| By Harry Boxer, Technical Market Analyst
Volatility Surges as Markets Face Deepest Pullback Since April
Global markets were hit by another bout of volatility last week, with stocks finishing lower in a choppy week, continuing the deepest pullback/retracement since the tariff driven sell-offs in April. Spikes in volatility are normal in equity markets, and we think even less surprising given the speed and scale of recent gains.
The NASDAQ sustained its third consecutive weekly decline as doubts resurfaced about the resilience of this year’s AI-fueled market rally. The index finished the week down 2.7%; with more modest weightings in tech stocks, the S&P 500 and the Dow posted smaller declines of just under 2.0%.
The weakness in part reflects concerns over the technology sector, with a solid earnings report from NVIDIA unable to stifle the correction emerging across these companies as investors appear to take profits amid ongoing bubble chatter.
AI-Fueled Rally Shows Cracks as Mega-Caps Reverse
The boom in AI related stocks, which had helped power large-cap equity-market gains, is looking vulnerable, with investors booking profits as concerns grow over valuations and a potential bubble. There is increasing uncertainty that the Fed will swoop in with rate cuts to help soothe markets.
The Magnificent Seven mega-cap tech companies have had a tough month. In market-capitalization-weighted terms, this group is down close to 6% in November so far, pushing large-cap markets, and in particular the tech-focused Nasdaq index, lower.
After an initial strong post-earnings rally in NVIDIA stock helped drive a 1% bounce in the S&P, we saw a swift and sharp reversal in sentiment that pushed markets lower. Since 1957 we have only seen eight instances in which an opening rally of this magnitude has closed in the red.
Volatility Rises, Bitcoin Slides, and Gold Holds Over $4,000
A gauge that tracks investors’ short-term expectations of U.S. stock market volatility surged, accelerating a rise that began the previous week. The Cboe Volatility Index climbed as high as 28 in trading on Thursday before pulling back to close around 23 on Friday. The figure was up from the prior week’s closing VIX level of just below 20.
In addition, the price of Bitcoin, the most widely traded cryptocurrency, fell further, sinking near $80,000 to the lowest level in seven months. Bitcoin was trading around $80,000 on Friday afternoon, down from its record price of about $126,000 reached in early October.
Gold has stabilized over $4000 but still looks potentially vulnerable technically.
Key Technical Support & Resistance Levels to Watch
Key technical support levels in the days ahead appear to be near SPX 6522-25 & 6465. Technical chart resistance appears near 6675 and 6860-70.
In any case, as we always do at thetechtrader.com, we’ll “Trade What We See. Not What We Think”
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