to AI. The scarier question is what happens if other sectors begin to sell off as well? What happens to SPX then?

We are in one of the most interest market conditions perhaps in history.

I will have more over the weekend as usual!

Stay tuned!