Published November 21, 2025
Last week’s drop in the stock market unnerved investors as it was the second such drop in a month’s time. Nonetheless, the major stock market indexes remained in good shape holding their intermediate-term trendlines. This week though lines have been further challenged.
Here was the shape of the S&P 500 being carried upward using its 10-week moving average for support along the way.
Same for our Nasdaq 100 (QQQ) index:
However, the riskier ends of the market have come undone. The chart below shows one of those riskier indicators – the price of bitcoin – tumbling below its trendline and seeming to roll over. It is perhaps the worst such break of the uptrend in two years.
We also have witnessed trendline breaks in some of the others in the riskier asset group cohort – e.g. ARK funds’ ETF (ARKK), micro-cap and small-cap stock indexes.
There are flies in the ointment, as we’ve written, with employment trends deteriorating and inflation seeming to stick at higher levels, all amidst a relatively expensive stock market environment. The AI cheerleaders have been drowned out recently by the increasingly vocal naysayers who argue that the gargantuan amount of money being spent will not be offset by quick profits for the spenders. In the past couple of weeks, investors seemed to fear that these facts may lead the Fed to hold off on future interest rate cuts – the prospect of a December cut fell from a 95% chance a month ago to just over a 50/50 reading this week. Investors are clearly getting nervous.
Our models do not consider market averages nor interest rate moves in determining buy or sell signals. However, the drop off in the riskier areas of the market can easily be a harbinger of a broader market dip. Whether that happens, or whether stocks gather themselves for the hoped-for year-end rally is what we are waiting to see.
Market Update
Stocks fell -1% to begin the week as a selloff in cryptocurrency and a downgrade of some computer hardware companies weighed on the high-flying AI sector. Investors were focused on market heavyweight Nvidia’s earnings due out Wednesday night. A downgrade to Amazon and Microsoft added further to the fresh negative sentiment toward AI stocks Tuesday sending markets down another -1%. Of note, an AI deal between Nvidia, Microsoft and AI developer Anthropic had no positive impact on the stocks. It was the type of deal that was sending shares zooming higher only a few weeks ago. In other sectors, Home Depot’s earnings failed to excite buyers with the stock falling -6%. Stocks rose +0.4% Wednesday ahead of Nvidia’s report as the company’s stock added +3% in anticipation of a strong report. After the bell, the report did not disappoint with the company posting extraordinary gains in sales and profit. The earnings sent stocks higher +2% at Thursday’s market open. But it all came undone as the day progressed. Stocks sold off hard throughout the session in a stunning reversal to leave the Nasdaq down -2.4% on huge volume. Bitcoin continued plunging with the crypto down -30% in just over one month’s time. After being up +5%, Nvidia closed down over -3%. Outside the selloff in tech shares, other sectors were much less effected; leaving something for bulls to feel better about. Good earnings from Walmart helped provide support for non-tech investors. Further weighing on stocks perhaps was the release of September’s labor report showing good growth in employment while the unemployment rate also rose to 4.4%. The mixed report kept the picture muddled for possible future Fed rate cuts. Stocks got a reprieve Friday as one Fed governor called for lower interest rates. The comments sent rates notably downward helping stocks to bounce back to a +1% recovery.
Stocks broke down through a key moving average trendline this week leaving the S&P 500 down -1.92%. The Nasdaq 100 (QQQ) slumped -3.09%. Small caps recovered to a relatively benign -0.79% weekly move.
Warm wishes and until next week.