Markets Expected a Victory Lap—Instead Got Body-Slammed
The Market Got Ambushed—But the Trend Is Still Alive
KR Opinion
Markets were caught off guard yesterday. Most investors had expected a government reopening bounce, anticipating a relief rally once Washington finally passed the bill. Instead, the day became a complete rout. Much of the current chatter focuses on valuation concerns—especially around the top-tier tech stocks. In the livestream I shared below, I examined many of these stocks in detail, including the largest market-cap giants. What’s important to note is that even though these stocks are under pressure, they are still trading well within their intermediate trends. Nothing in the charts indicates a structural breakdown or an impending collapse. The selling is real, but it’s not chaos.
The larger story continues to be the blackout in economic data. There’s still speculation that we may not see the October employment numbers or the CPI print at all, and the media has been framing that as some kind of political cover-up. I don’t buy that narrative. The ADP report did show some slowing in employment, but nothing that seems significant or concerning. As we move forward, we should start receiving a more normal flow of weekly claims and other baseline indicators to help rebuild an accurate picture of what’s happening beneath the surface.
For now, market activity remains intense. As I mentioned in the video, the short-term outlook still indicates weakness as we approach the final weeks of this month. The year will quickly wind down from here. However, the indicators I monitor suggest that a stabilization should occur, and a rally recovery is likely as we enter the early part of the new year. There’s no indication of a major market crash—just the typical corrective phase that happens when uncertainty, missing data, and valuation stress all converge.
One aspect that will influence the macro discussion is the estimated impact on GDP. Current estimates indicate the shutdown may have reduced output by about $1.2 trillion. That’s a significant figure, and it will impact the fourth-quarter GDP calculation. However, it does not signal a fundamental decline in the underlying economy—it’s simply the result of government shutdowns and system closures. Once data flows resume and normal operations restart, these distortions should diminish.
Looking ahead, the next four to six weeks should give the markets enough time to recalibrate. I’m already thinking about what 2026 might look like and the factors that could influence the next major cycle. In the short term, I expect some deeper corrective pressure, but nothing that resembles the kind of market-wide collapse that headlines often predict.
WaveTech Database
The short-term WaveTech Database indicates a market firmly in liquidation mode, with positioning metrics showing ongoing pressure across different timeframes and levels. The sector-level reading is at 41.67% long, just below the critical 42% threshold that separates a sustainable upside bias from liquidation. This suggests the market remains vulnerable to further downside, especially as it stays close to the line that has historically signaled a shift toward correction.
