Once the major indexes broke key technical levels, there were forced sellers across the board.

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The Fast Money Is Gone (For Now)

Why was last Thursday such a bloodbath?

Bloomberg reported that JPMorgan strategists believe trend-following funds slashed their exposure and likely turned net short U.S. stocks. Those funds respond to share price movement, not earnings reports or fundamentals.

We call this the “fast money” – the institutions trading technical price signals rather than fundamentals.

So once the major indexes broke key technical levels, there were forced sellers across the board.

That forced-seller dynamic feeds on itself. One wave of selling triggers the next, and the price move can run far past what the news justifies. That makes this kind of market action short-term, not tied to individual company performance or even sector growth and investment.

Notably, prices reversed sharply on Friday, with the Nasdaq rising 1.1% and the S&P 500 gaining 0.3%.

That’s an encouraging sign. But the question remains – has the selling stopped, or is the worst still to come?

Everything I’ve seen paints a clear picture. The AI buildout is not slowing down. It continues to accelerate. The companies we follow are direct beneficiaries of that trend and critical suppliers to the AI infrastructure buildout.

The simple fact is that the election results will not change that dynamic. Even if Congress were to pass a bill restricting AI data center development, President Trump would veto it. He’s already signaled as much.

National politics will not be able to slow this once-in-a-generation capital investment cycle and technological breakthrough.

And while we do expect local politics in certain states to succeed in blocking or delaying AI data center construction, all that would accomplish is private industry moving new data center investment to states and municipalities that welcome the economic growth and tax revenue.

Put simply, capital goes where it is best treated.

I’m confident the AI buildout will continue to accelerate in 2027. More than $1 trillion will go into this technology infrastructure next year, at a scale even greater than this year.

We should expect short-term volatility, but the trend for the next two years (at a minimum) is a continued acceleration of investment and technological advancement.

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A Silver Lining in the AI Rout…

Thursday’s AI rout dominated last week. Yet behind the headlines was data showing an economy in good health.

Job openings bounced back to 7.5 million for September – over 300,000 higher than August’s print and more than 400,000 above estimates. Nonfarm payrolls for October rebounded to 165,000 – 100,000 more than expected and well above September’s 60,000.

Consumer sentiment recovered to 51.0 points in the preliminary November reading, after September’s and October’s anemic prints (48.1 and 48.0 points, respectively). Institute for Supply Management data showed the services and manufacturing sectors continue to expand at a healthy clip.

Key economic data continues this week with yesterday’s Consumer Price Index (CPI) reading showing a 0.4% monthly rise (last fall’s government shutdown means there was no year-over-year reading this month). With the hotter reading, the odds of a quarter-point Fed hike in December rose to around 87%.

But one encouraging sign on the inflation front is the recent pullback in oil.

Late in October, Brent crude was pushing toward the $120 level. But after topping out around $119, it reversed sharply, trading back under $100 last week. That pullback also took West Texas Intermediate from above $106 on October 30 to briefly below $88 last Thursday.

If oil prices keep weakening, that could take some of the sting out of inflation and even give the Fed room to defer a rate hike at future meetings.

That said, investors’ immediate focus will return to the AI trade this week, and to whether its unwinding will continue.

At its heart is whether the hundreds of billions of dollars being poured into data centers and AI infrastructure will generate adequate returns. The other big event last week – the midterm elections – added another layer to those concerns.

The dramatic change in Congress could mean a more uncertain future for data centers and the AI rollout. Tighter scrutiny and regulation could become a significant obstacle to the sector’s growth.

That will flow into the broader market. Throw in earnings from AI players – including CoreWeave (CRWV), Cisco Systems (CSCO), and Applied Materials (AMAT) – and plenty of factors could pull the market in different directions.

Bitcoin’s Final Pullback

Bitcoin is at the level we’ve spent the past month waiting for…

The key support zone we discussed just before the midterm elections was the 200-day moving average.

Here’s what we wrote in A Poisonous Recipe for Bitcoin:

BTC recently lost its 50-day simple moving average (SMA) for the first time since August. Should the $80,000 level now fail to hold, we’ll be watching to see if price can find support at the 50-week SMA around $75,700. If not, the 200-day SMA near $73,000 is likely the next stop.

BTC recently lost its 50-day simple moving average (SMA) for the first time since August. Should the $80,000 level now fail to hold, we’ll be watching to see if price can find support at the 50-week SMA around $75,700. If not, the 200-day SMA near $73,000 is likely the next stop.

The 200-day SMA still rests around $73,100, and there’s even the 200-week moving average at $67,000.

As I write, Bitcoin trades near $73,000, almost precisely at the 200-day moving average. The big question is whether the asset can find support here.

There are three reasons why that’s likely.

First, the order book is a real-time snapshot of whether the market prefers to buy or sell a specific asset. Right now, resting bids, shown as “bid depth,” have trended higher since the summer.

These bids reflect the market’s hidden demand.

They also represent nearly $280 million of real capital from willing buyers. Any drop will run into that wall of demand.

There’s also inflation…

Tuesday morning’s CPI print came in above expectations.

Higher inflation tends to mean higher rates, all else equal. And Bitcoin has not performed well in a rising-rate environment. But the market’s muted reaction is telling. A December Fed rate hike is likely already heavily priced in. In other words, the inflation “surprise” wasn’t much of one.

What’s more interesting is the divergence in longer-dated yields…

Even with inflation running hotter than expected and a December hike all but guaranteed, the 10-year Treasury yield remains over 40 basis points below its October high of 5.36%.

Typically, higher inflation translates to higher bond yields, so seeing them still so far from their peak is noteworthy. This can be interpreted as a signal that the market is looking past the near-term headlines.

Next, we have to talk politics.

With the Democrats set to take the majority in both chambers of Congress in January, D.C. is about to become a lot less favorable to digital assets. But the blue Congress could inadvertently provide a tailwind as well.

Among the Democrats’ top post-midterm priorities are reversing roughly $1 trillion in Medicaid cuts and restoring the Affordable Care Act subsidies. A Democratic majority means higher government spending and more borrowing to fund it.

In other words, they’re going to be Turning on the Spigot.

And finally, there’s the calendar.

All these developments are taking shape at the perfect time.

Bitcoin’s four-year halving cycles have defined the asset since its inception, with each previous bear-market low arriving on a predictable schedule.

The final low has historically come roughly 18 months before a halving, which is exactly where we sit now, ahead of the one scheduled for April 2028.

Fiscal shifts like the one we may be about to witness only accelerate these trends, as we covered in Bitcoin Will Hit $251,000 last month.

We continue to believe this time is no different and that any dips lower into the end of 2026 will provide the final entry point before the next cycle begins.

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The Only Thing That’s Changed Is Sentiment

None of the AI infrastructure companies I heard from last week said anything other than business as usual.

The Midterm Hangover

Yesterday was bruising, but the selling started long before Election Day...

The AI Disconnect

Something about this sell-off doesn’t add up…

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Read the latest insights from the world of high technology.

The Only Thing That’s Changed Is Sentiment

None of the AI infrastructure companies I heard from last week said anything other than business as usual.

The Midterm Hangover

Yesterday was bruising, but the selling started long before Election Day...

The AI Disconnect

Something about this sell-off doesn’t add up…

Join First Signal for curated analysis on hot growth stocks, market-moving developments, and the institutional intel typically reserved for hedge funds.