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*                       FIEND'S SUPERBEAR MARKET REPORT                     *

*                                November 6, 2026                           *

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*                       e-mail: fiendbear@fiendbear.com                     *

*                    web address: http://www.fiendbear.com                  *

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Fiend Commentary
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Vesuvius Erupts on Wall Street

Mount Vesuvius did not erupt without warning. There were tremors, escaping gases and other signs that something dangerous was developing beneath the surface. The people living below the volcano had plenty of indications that trouble was coming.

Wall Street's AI volcano has been smoking for weeks.

The semiconductor stocks began breaking down in October. Investors questioned the extraordinary costs of data centers, the financing arrangements supporting the expansion and the likelihood that today's enormously expensive computing equipment would become obsolete long before investors recovered their money.

There were warnings, sharp declines and occasional rallies that encouraged investors to believe the worst was over.

Then Thursday arrived.

The Nasdaq plunged 5.52%, its worst session since April 2025, while the more concentrated Nasdaq-100 lost approximately 6.4%, its worst decline since the March 2020 pandemic panic. The semiconductor index collapsed more than 12%, also its worst performance since 2020.

The S&P 500 lost 4.36%, and the Dow plunged 1,833 points, or 3.44%. The Russell 2000 fell approximately 4.4%.

Nearly $3 trillion in S&P 500 market capitalization disappeared in a single session.

That qualifies as an eruption.

The Smoke Was There All Along

Nvidia lost more than 9%, pushing it into bear-market territory and wiping out its gains for the year. AMD dropped 17%, Micron nearly 18%, and Sandisk more than 22%.

The selling spread through data-center operators, equipment suppliers, utilities and other businesses whose valuations had become dependent on continued extraordinary AI infrastructure spending.

Tuesday's Democratic election sweep provided a catalyst, particularly with growing opposition to data-center expansion and its demands on electricity and water supplies.

But the underlying problem existed long before Election Day.

Investors had already begun questioning whether trillions of dollars in AI expenditures would eventually produce adequate returns. The possibility of additional restrictions on data-center construction simply gave them another reason to sell.

One should also keep the enormous size of today's stock averages in perspective.

A thousand-point decline in the Dow is no longer equivalent to a thousand-point decline twenty years ago. The index is above 50,000, and percentage changes provide a much better measure of the damage.

Thursday's 1,833-point Dow loss was among the largest in its history, but at 3.44% it was nowhere near the devastating percentage declines of 1987 or March 2020.

The Nasdaq's decline, however, was exceptionally severe even by historical standards.

And the selling was not confined to technology. All eleven S&P 500 sectors declined, while the Russell suffered almost as badly as the large-cap indexes.

Whatever rotation had been occurring into smaller and less expensive stocks was overwhelmed by Thursday's liquidation.

Where Was the Panic?

Perhaps the strangest development was the relatively restrained behavior of the VIX.

The volatility index surged more than 62% to close at 27.01, its highest level since March.

That is a substantial increase in fear.

But it is hardly the kind of reading associated with the most violent market capitulations.

During genuine financial panics, the VIX can rise above 40, 50 or even 80.

Thursday's decline was dramatic, and trading volume surged well above normal levels. Yet the volatility market did not suggest that investors had reached a state of complete desperation.

That raises an uncomfortable possibility.

Perhaps Thursday was not the final washout. Perhaps it was the first major liquidation.

There are two ways to interpret the restrained VIX.

One is that investors remain relatively calm because the economic and financial system is still functioning normally. There is no banking crisis, no generalized shortage of liquidity and no evidence of widespread forced selling across every asset class.

The other is that complacency has not been completely extinguished.

Investors who watched technology stocks recover from previous corrections may still expect another quick rebound.

If the decline continues, that confidence could deteriorate rapidly.

A VIX around 27 is not proof that the selling must continue. It simply does not provide the kind of extreme fear reading that often accompanies a durable market bottom.

Bonds and Gold Find Buyers

The behavior of other markets was revealing.

