This week, we’ve seen a shocking level of volatility in the financial markets. Even the S&P 500 and NASDAQ 100 both found it difficult to hold onto their bullish trajectories. Analysts reported a notable increase in short selling activity, particularly by prominent investor Michael Burry’s family office, which has taken substantial positions against companies like Nvidia and Palantir. On Friday, the S&P 500 fell through its 50-day SMA. Most market traders have interpreted this as a very bearish indication that the recent stock market rally is on its last legs.
Through this week, the S&P 500 was down -2.6%, marking a period of loss the index has not seen since late April. This extraordinary performance of the index puts into question the future level of support with an important floor of 6,550 now being called into question. Market watchers are looking at this level quite closely, as it would open up a whole new phase of downward movement if crossed.
Even more worse than today’s NASDAQ 100 tumble were the warnings signs it showed today. Specifically, it opened below its medium-term supportive trendline for the first time since that trend began in May. This surprising news has led to concerns that the index is headed into a downward correction after many months of increases. See the NASDAQ Composite down 4.2% on the week. This is its third decline of greater than 1% during such a short time frame, contributing to a rising sense of jitteriness.
Major Michael Burry’s Family Office Shorts 1 million shares of Nvidia (NVDA) In addition, they’ve shorted 5 million shares of Palantir (PLTR). The strategic short positions are a sign of increasing pessimism on these highly speculative tech stocks, especially with Nvidia nearing a key resistance level. Although Nvidia’s price is currently viewed as having long-term support at $153, traders remain cautious about potential downturns in the stock’s value. The technical backdrop for Nvidia continues to be positive, with its 50-day average still holding up. As investors grapple with unprecedented upheaval in public markets, this stability will be welcome.
Beyond the qualitative shifts in the indices, economic indicators have added fuel to the fears of a market burn. The University of Michigan’s preliminary Michigan Consumer Sentiment Index for November fell off a cliff. It declined from 53.6 to 50.3, its lowest point since 2022. This double-digit plunge is a clear indication of declining consumer confidence, likely to weigh on corporate earnings and market sentiment in the months ahead.
The best part of the labor market got a bit more worrisome in October. U.S. corporations reported 153,000 layoffs, a mind-boggling 175% increase over this period last year. This increase in layoffs aligns with declining consumer sentiment and may reflect broader economic challenges that could weigh on corporate profitability.
Market participants absorbed the recent chaos and confusion. All they know is if these signs represent a short term blip or the beginning of a longer term slide. Major technical support levels are now being tested as consumer confidence crumples. The next several weeks are likely to be decisive for these S&P 500 and NASDAQ indices, so stay tuned.