The S&P 500 (Index: SPX) was heading for a good week. The stock market appeared to react well to news of the Democratic party's sweeps of many elections across the U.S. on Wednesday, 3 November 2026. The index was up almost 1.6% on that news, which seemed contrary to what might be expected for the biggest companies in the index, the Big-AI tech giants, because many of the winning candidates opposed building the data centers they need to support the boom in Artificial Intelligence technologies.

Then Thursday, 5 November 2026 came and the crash that seemed like it should have happened on Wednesday arrived like a ton of weights. It was as if investors suddenly realized that yes, the political party that specifically ran against AI technology development had won power at the federal, state, and local levels of government and would follow through on imposing new regulations and other costs on the AI tech giants. The S&P 500 plunged almost 4.6%, led by AI chipmakers like Nvidia (NASDAQ: NVDA), Micron Technology (NASDAQ: MU), and Advanced Micro Devices (NASDAQ: AMD.

Then Friday arrived and the investors who like to pick through the carrion of market carnage to find deals on heavily discounted stocks found enough among the AI tech sector to boost the index by a little over 0.3% on the day. For the trading week as a whole, the S&P 500 closed the week at 7,376.86, down almost 2.7%.

So what happened on Wednesday to delay the expected drop in stock prices by a day?

The answer turns out to be pretty technical, and to give credit where it's due, Zerohedge provided some of the better reporting of what happened on the day it happened, compiling observations from several sell-side analysts for why the market bounced up instead of realizing the expected drop:

1. Clarity - the event is passed and Trump "absolutely willing" to accept the results and a 'medium bad' outcome for Republicans
2. Gridlock - lowers the risk premium. Dem majority plus Trump’s willingness to work with it “should act as a break on extreme policy outcomes and bring down risk premia” - DB Saravelos.
3. Plunging Oil - recognition of Iran War as reason for Dem Sweep, Trump confirmed he wouldn't escalate in Iran any time soon, and "expect Dems to use fiscal deadlines to seek to limit the war with Iran" - GS Hatzius
4. Hopes of Tariff Rollback - "...roll back selected tariffs, and reverse spending cuts enacted last year." - GS Hatzius, and it fits who led today with AAPL/MSFT surging as investors perceived the stock as a winner from the Democratic sweep.
5. Hedges Unwound - deeply in the money protection was sold (driving down vol and sparking the heavy delta/gamma flow-driven rebound)
6. Technicals - NDX bounced off its 200DMA
7. Rotation - Money is moving out of AI CapEx (on worries that Democrats will regulate AI more) and into cash-generating MegaCaps.
8. Seasonality - 6 months after the past 19 midterm elections, SPX higher 100% of the time, with an average gain of 14.18%.

We are sure there are more (obviously aside from the classic 'relief rally' argument), but those all seemed to add up to what we saw today...

It was enough to last for a day. And then the Thursday, 5 November 2026 AI Crash happened, where we're now wondering if stock prices are themselves experiencing a regime change. That possibility is hinted at in the latest update, where we find the trajectory of the S&P 500 has dropped well below the range we would expect to find it when investors are focused on the current quarter of 2026-Q4 in setting current day stock prices.

It's too early to tell using the dividend futures-based model since we have to identify potential changes in market regime from observations. On one hand, we have a Lévy flight event where the trajectory of the index has broken away from all of the alternative trajectories it would be expected to be found in the established market regime that's been in place since 28 April 2025. On the other hand, we see that trajectory is on par with where the model would put it in early December 2026, assuming investors are still focusing on 2026-Q4.

The difference between the model's projections in November 2026 and December 2026 could be attributed to how its projections work. Here, its projections a month into the future are "locked in", while its projections of the more distant future are still dynamic and can adapt and provide accurate predictions assuming the existing market regime still holds.

We'll find out which scenario applies in the weeks ahead as investors absorb the random onset of new information from the newstreams. Like those they absorbed from the market moving headlines of the week that was.

Monday, 2 November 2026

• Signs and portents for the U.S. economy:
• Manufacturing solid but strain of energy costs, supply disruptions starts to show
• Oil drops over 4% on hopes of progress in talks on ending US-Iran war
• Trump says US, Canada have 'concept' of a new trade deal
• China's slow buying of US farm goods tests $17 billion trade pledge
• Fed minions fear inflationary impact of El Nino:
• El Nino poses 'meaningful risk' of higher inflation in 2027, SF Fed paper says
• Bigger trouble developing in China:
• Beijing To Convene Stock Market Rescue Meeting As Plunge Protection Goes Into Overdrive
• China's top three airlines head for full-year losses as fuel costs weigh
• Bigger trouble developing in Japan, South Korea:
• Japan's October factory growth slows as costs pick up, PMI shows
• South Korea factory activity growth slows to 8-month low, PMI shows
• EU minions dismayed by EU trade with US and value of AI companies. Also getting excited to hike Eurozone interest rates in December:
• Euro zone countries are integrating faster with US than with each other, ECB says
• ECB flags AI valuations, bond stress and fund losses as main risks
• AI-related debt binge may pressure European bond markets
• ECB will have to raise rates again, extent uncertain, Kazimir says
• Nasdaq, S&P 500 fall behind ahead of U.S. midterms, key earnings results
• S&P 500 ends down; Apple dips ahead of quarterly report
• October delivers S&P 500 equal-weight stocks' biggest outperformance since 2009

