The weekender: No doubt Nvidia will be the swing factor

This market has spent the week behaving like a jittery orchestra warming up before the conductor walks onstage — every section tuning at its own pitch, every asset class playing a different bar, all waiting for the one performer who actually matters to step into the spotlight. And that performer is Nvidia.

What looked like a tech wobble early in the week morphed into something far stranger — a rolling, AI-centric mini-bear market hiding inside an index that refuses to break. Momentum was getting clubbed like a rental drum set, semis were coughing up air pockets, and yet the S&P never strayed far from its highs because every dip was met with a mechanical, almost Pavlovian bid. What we got was a market that didn’t melt down — it rewound itself.

Traders woke up each morning swinging between existential dread and full-blown FOMO. By the time New York cracked open, the inbox read like a mood board: Citadel’s Scott Rubner summed his day up perfectly 4 AM – absolute fear; 10 AM – “we’re back, brother!” That’s what negative gamma and ETF-heavy liquidity do — they yank the wheel in both directions at once. You don’t trade flows anymore; flows trade you.

And just when it looked like the market would fold into the weekend, the machines found their technical anchor. Every major index bounced precisely where their 50- and 100-day marks said they should( led by the Mag 7 50-day, of course.) The whole thing looked less like price discovery and more like a pinball table.

Source: Bloomberg

But under the hood, the narratives that powered 2025’s AI-supercycle finally hit some turbulence. The market isn’t abandoning AI — far from it — but it is starting to sniff around the edges of a proper rate-of-change scare:

• The true cost of the AI arms race is becoming harder to ignore.
• The credit spigots feeding data-center capex are beginning to groan.
• The duration of the spending boom suddenly looks less like a straight line and more like a sine wave.

This wasn’t a tech wreck — but it was very much a tech reckoning.

Meanwhile, the Fed decided to play both the role of firefighter and arsonist at the same time. One hawk after another stepped up to remind markets that December isn’t a policy layup, shoving rate-cut odds from near-certainty to a coin toss. If you’re running a rich multiple market and the Fed starts tightening the screws on the forward curve, that’s not the macro setup you want heading into year-end.

Source: Bloomberg

And yet — the trend held. The dip was bought. Retail didn’t blink.

Hedge funds flipped from sellers to heavy coverers, ranking in the 96th percentile of buying appetite. Large longs dumped software and semis, while fast money chased healthcare like it suddenly became the world’s most mispriced volatility hedge. Materials, biopharma, and the consumer space all caught traction from rotational flows fleeing AI indigestion. (Goldman)

Crypto, though — that was a body bag. Bitcoin broke support versus gold, ETF outflows surged, and the entire “digital gold” narrative suffered a public whip-crack. When $19B in liquidations crushes $1T in market cap, you don’t need a glass-bead economist to tell you risk tolerance got torched.

But in equities, the bigger picture is unchanged: this is still a market dominated by one story — AI — and one stock — Nvidia. Every major bullish regime in modern history has been interrupted only when the Fed stepped in with a tightening cycle. That isn’t today. We’re still in an easing phase, whether December prints or not. Valuations can stay expensive, stretch further, and become outright silly as long as the dream stays intact.

And the dream right now is Nvidia.

Options markets are already pricing a 6.2% swing for next week — the biggest implied move in a year. You can feel the tension in the tape: this isn’t just an earnings print, it’s an industry-wide truth serum. If Nvidia confirms that the AI CapEx boom still has a second wind, the entire AI complex will refill its lungs and run again. If they wobble, even slightly, the market will quickly discover who has real cash-flow engines and who’s just burning credit to chase Moore’s Law cosplay.

This is the axis upon which the market now turns.

Treasuries tried to stage their own rebellion, swinging wildly without adding much vol, ending the week with yields higher, liquidity thin, and positioning fragile. Credit spreads widened just enough to remind everyone that the cost of funding the AI build-out is the sleeper macro theme of 2026. But none of that overrides Wednesday.

Because for all the noise — the shutdown reopening, the data delays, the hawkish jawboning, the crypto washout, the systematic de-risking and forced mechanical flows — the only question the equity market is asking itself is deceptively simple:

Does Nvidia keep the dream alive?

If yes — the index can blast through the 6,775–6,800 resistance zone and ride lighter positioning toward 6,900 into December’s seasonals. If not — the negative gamma trap door opens and the market has to absorb $30+ billion in mechanical selling into a liquidity-starved tape.

So forget dollar oscillations, forget beta rotations, forget the noise. The entire equity complex is leaning into one trade.

Nvidia isn’t just a stock next week. It’s the swing factor for the entire global risk regime.

And for a market this stretched, this concentrated, and this dependent on one storyline, the difference between a reaffirmed AI supercycle and a rate-of-change disappointment isn’t measured in basis points — it’s measured in belief.

Wednesday decides which version of 2026 we start pricing.

What’s wrong with the AI trade?

The cracks in the AI trade aren’t about belief anymore — they’re about balance sheets. We’ve finally hit the stage of the supercycle where capital, not compute, becomes the bottleneck. Oracle’s CDS widening is the canary here: when a top-tier enterprise vendor starts flashing distress signals, it tells you the capex treadmill is running faster than even the well-funded players can afford. And if the spending engine stalls, even a little, all the “picks and shovels” that were priced for infinite build-out suddenly look like they’re standing on air. The highly levered or peripheral AI names — the neo-infrastructure players, the multi-cloud also-rans — are getting treated exactly like over-geared shale producers during an oil capex bust.

And the problem isn’t isolated. The entire AI complex has become so crowded that it behaves like a single trade wearing different jerseys. Every sector has been repackaged as an “AI adjacency,” so when sentiment wobbles — even for 24 hours — the rotations are violent. What used to be sector dispersion is now just one giant AI factor getting yanked around by flows. That is why every hiccup feels like a shockwave.

Then came Kimi K2, the cheap-but-dangerous model that basically reminded the market that AI performance curves move faster than the cost curves of data centers. A near-GPT competitor built at a fraction of the input cost is exactly the kind of thing that makes CFOs sit up and ask why they’re signing off on multibillion-dollar infrastructure that may be obsolete before the concrete cures. It reignites the one question bulls desperately avoid: what if the ROI math never pencils out?

Tencent didn’t help either. Their capex cut may be officially blamed on chip constraints, but nobody in the market bought that spin. Whether it’s a supply hiccup or something deeper, the signal is the same: hyperscalers are no longer charging blindly into the breach. Any slowdown — even a cosmetic one — reinforces the fear that the hyperscaler spreadsheets simply aren’t getting the returns they modeled when this arms race started. If one giant hesitates, others will too.

Put all of this together and you get a market that still believes in AI long-term but is suddenly willing to question the funding, the economics, the scalability, and the valuation layer stacked on top of it. In other words: the narrative didn’t break — but the financing machine is beginning to cough.

From market ear

It is rare to see such a big doji candle as we saw today. NASDAQ (futures) basically closed at the same level as we opened at, but the intraday range was huge. This is a classical sign of nobody in control (yet). Note we closed right on the 50 day, and pretty much right on the trend line. Short term supports to watch: 25k, 24500. Short gamma isn’t helping to stabilize moves either...

Chart of the week: Chinese exports shifting from the US to Asia

Since the beginning of the year, Chinese exports to the US are down $75 billion and Chinese exports to Asia are up $150 billion. Chinese exports to Europe, Africa and Latin America are basically flat, see the chart below.