ES-
SUPPORTS= 7360-(JUNE LOW)-7346-7318
RES=7385-7426-7450-7472(200 DAY)
NQ-
SUPPORTS= 26734-26627-26570-LOD
RES= 26888-26981-27093
ASSUMPTIONS =
PIVOT 7426
BABA:
I HATE TRADING CHINA, BUT IN A TAPE THAT WAS DOWN 6%, CHINA WAS GREEN, WITH BABA CLOSING UP 2.6% TODAY. THE THESIS HERE IS THAT IF DATA CENTER REGULATION INCREASES IN THE US, IT COULD CREATE HEADWINDS FOR US NAMES. HOWEVER, AS WE KNOW, CHINA DOES NOT FACE THE SAME REGULATORY CONCERNS, AND TODAY WE SAW THAT BENEFIT SHOW UP IN BABA AND OTHER CHINESE NAMES. IF 105 CAN HOLD HERE, I THINK 110 0DTE COULD COME INTO PLAY FOR A POTENTIAL WEEKLY WEDGE BREAK.
NOTE=
Market Recap: The AI Flush
Today was nasty, and the thesis behind it was simple: sell AI names on the Democratic win. Yesterday looked like a short covering rally after the overnight midterm selloff. Today the real move came. Chips led the selling and nearly everything followed them lower.
The Damage: Wild Stats From Today
Nasdaq 100 had its worst day since 2020, down 6.36%. All three major indexes had their worst day since April 2025.
The Mag 7 shed about $1.1 trillion in a single session, a one day record per Bloomberg.
VIX jumped 11.57 points to 28.18, its biggest one day point gain since April 2025. It traded as low as 17.28 during the session.
Breadth was ugly. S&P decliners beat advancers 411 to 75, the Nasdaq ran 6 to 1 negative (2,822 down vs 463 up), and all 11 sectors closed red.
Semis had their worst day since March 2020, with the SOX down 12%.
SPX broke its 100 day (around 7,621) and its September low (around 7,511) in the same session. Both Nasdaq indexes fell through their 200 day moving averages.
Year to date gains got cut hard. The Nasdaq Composite went from up 10.7% to up 4.6%, and SPX went from up 12.3% to up 7.4%. Every major index is still green for 2026, and the Russell is the only one still in double digits at up 10.1%.
Equal weight S&P now leads the cap weighted index for the year. Today RSP fell 2.9% while SPY fell 4.8%.
December hike odds dropped to about 68% from about 82% this morning, so the flush repriced the Fed. The BoE also hiked to 4.00% today, its first increase in more than three years.
The Volatility Picture
VIX rose 70% today and sent implied volatility through the roof. The last five times this happened were 2018 (Volmageddon), 2024 (hawkish Fed), 2024 (hawkish Fed), 2007 (China selloff), and 2021 (meme stock squeeze). Today joins that list as vol suppression unwound.
The Big Question
Is the market front running Democratic policy and how markets might react to it? My view is yes, this is front running an idea, and my 2023 analog is still live. Here is what I posted about a month ago:
"Imagine this is similar to 2023. Rather than selling immediately, we start sliding into the end of September and potentially into November. Trump has said the Iran war will be ended once the midterms conclude, and that is what makes this analog interesting to me. A flattish or slightly green FOMC hike, followed by an OPEX unwind and selling into the midterms and the end of the Iran conflict, potentially ending with the December to remember, aka the Santa Rally, and yields pulling back off 20 year highs."
This is the window for the selling, and so far it fits the analog well. If we get one or two more down sessions and bids step in near recent lows or the 7000 zone, the 2023 analog stays live and a squeeze into December is still on the table in my opinion.
That sounds crazy given the tape, but I think many of these names got punished for what might happen, not for policy that has actually been enacted. Nothing good is going on when DNUT and APP lead the market. Still, today's move was extreme, and I think it was needed to flush a lot of people out. This has been my stance for a while now, and until something changes I am staying true to it.
Supporting Signals
The 10 year fell again to 4.84, down from 5.4 a few weeks ago.
Crude remains under 100.
Iran tensions are cooling.
My suspicion is that nobody stepped in to fight today's selling, because Trump wanted to make a point. After hours he tweeted blaming Democrats for the worst QQQ move since 2018. Point made, Don. We heard it loud and clear.
How to Trade It
Don't force upside or downside after a 70% day in VIX. Premiums are jacked, moves are extreme, and fear is elevated. Elevated VIX means elevated risk. Play it smart and tactical.
Levels: ES
Pivot: 7426 (July lows). We need to hold above this for any kind of relief.
Below the pivot: continuation lower toward the 7255 to 7700 zone.
Reclaim 7426: room to backtest the 7491 zone from the election night lows.
The pivot is the north star, and chips dictate it all.