The 90-Second Read
volatility elevated
- The rally was erased in one session The S&P 500 lost 4.36% on Thursday to close at 7,353.73, a drop of 334.89 points that more than gave back Wednesday's 1.58% gain. The Dow fell 3.44% to 51,523.06, a loss of 1,833 points, the Nasdaq Composite fell 5.52% to 24,315.00 and the Russell 2000 fell 4.45% to 2,729.89.
- Chips took the worst of it Micron fell 17.46% to 656.39 and AMD fell 17.26% to 404.40, while the semiconductor fund SMH fell 11.21%. The trigger was fear that a Democratic sweep of the midterms would slow the data-center build-out that feeds the whole AI hardware chain.
- A lopsided overnight bounce ES Dec trades at 7,422.50, up 39.50 points from its 7,383.00 settle. Nasdaq-100 futures are up 1.76%, Russell futures are up 0.26% and Dow futures are down 0.55%, so the bounce is a technology bounce. That puts the implied cash open near 7,393.
- Volatility nearly doubled The VIX closed at 28.18 against 16.61 on Wednesday, a rise of 11.57 points in a single session.
- Oil and gold did not flinch WTI Dec settled at 90.52, up 2.40 on a day when stocks fell 4.36%, and trades at 89.13 this morning. Gold Dec settled at 4,113.50 and trades near 4,082, down about 0.8%, while the 10-year yield closed about 6 basis points lower.
- Payrolls arrive into this tape The October employment report at 8:30 carries a 55K consensus for nonfarm payrolls against 29K in September, with unemployment expected to hold at 4.2%. The debate over a December Fed hike sits behind the number.
- Levels into the open ES sits 64.08 points under Cannon's pivot at 7,486.58, 188.08 above first support at 7,234.42 and 192.67 under first resistance at 7,615.17.
The Scoreboard
| Instrument | Level | Change | Session |
|---|---|---|---|
| S&P 500 | 7,353.73 | −4.36% | Thu close |
| Dow Jones Industrials | 51,523.06 | −3.44% | Thu close |
| Nasdaq Composite | 24,315.00 | −5.52% | Thu close |
| Russell 2000 | 2,729.89 | −4.45% | Thu close |
| ES Dec 26Thursday settle 7,383.00 | 7,422.50 | +0.54% | 4:44 AM ET |
| NQ Dec 26Thursday settle 26,752.00 | 27,221.50 | +1.76% | 4:44 AM ET |
| Dow futures (YM Dec 26)Thursday settle 51,615 | 51,329 | −0.55% | 4:44 AM ET |
| Russell futures (RTY Dec 26)Thursday settle 2,735.40 | 2,742.40 | +0.26% | 4:44 AM ET |
| WTI Dec 26Thursday settle 90.52 | 89.13 | −1.54% | 4:47 AM ET |
| Gold Dec 26Thursday settle 4,113.50 | 4,082 | −0.8% | 4:44 AM ET |
| Dollar indexThursday close 101.55 | 102.00 | +0.44% | 4:44 AM ET |
| US 10-yearTreasury yield | 4.84% | −6bp | Thu close |
| MicronWednesday close 795.23 | 656.39 | −17.46% | Thu close |
| AMD | 404.40 | −17.26% | Thu close |
| Semiconductor fund (SMH) | 447.73 | −11.21% | Thu close |
Rows with a clock time are reads at that time against Thursday's settlement; index, Treasury and single-name rows are Thursday's closes.
Sentiment & Flow Gauges
| Gauge | Reading | Read |
|---|---|---|
| VIXWednesday close 16.61 | 28.18 | SPIKING Volatility rose 11.57 points in one session, from a level that had been easing into the election. |
| S&P 500 new highs / lows52-week · prior session | 11 / 7 | NARROW Both counts are small, and new highs fell from 71 a session earlier. |
| S&P 500 above 200-dayprior session | 58.2% | THIN Participation above the long-term average slipped from 66.5% a session earlier. |
| S&P 500 up / down volumeprior session | 9% up | 90% DOWN Almost all of the day's volume traded on stocks that fell. |
| High-yield spreadICE BofA HY OAS · Nov 4 | 3.32% · +18bp w/w | WIDENING Credit spreads are wider than a week earlier, though they have eased for three sessions from the October 30 peak, before the selloff. |
Flow Read
Thursday met the 90% day definition Lowry Research's Paul Desmond set, with nearly all of the S&P 500's volume trading on the down side, a pattern that traders watch for exhaustion but that says nothing on its own about the next session. The net liquidity gauge also switched from draining to adding on this week's Fed balance sheet release, a change of regime that arrives on the same day the futures are trying to hold a bounce.