Treasury bonds rallied as investors moved toward safety, pushing the 10-year yield back below 5%. This continues the extraordinary reversal from October, when yields approached multi-decade highs and investors were discussing the possibility of 6%.

Gold and silver also attracted buyers after their prolonged corrections, while mining shares performed considerably better than the broader stock market.

Bitcoin provided no such protection.

The cryptocurrency fell more than 5%, dropping below $76,000, while associated speculative stocks suffered heavy losses.

That distinction is important.

Investors were willing to own government bonds and precious metals. They were considerably less interested in speculative assets whose valuations depend on continued enthusiasm and abundant liquidity.

The bond rally also raises another question.

Are investors suddenly convinced inflation is coming under control?

Or are they beginning to anticipate a significant slowdown in economic activity?

The second explanation looks increasingly plausible.

If the AI investment boom weakens, capital spending could decline, demand for credit could fall and one of the largest contributors to recent economic growth could begin contracting.

That would be bullish for Treasury bonds.

It would be considerably less encouraging for corporate earnings.

December Is Suddenly Less Certain

Thursday's market collapse also changed expectations for the Federal Reserve.

The probability of another quarter-point rate increase in December fell toward 65%, down from more than 80% only a day earlier.

That is another remarkable reversal.

Only weeks ago, December appeared almost certain. Now investors are beginning to question whether Kevin Warsh can raise rates while the stock market is undergoing a serious correction.

There is an obvious problem with that interpretation.

Inflation has not disappeared.

CPI reached 3.7%, producer inflation climbed to 6.3%, and oil remains expensive even after its recent decline.

The Fed has raised rates only 25 basis points this year.

Yet markets are already considering whether September might ultimately prove to have been the first and last hike of this cycle.

Friday's employment report could accelerate that change.

Economists expect approximately 55,000 to 65,000 additional jobs in October, following September's disappointing 29,000 increase. Unemployment is expected to remain around 4.2%.

A substantially weaker report would almost certainly reduce December hike expectations further.

If employment begins contracting while technology stocks remain under pressure, Warsh would have a much stronger argument for leaving rates unchanged.

Eventually the discussion could even turn toward cuts in 2027.

But that would hardly be an ideal outcome if inflation remains stubbornly elevated.

The Fed could find itself forced to choose between defending its inflation target and protecting an increasingly fragile economy.

That is the stagflation dilemma we have been warning about for months.

What Happens Friday?

After Thursday's enormous decline, some sort of rebound would be entirely normal.

Stock futures were mixed overnight, and investors may be reluctant to establish additional short positions immediately before the employment report.

A soft number could provide the excuse for another technology rally as expectations for further Fed tightening diminish.

But the days when weak economic news automatically rescued technology valuations may be ending.

If the real problem is the profitability of enormous AI investments, a 25-basis-point reduction in expected interest rates will not suddenly make uneconomic projects profitable.

The industry's biggest companies still have substantial cash flows and competitive advantages. AI itself is not going away.

But the market has begun reassessing what investors should pay for the businesses financing the revolution.

After such a violent decline, powerful rallies are almost inevitable. Some could last several days or even weeks.

The important test will be whether those rallies restore the broken technical trends or simply provide opportunities for investors to unload positions at better prices.

The Nasdaq has now fallen into correction territory and broken below its 200-day moving average. Nvidia and several other former leaders are already in bear markets.

That is a meaningful deterioration.

Thursday's liquidation may ultimately prove to have been an exaggerated reaction to political uncertainty and crowded speculative positions.

Or it may be the beginning of a much larger repricing of the AI boom.

For now, the bond market is signaling caution, Bitcoin is signaling risk aversion, and the VIX has not yet reached the extreme levels that would provide a convincing capitulation signal.

Friday's employment report may temporarily change the direction of trading.

It will not settle the larger question.

The AI volcano had been smoking for weeks before Thursday's eruption.

What we don't yet know is whether the mountain has finally released the pressure—or whether the biggest eruption is still ahead.

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