Volatility Explosion

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I said I didn't think the ES could fall 5%, and I was wrong. As of the recent low, the ES is now 9% off its all-time contract high and the NQ is down 17% from its all-time high. The NQ is still up about 4% YTD, and from the 2024 low, it is still up 8.5%, while the ES is up 8.3% and 11%, respectively. The NQ and ES are still up 15.5% and 16%, respectively, over the last 12 months. 

So why am I posting this? It’s to highlight that despite the recent declines, the indices are still up and over longer stretches, they are still up significantly.

The markets performed poorly last week, with a particularly negative Friday and close. One pattern I have noticed is the recurring 50-point dead-cat bounces in the ES. Adding to the current weakness in the Magnificent 7 stocks and the broader tech rotation. 

A story over the weekend revealed that Nvidia's Blackwell GPU architecture, unveiled in March, has a flaw. This flaw will delay the launch of Nvidia’s latest AI chips by at least three months. Not surprisingly, NVDA is down about 10% this morning (with a key gap-fill at the $96 level). The delivery delay will also impact other Magnificent 7 stocks such as Meta, Google, and Microsoft, which collectively have ordered tens of billions of dollars' worth of these chips.