S&P 500 broad
market index futures declined by 1.5% to 6,736 points this week. The benchmark
was falling for the five days out if the last seven trading days. This is a clear sign of weakeness. The index retreated
2.7% from its all-time high of 6,922 points. The drop reached 3.1% at some point. Another 1.9% decline could have completed a
standard 5% correction.
So far, there are no
clear signs for a rebound. Instead, concerns about an AI sector bubble
are gaining traction. First, major
banks highlighted overvaluation risks. Then, came Michael Burry,
the famed investor and portfolio manager behind Scion Asset Management,
reigniting fears with confirmation that his fund has placed significant put
options on NVIDIA (NVDA) and Palantir (PLTR).
Nasdaq 100 dropped
2.1% to 25,415 on
Tuesday, while the S&P 500
fell 1.1% to 6,778. Big Tech led the decline, particularly
AI-related stocks. A brief pause
came on Wednesday, when ADP’s Nonfarm Payrolls showed moderate job growth of
42,000, above the 32,000 forecast. More importantly, ISM’s U.S. Services PMI
surged from 49.9 to 54.3 in October, which could be considered a strong signal
of economic reacceleration. Markets interpreted this as
evidence that AI valuations may not be as excessive as feared. On Wednesday, Nasdaq 100 bounced 0.67% to
25,602, and the S&P 500 gained 0.33% to 6,801 points.
But the optimism was
short-lived. Challenger, Gray & Christmas released its monthly layoff
report on Thursday revealing that October 2025 was the worst month for job cuts
since 2003, with 154,074 announced layoffs versus a monthly average of around
50,000 earlier in the year. The narrative of a cooling
U.S. economy returned. Traders now believe 2025 could become the worst year for
job losses since 2009.
As a result, the odds
of a Fed rate cut in December jumped to 68.9% from 62.0%.
David Sacks, the
crypto-focused technology tsar in President Donald Trump’s administration,
stated that the AI industry would not receive federal support. This followed
earlier hints from OpenAI CFO Sarah Friar about potential subsidies needed for the sector prompting CEO Sam Altman to publicly clarify
that the company is not seeking government backing and remains fully
self-sufficient.
On Thursday, Nasdaq
100 fell another 2.0% hitting a low of 25,078, its weakest level since October
23. The S&P 500 plunged 1.38% to 6,706 points.
Sentiment is deteriorating. The ongoing government shutdown is increasingly
frustrating investors, who are now eyeing the next downside target for the
S&P 500 at 6,450–6,550. This
zone includes the open gap at 6,507, which is align with a 5% correction. To activate this leg down, prices must retest the broken support at
6,750 and begin a sustained move lower.
Amid this negative wave large investors appear to be stepping in. The
SPDR S&P 500 ETF Trust (SPY) reported weekly inflows of $9.13 billion, the
largest since late September. Final figures will confirm
whether this buying continues. If
so, it would signal that large players are positioning for the traditional Christmas
rally.
The technical outlook
for the S&P 500 has reversed. The index formation has shifted from a bullish to a bearish structure with a
primary downside target of 6,450–6,550 points. A confirmed
break below 6,750 would accelerate the decline. However, if institutional buying in SPY continues, a recovery should not be ruled out.
In the oil market, the technically
unfavourable phase has ended. Yet
prices struggle to sustain above the three-month broken support zone of
$65.00–$67.00 per barrel of Brent crude. If they fail to hold above $67.00 by
the end of November, the downtrend will likely resume toward $55.00–$57.00, not
far from the final bearish target of $45.00–$55.00. Conversely,
a sustained move above $67.00 would revive the case for a rally toward
resistance at $75.00–$77.00.
Gold prices fell by 11.2% from the peak. The
key support zone at $3,800–$3,900 per troy ounce has been breached. Ahead lies a period of November consolidation.
The market could follow the 1979 playbook staging another powerful rally toward
$5,000 by late 2025 or early 2026. Alternatively, the
pullback could deepen toward $3,500.
In the currency
market, the U.S. Dollar has begun to retreat. The impact
of Fed Chair Jerome Powell’s overly hawkish comments is fading. The EURUSD now needs to sustain above 1.15500 to open the path toward
resistance at 1.16400–1.16600, a key psychological and technical barrier. A
confirmed breakout above this zone would make closing the gap at 1.17380 a
realistic near-term objective.