Tech Bloodbath Now: Is Bubble Pop Finally Happening? | Chris Vermeulen

Alphabet

Across the shows: 41 speakers in other episodes, 32 bullish and 20 bearish calls, past 30 days

• Chris Vermeulen · The Technical TradersBearish

  Google's heavy AI spending is hurting its core search business, which is why its shares were hit hard.

  Vermeulen describes Google as one of the top AI spenders, with that spending now cutting into its core search revenue. He argues this double hit explains why the stock fell so hard after its earnings miss. He ties it to a broader pattern of investor frustration, where the market is punishing companies that spend heavily on AI without showing profits yet. In his view, Google is a clear example of AI capex damaging the rest of the business, which makes the spending more of a liability than an asset in the market's eyes.

  “They're, like, one of the top spenders on AI, and they're spending it on AI, which is killing their search revenue, which is why they've got hit so hard.”at 5:25

US stock market outlook

• Chris Vermeulen · The Technical Traders

  Nasdaq is still in a bull market, and a flush-out could carry it to about 35,000 before any deeper break.

  Vermeulen's technical read is that the major trend is still up, because the market rallies, pulls back, and rallies again. The Nasdaq is still well above the year's opening level, so it would need to fall another 10% before the year turned negative. Although the semiconductor leaders are dropping sharply, their chart patterns still look strong. He thinks today's selling could be a flush-out, a shakeout, or margin-driven rebalancing that clears the way for the Nasdaq to run up toward about 35,000, with semiconductors potentially moving 50% higher from here. He is not shorting, because the market is still in a bull trend. He waits for a new uptrend before getting back in.

  “This could just be a flush out. This just could be a shakeout... we could go and see the Nasdaq run all the way up to about [35,000].”at 10:13

• Chris Vermeulen · The Technical Traders

  Warns a major bear market and possibly a huge financial crisis may be starting, though the trend is not yet confirmed.

  Vermeulen argues the current selloff could be the first week of a major unwinding of AI stocks and the wider market. He compares it to 2008, when prices fell fast week after week, and says news travels faster today, so a decline could be abrupt and sharp. He notes that no traditional investment method survives a bear market, and that the market has been moving down since trend-following exits were triggered. He is careful about timing, though. He says the big trend still points up, that the drop is a controlled pullback inside a larger bull market, and that the bear case needs more proof, such as a breakdown and retail investors selling, before it is confirmed.

  “overall, I do think we're gonna have a huge financial crisis. The question is when all of this resets, when we see the AI space start to unwind, maybe this week is week one of the unwinding of a of a major bear market.”at 16:30

• Chris Vermeulen · The Technical Traders

  Expects Monday to gap sharply lower on overseas trading, then a short-term capitulation bottom and rebound.

  Vermeulen expects a sharp gap lower when markets open Monday, because traders in other time zones who could not act on Friday's selloff will exit positions. He points to a spiking VIX and put/call ratio as evidence of fear, and to margin calls and forced liquidation as the source of the pressure. He expects a sharp drop in the morning, complete panic, and then a rebound later in the day or the week that puts in a short-term capitulation washout low. He is not calling a durable bottom, only a short-term low after an extreme selloff.

  “I have a feeling we'll see it open. I think it'll gap sharply lower on Monday.”at 19:17

• Chris Vermeulen · The Technical Traders

  Money is rotating out of tech into dividend stocks, utilities, staples and health care, not leaving equities.

  Vermeulen points to dividend stocks rocketing higher while the broader market falls. This explains why there is no panic selling: money is moving from one group of stocks to another rather than leaving equities for cash. Defensive sectors such as utilities, consumer staples, health care and real estate are rising, while energy is up because oil is rising. Institutional advisers and hedge funds cannot simply sell to cash because of their rules, so they move from volatile tech into these lower-volatility sectors. The rotation, rather than an exit from the market, is why the market's panic gauge has not spiked.

  “money is not just really exiting the stock market. It's actually just shifting... to other sectors.”at 27:46

AI chips & semiconductors

• Chris Vermeulen · The Technical Traders

  Semiconductor charts show institutional distribution and a topping pattern, though a flush-out could still spark a rally.

  On the SMH semiconductor ETF chart, Vermeulen uses on-balance volume to argue that big institutional selling has replaced accumulation. Shares have been breaking down on heavy red volume, and the on-balance volume line broke and then rose into a 'kiss goodbye', which he reads as a topping phase before a potentially very large unwind. He cites Goldman Sachs reporting record hedge-fund selling of tech in October as confirmation. He is not fully bearish, though. He thinks the current move could be a flush-out, and that semiconductors could then rally about 50% from here, so the setup is a major distribution top that might still shake out before any upside.

