Liquidity is drying up across markets after seven months of exuberance and straight-up bull moves. High-beta names and AI darlings have started cascading lower as rising concerns over debt loads and debt servicing push investors into risk-off positioning. Crypto—one of the most liquidity-sensitive asset classes on earth—has been getting obliterated since the October 4th peak, with capital flight accelerating as U.S. Dollar liquidity tightens and markets reprice rapidly.

Large AI and tech names like META and ORCL have sold off as well, pressured by heavy capex, high debt loads, and the growing realization that revenue from those investments is still lagging. Market breadth has narrowed meaningfully, and the recent correction has confirmed a real regime shift away from the momentum-driven rally we enjoyed all summer.

META

Fear and Greed has been bouncing around in extreme fear, while the VIX spiked toward 30—signaling heightened volatility and persistent uncertainty. Yet, with all that, the SPY is only 5% off its all-time high, masking the turbulence happening inside sector leadership and individual equities. The DXY continues grinding higher, draining global liquidity and pulling capital out of risk assets across the board: U.S. equities, small caps, crypto, all of it.

Fear & Greed Index

The yen carry trade unwind is adding another layer of tightening to an already fragile liquidity environment. With Japanese 10-year yields hitting 1.82%—the highest since 2008—major institutions are repatriating capital, putting fresh pressure on global liquidity. The unwind of the roughly $1.2 trillion global carry trade has likely contributed to multiple compression across U.S. growth and momentum stocks. FX volatility is bleeding into U.S. equities almost instantly, amplifying correlation risk across the board. The risk remains asymmetric to the downside: a firm break of the 10-year JGB above 2%, or continued sharp moves in super-long yields, could accelerate repatriation and force a much faster, more disorderly deleveraging cycle.

And then there’s the Federal Reserve helmed by Jerome Powell. They remain committed to 2% inflation while inflation has been parked around 3% all year. Rate-cut odds for December sit around 40% as of November 20th—not exactly the backdrop for imminent easing. Until the Fed signals a real shift or liquidity meaningfully returns, volatility is likely here to stay.

That’s the macro and fundamental backdrop we’re dealing with right now—and it’s exactly why stocks aren’t behaving like they did this summer. Price action has been screaming that something had to give, and anyone in the RLT Newsletter shouldn’t be surprised by the weakness in Bitcoin or the cracks in the small-cap momentum space. I’ve been all over those trends for weeks now and warning that things were likely to get bumpy.

With SPY and QQQ, I’ve said repeatedly that as long as key supports hold, we should push higher. Well… the first of those supports broke on Thursday, opening the door to a bigger drop than most people are expecting. Bitcoin broke my Bull/Bear line at the start of November, and now SPY/QQQ are hitting or breaking the 100-day SMA—the main level I wanted to see hold for a potential Santa rally. A clean break below that opens up risk of a move toward the 200-day SMA and the prior all-time high around $614.

SPY

I’m not trying to be the bearer of bad news—get it, bearer, like a bear—despite the fact that all I seem to be saying lately is, “Hey, watch out, charts are heading lower.” But it’s better to stay prepared, monitor key levels, and respect risk than fall into the permanent hopium mindset I keep seeing where people totally ignore price and sentiment. Bitcoin can be a great asset and NVDA can be an amazing company, but neither is immune to sharp selloffs under the wrong environment.

Speaking of NVDA—let’s talk about that chart and their earnings. Earnings were phenomenal, as expected. But apparently not phenomenal enough to stop a massive green-to-red reversal that dragged the entire market with it. That comes down to the overall market setup and sentiment around AI going into the earnings. Even after Thursday’s bear candle, NVDA is still up 107% from the April 7th low just eight months ago. The AI trade is tired, but the fundamentals still look great. That’s actually a positive: it means we may be able to pick up elite companies at meaningful discounts if selling continues.

NVDA technically still held its 100-day SMA, which keeps a small window open for a move higher. We might even see something like the price action around the May earnings—gap, crap, hold support, launch back higher. I’m not saying that’s what’s coming, but until we close decisively below the 100-day SMA, I’ll keep it in the realm of possibility.

If NVDA loses the 100-day, the next big level is the prior all-time high near $155, which also aligns with the 200-day SMA and the anchored VWAP from the April low. If that area holds, great—we could see another push to new highs. If it breaks, the path opens toward the 100-week SMA down near $126. And honestly, if NVDA sells off 40% after reporting numbers like they just did, you can go ahead and call me a full-time NVDA shareholder because that’s all I’ll be doing.

I’d also be remiss not to mention that there is an Elliott Wave count that has the top already in, which would send us back to the April lows or worse. I don’t think that’s the base case after the earnings report, but even the best stocks in the strongest trends can get obliterated. AAPL—the NVDA of the 2010s—had eight separate 35%+ drawdowns since the 2003 low. Volatility is simply part of the path to massive gains.

NVDA

I’ll be viewing any further weakness as an opportunity to buy great assets at great prices—but I’m not going to recklessly buy every dip or try to catch every falling knife. I’ll stay cautious and tactical, hedging aggressively when key levels break. Because if things really go sideways, we have seven straight months of vertical price action with very little support built underneath us. That’s a lot of empty air if markets keep unwinding.