Futures are weaker following softer Asia sessions, though Japan retraced nearly 50% of its losses intraday. China banned foreign made chips in state funded data centers. After two weeks of poor breadth, we finally got good breadth yesterday, but on the downside. The many reasons cited point to something more technical, including 13F showing NVDA235.05 and PLTR188.80 puts from Michael Burry's fund, the record length shutdown, today's IEEPA hearing, and valuation concerns from the Financial Services conference. PLTR's earnings PA ignited the selloff. After about 20 months of ignoring valuation multiples, the market suddenly cared, and Burry's 13F added fuel.
As noted, the music stops only when the big players run out of cash or balance sheets materially weaken. Before that, we will likely see record capex refreshed each quarter, with NVDA or OpenAI round tripping deals that hit record highs every few months. We will have a day when either NVDA or OpenAI announces a record deal that is followed by a sharp selloff, similar to PLTR's faded beat. We are close to that stage, but not there yet. In the absence of Trump's pump tweets in recent days, PA looked normal, which is why we were able to short near the highs and our levels worked well yesterday. I am not quite sure if this selloff can turn into a major correction. But if it does, ES could trade below 6K in the coming weeks. I would then expect a market saving tweet from Trump, Altman, or Jensen, followed by a Santa rally into year end.