Tuesday, 3 November 2026

• Signs and portents for the U.S. economy:
• US job openings jump in September; layoffs lowest in 1-1/2 years
• US manufacturing strengthens in October, input prices stay high
• US factory orders beat expectations in September amid broad strength
• Trump says US close to trade deal with Canada, Carney says work remains
• Oil prices ease to settle near 4-week low on hopes peace talks will end wars
• Bigger trouble, stimulus developing in China:
• China regulator tells banks to pause IPOs, FT reports
• China halts listings in bid to bolster struggling markets
• Beijing's Stock Rescue Turns More Desperate: Regulators Reportedly Halt IPOs
• AI investment is becoming overly concentrated, Chinese official says
• BOJ minions getting excited to hike Japan's interest rates again in December:
• BOJ locks in December hike, but neutral-rate uncertainty muddies outlook
• ECB minions lining up behind December interest rate hike in Eurozone:
• Bundesbank's Nagel joins ECB chorus backing December rate hike
• S&P 500, Nasdaq end higher as markets weigh on U.S. midterms
• Nasdaq ends higher as AI heavyweights rebound ahead of midterm results
• AMD forecast eases AI spending fears as data-center sales surge

Wednesday, 4 November 2026

• Signs and portents for the U.S. economy:
• Mortgage rates drop for the third straight week, but homebuyers are still leaving the market
• McDonald's US sales decline for first time in six quarters despite value push
• Oil rises on Iran war uncertainty after Trump's Republicans face election rout
• US to loan about a third of heating oil reserve in bid to tame prices
• Bigger trouble, stimulus developing in China:
• China's services growth slows to three-month low as confidence weakens
• ECB minions getting excited again to hike Eurozone interest rates, predict wages in Eurozone will rebound next year
• ECB rate hike looks nearly certain after inflation rises to three-year high
• Euro zone wage growth to rebound slightly next year, ECB says
• Dow has best day in 1.5 years as traders assess a Democrat sweep
• Wall Street ends higher after Democrats win Congress; data center stocks tumble
• Democrats' midterm sweep fuels $750 billion Big Tech rally
• US Democratic win unlikely to ease firms' cost, tariff woes in near term, executives say

Thursday, 5 November 2026

• Signs and portents for the U.S. economy:
• US weekly jobless claims at 57-year lows; worker productivity surges in third quarter
• US worker productivity surges in third quarter
• China says US farm purchases hinge on tariff-cut deal
• Brent crude jumps, settles up over $3 after tanker attacks
• Fed minions want to go slow on U.S. interest rate hikes:
• Fed's Hammack, Barkin favor gradual rate-hike path to lower inflation
• Growth signs developing in Japan:
• Japan services activity expands for fifth month, PMI shows
• ECB minions getting excited again to hike Eurozone interest rates again:
• ECB's Lagarde says data will tell if December rate hike needed
• Nasdaq ends -5.5%, S&P 500 sees worst day since April 2025
• Wall Street fear gauge jumps most since 'Liberation Day' as AI trade stumbles
• Nasdaq posts biggest daily drop in 19 months on fears of AI regulations
• AI storm dooms tech stocks to $2 trillion decline on darkest day since 2025
• NVIDIA drops 9%, now down for 2026

Friday, 6 November 2026

• Signs and portents for the U.S. economy:
• AI rout sets off market alarm signals as traders brace for what's next
• Democrats planning flood of AI bills when they take control of Congress
• US labor market regains ground as job growth surges, unemployment rate falls to 4.1%
• Four things to note from Friday's US jobs report
• VIEW Strong October jobs report sends yields higher
• Brent oil price benchmark set for biggest weekly drop since 2020
• Soaring freight rates give US refiners edge as crude discounts widen
• Fed minions expected to deliver quarter point rate hike in December 2026, say they don't care about AI tech stock crash:
• Fed seen sticking to December rate hike after jobs data
• Daly says Fed rate hike likely, despite 'painful' tech-stock dive
• BOJ minions have a fever, the only prescription is more rate hikes, at least until they hit a two percent yield:
• BOJ to hike in December, seek terminal rate of 2%, says ex-central bank top economist
• S&P 500 reports weekly losses as technology rout weighs on markets
• Nasdaq rebounds 1% following worst session in 18 months as traders snap up tech shares

The CME Group's FedWatch Tool sees just two more increases in the Federal Funds Rate in the weeks ahead. It continues to anticipate the Fed's next rate hike will be a quarter point, coming on 9 December (2026-Q4). The other rate hike the FedWatch tool foresees would be another quarter point increase that would take place on 17 March (2027-Q1).

The Atlanta Fed's GDPNow tool projects the current quarter of 2026-Q4's inflation-adjusted economic growth rate will be +3.4%, up from its initial estimate of 3.2% a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bear who has set a balloon labeled 'AI' on the ground and is trying to crush it with several large weights that say 'REGIME CHANGE' and 'NEW REGULATIONS' and 'HIGHER COSTS' and 'LOWER PROFITS'".