Lin Liu
Lin Liu
Austria
7mo
๐—ก๐—ผ๐˜ƒ๐—ฒ๐—บ๐—ฏ๐—ฒ๐—ฟ ๐—จ๐—ฝ๐—ฑ๐—ฎ๐˜๐—ฒ The S&P 500 officially closed its most volatile month since April. It made a bit of unwanted history last week. Last Thursday, it opened up more than 1.5% and then closed down more than 1.5%. It was only the 4th time in history that the S&P 500 experienced an intraday swing of that magnitude. And if you look at the times since 1950, there have been only 8 days when the index opened more than 1% higher but still finished red. One month later, the S&P 500 was higher in 6 of the last 7 cases. The last 3 times this happened marked the bottom. Even Nvidiaโ€™s incredible earnings could not stop the pullback. The numbers were off the charts. No other company on earth is growing at this scale. Jensen said it well: โ€œAI is going everywhere, doing everything, all at once.โ€ AI is not hype. It is a multi-trillion build out. But that does not mean it will go up in a straight line. There have already been several big drawdowns. And there will be many more. Each time, the skeptics said the AI bull market was over. Each time they were wrong. Sometimes it helps to zoom out and look at the long term performance. When you compare this to the dot-com bubble, weโ€™re still only in the third inning. There is still room to run. And the actual big moves happen much later. Last week, the S&P 500 closed below its 50-day moving average for the first time since April 30. That ended a 198-day uptrend. It was the fifth longest since 1950. This is why trend following matters. It keeps you safe from the worst drawdowns while still catching the big upside with zero guesswork. So what now. The most likely outcome is that volatility comes back. The rally since April was almost too smooth. It ran more than 40% without a simple 5% pullback. That is not normal. We pulled back about 5.8% from the October high. Since the 2009 low, we have seen 31 corrections bigger than 5%. Every single one came with scary headlines. Every single one felt like the end of the world. But the world did not end, and the market made new highs each time. Bitcoin has been crushed and is now the worst performing major asset in 2025. It is down about 36% from its all-time high and even down for the year. That has never happened before. So either the rest of the market follows suit or we are setting up for a violent snap back. We also saw one of the largest selling waves ever. It was the second-biggest outflow in crypto history. Why? The majority of Bitcoin ETF holders are now in the red. When that happens, you often get forced selling and cascading liquidations. Fear is now high. The Crypto Fear and Greed Index is near extreme fear. When it hits these levels, the bottom is usually closer, not further. But even if the market is oversold, bottoms take time. They are messy. Full of volatility. You do not want to rush in and try to catch the exact low. V-shaped reversals are rare. Instead, you want to wait for confirmation. Another sign that we are getting closer is that put volume jumped to the second-highest reading ever on Thursday. Big spikes like this often happen near market bottoms. Itโ€™s hard to call it a bubble when the S&P 500 price to earnings ratio has gone nowhere over the last year. So when prices are up, but PE is flat, it just means that fundamentals are catching up just as fast as price. Earnings momentum is still strong, which means companies keep raising their profit expectations. Profit guidance momentum just hit its highest level since 2021, showing that confidence is improving across the board. The big jump in 2026 estimates makes this even clearer. And this usually happens when demand is substantial. December tends to bring an increase in equity fund inflows. If that repeats, we could see some fuel for a year-end rally. Especially since a lot of funds need to catch up on their performance. On the fundamental side, some investors worry that the AI spending boom will end like the 1999 to 2000 bubble. But there are big differences. Back then you had weak earnings, weak balance sheets and no proven demand. Today you have record cash flows, real customers, and real economic impact across every sector. This time itโ€™s being built on profits, instead of promises. So in short, the near term is still messy. Prepare for more volatility. But the long term growth story is intact. This correction will create a ton of new opportunities, just like it did in April. But right now the key is to stay patient, let the market reset, and most important be prepared.
Not investment advice. The author may have financial interests in the mentioned instruments.
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