Calendar & Scenario Map
| Time ET | Event | Consensus | Prior |
|---|---|---|---|
| Fri 8:30 | Employment report, October: nonfarm payrolls | 55K | 29K |
| Fri 8:30 | Unemployment rate, October | 4.2% | 4.2% |
| Fri 8:30 | Average hourly earnings, October, month over month | 0.3% | 0.1% |
| Fri 9:10 | St. Louis Fed President Musalem speaks | — | — |
| Fri 10:00 | University of Michigan consumer sentiment, November preliminary | — | — |
| Fri 12:15 PM | Fed Governor Bowman speaks | — | — |
| Fri 3:00 PM | Consumer credit, September | $11.5B | $8.3B |
Consensus and prior figures are shown where the calendar carries them.
Levels & Structure
Cannon's daily pivot for ES Dec is 7,486.58, with resistance at 7,615.17, 7,867.33 and 7,995.92 and support at 7,234.42, 7,105.83 and 6,853.67. The overnight session carved a new low at 7,322.25, below the contract's 30-day low of 7,358, and Cannon's short-term trend arrow for ES points down.
| Open-interest shelf | SPX | ES Dec · +29.27 | Role in today's tape |
|---|---|---|---|
| Call shelf | 7,500 | 7,529 | The largest call open interest above the market in the November 20 chain, 146.27 points above the close. |
| Heavy strike, in the money | 7,400 | 7,429 | Carries the second-largest put open interest on the board, 46.27 points above the close, right where ES trades. |
| Put shelf | 7,300 | 7,329 | The largest put open interest below the market, 53.73 points under the close and almost on top of the overnight low. |
| Second put shelf | 7,200 | 7,229 | Nearly equal in size to 7,300, 153.73 points under the close, which gives the downside a second reference. |
The November 20 SPX options chain, on a window running from 7,135 to 7,565, shows its largest call open interest above the market at 7,500 with 8,828 contracts, ahead of 7,400 with 6,062 and 7,550 with 5,017, and open interest fades to 114 at the upper edge, so the 7,500 peak is a closed one. Below the market the largest put open interest is at 7,300 with 18,150 contracts and 7,200 with 17,957, ahead of 7,250 with 12,010, and open interest falls to 122 at the lower edge. The heaviest open interest on the board sits in the money: 7,500 carries 39,968 puts and 7,400 carries 22,586 puts, which are heavily traded strikes rather than floors. Today's expiring ES weekly options, on a window running from 7,160 to 7,600, show call open interest above the market peaking at 7,500 with 3,077 contracts, with 7,600 at 1,644 sitting on the upper edge, so that is a shelf that may continue beyond the window, while puts below the market peak at 7,300 with 9,983 and 7,200 with 9,374, ahead of 7,285 with 6,390. The 7,400 weekly strike carries 8,559 puts against 721 calls, and those strikes were read when ES traded near 7,379, so with ES now near 7,422 the 7,400 weekly strike is only about 22 points below it.
Institutional Positioning
Ives cut his data-center framework after the midterm result: he now assumes at least 10% of planned data centers do not get built, with 15% to 20% possible, and says big-tech capital spending growth peaks in 2027 rather than in 2028 or 2029. He still calls demand 40% to 50% above supply and argues the cycle is elongated rather than finished, with total spending over the next three to four years unchanged and only its path shifting.
His positioning leans toward software over semiconductors and toward the large hyperscalers, which he says gain because markets have been worried about overbuilding and free cash flow. He expects the newer cloud names to face consolidation, and says the model-lab companies would be the ones to be more negative on if they were public, because they have to fill the capacity. He compares the moment with Liberation Day.
Lee called the selloff a policy shock that smells of forced liquidation, aggravated by the overnight session in Korea and by stories of large hedge funds being liquidated. He argued AI demand is not slowing and that the repricing is overdone, noting that 10 gigawatts of construction is equal to roughly 350,000 homes or 5,000 hotels, a hole in the budget of any state that blocks it, and that the Texas governor-elect has said existing projects can finish.
On the Fed he said the September hike looks like a mistake and the December hike probably does not happen, with the Fed put coming into play if the story turns into employment risk.
Thomas called Thursday an overshoot to the downside after what she saw as an overshoot to the upside on Wednesday. She does not expect elections to end the AI trade, but warned the move may be directionally correct for semiconductors, and sees possible classic late-cycle behavior without a recession call. If the cycle turns stagflationary she would expect commodities and energy to do well, and she described the Fed as in a predicament whose December message will be pivotal.
Greenhaus said already permitted data centers will almost surely proceed without a hitch and that the open question is 2028 capacity. He said selling in the newer cloud names of 15% to 20% is probably not warranted but persists until the market gets clarity, and agreed with Ives that investors have to rethink their math, adding that prices often lead fundamentals.
El-Erian said he is completely bullish on technology over the long run, but called the market a timely warning against repeating the globalization mistake, saying the economy is highly levered to AI and that tech has acted as a shield for everything else. He expects the market to overdo the move for a while, sees the 10-year yield staying around 5% absent a recession, and expects at least one more Fed hike, not the three priced in.
