It was one of the most significant intraday reversals, from a strong open to a harsh close, yesterday. I’m not sure what it means, although, it's been associated with reversals higher (April 8th, 2025), and the action seen during meltdowns (twice in 2008).

Why?

The market was already on the back foot – I think savvy money investors were ready to sell into strength. Market breadth has deteriorated for weeks, and yesterday, only 27% of the S&P 500 (S&P) closed above their 20-day moving average. This is very close to the low on April 8^th. 

The lack of rotation from mega-cap tech to the rest of the market has been a red flag as well.

The AI Trade

Technology (XLK) took it on the chin big time, with semiconductors taking the biggest hit.

Semiconductors (SMH) have rallied so much that they are still sitting on a lofty but vulnerable perch.

Hot Stocks Melt

Obviously, artificial intelligence (AI) was weakening, as profit-taking mounted. Most of the sellers were taking profits.

• Palantir Technologies (PLTR) is still up 107% for the year, and 756% over the past five years, and closed at the same level as September 5^th.
• Nvidia (NVDA) is still up 36% for the year; 1,280% over the past five years, and closed at the same level it was on October 22^nd.
• Oracle Corp (ORCL) is only up 23% on the year, and there has been massive damage after a monster spike. It's now at the same level as June 25^th.

Cascading Fear

The Volatility Index (VIX), also know as the Fear Index, moved before the stock market reversed:

• Wednesday’s Close 23.60
• Thursday’s Open 20.78
• Thursday’s Low 19.28
• Thursday’s High 28.27
• Thursday’s Close 26.35

The Fear & Greed Index is nearly maxed out in extreme fear, and while it's considered a contrarian indicator, such conditions signal enhanced short-term vulnerability.

Low Volatility

Low volatility held up as a safe haven, and everything else was slammed.

Seasonality to the Rescue?

It would be uncanny if this is the low point for the month, and still the start of the year-end rally after that awful reversal.

Today’s Session

Futures moved up following this morning’s comments from Fed Williams who signaled a possible rate cut in the “near term.”

Following Fed’s Williams comments, Fed Fund Futures jumped to a 65% chance of a rate cut on December 10^th from 36% just an hour ago.

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