  “So you have a topping phase. The market breaks down. It comes up and kinda kisses it goodbye for one last move and then potentially unwinds in a very big way.”at 4:42

Market sentiment, positioning & volatility

• Chris Vermeulen · The Technical Traders

  Record margin debt is causing forced liquidation, since a 10% index drop means roughly 20% losses for two-times margin users.

  Vermeulen says brokerage margin balances are at record levels, and margin calls are starting. Many investors use two-times leverage, so a 10% fall in the market means roughly 20% losses for them, and many individual stocks and sectors have fallen 30% to 50%. He sees forced liquidation, with leveraged investors being margin-called and selling into the drop, as a major driver of the current selling. This unwinding of leverage is why he expects a sharp flush-out, and it is a key reason why he thinks the current move could be a capitulation rather than the start of a sustained bear market.

  “I think we're starting to get into margin calls. I mean, we have record margin levels for brokerage accounts. And if the stock market is down 10%, that means people are down 20% because a lot of people use two times margin.”at 8:07

AI bubble & tech valuations

• Chris Vermeulen · The Technical Traders

  AI resembles the Internet bubble: valuations are stretched and spending far exceeds profits so far.

  Vermeulen compares AI to the late-1990s Internet bubble. Like that bubble, AI has produced a euphoric, feeding-frenzy phase in which prices are a little overvalued. Companies are spending heavily on AI but are not yet turning that spending into large profits. Investors are now scrutinising earnings, and he argues that companies that do not clearly beat expectations will struggle. He notes the Internet, though it changed the world, took five to ten years to become a big business, and the 2000 bubble took two and a half to three years to unwind, so the path is likely long even if the technology is transformative.

  “it's not turning into a profit at this point... I think AI is kind of in the similar space as we saw back in the Internet bubble.”at 12:33

Gold & precious metals

• Chris Vermeulen · The Technical Traders

  Gold has entered a bear market and could fall about 20% more, to roughly $3,132, before bottoming.

  Gold has cleanly broken below the $4,000 level, which Vermeulen calls a very clean support that is now failing. Technically, gold did not enter a bear market until about June, but the decline has been very fast. He says charts usually take several months to confirm a new bear market, yet gold has moved quickly. He expects a further roughly 20% drop, to about $3,132 (the transcript reads $313,200, which appears to be a transcription error), before a bottom forms. He also expects gold and silver to keep selling off over the next few weeks. Today's drop reflects traders who bought near $4,000 being stopped out and forced margin selling, and that the low is probably much lower.

  “And to me, gold is in a bear market... And now we're in a bear market, and, you know, it is pointing to about [$3,132] for gold. It's another 20% down from here, before it puts in a bottom.”at 23:34

US Treasuries & yields

• Chris Vermeulen · The Technical Traders

  Ten-year yields are in a bull market and will keep rising on oil-driven inflation before eventually falling.

  Vermeulen expects yields to keep climbing as long as Middle East tensions persist. Rising oil prices would revive inflation concerns, which would keep yields elevated or push them higher. Higher yields give investors a safe return of 5% or 6% from cash and bonds, which draws money away from expensive tech and stocks. He expects that eventually mortgage rates and yields will fall as the Fed tries to support the economy, but he thinks that would need a much weaker stock market and broader public selling first. Current yield momentum and inflation risk therefore point higher in the near term.

  “The rates, I think, are still gonna work their way higher. I think we're in a bull market when it comes to the ten year yield.”at 28:17

Oil & fuels

• Chris Vermeulen · The Technical Traders

  Middle East attacks are pushing oil higher, which should fuel inflation concerns and keep yields elevated.

  Vermeulen links ongoing attacks in the Middle East to a sharp oil rally today. He argues that if the chaos continues or worsens, oil should keep rising, which would create inflation concerns and push up yields. Higher yields would then act as a headwind for both gold and equities. He sees this as a chain of effects from geopolitics to oil to inflation to yields, though he does not give a specific oil price forecast. The argument depends on the conflict persisting.

  “We're hearing attacks. You know, today, we're seeing oil [pop] and rally. Think we're gonna see oil go up, which is going to cause inflation concerns, potentially inflate more inflation.”at 28:32