Don’t Confuse a Bounce With a Bottom
Thursday’s rout set up a snapback, but many trapped buyers are waiting to sell into it.
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Thursday’s selling was intense enough to set up a snapback, and we are getting one Friday morning. Nasdaq 100 futures are up more than 1%, and the stocks that were hit hardest this week are leading. Nvidia (NVDA), Intel (INTC), Micron Technology (MU) and CoreWeave (CRWV) are all rebounding ahead of the open. The Dow Jones Industrial Average is going the other way, with futures down nearly 1% as money comes out of the defensive stocks that held up on Thursday.
The bounce comes after a brutal week. Thursday was Wall Street’s worst day in about 19 months. The S&P 500 fell 4.4%, the Nasdaq 5.5% and the Philadelphia Semiconductor Index more than 12%. The S&P 500 is on course for its worst week since the Liberation Day tariff selloff in April 2025.
The damage spread overseas. Japan and Taiwan fell into bear markets. The Nikkei closed down about 6%, South Korea’s KOSPI triggered a circuit breaker for the second straight day, and SoftBank, one of OpenAI’s biggest investors, dropped about 11%. European stocks fell more than 1.5%.
Why a V-Shaped Recovery Is a Poor Bet
Sharp drops like this produce sharp bounces. When nearly nine of 10 stocks are down and new lows top 750, the market is stretched, and it doesn’t take much buying to push prices up quickly. Short sellers cover, bargain hunters jump in and the move feels like a turn.
What happens next depends on who is waiting to sell. Many folks who were caught in this drop will be looking for an opportunity to escape with smaller losses. That is what overhead resistance is all about.
Look at the VanEck Semiconductor ETF (SMH). Everyone who bought between about $520 and $560 over the past month, believing the chips were cheap, is now sitting on a loss. Plenty of them have promised themselves they’ll sell if they can just get closer to even. Every bounce into that range runs into their supply. That is why V-shaped recoveries are rare after a breakdown like this. The market needs time to work through the trapped buyers before it can move higher.
The fundamental picture adds to the overhead. The Wall Street Journal reports that major investors are increasingly skeptical that Anthropic’s IPO can go ahead at the expected $1.5 trillion valuation after this week’s selloff. Broadcom (AVGO) guaranteed $63 billion of Anthropic’s debt, so a lower price on the most anticipated AI deal of the year raises the cost of funding the build-out for everyone in the chain. That is not the kind of news that sets up a quick recovery.
The Jobs Report
The October jobs report comes out at 8:30 a.m. ET, and it lands on a market that is stretched to the downside. Traders still put the odds of a December rate hike above 65%, and the 10-year Treasury yield is about 4.85%.
A soft report, especially on wages, would ease that pressure and give the bounce some fuel. A hot one would put the Fed back in focus at the worst possible time for the most expensive stocks.
Game Plan
I expect a bounce, and it could be a strong one. I don’t expect it to mark the bottom. What matters is how the market acts when it hits overhead resistance. A bounce that stalls and fades means the trapped buyers are using it to get out. A bounce that holds, broadens to small-caps and is followed by a pullback that stays above Thursday’s lows would be the start of a durable base.
Until then, I’m not chasing. If you want to buy, do it slowly, use Thursday’s lows as your line in the sand, and be ready to step aside if the market rolls over again.
At the time of publication, Rev Shark had no positions in any securities mentioned.
