📉 Thursday's Massacre: AI Bubble Bursts
Thursday, November 6, 2025, was brutal. Markets sold off hard across the board:
- Dow Jones: Plunged 398.70 points (-0.84%) to 46,912.30
- S&P 500: Fell 1.12% to 6,720.32
- Nasdaq Composite: Crashed 1.9% to 23,053.99
The Nasdaq led the carnage, and it wasn't close. Tech and AI stocks—the darlings of 2025's rally—got absolutely demolished on valuation fears.
This wasn't a normal correction. This was the market finally asking: "Are these AI valuations actually justified?" And the answer was a resounding "no."
💻 AI Stocks Get Crushed
The biggest downside impact came from the AI trade—the same stocks that powered the entire 2025 rally:
- Nvidia - Down sharply, leading the selloff
- Microsoft - Pulled back hard on valuation concerns
- Palantir Technologies - Crushed despite strong AI positioning
- Broadcom - Fell alongside the broader AI selloff
- Advanced Micro Devices (AMD) - Down significantly
What triggered the selloff? Valuation reality. These stocks have been trading at stratospheric multiples for months, priced for perfection. Investors finally started asking: "Are these companies delivering profits that justify these prices?"
The answer, at least this week, was no. AI is real. It's transformative. But the stock prices got way ahead of the fundamentals. This correction was overdue.
📊 Layoffs Hit Worst Level Since 2003
Adding fuel to the fire, Thursday morning brought bearish jobs data from global outplacement firm Challenger, Gray & Christmas:
October 2025 was the worst month for layoff announcements since October 2003.
Let that sink in. The worst in 22 years. This isn't just noise—it's a clear signal that the labor market is cracking. Companies are cutting costs aggressively, and that typically happens when they see trouble ahead.
When layoffs spike, consumer spending falls. And consumer spending is 70% of U.S. GDP. This is a massive red flag for the economy.
📉 Nasdaq on Track for Worst Week Since April
Thursday's selloff put the Nasdaq on track for its worst weekly performance since early April 2025, when the index dropped 10% during the tariff scare.
The Nasdaq 100 was down more than 2% since last Friday's close, and tech investors were starting to panic. The AI trade—which carried the market all year—was finally breaking down.
Why does this matter?
Because the rally in 2025 has been incredibly narrow. A handful of mega-cap AI stocks (Nvidia, Microsoft, Google, Meta) drove the entire market higher. If those names break, the whole structure collapses.
And Thursday, they broke.
🏛️ Government Shutdown Adds to the Chaos
As if valuation fears and layoff data weren't enough, the ongoing U.S. government shutdown continues to weigh on sentiment.
The shutdown—now in its 5th week—is creating an economic data blackout. Key reports like jobless claims, nonfarm payrolls, GDP updates, and housing data aren't being published. The Fed is flying blind, and that makes investors nervous.
When you combine valuation concerns, layoff surges, and government dysfunction, you get days like Thursday.
🎯 My Take: The Score Would Say "I Told You So"
If the Edge Of Markets score could talk, it would be screaming "I told you so!" right now.
The score has been sitting in the Short 20% zone (5.05-5.14 range) for a while, warning that the economic fundamentals don't support current valuations. And Thursday proved it right:
- AI stocks crushed on valuation fears (the score saw this coming)
- Layoffs at 22-year highs (labor market cracking, exactly what the score tracks)
- Nasdaq worst week since April (score warned of defensive positioning)
But here's the thing: The EMA override keeps us long. As long as QQQ stays above its 70-day EMA, we're staying 100% long despite the defensive score. That's by design—backtesting shows that fighting uptrends costs money.
But Thursday's action is a warning. The trend is under pressure. If QQQ breaks below that EMA level, the override turns off, and we shift to defensive positioning (Short 20% = 40% SQQQ / 60% Cash).
⚠️ Bottom Line: The Cracks Are Showing
Thursday was a reality check. The AI trade that dominated 2025 is under serious pressure. Valuations are stretched, layoffs are spiking, and the Nasdaq is headed for its worst week since April.
What to watch:
- QQQ vs. its 70-day EMA: As long as price holds above the EMA, stay long. If it breaks, shift defensive immediately.
- AI stock performance: If Nvidia, Microsoft, Google, Meta continue to fall, the whole market is at risk.
- Layoff data: If more companies announce cuts, consumer spending will crater.
- Government shutdown: The longer it drags on, the worse for the economy.
The score at 5.08 (Short 20%) has been warning about this for weeks. Thursday's selloff is just the beginning. The fundamentals are weak, valuations are stretched, and the margin for error is shrinking.
Stay long for now (EMA override active), but don't ignore the warning signs. This market is fragile.