Yardeni reconfirmed his 7,900 year-end target for the S&P 500 before the selloff and called a slowdown in the AI build-out a bullish story for hyperscaler profitability. After the close his note said the cold shower the firm warned might follow a Democratic sweep arrived a day late, and that Wednesday's rally had been driven by short covering.
Newton's evening technical note said the selloff has the Nasdaq-100 fund and the semiconductor index at trendline support and that a low looks to be right around the corner, though he also warned that no one should be fully long technology.
Desk Shift Tracker
| Voice | Stance | What moved |
|---|---|---|
| Dan IvesYorkville | CONSTRUCTIVE | Trimmed: at least 10% of planned data centers will not happen; capex growth peaks next year. |
| Tom LeeFundstrat | BULLISH | Reads Thursday as forced liquidation; sees the December hike as unlikely. |
| Ed YardeniYardeni Research | CONSTRUCTIVE | Held his 7,900 year-end target; the cold shower arrived a day late. |
| Mark NewtonFundstrat | CONSTRUCTIVE | New: Nasdaq-100 and semiconductors at trendline support; a low looks near. |
| Dan GreenhausSolus | CONSTRUCTIVE | New: permitted data centers proceed; the risk is 2028 capacity. |
| Liz ThomasSoFi | CAUTIOUS | New: overshoot to the downside, but late-cycle behavior and a Fed in a predicament. |
| Mohamed El-ErianAllianz | CAUTIOUS | New: bullish on tech long term, warns the economy is levered to AI. |
| Jeff deGraafRenaissance Macro | BEARISH | Unchanged: semiconductors and AI are a bubble under pressure, with bounces along the way. |
Macro Pressure Map
| Driver | Reading | Read |
|---|---|---|
| Net liquidityFed balance sheet − TGA − RRP · Wednesday levels · updates Thu | $5.81T · ▲ $82B w/w | ADDING The Treasury's cash balance fell back from last week's peak while the Fed balance sheet edged higher. |
| Crude oilWTI Dec · Thursday settle 90.52 | 89.13 | SOFTER Oil rose 2.40 on Thursday while equities collapsed and gives back part of that overnight. |
| Treasury yield10-year · Thursday close | 4.84% | LOWER The 10-year yield closed about 6 basis points lower on the equity selloff. |
| GoldDec · Thursday settle 4,113.50 | 4,082 | LOWER Gold gives back about 0.8% overnight after Thursday's settle. |
| DollarIndex · Thursday close 101.55 | 102.00 | FIRMER The dollar index is up 0.44% as the equity rout draws a bid for safety. |
Portfolio Positioning
| Name | The story |
|---|---|
| Micron and AMD | Micron fell 17.46% to 656.39 and AMD fell 17.26% to 404.40 on Thursday, and the semiconductor fund SMH closed 11.21% lower. Both names sit at the center of the data-center debate Ives, Greenhaus and Lee are arguing over, and both trade higher before the bell. |
| Qualcomm | Chief executive Cristiano Amon said the company is committing to data-center revenue of $5 billion in fiscal 2027 and $15 billion in fiscal 2029, and that demand is not the limit: it is supply. He said with more supply he would probably do better than $5 billion. |
| Software against semiconductors | Ives prefers software to semiconductors and the large hyperscalers to the newer cloud names, the positioning that follows from a lower capex path; Greenhaus argues the neocloud selling is probably overdone. |
| AppLovin | One of the few winners on a day when almost everything fell, AppLovin rose about 31% on earnings. |
Fed Watch
No policy meeting is scheduled this week. Musalem speaks at 9:10 this morning, Bowman at 12:15 PM, and Bowman is on the calendar again Monday morning in Boston. The rate debate is two-sided: Lee says the September hike looks like a mistake and the December hike probably does not happen, while El-Erian expects at least one more hike, not the three the market has priced. Thomas calls the Fed's position a predicament in which the December message will matter most, and the 8:30 payrolls print is the first hard data point of that debate. The 10-year closed at 4.84%.
What the Consensus Is Missing
Oil rose on the day stocks crashed
WTI settled up 2.40 on Thursday while the S&P 500 fell 4.36%, and the 10-year yield fell only about 6 basis points. A growth scare would normally drag crude and push yields lower by more. The cross-asset tape reads as an AI-specific repricing rather than a macro one, which is the distinction Thomas and Lee both draw and the reason the payrolls print matters more than usual.
The bounce is a technology bounce
Nasdaq-100 futures are up 1.76% while Dow futures are down 0.55%, the mirror image of Wednesday, when the Dow led the rally. If the overnight move holds, the leadership that was sold hardest is the leadership being bought first, the pattern Newton's trendline-support call describes.
The argument has narrowed to 2028
Ives, Greenhaus and Amon disagree about how much capacity gets built, but none of them says demand has faded; Ives still sees demand running well ahead of supply and Amon calls his business supply-bound. A market that took the semiconductor fund down 11.21% in one session has priced a sharp cut to future capacity, so the next data point that matters is a permit or a cancellation, not an earnings beat.
Cannon Intelligence Desk
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