Markets hit hard this week as AI bubble fears explode and traders revisit the ghosts of the dot com era.
USD surges, crypto collapses, gold steadies and next week becomes a pure risk on versus risk off battleground
“There is a time to trade, there is a time to go fishing”………. Jesse Livermore
AI Bubble Fears Trigger a Global Selloff
Markets were hit hard this week as traders stepped back and questioned whether the global AI boom is getting dangerously close to bubble territory. The concerns echo the dot-com era, when the Nasdaq 100 surged 400% before collapsing 80% over the following two years.
Nasdaq and Mega-Cap Tech Lead the Declines
Although many believe AI began shaking markets with ChatGPT in 2025, the move started in late 2022. Since then, the Nasdaq 100 has surged 150%. Now, investor nerves are showing. The Mag 7 – Nvidia, Microsoft, Amazon, Meta and others – are all tightly connected to the AI narrative, making them extremely sensitive to any sentiment shift.
Nvidia Earnings Beat Expectations but Still Sell Off
Nvidia posted stronger-than-expected Q3 results. Despite an early 5% rally, the stock reversed sharply and closed 3% lower. Nvidia is now down 15% from its highs and has fallen for three consecutive weeks — a classic sign of momentum exhaustion.
Strong Non-Farm Payrolls Crush Rate-Cut Hopes
After the US government shutdown delay, Non-Farm Payrolls finally landed, and they were hot. Last month markets priced a 98% probability of a December rate cut. That has collapsed to around 30%. Strong labour data plus fading rate-cut expectations have strengthened the US dollar and increased pressure on global equities.
Global Indices Slide as Risk-Off Takes Control
The S&P 500 fell 5%, the German DAX dropped 5%, Asian equities retreated and even the FTSE 100 slipped 4.5%. The move was broad and aggressive, a clear flight from risk.
Crypto Market Crashes as Bitcoin Drops 35%
Crypto saw the largest damage. Bitcoin has plunged 35% from its highs. While stronger USD and risk aversion played a part, forced liquidations from traders needing to cover equity margin calls may also be contributing.
Gold Shows Relative Strength Despite Market Turmoil
Gold held up surprisingly well compared to other risk assets. Although it has slipped, underlying demand appears strong. Central banks continue to buy, and retail interest remains healthy, making current dips potentially attractive opportunities.
USD Strength Dominates the FX Market
Forex trading has been shaped almost entirely by USD strength. Strong US data and risk-off sentiment typically benefit the dollar. Commodity currencies — AUD, CAD, and NZD — were hit the hardest. Buying USD or EUR against these weaker currencies has been one of the cleanest trades of the week.
Correlation Still Rules: A PropIQ Reminder
As I always teach in PropIQ: correlation is king. Ignore it and it will cost you. My free Forex 101 ebook covers this in more depth — and if you trade FX, it’s essential reading.
Key Market Theme for Next Week: Risk-On or Further Risk-Off?
Next week hinges entirely on one question: does this risk-off move continue, or do markets stabilise and rebound?
The macro calendar is light, meaning stock indices, particularly the Nasdaq 100 and Mag 7, will set the tone.
When Not Trading Is the Smartest Trade
After 30+ years in the markets, I can tell you that sometimes the best trade is no trade. As Jesse Livermore said, “There is a time to trade, and a time to go fishing.” This might be one of those weeks. Let markets settle, stay patient and pick your spots.
Outlook: Potential Gold Bounce and EUR Strength
If pushed to take a view, I would lean toward a bounce in gold and resilience in EUR versus AUD, CAD and NZD. Stay nimble and stay sharp.
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